TaxTMI 
TaxTMI 
2023 (10) TMI 612
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....butors on sale of pre-paid recharge vouchers and start-up kits under section 194H. 2.1 The Ld. CIT(A) erred in confirming the levy of penalty despite of the fact that substantial question of law is involved in the issue of non-deduction of tax on discount offered to pre-paid distributors on sale of pre-paid recharge vouchers and start-up kits under section 194H 2.2 The Ld. CIT(A) erred in confirming the levy of penalty despite of the fact that various High Court judgments delivered in favor of the appellant exists on records 2.3 The Ld CIT(A) erred in confirming the levy of penalty despite of the fact that the subject issue is presently pending before the Hon'ble Supreme Court of India for adjudication 24 The Ld. CIT(A) erred in not appreciating that admission of appeals on this issue before the High Courts and Supreme Court clearly evidences that this issue involves substantial question of law and hence, is a debatable issue. 2.5. The Ld. CIT(A) erred in not considering the provisions of Section 273B which provide that the penalty under section 271C cannot be levied in case there is a reasonable cause for non-deduction of tax. 2.6 The Ld. CIT(A) erred in not apprec....
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....the action of the AO before the Ld. CIT(A) but could not succeed. 3. Before the Tribunal the Ld. Sr. counsel of the assessee has submitted that the assessee supplied Pre-paid SIM Card, and recharge vouchers to pre-paid distributors at a discounted price. Distributors are free to re-supply then to the Retailer subject to Maximum Retail Price (MRP). The retailer in turn would supply the same to ultimate subscriber against any price subject to MRP. Thus, the distributors have to pay discounted price in advance to the assessee before delivery of SIM and recharge coupon supplied by the assessee. The assessee would deliver the SIM/RV to the distributors only after receipt of the advance payment on discounted price. He has explained the nature of transactions by narrating the facts that the assessee is not assuring any profit of the distributors on the transactions of sale and purchase of SIM Card/RV. The income/loss of the distributors would be depend on the price on which they are supplying to the retailer as well as the expenditure incurred by them. Therefore, these are the transactions of sale by the assessee and the discount allowed by the assessee to the distributors is not in the ....
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....ource u/s 194H and consequently, the assessee was under bona fide belief that no tax was liable to be deducted on the alleged commission/discount which constitute a reasonable cause for such failure. 6. Ld. Sr. counsel for the assessee also relied upon the judgment of Hon'ble Rajasthan High Court in case of Hindustan Coca Cola Beverages Pvt. Ltd. v. Commissioner of Income 402 ITR 539 and submitted that the penalty levied u/s 271C is not sustainable and liable to be deleted. 7. On the other hand, Ld. DR has submitted that the assessee was very much aware about the various decisions on this issue that the assessee is under obligation to deduct TDS as per the provision of section 194H and therefore the assessee cannot take a plea that it was under bona fide belief that not required to deduct the tax at source in respect of the commission paid to the distributors. He has relied upon the orders of the authorities below. 8. We have considered rival submission as well as relevant material on record. An identical issue arising from identical facts and circumstances has been considered and decided by This Bench vide even date order in case of Idea Cellular Ltd. ITA No.261/Ind/2018 & ITA ....
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.... obligation to deduct tax at source as per the provisions of chapter XVII of Income Tax and particularly u/s 194H of the tax. This belief of the assessee is one of the possible view and therefore failure to deduct the tax at source in respect of the discount/commission allowed to the distributors in light of divergent decisions by the different High Courts as well as by the different benches of this Tribunal clearly established the genuine and bona fide decision of the assessee not to deduct tax u/s 194H. Hence there was a reasonable cause as provided u/s 273B of the Act to have not deducted TDS on these transactions. 11. Hon'ble Supreme Court in the case of Singapore Airlines Ltd. Vs. CIT (supra) while considering the issue of penalty levied u/s 271C has held in para 59 to 62 as under: 59. The denouement of our examination of these issues concerns the levy of penalties under Section 271C of the IT Act. The Assessing Officer had initially directed that penalty proceedings be commenced against the Assessees for the default in subtraction of TDS but we are informed that this process was put in cold storage while the airlines and the revenue were contesting the primary issue of ....
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....uch person or the assessee proves that there was a reasonable cause for the said failure. Therefore, the liability to levy of penalty can be fastened only on the person who do not have good and sufficient reason for not deducting tax at source. Only those persons will be liable to penalty who do not have good and sufficient reason for not deducting the tax. The burden, of course, is on the person to prove such good and sufficient reason. 95. In each of the 104 cases before us, we find that non- deduction of tax at source took place on account of controversial addition. The concept of aggregation or consolidation of the entire income chargeable under the head "Salaries" being exigible to deduction of tax at source under Section 192 was a nascent issue... The tax deductor assessee was under a genuine and bona fide belief that it was not under any obligation to deduct tax at source from the home salary paid by the foreign company/HO and, consequently, we are of the view that in none of the 104 cases penalty was leviable under Section 271C as the respondent in each case has discharged its burden of showing reasonable cause for failure to deduct tax at source. 61. We find some par....
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.... stages of examination and pronouncements resulting divergent decisions at the level of this Tribunal as well as at the level of the Hon'ble High Courts and finally reached to the Hon'ble Supreme Court for final resolution. The Hon'ble Allahabad High Court in the case of CIT-TDS vs. GM (Telecome) BSNL (supra) has also considered the issue of levy of penalty u/s 271C on the identical facts in para 5 as under: 5. There can be no dispute about the fundamental principle of law that ignorance of law is no excuse. Section 273B of the Act, however, stipulates that notwithstanding anything contained in Section 271C, no penalty shall be imposed on a person or assessee for any failure to deduct tax at source, if it is proved that there was a reasonable cause for such failure. That the assessee was liable to deduct tax at source is beyond dispute. The only issue is as to whether reasonable cause for a failure to deduct tax at source under Section 194H had been shown. The CIT(A) has exercised his discretion particularly having regard to the fact that at the relevant time, there was a decision in Idea Cellular Ltd. (supra) and in view whereof the assessee was under a bona fide belief that ta....
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....39;. It had also taken support of an earlier decision of the ITAT Delhi Bench passed on 28.03.2008 [313 ITR (A.T.) 55] whereby it was concluded that the provisions of section 201(1) and 201(1A) are not applicable, under identical circumstances. In such an event of matter - since the decision of ITAT Delhi Bench was already available before the commencement of Previous Year relevant to Assessment Year 2010-2011 the assessee's stand that it need not deduct tax at source can be taken as a 'reasonable cause'. Hon'ble Supreme Court, in the case of in the case of CIT vs. Eli Lilly (312 ITR 225), observed that if non- deduction of tax at source took place on account of controversial addition and if the tax deductor was under genuine and bonafide belief that it was not under any obligation to deduct tax it amounts to 'reasonable cause' and penalty u/s 271C is not leviable. Hon'ble Delhi High Court in the case of Woodward Governors India Private Limited (supra) observed that the expression "reasonable cause" has to be understood in the backdrop of the circumstances of each case and if an assessee does not deduct tax, based on its understanding of a particular pro....