Volkswagen India Private Limited, Pune V. Additional Commissioner of Income-tax,

ITA 1334/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7213 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-12-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: R D ONKAR
• Keywords: Bonafide belief; Services rendered outside India; Non-deduction of tax; Reasonable cause; Competent authority; Tax effect; Bonafide mistake
• Section: 273B; 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , ' , % BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURV EDI, AM . / ITA NOS.1334 TO 1337/PUN/2014 ' ' / ASSESSMENT YEARS: 2008-09 TO 2011-12 VOLKSWAGEN INDIA PRIVATE LIMITED, E-1, MIDC, INDUSTRIAL AREA (PHASE-III), VILLAGE NIGOJE MHALUNJE, KHARABWADI, TAL. KHED, CHAKAN, PUNE 410501 PAN : AACCV4229P . APPELLANT VS. ADDL.CIT, TDS RANGE, PUNE . RESPONDENT / APPELLANT BY : SHRI R.D. ONKAR / RESPONDENT BY : SHRI HITENDRA NINAWE DATE OF HEARING : 06.12.2016 / DATE OF PRONOUNCEMENT: 25.01.2017 / ORDER PER SUSHMA CHOWLA, JM: THIS BUNCH OF FOUR APPEALS FILED BY ASSESSEE ARE AG AINST RESPECTIVE ORDERS OF CIT(A)-V, PUNE, ALL DATED 24.04.2014 RELA TING TO ASSESSMENT YEARS 2008-09 TO 2011-12 AGAINST ORDER PASSED UNDER SECT ION 271C OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THIS BUNCH OF F OUR APPEALS RELATE TO THE ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 2 SAME ASSESSEE WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ALL THE APPEALS THE ISSUE RAISED IS AGAINST L EVY OF PENALTY UNDER SECTION271C OF THE I.T. ACT FOR SHORT/NON-DEDUCTION OF TAX AT SOURCE. THE FACTS AND ISSUE ARISING IN THE BUNCH OF APPEALS IS SIMILA R, HOWEVER, IN ORDER TO ADJUDICATE THE ISSUE REFERENCE IS BEING MADE TO THE FACTS IN ITA NO.1334/PUN/2014. 3. THE ASSESSEE IN ITA NO.1334/PUN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW : 1. THE LD.CIT(A) ERRED IN CONFIRMING PENALTY OF RS. 6,41,219/- UNDER SECTION 271C OF THE INCOME TAX ACT, 1961 FOR SHORT/ NON DEDUCTION OF TAX AT SOURCE THAT HAD ARISEN DUE TO BELIEF OF APPL ICABILITY OF ONE PROVISION THAN THE OTHER OF THE INCOME TAX ACT AND DEBATABLE NATURE OF ISSUE INVOLVED AND WAS NOT DUE TO ANY CONTUMACIO US CONDUCT OR FOR WANT OF BONAFIDES ON THE PART OF THE APPELLANT AND THEREFORE THE APPELLANT COULD NOT HAVE BEEN FAULTED FOR FAILURE T O DEDUCT TAX AT SOURCE WITHOUT A REASONABLE CAUSE. IT IS PRAYED THAT IN THE LIGHT OF THE FACTS OF THE CASE OF THE APPELLANT, ATTENDANT CIRCUMSTANCES AND JUDICIAL PRECEDENTS THE PENALTY CONFIRMED BY THE LEARNED CIT(A) BE DELETED. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS A SUBSIDIARY COMPANY OF VOLKSWAGEN AG, GERMANY. IT WAS ENGAGED IN THE MANUFACTURING OF PASSENGER VEHICLES OF SKODA AND VOLKSWAGEN BRAND . THE ASSESSEE HAD A MANUFACTURING UNIT AT CHAKAN WHEREIN PASSENGER VEHI CLES WERE MANUFACTURED. SURVEY UNDER SECTION133A OF THE I.T. ACT WAS CONDUCTED ON THE PREMISES OF THE ASSESSEE ON 09-11-2011 FOR VERI FICATION OF COMPLIANCE TO THE TDS PROVISIONS AT THE CHAKAN PLANT. THE SURVEY TEAM NOTED CERTAIN DEFAULTS IN RESPECT OF TDS PROVISIONS WHICH ARE TAB ULATED AT PAGE 2 OF THE ORDER PASSED UNDER SECTION 201(1)/201(1A) OF THE AC T. THE ASSESSING OFFICER NOTED THAT THERE WAS DEFAULT IN DEDUCTION OF TAX UN DER SECTION194H/194J OF THE I.T. ACT. THE TOTAL TAX EFFECT FOR THE F.Y. 20 07-08 WAS RS.8,81,819/- ON THE ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 3 SAID DEFAULT DEMAND WAS RAISED UNDER SECTION 201(1) OF RS.8,81,819/-. THE ASSESSING OFFICER ALSO COMPUTED THE INTEREST UNDER SECTION 201(1A) OF THE ACT AT RS.14,10,909/-. 5. THE ASSESSEE WAS ALSO ISSUED SHOW CAUSE NOTICE U NDER SECTION 271C OF THE ACT. IN RESPONSE TO THE SAID NOTICE THE ASS ESSEE PLEADED THAT THE SHORT DEDUCTION/NON DEDUCTION UNDER VARIOUS HEADS WAS SUO MOTU ACKNOWLEDGED BY THEM SO IT DOES NOT ATTRACT THE PENAL PROVISIONS . THE ADDITIONAL CIT, TDS, PUNE OBSERVED THAT THE DEFAULTS WERE NOTED ONLY DUR ING THE SURVEY ACTION WHICH WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE AND DURING POST SURVEY PROCEEDINGS. THE SUO MOTU COMPLIANCE BY THE ASSESS EE WAS HELD TO BE NOT CORRECT. THE PLEA OF THE ASSESSEE THAT THE DEFAULT OCCURRED DUE TO OVERSIGHT AND WAS A BONAFIDE MISTAKE WAS ALSO NOT ACCEPTED BY THE ADDITIONAL CIT. RELYING ON THE RATIO LAID DOWN BY THE HONBLE SUPRE ME COURT IN UNION OF INDIA AND OTHERS VS. DHARMENDRA TEXTILE PROCESSORS AND OT HERS (2008) 306 ITR 277 (SC), THE ADDITIONAL CIT HELD THAT IT WAS DIFFI CULT TO ACCEPT THE PLEA THAT ERROR WAS BONAFIDE. IN THE ABSENCE OF THE ASSESSEE JUSTIFYING ANY REASONABLE CAUSE FOR NON DEDUCTION OF TAX AT SOURCE, THE ASSES SEE WAS HELD TO BE AT DEFAULT TO DEDUCT TAX AT SOURCE AND PENALTY UNDER S ECTION 271C OF THE ACT WAS LEVIED AT RS.8,81,818/-. 6. BEFORE THE CIT(A) THE ASSESSEE RAISED THE ADDITI ONAL GROUNDS OF APPEAL TO THE EFFECT THAT THE ORDER LEVYING PENALTY UNDER SECTION 271C PASSED ON 30-07-2013 WAS BARRED BY LIMITATION BESIDE OTHER GROUNDS OF APPEAL AGAINST THE MERIT OF LEVY OF PENALTY. THE PLEA OF THE ASSESSEE IN THIS REGARD WAS REJECTED BY THE CIT(A) HOLDING THAT THE DCIT, T DS-1, PUNE HAD ONLY INTIMATED THE DEFAULT TO THE ADDITIONAL CIT, TDS, P UNE WHO IS THE COMPETENT AUTHORITY TO INITIATE THE PENALTY PROCEEDINGS. REL YING ON THE SIMILAR ISSUE DECIDED IN ANOTHER CASE THIS PLEA OF THE ASSESSEE W AS DISMISSED. ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 4 7. THE SECOND PLEA OF THE ASSESSEE WAS THAT IT HAD DEDUCTED TAX AT SOURCE UNDER SECTION194C OF THE ACT INSTEAD OF 194J OF THE ACT WAS NOT ACCEPTED TO BE THE BONAFIDE BELIEF FOR APPLYING DIF FERENT PROVISIONS OF THE I.T. ACT. THE CIT(A) ACCEPTED THE NEXT PLEA OF THE ASSE SSEE THAT IN RESPECT OF HOTEL AND SERVICE OF APARTMENT EXPENSES, IT WAS NOT FOR HIRING OF ROOM BUT CONTRACT FOR RATE AND HENCE THE ASSESSING OFFICER W AS DIRECTED TO MODIFY THE AMOUNT OF PENALTY EXCLUDING NON DEDUCTION OF TAX IN RESPECT OF HOTEL/SERVICE APARTMENT EXPENSES AMOUNTING TO RS.2,40,600/-. THE NEXT PLEA OF THE ASSESSEE IN RESPECT OF OTHER DEFAULTS WAS THAT IT H AD REASONABLE CAUSE AGAINST THE SAID DEFAULT AND ITS PLEA UNDER SECTION 273B OF THE ACT FOR FAILURE TO DEDUCT THE TAX OR FAILURE TO COMPLY THE PROVISIO NS OF THE TDS BY THE CHARTERED ACCOUNTANT WAS ALSO NOT ACCEPTED BY THE C IT(A). 8. THE ASSESSEE IS IN APPEAL AGAINST UPHOLDING OF T HE PENALTY LEVIED UNDER SECTION 271C OF THE ACT. 9. AFTER TAKING US THROUGH THE FACTS OF THE CASE, T HE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE ENTIRE TAX DUE ON ACC OUNT OF DEDUCTION OF TDS ALONGWITH INTEREST WAS PAID BY THE ASSESSEE IN RESP ECT OF ASSESSMENT YEARS 2008-09 TO 2009-10. THE LD. AR FOR THE ASSESSEE PO INTED OUT THAT THE DEFAULT IN DEDUCTION OF TAX AT SOURCE WAS NOT TO BE HELD AG AINST THE ASSESSEE AS IT WAS NOT FEES FOR TECHNICAL SERVICES AND HENCE THE P ROVISIONS OF SECTION 194J WAS NOT ATTRACTED. HE SUBMITTED THAT THE ASSESSEE WAS ACCESSING STANDARD FACILITIES. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION IGATE COMPUTER SYSTEMS LTD. VS. DCIT (TDS)-2, PUNE, 53 TAXMANN.COM 431. THE SECOND CONTENTION RAISED BY THE ASSESSEE WAS THAT FOR THE FINANCIAL YEAR 2007-08 TWIN CONDITIONS OF SECTION 9(1)(VII) WERE APPLICABL E, WHEREIN IT HAD TO BE SATISFIED THAT THE SERVICES WERE RENDERED IN INDIA AND UTILIZED IN INDIA. IN THIS REGARD, RELIANCE WAS PLACED ON THE RATIO LAID DOWN IN ISHIKAWAJMA HARIMA ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 5 HEAVY INDUSTRIES LTD. VS. DIT 288 ITR 408 (SC). HE STRESSED THAT IN ASSESSEES CASE THE PROJECT REPORT WAS DONE OUTSIDE INDIA IN GERMANY. THE OFF-SHORE SERVICES THUS WOULD NOT ATTRACT THE FEE F OR TECHNICAL SERVICES AS THE TWIN CONDITIONS OF THE RELEVANT SECTION WERE NOT SA TISFIED. HE FURTHER POINTED THAT THE AMENDMENT WHICH CAME IN EFFECT FROM 2010 W ERE NOT APPLICABLE TO THE INSTANT ASSESSMENT YEARS. 10. ANOTHER ASPECT OF THE ISSUE POINTED OUT BY THE LD. AR FOR THE ASSESSEE WAS THAT SOME PAYMENTS WERE AGAINST REIMBURSEMENT O F EXPENSES AT ACTUAL AND ALSO THERE WAS ELEMENT OF SERVICE TAX, ON WHICH NO TDS HAD TO BE DEDUCTED. THE TDS, IF ANY, HAD TO BE DEDUCTED ON P ROFESSIONAL FEES AND NOT ON REIMBURSEMENT OF EXPENSES OR THE SERVICE TAX ELE MENT. WITH REGARD TO RELEVANT PROVISIONS APPLICABLE, THE LD. AR FOR THE ASSESSEE POINTED THAT THE ASSESSEE HAD REIMBURSED THE RECRUITMENT AGENCY SERV ICE AND AS PER THE ASSESSEE DEDUCTION WAS MADE UNDER SECTION194C OF TH E ACT WHEREAS THE ASSESSING OFFICER SAYS IT IS AKIN TO TECHNICAL SERV ICES AND THE DEDUCTION OF TAX AT SOURCE HAD TO BE MADE UNDER SECTION194J OF THE A CT. HE FURTHER REFERRED TO THE CERTIFICATE ISSUED BY THE INCOME TAX DEPARTMENT FOR LOWER RATE OF DEDUCTION OF TAX AT SOURCE, I.E. BOTH IN SECTION 19 4J AND 194C OF THE ACT. IN THIS REGARD, HE SUBMITTED THAT BECAUSE OF THE CONFU SION IN THE RELEVANT PROVISIONS APPLICABLE, THE ISSUE BECOMES DEBATABLE AND NO PENALTY UNDER SECTION271C OF THE ACT IN SUCH CASE ON SUCH DEBATAB LE ISSUE IS ATTRACTED. 11. THE AR FOR THE ASSESSEE PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CAD BURY INDIA LTD. (2011) 11 TAXMANN.COM 66, ON INTERPRETATION OF THE EXPRESSION REASONABLE CAUSE. HE STRESSED THAT THERE WAS NO FAILURE TO DEDUCT TAX AT SOURCE AND IN ANY CASE THERE WAS REASONABLE CAUSE AND HENCE NO PENALTY T O BE LEVIED. THE LD. AR FOR THE ASSESSEE THEREAFTER POINTED OUT THAT IN RES PECT OF CERTAIN AMOUNTS TDS ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 6 WAS PAID IN THE SUCCEEDING YEAR AND HENCE NO PENALT Y IS TO BE LEVIED IN THE YEAR UNDER CONSIDERATION ON SUCH AMOUNTS. HE FURTH ER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN PRI CE WATERHOUSE COOPERS PVT. LTD. VS. CIT (2012) 25 TAXMANN.COM 400. 12. THE LD. DR FOR THE REVENUE POINTED OUT THAT THE ASSESSEE ON REALIZING THE DEFAULT HAD PAID THE ENTIRE TAX ALONGWITH INTER EST AS ASSESSEE WAS SATISFIED THAT IT HAD COMMITTED DEFAULT. IN SUCH A CASE WHERE THERE IS DEFAULT OF PAYMENT OF TAX DEDUCTIBLE AT SOURCE, THE ASSESSE E WAS LIABLE TO LEVY OF PENALTY UNDER SECTION 271C OF THE ACT. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS IN APPEAL AGAINST THE ORDERS OF THE AUT HORITIES BELOW IN LEVYING PENALTY UNDER SECTION 271C OF THE ACT. UNDER THE P ROVISIONS OF SECTION 271C OF THE ACT IT IS PROVIDED THAT WHERE ANY PERSON FAI LS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX AS REQUIRED UNDER THE PROVISIONS OF CHAPTER XVIIB, OR PAY THE WHOLE OR ANY PART OF THE TAX AS REQUIRED UNDER SECT ION 115O (2) OR PROVISO TO SECTION 194B OF THE ACT, THEN SUCH PERSON SHALL BE LIABLE TO PAY BY WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUC H PERSON FAILS TO DEDUCT OR PAY. IT IS FURTHER PROVIDED THAT THE PENALTY IM POSABLE UNDER SUB-SECTION (1) SHALL BE IMPOSED BY THE JOINT COMMISSIONER. FURTHER UNDER THE PROVISIONS OF SECTION 273B OF THE ACT IT IS LAID DOWN THAT, NOTWI THSTANDING ANYTHING CONTAINED IN THE VARIOUS PROVISIONS OF SECTION MENT IONED THEREIN, WHICH ALSO INCLUDE SECTION 271C OF THE ACT, NO PENALTY IS TO B E IMPOSED ON SUCH PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILUR E REFERRED TO IN THE SAID PROVISIONS OF DIFFERENT SECTIONS, IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. IN OTHER WORDS, THE PENALTY LEVIABLE UNDER SECTION 271C OF THE ACT CAN BE WAIVED OFF IN CASE THE ASSESSEE OR T HE PERSON, AS THE CASE MAY BE, PROVES THE REASONABLE CAUSE, I.E. THE REASO N FOR FAILURE TO COMPLY ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 7 WITH THE REQUISITE PROVISIONS UNDER WHICH HE WAS LI ABLE TO DEDUCT TAX AT SOURCE AND PAY THE SAME IN THE ACCOUNT OF THE TREASURY. I N OTHER WORDS, IN CASE OF REASONABLE CAUSE THE PERSON CAN BE EXEMPTED FROM TH E LEVY OF THE PENALTY UNDER THE REQUISITE PROVISIONS AS APPLICABLE. 14. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD MADE CERTAIN PAYMENTS AND IN RESPECT OF ONE SET OF PAYMENTS THE ASSESSEE HAD DEDUCTED THE TAX AT SOURCE UNDER SECTION194C OF THE ACT. HO WEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PROVISIONS OF SECT ION 194J ARE ATTRACTED. IN RESPECT OF ANOTHER SET OF PAYMENTS THE ASSESSEE HAD CLAIMED THAT IT WAS REIMBURSEMENT OF EXPENSES OR THE SERVICE TAX ELEMEN T THEREOF AND NO TAX WAS TO BE DEDUCTED AT SOURCE. IN EACH OF THE YEARS UND ER APPEAL BEFORE US, THERE WAS ADMITTEDLY SHORT DEDUCTION OF TAX AT SOURCE OR NON DEDUCTION OF TAX AT SOURCE WHICH THE ASSESSEE CLAIMS DUE TO OVERSIGHT A ND THE LAST SET OF PAYMENTS ON ACCOUNT OF TDS WERE DEPOSITED IN THE BA NK ACCOUNT IN THE SUCCEEDING YEAR. THE ASSESSEE BEFORE US HAS PLEADE D THAT ON ACCOUNT OF VARIOUS REASONS AS POINTED OUT BEFORE THE AUTHORITI ES BELOW, THERE IS NO MERIT IN THE LEVY OF PENALTY AND HENCE NO DEFAULT UNDER S ECTION 271C OF THE ACT. THE ASSESSEE HAS FURTHER TABULATED THE DETAILS IN R ESPECT OF THE DEFAULT IN TDS YEAR-WISE UNDER DIFFERENT HEADS FOR THE RESPECT IVE YEARS AND FURNISHED A CHART IN THIS RESPECT WHICH READS AS UNDER: SR. NO. PARTICULARS FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 TOTAL 1 FACILITY OUTSIDE INDIA OR SERVICES RENDERED OUTSIDE INDIA 4,79,874 5,25,028 1,01,175 - 11,06,077 2 REIMBURSEMENT OF EXPENSES OR SERVICE TAX ELEMENT 751 2,85,522 77,261 - 3,63,534 3 SECTION 194C/194J DEBATE 1,58,716 6,52,402 31,777 546 8,43,441 4 TDS NOT APPLICABLE 283 9,905 - 34,690 44,878 5 SHORT DEDUCTION/OVERSIGHT 1,594 17,951 180 25,041 44,766 6 TDS IN SUCCEEDING YEAR - 52,865 - 17,522 70,387 TOTAL 6,41,218 15,43,673 2,10,393 77,799 24,73,083 ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 8 15. THE ISSUE WHICH ARISE FOR ADJUDICATION IS IN RE SPECT OF THE ABOVE SAID DEFAULTS WHERE THE ASSESSEE CAN AVAIL THE BENEFIT O F THE PROVISIONS OF SECTION 273B OF THE ACT ESTABLISHING ITS CASE OF REASONABLE CAUSE FOR NON DEDUCTION OF TAX AT SOURCE IN ORDER TO ESCAPE THE RIGOURS OF SEC TION 271C OF THE ACT. 16. THE HONBLE SUPREME COURT IN PRICE WATERHOUSE C OOPERS LTD. (SUPRA) WHILE DECIDING THE ISSUE OF LEVY OF PENALTY UNDER S ECTION 271(1)(C) OF THE ACT, WHERE THE PLEA OF THE ASSESSEE WAS THAT BECAUSE OF A BONAFIDE MISTAKE BY THE AUDITOR, A PROVISION FOR GRATUITY WAS NOT ADDED BACK TO THE TOTAL INCOME AND HENCE NO PENALTY FOR CONCEALMENT IS ATTRACTED. THE HONBLE SUPREME COURT ADDRESSED THE ISSUE OF THE ASSESSEE THAT WHER E THERE WAS A BONAFIDE AND INADVERTENT ERROR AND THE ASSESSEE IN SUCH CIRC UMSTANCE WAS NOT GUILTY OF FURNISHING INACCURATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. THE PLEA OF THE REVENUE ON THE OTHER HAND WAS THAT WHER E THE ASSESSEE WAS A REPUTED FIRM AND HAD EXPERTISE AVAILABLE WITH IT, C OULD IT MAKE SUCH MISTAKES IN COMPUTING THE TOTAL INCOME. THE HONBLE SUPREME COURT ON SUCH ISSUE HELD THAT UNDOUBTEDLY THE ASSESSEE WAS A REPUTED FI RM AND HAD GREAT EXPERTISE AVAILABLE WITH IT BUT NOTWITHSTANDING THA T, IT WAS POSSIBLE THAT EVEN THE ASSESSEE COULD MAKE A SILLY MISTAKE. THE APEX COURT FURTHER OBSERVED THAT IN THE AUDIT REPORT IT WAS STATED THAT THE PRO VISION FOR PAYMENT WAS NOT ALLOWABLE BUT AN ERROR OF COMPUTATION WAS MADE BY T HE ASSESSEE IN ITS RETURN OF INCOME. IN SUCH CIRCUMSTANCES, IT WAS HELD BY T HE HONBLE SUPREME COURT THAT IT WAS A HUMAN ERROR AND THE CALIBER AND EXPER TISE OF THE ASSESSEE HAD LITTLE OR NOTHING TO DO WITH THE INADVERTENT ERROR. THE HONBLE SUPREME COURT WHILE DELETING THE PENALTY LEVIED UNDER SECTION 271 (1)(C) OF THE ACT OBSERVED AS UNDER : ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 9 . . . . . . .THAT THE ASSESSEE SHOULD HAVE BEEN CA REFUL CANNOT BE DOUBTED, BUT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRES ENT, DOES NOT MEAN THAT THE ASSESSEE IS GUILTY OF EITHER FURNISHING INACCUR ATE PARTICULARS OR ATTEMPTING TO CONCEAL ITS INCOME. 17. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CADBURY INDIA LTD. (SUPRA) WHILE DECIDING THE ISSUE OF LEVY OF PENALTY UNDER SECTION 271C R.W.S. 273B OF THE ACT HELD AS UNDER : IT IS A SETTLED LAW THAT WHAT WOULD CONSTITUTE REA SONABLE CAUSE CANNOT BE LAID DOWN WITH PRECISION AND THAT THE QUESTION AS TO WHE THER THERE WAS REASONABLE CAUSE OR NOT FOR THE ASSESSEE NOT TO DED UCT TAX AT SOURCE AT ALL OR UNDER COME PARTICULAR PROVISION THAN PRESCRIBED WAS A QUESTION OF FACT WHICH HAD TO BE SEEN IN THE FACTS AND CIRCUMSTANCES OF EA CH CASE. 18. IN THE FACTS OF THE CASE BEFORE THE HONBLE DEL HI COURT THE ASSESSEE HAD DEDUCTED THE TAX UNDER SECTION194C OF THE ACT O N A CONSOLIDATED BASIS AND IT WAS HELD TO BE A CASE OF MISCONCEIVED BELIEF OF APPLICABILITY OF ONE PROVISION OF LAW AND IT COULD NOT BE SAID THAT THE ASSESSEE HAD FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 194C AND/OR 1 94J WITHOUT REASONABLE CAUSE. 19. NOW COMING TO THE VARIOUS DEFAULTS OF NON DEDUC TION OF TAX AT SOURCE/SHORT DEDUCTION OF TAX AT SOURCE WHICH HAVE BEEN ATTRIBUTED TO THE ASSESSEE, THE FIRST ALLEGATION AGAINST THE ASSESSEE IS FOR NOT DEDUCTING THE TAX AT SOURCE AGAINST PAYMENTS MADE TO ITS GERMAN COMPA NY FOR ACCESSING STANDARD DATA SERVER FACILITY LOCATED OUTSIDE INDIA . THE PLEA OF THE ASSESSEE IS THAT SUCH SERVICES WHICH DID NOT INVOLV E ANY HUMAN INTERVENTION FOR TRANSMITTING THE DATA THROUGH SUCH DATA LINES D ID NOT INVOLVE TECHNICAL SERVICES AND THERE WAS NO LIABILITY TO DEDUCT TAX A T SOURCE UNDER SECTION194J OF THE ACT. THE SECOND ASPECT WHICH HAS BEEN RAISED IN THIS REGARD IS THAT THE OFF-SHORE SERVICES WERE RENDERED OUTSIDE INDIA AND SINCE IT DID NOT SATISFY THE TWIN CONDITIONS LAID DOWN IN SECTION 9(1)(VII) APPLICABLE TO THE FINANCIAL YEAR 2007-08, THERE WAS NO MERIT IN HOLDING THE ASS ESSEE TO BE IN DEFAULT. ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 10 20. THE ISSUE OF APPLICABILITY OF SECTION 194J OF T HE ACT, VIS--VIS SIMILAR PAYMENTS OF DATA LINE CHARGES ARISE BEFORE THE PUNE BENCH OF THE TRIBUNAL IN IGATE COMPUTER SYSTEMS LTD.(SUPRA) AND IT HAS BEEN HELD THAT AS THERE WAS NO HUMAN INTERVENTION FOR TRANSMITTING THE DATE IT DID NOT INVOLVE TECHNICAL SERVICES AND THE PROVISIONS OF SECTION 194J OF THE ACT WERE NOT APPLICABLE. 21. THE PLEA OF THE ASSESSEE BEFORE US IS SIMILAR T HAT WHERE IT WAS ACCESSING STANDARD DATA SERVER FACILITY OF THE GERM AN COMPANY WHICH WAS LOCATED OUTSIDE INDIA IN FINANCIAL YEARS 2007-08 TO 2009-10, THEN THE PAYMENTS MADE DID NOT PARTAKE THE NATURE OF PROFESS IONAL/TECHNICAL SERVICES AND THE PROVISIONS OF SECTION 194J OF THE ACT WERE NOT APPLICABLE. WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGARD AN D EVEN WHERE THE ASSESSEE HAS DEDUCTED THE TAX AT SOURCE ON SUCH CONSULTANCY FEES PAID AND DEPOSITED THE SAME IN THE ACCOUNT OF THE TREASURY, BUT THE AS SESSEE CANNOT BE HELD TO BE LIABLE TO PENALTY UNDER SECTION 271C OF THE ACT. ACCORDINGLY, WE HOLD SO. 22. IN RESPECT OF THE FIRST FINANCIAL YEAR, I.E. 20 07-08 WHERE THE SERVICES WERE RENDERED BY THE FOREIGN PARTY FROM OUTSIDE IND IA, THEN THE PROVISIONS OF SECTION 9(1)(VII) ARE NOT ATTRACTED AND THE ASSESSE E CANNOT BE HELD TO BE IN DEFAULT IN NON DEDUCTION OF TAX AT SOURCE. HOWEVER , THE ASSESSEE HAS ALREADY DEPOSITED THE TDS ON SUCH AMOUNTS AND WE HOLD THAT THERE IS NO MERIT IN THE LEVY OF PENALTY UNDER SECTION 271C OF THE ACT. 23. NOW COMING TO THE NEXT SET OF PAYMENTS, I.E., R EIMBURSEMENT OF EXPENSES AT ACTUAL OR REIMBURSEMENT OF THE SERVICE TAX ELEMENT. THE AMOUNTS RELATE TO FINANCIAL YEARS 2007-08 TO 2009-1 0 AGAINST WHICH THE ASSESSEE HAS BEEN HELD TO BE IN DEFAULT. HOWEVER, REIMBURSEMENT OF EXPENSES OR SERVICE TAX ELEMENT ARE NOT LIABLE FOR TAX DEDUCTION AT SOURCE AND ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 11 EVEN WHERE THE ASSESSEE HAD DEPOSITED THE SAID TDS DOES NOT MAKE THE ASSESSEE LIABLE FOR LEVY OF PENALTY UNDER SECTION27 1C OF THE ACT. WE HOLD SO. 24. THE NEXT DEFAULT WAS ON ACCOUNT OF THE DIFFEREN CE IN SECTION UNDER WHICH TDS IS TO BE DEPOSITED. THE ASSESSEE HAD DEPO SITED THE TAX AT SOURCE UNDER SECTION194C OF THE ACT WHEREAS THE PROVISIONS OF SECTION 194J WERE APPLIED BY THE ASSESSING AUTHORITY TO WORK OUT THE DEFAULT IN THE HANDS OF THE ASSESSEE. 25. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CADBURY INDIA LTD. (SUPRA) WHE REIN ALSO THE ASSESSEE WAS HELD TO BE LIABLE FOR PENALTY UNDER SECTION 271 C OF THE I.T. ACT FOR DEDUCTING THE TAX AT SOURCE UNDER SECTION194C OF TH E ACT AS AGAINST THE APPLICABLE PROVISIONS OF SECTION 194I AND 194J OF T HE ACT. THE HONBLE HIGH COURT HELD THAT THERE WAS A BONAFIDE BELIEF ON THE BASIS OF THE ADVICE OF THE CHARTERED ACCOUNTANT DUE TO WHICH THE SAID TAX WAS DEDUCTED UNDER SECTION194C OF THE ACT. THE EXPLANATION OF THE ASS ESSEE WAS ACCEPTED THAT IT HAD REASONABLE CAUSE FOR NON DEDUCTION OF TAX UNDER THE REQUISITE PROVISIONS AND THE PENALTY LEVIED UNDER SECTION 271C OF THE AC T WAS DELETED. 26. FOLLOWING THE SAME RATIO LAID DOWN BY THE HONB LE DELHI HIGH COURT, WE HOLD THAT IN CASE OF PAYMENTS ON WHICH THE ASSESSEE HAD DEDUCTED THE TAX AT SOURCE UNDER SECTION194C OF THE ACT AND MERELY BECA USE THE DEBATE WAS WHETHER THE PROVISIONS OF SECTION 194J ARE ATTRACTE D OR NOT AND EVEN IF THE STAND OF THE ASSESSING OFFICER WAS SUCH, DOES NOT M AKE THE ASSESSEE EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271C OF T HE ACT AND HENCE THE SAME IS DELETED. ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 12 27. THE NEXT SET OF DEDUCTION WHICH IS CLAIMED TO B E AMOUNTS ON WHICH TDS WAS NOT APPLICABLE AND SHORT DEDUCTION/OVERSIGH T IN DEDUCTION OF TAX AT SOURCE. THE TOTAL AMOUNT OF PAYMENTS ON WHICH TAX IN DEFAULT IS RS.44,878/- AND FURTHER SHORT DEDUCTION WAS ON AMOUNTS TOTALING RS.44,766/-. THE ASSESSEE HAS FAILED TO EXPLAIN AS TO WHY THE TDS WA S NOT APPLICABLE ON THE AMOUNTS PAYABLE AT RS.44,878/-. FURTHER THE ASSESS EE HAS ADMITTED THAT IT HAS BY OVERSIGHT NOT DEDUCTED THE TAX AT SOURCE ON PAYMENTS ON WHICH TDS OF RS.44,766/- HAS BEEN HELD TO BE IN DEFAULT. WE FIND THAT WHERE THE ASSESSEE HAS SHORT DEDUCTED THE TAX AT SOURCE AND H AS ADMITTED TO HAVE DONE THE SAME, THEN THE ASSESSEE IS LIABLE TO LEVY OF PENALTY ON SUCH SHORT DEDUCTION OF TAX AT SOURCE AMOUNTING TO RS.44,766/- . SIMILARLY, THE ASSESSEE HAVING NOT ESTABLISHED ITS CASE OF TDS NOT APPLICAB LE ON WHICH SHORT DEDUCTION WAS TO THE EXTENT OF RS.44,878/- THE ASSE SSEE IS EXIGIBLE TO LEVY OF PENALTY UNDER SECTION 271C OF THE ACT. ACCORDINGLY , WE UPHOLD LEVY OF PENALTY UNDER SECTION 271C OF THE ACT. 28. THE NEXT SET OF DEFAULTS IS IN RESPECT OF TDS O N SUCH AMOUNTS WHICH WERE PAID IN THE SUCCEEDING YEAR. THE ASSESSEE CLA IMS THAT THERE WAS SOME RECONCILIATION PENDING IN THE CASE OF TWO TRANSPORT ERS AND ON RECONCILIATION OF THE AMOUNTS THE TDS WAS PAID IN THE SUCCEEDING YEAR . IN RESPECT OF SUCH A CLAIM OF THE ASSESSEE, WE FIND MERIT IN THE BONAFID ES OF THE SAME AND WE HOLD THAT THE ASSESSEE HAD REASONABLE CAUSE FOR NON DEDU CTION OF TAX ON SUCH PAYMENTS AND AFTER RECONCILIATION THE ASSESSEE ADMI TTEDLY HAS PAID THE TDS ON A TOTAL SUM OF RS.70,387/- IN THE SUCCEEDING YEA R. THERE IS NO MERIT IN THE LEVY OF PENALTY UNDER SECTION 271C OF THE ACT ON SU CH PAYMENTS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO REC OMPUTE THE PENALTY LEVIABLE IN THE HANDS OF THE ASSESSEE UNDER SECTION 271C OF THE ACT. THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE PARTLY ALLOWED. ITA NOS.1334 TO 1337/PUN/2014 VOLKSWAGEN INDIA PRIVATE LIMITED 13 29. THE FACTS AND ISSUE IN ITA NOS. 1335 TO 1337/PU N/2014 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.1334/PUN/2014 AND OUR DECISION IN ITA NO.1334/PUN/2014 SHALL APPLY MUTATIS MUTANDIS TO IT A NOS.1335 TO 1337/PUN/2014. 30. IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 25 TH DAY OF JANUARY, 2017. SD/- SD/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE DATED : 25 TH JANUARY, 2017. SATISH ) *+, -, / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; ( () THE CIT(A)-V, PUNE; ( / THE CIT(TDS), PUNE; + ../, /, / DR B, ITAT, PUNE; 4 / GUARD FILE. BY ORDER //TRUE COPY// 9: /ASSISTANT REGISTRAR / , / ITAT, PUNE