Joint Commissioner of Income-tax, V. I-Gate Computer Systems Ltd., Pune

ITA 1018/PUN/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0821 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-03-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 09-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHABANA PARVEEN
• Keywords: Double taxation relief; Non-deduction of tax
• Section: 273B; 201(1); 195

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 1018 /P U N/201 5 / ASSESSMENT YEAR : 20 07 - 08 THE JT . COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION), PUNE . / APPELLANT VS. I - GATE COMPUTER SYSTEMS LTD., PUNE (FORMERLY PATNI COMPUTER SYSTEMS LTD.) LEVEL I, I I, IV, VI, TOWER - 3, CYBERCITY, MAGARPATTA CITY, HADAPSAR, PUNE 411013 . / RESPONDENT PAN: A A BCP6219N / APPELLANT BY : MS. SHABANA PARVEEN / RESPONDENT BY : SHRI C.H. NANIWADEKAR / DATE OF HEARING : 19 . 0 3 .201 9 / DATE OF PRONOUNCEMENT: 27 . 0 3 .201 9 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY REVENUE IS AGAINST ORDER OF CIT (A) - 13 , PUNE , DATED 22 . 04 .201 5 RELATING TO ASSESSMENT YEAR 20 07 - 08 AGAINST LEVY OF PENALTY UNDER SECTION 271C OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE LD. CIT(A) ERRED IN HOLDING THAT NO PENALTY U/ S 271C IS LEVIABLE. ITA NO. 1018 /P U N/20 1 5 I - GATE COMPUTER SYSTEMS LTD. . 2 2. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE LD. CIT(A) ERRED IN HOLDING THAT NO PENALTY U/S 271C IS LEVIABLE DESPITE HOLDING THAT TAX AND INTEREST U/S 201(1) AND 201(1A) WAS CORRECTLY LEVIED ON CERTAIN PAYMENTS, WHILE ALLOWING SOME RELIEF TO THE ASSESSEE ON THE ADDITIONS MADE BY THE AO. 3. ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE LD. CIT(A) ERRED IN APPLYING THE SECTION OF 273B DESPITE THE FACT THAT THE RECOURSE WAS AVAILABLE TO THE ASSESSEE U/S 248 OF THE ACT. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DELETION OF PENALTY LEVIED UNDER SECTION 271C OF THE ACT. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT AND EXPORT OF COMPUTER SOFTWARE. DURING THE YEAR UNDER C ONSIDERATION, THE ASSESSEE MADE PAYMENTS FOR PURCHASE OF SOFTWARE LICENSE AND FOR AVAILING OTHER RELATED SOFTWARE WITHOUT DEDUCTING TAX AT SOURCE ON THE SAID PAYMENTS. THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX UNDER SECTION 1 95 OF THE ACT AND THE SAME WAS TAXABLE AS ROYALTY UNDER DTAA WITH RESPECTIVE COUNTRIES. ACCORDINGLY, THE ASSESSING OFFICER TAXED THE PAYMENTS MADE FOR ACQUIRING THE RIGHT TO USE SOFTWARE AND DATABASE ACCESS CHARGES AS ROYALTY, PAYMENT OF CONSULTANCY C HARGES AS FEES FOR TECHNICAL SERVICES (FTS). THUS, THE ASSESSING OFFICER HELD THE ASSESSEE IN DEFAULT IN NOT DEDUCTING TAX AT SOURCE OUT OF SUCH PAYMENTS MADE OF 2,60,81,820/ - UNDER SECTION 201(1) OF THE ACT. THE CIT(A) ALSO HELD THE ASSESSEE IN DEFAU LT . FURTHER, THE ASSESSING OFFICER HELD THE ASSESSEE LIABLE FOR LEVY OF PENALTY UNDER SECTION 271C OF THE ACT AND ACCORDINGLY LEVIED PENALTY AT 91,42,619/ - FOR FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 195 OF THE ACT . 5. THE CIT(A) HAS DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER. 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). ITA NO. 1018 /P U N/20 1 5 I - GATE COMPUTER SYSTEMS LTD. . 3 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST DELETION OF PENALTY LEVIED UNDER SEC TION 271C OF THE ACT. THE ASSESSING OFFICER HELD THE ASSESSEE IN DEFAULT IN NOT DEDUCTING TAX OUT OF PAYMENTS MADE , UNDER SECTION 201(1) OF THE ACT , FOR PURCHASE OF SOFTWARE LICENSE AND FOR AVAILING OTHER RELATED SOFTWARE . 8. THE TRIBUNAL IN CAPGEMINI TECHNOLOGY SERVICES INDIA LTD. VS. DDIT IN ITA NO.2011/PUN/2014 AND CROSS APPEAL FILED BY REVENUE IN ITA NO.2182/PUN/2014, RELATING TO ASSESSMENT YEAR 2007 - 08, ORDER DATED 28.02.2019 HELD THAT THE PAYMENTS MADE BY ASSESSEE FOR USE OF SOFTWARE WERE NOT TAXA BLE AS ROYALTY AND HENCE, THE ASSESSEE HAS NOT DEFAULTED IN NOT DEDUCTING TAX AT SOURCE OUT OF SUCH PAYMENTS. CONSEQUENTLY, THERE IS NO MERIT IN RAISING THE DEMAND UNDER SECTION 201(1) OF THE ACT AND CHARGING INTEREST UNDER SECTION 201(1A) OF THE ACT. SIMILAR STAND WAS IN RESPECT OF SUBSCRIPTION CHARGES, ETC. ONCE THE ASSESSEE HAS BEEN HELD TO BE NOT IN DEFAULT AND DEMAND CANCELLED UNDER SECTION 201(1) OF THE ACT, PENALTY LEVIED UNDER SECTION 271C OF THE ACT FOR SUCH DEFAULT FAILS. HENCE, THE ASSESS EE IS NOT LIABLE FOR LEVY OF ANY PENALTY UNDER SECTION 271C OF THE ACT. HENCE, GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 9 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 27 TH DAY OF MARCH , 201 9 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 27 TH MARCH , 201 9 . GCVSR ITA NO. 1018 /P U N/20 1 5 I - GATE COMPUTER SYSTEMS LTD. . 4 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 13 , PUNE ; 4. THE CIT (IT/TP) , PUNE ; 5. 6. , , / DR A , ITAT, PUNE ; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE