TaxTMI 
TaxTMI 
2026 (8) TMI 1642
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....ding India. The assessee has an AE in India i.e. Discovery Communications India (DCIN) that is engaged in the business of distributing channels/digital platforms in India through its sub-distributors and selling commercial airtime on the channels/digital platforms. The assessee entered into an agreement w.e.f. 01.04.2017 and 01.04.2019 with DCIN grating exclusively rights for sale of commercial airtime and distribution of channels/digital platforms in India upon payment of specified percentage of revenue derived from aforesaid functions. The assessee filed its return of income for the impugned assessment year declaring NIL income. As per the assessee, the distribution revenue received from its Indian AE was not in the nature of royalty under India-Singapore Double Tax Avoidance Agreement (DTAA), hence, revenue received by the assessee from advertisement and distribution in India is not chargeable to tax in the absence of any Permanent Establishment (PE) in India. Further, the stand of the assessee is that since DCIN has been remunerated at Arm's Length, no further attribution of assessee's revenue from India is required to be made. 2.1. In scrutiny assessment proceedings, the As....
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....ution does not invalidate separate penalty proceedings. In any case under MAP resolution, the adjustment to the assessment has not been annulled, part of the addition has been sustained even under MAP. Penalty has been levied on the addition to the extent sustained under MAP. The ld. DR asserted that the onus lies on the assessee to establish that the addition finally sustained under MAP was not due to concealment or furnishing inaccurate particulars. Rule 44H(5) of the Income Tax Rules, 1962 explicitly allows for "adjustment of tax, interest or penalty already determined" to incorporate the MAP decision rather than requiring its deletion. The ld. DR further contended that the penalty provisions are intra vires even when applied to amounts determined through international conventions u/s. 90 of the Act. To support his submissions, the ld. DR placed reliance on the decision rendered in the case of Toyota Kirloskar Motor P. Ltd. vs. UOI, 109 taxmann.com 137 (Karnataka). 6. Per contra, Shri Manuj Sabharwal, appearing on behalf of the assessee, vehemently defended the impugned order passed by the CIT(A) in deleting penalty levied u/s. 270A of the Act. He contended that the assessee ....
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....tice or the penalty order the clause that has been violated resulting in 'under reporting'. Thus, there is ambiguity in the notice as well as the order levying penalty u/s. 270A of the Act. It is settled law that penalty proceedings are unsustainable where the notice for initiating penalty proceedings is ambiguous. Similar view has been taken by the Co-ordinate Bench in the case of SSRS MEM EDU Society vs. ACIT in ITA No.3064/Del/2025 for AY 2018-19 decided on 03.02.2026 following the decision of Hon'ble Jurisdictional High Court rendered in Prem Brothers Infrastructure LLP vs NFAC, 142 taxmann.com 38. 8. Further, the assessee, in original return of income filed on 02.02.2021, has shown total income of Rs. 2,38,48,67,120/- which includes the gross revenue from advertisement and net distribution/subscription revenue. Subsequently, the assessee filed revised return of income on 30.03.2021 declaring total income of Rs. 1,07,98,430/- and claiming income in respect of advertisement and subscription revenue taxable as NIL and has claimed credit for tax deducted at source on the revenue received on advertisement and distribution/subscription. Thus, it is not a case where the assessee h....
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....39;s predecessor company) cannot be treated at par with the instant case since DALLC's case was covered under MAP and finally the assessee failed to offer a bona-fide explanation and has furnished inaccurate particulars of income. The AO held that had the case not been selected for scrutiny assessment, the income would have remained untaxed. 51. From the conspectus of facts as discussed above, we are of the considered view that the assessee has truly and fully disclosed all the material facts of its receipts of advertisement and distribution activities. The assessee was merely contesting the taxability of such receipts as 'Royalty' or 'business income'. We find the basis of such a stand of the assessee are the judicial precedents and legal interpretation of 'Royalty' in decisions of the Hon'ble HC of Delhi in the case of CIT International Taxation vs. ESPN Star Sports (Mauritius) SNC et Co mpagnie (supra) and Hon'ble HC of Bombay in the case of CIT v. MSM Satellite (Singapore) Pte. Ltd (supra). 52. We also find that the AO has not questioned the genuineness or adequacy of revenue received by the assessee. The penalty imposed is merely on the basis of a....
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.... disclosed all material facts during the assessment as well as MAP proceedings and has not concealed any particulars of income. It is only a difference of opinion as to whether there exists PE in India for assessee or not. There is no conclusive proof that the assessee has PE in India. It is only an assumption that the assessee has PE in India and by way of deeming fiction, the profits were attributed for such assumed PE by the authorities in the MAP proceedings. We hold that there is no concealment of income or furnishing inaccurate particulars of such income by the assessee." 55. We also agree with the CIT(A) that mere non-filing of appeal in quantum matter would not ipso-facto lead to an automatic levy of penalty under section 271(1)(c) of the Act. A view which is supported by the judgement of Hon'ble SC in the case of Sir Shadi Lal Sugar & General Mills Ltd. V. CIT (supra) wherein it has been held that: "14......from agreeing to additions, it does not follow that the amount agreed to be added was concealed. There may be 101 reasons for such admissions...". 56. Similarly, the Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton....