Appeal details
Counselvise Citation
[2019] 118 COUNSELVISE.COM (IT) 5823 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 19 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-01-2019
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
I
Assessment Year
2007-2008
Appeal Filed On
12-01-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 318 / MUM . /2018 ( ASSESSMENT YEAR : 20 07 08 ) INCOME TAX OFFICER (I.T) WARD 4(1)(2), MUMBAI . APPELLANT V/S RED HAT INDIA PVT. LTD. A 201, SUPREME BUSINESS PARK SUPREME CITY, HIRNANDANI GARDENS POWAI, MUMBAI 400 076 PAN AABCR7097N . RESPONDENT ASSESSEE BY : SHRI NISHANT SOMAIYA REVENUE BY : SHRI DEBOJIT MOHANTA DATE OF HEARING 31 . 01 .201 9 DATE OF ORDER 31.01.2019 O R D E R PER SAKTIJIT DEY, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE CHALLENGING THE ORDER DATED 13 TH OCTOBER 2017, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 58 , MUMBAI, PERTAINING TO ASSESSMENT YEAR 20 07 08 . 2 . THE ONLY DISPUTE IN THE PRESENT APPEAL IS , WHETHER OR NOT THE LEARNED COMMISSIONER (APPEALS) WAS JUSTIFIED IN DELETING THE PENALTY IMPOSED UNDER SECTION 271 C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) LEVIED B Y THE ASSESSING OFFICER. 2 RED HAT INDIA PVT. LTD. 3 . BRIEF FACTS ARE, THE ASSESSEE IS AN INDIAN COMPANY . AS STATED BY THE ASSESSING OFFICER, IT IS ENGAGED IN THE BUSINESS OF MARKETING, PROMOTION AND DISTRIBUTION OF RED HAT SUBSCRIPTIONS TO CUSTOMERS IN INDIAN SUB CONTINENT. THE SUBSCRIPTION ENABLE S THE CUSTOMER IN INDIA TO GET UPDATE S , UPGRADES OF LINUX AND OTHER RED HAT APPLICATIONS. THE SUPPORT SERVICES PROVIDED TO THE CUSTOMERS INCLUDE ON GOING MAINTENANCE SUPPORT FOR THE OPEN SOURCE SOFTWARE USED BY THE CUSTOMER DURING THE SUBSCRIPTION PERIOD, TROUBLE SHOOTING SUPPORT FOR THE OPEN SOURCE SOFTWARE BY RESPONDING TO QUESTIONS / QUERIES / PROBLEMS PERTAINING TO THE OPEN SOURCE SOFTWARE THROUGH WEB BASED SYSTEMS AND TELEPHONIC CALL. FOR THE PURPOSE OF ITS BUSINESS ACTIVITIES THE ASSESSEE HAS ENTERED INTO RESELLER AGREEMENT WITH RED HAT ASIA PACIFIC PTE. LTD., SINGAPORE. AS PER THE RE SELLER AGREEMENT, THE RE SELLER AGREES TO DEMONSTRATE, MARKET, PROMOTE AND SELL SUBSCRIPTIONS TO THE RED HAT SERVICES DURING THE TERM TO THE END USERS IN THE INDIAN SUB CONTINENT. AS PER THE TERMS OF THE RE SELLER AGREEMENT, THE ASSESSEE IS REQUIRED TO MAKE CERTAIN PAYMENT TO RED HAT ASIA PACIFIC PTE. LTD., SINGAPORE. THE ASSESSING OFFICER BEING OF THE VIEW THAT THE PAYMENT MAD E BY THE ASSESSEE TO RED HAT ASIA PACIFIC PTE. LTD., SINGAPORE, TOWARDS SERVICES RENDERED IS IN THE NATURE OF ROYALTY / FEES FOR TECHNICAL SERVICES REQUIRING DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT INITIATED PROCEEDINGS UNDER SECTION 201 OF THE ACT , SINCE , THE ASSESSEE HAD MADE SUCH PAYMENT WITHOUT DEDUCTING 3 RED HAT INDIA PVT. LTD. TAX AT SOURCE. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, THOUGH, THE ASSESSEE SUBMITTED THAT THE PAYMENT MADE IS NEITHER ROYALTY NOR FEES FOR TECHNICAL SERVIC ES AS NO TECHNICAL KNOWLEDGE WAS MADE AVAILABLE TO THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO PASS ORDER UNDER SECTION 201(1) AND 201(1A) OF THE ACT DEMANDING TAX AND INTEREST BY TREA TING THE ASSESSEE AS AN ASSESSEE IN DEFAULT. BEING AGGRIEVED WITH THE AFORESAID ORDER PASSED BY THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS) AND THEREAFTER BEFORE THE TRIBUNAL. THE TRIBUNAL, WHILE DECIDING ASSESSEES APPEAL IN ITA NO.1085/MUM./ 2014, DATED 24 TH MARCH 2017, QUASHED THE ORDER AND DELETED THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) OF THE ACT. IT IS RELEVANT TO OBSERVE , DURING THE PENDENCY OF ASSESSEES APPEAL BEFORE THE TRIBUNAL, THE AS SESSING OFFICER INITIATED PROCEEDINGS UNDER SECTION 271C OF THE ACT FOR IMPOSITION OF PENALTY DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE ON THE PAYMENT MADE TO RED HAT ASIA PACIFIC PTE. LTD., SINGAPORE . U LTIMATELY , THE ASSESSING OFFICER ALSO PASSED AN ORDER ON 30 TH JUNE 2014, IMPOSING PENALTY OF ` 1,04,71,920, UNDER SECTION 271C OF THE ACT. THE ASSESSEE CHALLENGED THE AFORESAID ORDER IMPOSING PENALTY UNDER SECTION 271C OF THE ACT BY FILING AN APPEAL BEFORE THE FIRST APPELLATE AUTH ORITY. 4 RED HAT INDIA PVT. LTD. 4 . THE LEARNED COMMISSIONER (APPEALS), TAKING NOTE OF THE FACT THAT THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) OF THE ACT , IN THE MEANWHILE , HAS BEEN QUASHED BY THE TRIBUNAL, DELETED THE PENALTY IMPOSED U/S 271C OF THE ACT. 5 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. THE LEARNED COUNSELS APPEARING FOR THE RIVAL PARTIES HAVE AGREED BEFORE US THAT THE DEMAND RAISED IN PURSUANCE TO THE ORDER PASSED UNDER SECTION 201(1) AND 201(1A) OF THE ACT , IN THE MEAN WHILE , HAS BEEN D ELETED / QUASHED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL IN ITA NO.1085/MUM./2014, DATED 24 TH MARCH 2017. SINCE , THE VERY BASIS ON WHICH PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271C OF THE ACT WAS INITIATED AND ULTIMATELY PENALTY WAS I MPOSED NO LONGER EXIST S BY VIRTUE OF THE ORDER PASSED BY THE TRIBUNAL QUASHING THE DEMAND RAISED UNDER SECTION 201(1) AND 201(1A) OF THE ACT, PENALTY IMPOSED UNDER SECTION 271C OF THE ACT CANNOT SURVIVE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IN DELETING THE PENALTY IMPOSED UNDER SECTION 271C OF THE ACT. GROUND RAISED IS DISMISSED. 6 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.01.2019 SD/ N.K. PRADHAN ACCOUNTANT MEMBER SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 31.01.2019 5 RED HAT INDIA PVT. LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI
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