Additional Director of Income-tax, V. Amdocs Development Centre India Private Ltd., Pune

ITA 1679/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9341 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY DHOKE
• Keywords: Bonafide belief; Non-deduction of tax; Reasonable cause
• Section: 273B; 201(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS. 1679 TO 1681/PUN/2014 / ASSESSMENT YEARS : 2008-09 TO 2010-11 ADDL. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-II, PUNE . / APPELLANT V/S AMDOCS DEVELOPMENT CENTRE INDIA PRIVATE LIMITED, 6 TH FLOOR, TOWER-2, CYBERCITY, MAGARPATTA, HADAPSAR, PUNE 411 013 PAN : AAECA5803G . / RESPONDENT ASSESSEE BY : SHRI KAPIL HIRANI & SHRI DARPAN KRI PLANI REVENUE BY : SHRI AJAY DHOKE / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 3 APPEALS UNDER CONSIDERATION. ALL THE 3 APPEALS FILED BY THE REVENUE ARE AGAINST THE COMMON ORDER OF THE CIT(A)- IT/TP, PUNE DATED 12-06-2014 RELATING TO ASSESSMENT YEARS 2008-09 TO 2010-11. SINCE THE ISSUE RAISED IN THE ABOVE APPEALS IS COMMON, THESE APPEAL S WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMPOSITE ORDER. 2. THE COMMON GROUND RAISED BY THE REVENUE IN ALL T HE THREE ASSESSMENT YEARS, I.E., 2008-09, 2009-10 AND 2010-11 READS AS UNDER : / DATE OF HEARING :13.06.2017 / DATE OF PRONOUNCEMENT: 16.06.2017 2 ITA NOS.1679 TO 1681/PUN/2014 ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE L D.CIT(A) ERRED IN HOLDING THAT NO PENALTY U/S.271C IS LEVIABLE DESPITE HOLDIN G THAT TAX AND INTEREST U/S.201(1) AND 201(1A) WAS CORRECTLY LEVIED BY THE A.O. AS PER PROVISIONS OF SECTION 271C, SUCH PERSON SHALL BE LIABLE TO PAY B Y WAY OF PENALTY, A SUM EQUAL TO THE AMOUNT OF TAX WHICH SUCH PERSON FAILED TO DEDUCT OR PAY. HENCE, THE LEVY OF PENALTY U/S.271C IS MANDATORY WHICH HAS BEEN RIGHTLY LEVIED. 3. COMING TO THE FACTS, THIS IS A CASE WHERE THE AS SESSEE MADE PAYMENTS TO VARIOUS VENDORS ABROAD WITHOUT MAKING TDS CONSIDERI NG THE FACT THAT THEY ARE MADE FOR THE PURCHASES OF OFF-THE- SHELF SOFTWARE P RODUCTS. ACCORDING TO ASSESSEE, THE PAYMENTS ARE OUTSIDE THE SCOPE OF CHA RGEABILITY. THEREFORE, THE ASSESSEE DID NOT EFFECT THE TDS ON SUCH PAYMENTS AS PER THE THEN EXISTING LAW ON THIS ISSUE. ACCORDING TO ASSESSEE, THERE ARE D IVERGENT DECISIONS FROM VARIOUS LEGAL FORUMS ON THIS ISSUE BOTH IN FAVOUR A ND AGAINST THE ASSESSEE. HOWEVER, DEMAND U/S.201 & 201(1A) WAS RAISED RELATI NG TO THE SAID PAYMENT AND THE TAX PAYMENTS WERE ALSO MADE BY THE ASSESSEE . HOWEVER, THE AO PROCEEDED TO LEVY PENALTY U/S.271C FOR VIOLATION OF THE PROVISIONS OF SECTION 201(1) AND 201(A) OF THE ACT. 4. BEFORE THE AO, ASSESSEE DEMONSTRATED THE EXISTEN CE OF THE REASONABLE CAUSE AS PER THE PROVISIONS OF SECTION 273 OF THE ACT, I.E. A CERTIFICATE ISSUED BY THE AUDITORS IN MAKING PAYMENT WITHOUT DEDUCTING TD S. ASSESSEE ALSO DEMONSTRATED THE EXISTENCE OF DISPUTE IN THE MATTER . HOWEVER, THE AO DID NOT APPRECIATE THE SAME AND PROCEEDED TO LEVY PENALTY F OR ALL THE 3 YEARS UNDER CONSIDERATION VIDE COMMON ORDER DATED 26-06-2013. 5. DURING THE FIRST APPELLATE PROCEEDINGS, A DETAIL ED SUBMISSIONS WAS MADE HIGHLIGHTING THE EXISTENCE OF REASONABLE CAUSE (SUP RA) AS WELL AS THE EXISTENCE OF CONFLICTING DECISIONS OF VARIOUS HIGH COURTS ON THIS ISSUE. THE ARGUMENTS OF THE ASSESSEE IS SUMMARIZED IN PARA NO.2.15 OF THE ORDER OF THE CIT(A) READS AS UNDER : 3 ITA NOS.1679 TO 1681/PUN/2014 (I) PAYMENT IN RESPECT OF OFF-THE-SHELF SOFTWARE I S NOT LIABLE TO TAX AS ROYALTY IN INDIA AND THIS VIEW IS SUPPORTED BY VARI OUS JUDICIAL PRECEDENTS. HENCE, THE APPELLANT WAS NOT UNDER THE OBLIGATION T O DEDUCT TAX UNDER 195 OF THE ACT. ACCORDINGLY, PENALTY UNDER SECTION 271 C CANNOT BE LEVIED SINCE TAX IS NOT REQUIRED TO BE DEDUCTED AS PER CHAPTER XVII-B. (II) NOTWITHSTANDING THE ABOVE, WHERE THERE ARE CON FLICTING DECISIONS OF HIGH COURTS ON THE ISSUE, THE TAX PAYER CANNOT BE PENALI ZED FOR RELYING ON THE MORE FAVOURABLE ONE. (III) ADDITIONALLY, WHERE THE TAX AUTHORITIES, THEM SELVES AFTER SCRUTINIZING THE WITHHOLDING TAX DETAILS IN AN EARLIER ASSESSMENT, D ID NOT LEVY ANY TAXES ON PAYMENTS FOR SOFTWARE LICENSES, THE SAME SHOULD CON STITUTE A REASONABLE CAUSE FOR NOT DEDUCTING TAX AT SOURCE. (IV) FURTHER, THE TAX PAYER RELIED ON THE CERTIFICA TE OF ACCOUNTANTS/OPINION OF AN EXPERT IN DETERMINING THE WITHHOLDING TAX AND AC CORDINGLY WAS UNDER THE BONAFIDE BELIEF THAT THE SUBJECT TRANSACTION WAS NO T SUBJECT TO WITHHOLDING TAXES. 6. AFTER CONSIDERING THE ABOVE SUBMISSION OF THE AS SESSEE THE CIT(A) HELD IN PARA NOS. 3.1 TO 3.5 THAT THERE IS NO CASE FOR L EVY OF PENALTY U/S.271C OF THE ACT IN ALL THE THREE ASSESSMENT YEARS. 7. BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE FOR T HE REVENUE HEAVILY RELIED ON THE PENALTY ORDER AND THE ASSESSMENT ORDE R OF THE AO. 8. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE READ OUT THE CONTENTS OF THE SAID PARA NOS. 3.1 TO 3.5 AND EXPLAINED THAT TH E ASSESSEE IS UNDER BONAFIDE BELIEF THAT THE TDS IS NOT REQUIRED TO BE DONE IN R ESPECT OF THE PURCHASES OF OFF- THE-SHELF SOFTWARE. HE ALSO DEMONSTRATED THE EXIST ENCE OF CONFLICTING DECISIONS ON THIS ISSUE, THEREBY EXISTENCE OF DISPUTE IN RESP ECT OF REQUIREMENT OF MAKING TDS ON PAYMENTS MADE BY THE ASSESSEE FOR THE PURCHA SE OF OFF-THE-SHELF SOFTWARE. 9. ON BEARING BOTH THE SIDES AND ON PERUSAL OF THE SAID PARAGRAPHS OF THE ORDER OF CIT(A) AS WELL AS THE PAPER BOOK FILED BEF ORE US, WE FIND NO PENALTY U/S.271C IS EXIGIBLE WHEN THE TDS IS NOT MADE IN VI EW OF THE EXISTENCE OF CONFLICTING DECISIONS AND THE DISPUTE ON THIS ISSUE . IT IS ALSO NOTED THAT THE CERTIFICATE OF THE AUDITOR WHICH LED THE ASSESSEE T O NOT TO MAKE TDS ON CERTAIN 4 ITA NOS.1679 TO 1681/PUN/2014 PAYMENTS CONSTITUTE A REASONABLE CAUSE. WE FIND TH E BOMBAY BENCH OF THE TRIBUNAL IN THE CASE OF ADDL. DIT (INTERNATIONAL TA XATION) VS. LEIGHTON WELSPUN CONTRACTORS (P) LTD. (47 ITR 97 (MUMBAI) (TRIBUNAL) , IN AN IDENTICAL ISSUE, HAS OBSERVED AS UNDER : ISSUE INVOKED DEBATABLE AND ASSESSEE HAVING ACTED ON A PLAUSIBLE VIEW FOR NON-DEDUCTION OF TAX AT SOURCE FROM PAYMENT TO NON- RESIDENT, THERE WAS REASONABLE CAUSE WITHIN THE MEANING OF SECTION 273B , HENCE PENALTY U/S.271C WAS RIGHTLY DELETED BY CIT(A). 10. FROM THE ABOVE, IT IS EVIDENT THAT THE CONCLUSI ON OF THE CIT(A) IS IN TUNE WITH THE DECISION OF THE BOMBAY BENCH OF THE TRIBUN AL IN THE CASE OF DIT (INTERNATIONAL TAXATION) VS. LEIGHTON WELSPUN CONTR ACTORS (P) LTD. (SUPRA). ACCORDINGLY, THE ORDER OF THE CIT(A) IS FAIR AND RE ASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. THEREFORE, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 11. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED. ITA NOS. 1680 & 1681/PUN/2014 (BY REVENUE A.YRS. 2009-10 & 2010-11) 12. THE GROUND RAISED BY THE REVENUE IN THE ABOVE T WO APPEALS IS IDENTICAL BOTH ON FACTS AND ON LAW. THE ARGUMENTS RAISED BY BOTH THE COUNSELS ARE IDENTICAL TO THE ONE PUTFORWARD BY THEM IN CONNECTI ON WITH ADJUDICATION OF APPEAL IN ITA NO.1679/PUN/2014 FOR THE ASSESSMENT Y EAR 2008-09. WE HAVE ALREADY HELD THE ISSUE IN FAVOUR OF THE ASSESSEE IN THIS APPEAL HOLDING THAT THE ORDER OF THE CIT(A) IS FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. CONSIDERING THE SAME COMMONALITY OF THE FACTS AND L AW, WE ARE OF THE CONSIDERED OPINION THAT THE SAID DECISION APPLIES E QUALLY FOR THESE TWO APPEALS TOO UNDER CONSIDERATION. ACCORDINGLY, THE GROUND R AISED BY THE REVENUE IN THE ABOVE TWO APPEALS IS DISMISSED. 5 ITA NOS.1679 TO 1681/PUN/2014 13. IN THE RESULT, ALL THE 3 APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF JUNE, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; DATED : 16 TH JUNE, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE //TRUE COPY// /ASSISTANT REGISTRAR , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - IT/TP , PUNE 4. D IT ( IT/TP ) , PUNE 5. DR, ITAT, B BENCH PUNE; 6. / GUARD FILE.