TaxTMI 
TaxTMI 
2019 (5) TMI 1601
X X X X Extracts X X X X
X X X X Extracts X X X X
....d detailed discussion to this effect in the penalty orders u/s 271(1)(c). 1(b) The Ld CIT(A) has erred in not appreciating the fact that the case of the assessee is squarely covered by Explanation 1 to section 271(1)(c) of the Act in view of the categorical findings of the Assessing Officer that the assessee has failed to establish the bona fides of explanation offered by it and that all facts material to the computation of its income were disclosed by it. 1(c) The Ld CIT(A) has erred in holding that the assessee had disclosed all material facts necessary for its assessment in that the entire receipts from M/s Prasar Bharti were disclosed in the returns, not appreciating the fact that: v) the returns were filed by the assessee not voluntarily but in response to notices u/s 142(1) of the Act and after persistent follow-up action by the Assessing Officer vi) the returns were filed declaring nil taxable Income on a legally and factually unsustainable claim that the entire receipts were in the nature of Business Income and were not taxable in India in the absence of a Permanent Establishment (PE) in India. 1(d) The Ld CIT has erred in holding that two views were possible with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tice u/s 143 (2) was issued on 24/11/2004. 6. Factual matrix of issue in dispute is that assessee entered into a contract with Prasar Bharti for production of TV feed of cricket matches to be held in India for the period 2002 to 2004 and earned a revenue of Rs. 284182470/-. The assessee requested The Assistant Director Of Income Tax (International Taxation), Mumbai for issue of a certificate under section 197 (1) of the income tax act 1961 permitting Prasar Bharati to make payment to the assessee company without deduction of tax at source in India. The AO as per his order dated 11/2/2003 passed an order u/s 197 (1) of the income tax act, held that profit should be estimated at 10% of gross receipts on which tax at 4.2%, including surcharge should be deducted at source. Though the total contract was for 81 days of play, out of which 15 days of play under the India vs Zimbabwe series was covered during financial year 2001 - 02. On pro rata basis, revenue for 15 days was determined at INR 52626383/- which was held to be the revenue accrued to the assessee during the financial year 2001 - 02. During the course of assessment proceedings, assessee was asked how the above income is not c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntry, where the foreign company maintains a permanent establishment , he held that it is subject to tax in that country. He held that income earned by the assessee directly or indirectly attributable to the permanent establishment is taxable in India. As the assessee did not furnish any basis for attribution of profit of the above income to the permanent establishment India, he applied the provisions of rule 10 of the Income Tax Rules and 20% net profit rate was applied by him. Accordingly he held that the total income accrued to the assessee of INR 52626383/- is taxable at the rate of 20%. The AO further enquired about the copies of all invoices raised by it against payments received by it from various parties in India. The assessee submitted that amount of US dollar 1646982 was also the amount of remuneration it received from Coca-Cola India private limited, Seagram manufacturing Ltd, Hero Honda motors Ltd and Nimbus Communications Ltd. The learned assessing officer applied the conversion rate of Rs. 48.77 per US dollar and determined the total revenue of INR 80323312/- and applied 20% profit attribution thereon amounting to INR 1 6064662/- . He further held that 50% of the above....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ipts?' 10. The revenue was also aggrieved with the order of the coordinate bench on the issue of the permanent establishment which has been decided against the revenue therefore it also filed an appeal under section 260A of the income tax act. The appeals of the revenue have also been admitted by the honourable High Court along with the appeals of the assessee and the following substantial question of law has been framed for answer:- (i) Whether the nature of activities and income earned by the assessee is business income and should be taxed as business income or fees for technical services? (Question of rate of tax is also included in this question) (ii) Whether the income tax appellate tribunal was right in holding that the assessee does not have permanent establishment in India under article 5 of the Double Taxation Avoidance Agreement between India and Singapore? 11. Meanwhile as the penalty proceedings were initiated in respect of the above addition, which was kept in abeyance till the disposal of the appeal by the tribunal, was proceeded with. Subsequently the penalty proceedings continued on receipt of the order of the coordinate bench. Assessee was asked to submit its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble on record. 17. The learned departmental representative vehemently supported the order of the learned assessing officer and stated that the learned CIT - A has deleted the penalty ignoring the specific findings in the detailed discussion made by the learned assessing officer in the penalty orders passed u/s 271 (1) ( C ) of the act. a. He further submitted that the learned CIT - A has erred in holding that there are two views possible with regard to the characterization of income and that assessee has only taken one of the plausible views without appreciating the fact that the receipts from the Prasar Bharti were clearly in the nature of the fees for technical services liable to tax in India and same view has been consistently adopted by both the appellate authorities and therefore there are no two possible views on the issue. b. He further submitted that the learned CIT - A has also erred in relying upon the decision of the Reliance Petro Products without appreciating the fact that the ratio of the said case is applicable only in cases where there is a bona fide difference of opinion with regard to admissibility of claim and all material facts related thereto are disclosed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e rate of 20% u/s 44D read with section 115A of the act. The learned CIT - A confirm the finding of the AO. Honourable ITAT held that there is no permanent establishment in India and receipts which are in the nature of fees for technical services are taxable at the rate of 10% on gross basis under relevant Double Taxation Avoidance Agreement. Both the appellant and department are in appeal before the honourable Delhi High Court and the question of law has been framed as mentioned supra. 5.2 The AO has observed in his penalty order that the appellant has concealed and furnished inaccurate particulars of its income. But the AO has not pointed out which particulars of income have been inaccurately furnished. It has been noted that the appellant has approached the AO for nil TDS certificate. Obviously, the proposed payments and contract under which the payments were to be received was placed before the AO. The AO in his order u/s 197 (1) took the view that there exists service PE and receipts are in the nature of business income. The appellant filed its return of income declaring nil taxable income. The returns were accompanied by audited financial statements and entire receipts ....