ADIT (IT) 4(1), MUMBAI V. LEIGHTON WELSPUN CONTRACTORS P.LTDMARG, KURLA (W), MUMBAI

ITA 4552/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2133 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Bench Allotted: L
• Next Hearing Date: 15-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-06-2013
• Court: TRIBUNAL
• Department Lawyers: AMERENDER REDDY
• Keywords: Business income; Double taxation relief; Bonafide belief; Permanent establishment; Reasonable cause
• Section: 273B; 2

Judgement Text

, , L, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.4552/MUM/2013 ASSESSMENT YEAR: 2009-10 ADIT ( IT ) , 4 (1) 133 SCINDIA HOUSE, BALLARD PIER, MUMBAI-400038. / VS. LEIGHTON WELSPUN CONTRACTORS P. LTD. 7F, TOWER 3, EQUINOX BUSINESS PARK, (PENINSULA TECHNO PART) OFF BKC, LBS MARG, KURLA(W) MUMBAI-400070 (REVENUE) (RESPONDENT ) P.A. NO. AAACL3338D REVENUE BY SHRI AMERENDER REDDY (DR) RESPONDENT BY SHRI PARAS SAVLA & SHRI HARSH KAPADIA (AR) / DATE OF HEARING : 26/10/2015 / DATE OF ORDER: 30/11/2015 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1 1, MUMBAI {(IN SHORT LD. CIT(A)} DATED 05.03.2013 FOR THE ASSESSMENT YEAR 2009-10, DECIDED AGAINST THE PENALT Y ORDER PASSED BY THE JT. DIRECTOR OF INCOME TAX (INTERNATI ONAL M/S. LEIGHTON WELSPUN CO.P.L 2 TAXATION) U/S 271C OF THE ACT. THE REVENUE HAS FILE D FOLLOWING GROUNDS OF APPEAL: ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW WHETHER THE LD. CIT(A) ERRED IN DELETING THE PENALT Y BY HOLDING THAT THE FACT OF PAYMENT WITHOUT TDS HAS BE EN NOTICED BY THE AO ONLY ON THE BASIS OF TDS RETURN F ILED BY THE APPELLANT AND THAT APPLICABILITY OF TDS PROV ISION IS DEBATABLE ESPECIALLY WHEN APPELLANT HAS ACCEPTED THE LIABILITY TO DEDUCT TAX BY NOT PREFERRING ANY APPEA L AGAINST THE ORDER OF AO U/S 195. 2. ON FACTS AND THE CIRCUMSTANCES OF THE CASE AND I N LAW WHETHER THE LD. CIT(A) ERRED IN HOLDING THAT PROVISIONS OF SEC. 271C WOULD NOT BE APPLICABLE IN THE ABSENCE OF ANY DESIRE ON THE PART OF APPELLANT TO MAKE PAYMENTS WITHOUT TDS AND WHETHER SUCH OBSERVATION CAN BE CONSIDERED 'REASONABLE CAUS E' U/S 273B. 3.ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AN D IN LAW WHETHER THE LD. CIT(A)'S FINDING IN PARA 31 OF HIS ORDER THAT LD. AR RELIED ON CA CERTIFICATE AND MADE PAYMENT WITHOUT TDS UNDER BONAFIDE BELIEF IS SUFFIC IENT TO ARRIVE AT 'REASONABLE CAUSE' AS ENVISAGED U/S 273B. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE ID. CI T(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. M/S. LEIGHTON WELSPUN CO.P.L 3 2 . DURING THE COURSE OF HEARING SHRI PARAS SAVLA & S HRI HARSH KAPADIA AUTHORISED REPRESENTATIVES (LD COUNSE L) ON BEHALF OF THE ASSESSEE AND SHRI AMERENDER REDDY DEPARTMENTAL REPRESENTATIVE (LD DR) ON BEHALF OF TH E REVENUE, ARGUED THE CASE. 3. ALL THE GROUNDS ADDRESS THE COMMON ISSUE OF DELETI ON OF PENALTY OF RS.11,55,280/- BY THE JDIT U/S 271C OF T HE ACT, THEREFORE, THESE ARE DISPOSED OF TOGETHER. 3.1. THE BRIEF BACKGROUND OF THE CASE IS THAT THE JDIT PASSED AN ORDER U/S 201/201(1A) DATED 30 TH MARCH, 2012 UPON THE ASSESSEE COMPANY, WHEREIN IT WAS HELD THAT THE ASSE SSEE HAS FAILED TO DEDUCT TDS ON THE FOLLOWING FOREIGN REMITTANCES/PAYMENTS:- (I)RS.11,80,727/- TOWARDS ENGINEERING AND DRAUGHTIN G SERVICES PROVIDED BY M/S. AEC TECHNOLOGY LTD., UK. (II) RS.63,27,749/- FOR PROVIDING ENGINEERING SERVI CES TO LYE SINGAPORE PTE. LTD., SINGAPORE (III) RS.49,084/- FOR PURCHASE OF SHRINK WRAPPED SOFTWARE FROM INSIGHT TECHNOLOGY SOLUTION PTE. LTD. , SINGAPORE. (IV) RS.33,47,404/- FOR PURCHASE OF SHRINK WRAPPED SOFTWARE FROM Q.A. SOFTWARE, AUSTRALIA. (V) RS.35,189/- FOR PURCHASE OF SHRINK WRAPPED SOFTWARE I.E. MICROSOFT'S VISIO SOFTWARE FROM SOFTW ARE ONE PTE. LIMITED, SINGAPORE. M/S. LEIGHTON WELSPUN CO.P.L 4 3.2 IT HAS BEEN INFORMED BY THE PARTIES TO US THAT NO APPEAL WAS FILED BY THE ASSESSEE COMPANY AGAINST THE AFORE SAID ORDER, AND IT WAS ACCEPTED SO AS TO BURY THE LITIGATION AN D TO BUY PEACE, OTHERWISE THERE WAS NO FAILURE ON THE PART O F THE ASSESSEE, AS NO TDS WAS LIABLE TO BE DEDUCTED ON TH E AFORESAID REMITTANCES/PAYMENTS, AS PER LAW. 3.3. SUBSEQUENTLY, BE THAT AS IT MAY, THE JDIT, INITIAT ED PROCEEDINGS U/S 271C FOR LEVY OF PENALTY ON THE FAI LURE OF THE ASSESSEE IN DEDUCTING TAX AS SOURCE. DURING THE PEN ALTY PROCEEDINGS, THE ASSESSEE MADE DETAILED SUBMISSIONS . IT WAS NOTED FROM THE RECORDS THAT DURING THE PENALTY PROC EEDINGS, THE ASSESSEE COMPANY SUBMITTED THAT ASSESSEE WAS NO T LIABLE TO DEDUCT TDS ON THE AFORESAID PAYMENTS AND CONSEQU ENTLY IT WAS NOT LIABLE FOR THE PENALTY U/S 271C ALSO, FOR T HE FOLLOWING REASONS: (I) PAYMENT TO M/S. AEC TECHNOLOGY LTD. IS MADE FOR PROVIDING ENGINEERING AND DRAUGHTING SERVICES AND THESE SERVICES DO NOT QUALIFY AS FTS WITHIN ARTICLE 13(4)(C) OF INDIA-UK TREATY, AND IN ANY CASE M/S. A EC TECHNOLOGY LTD. WAS NOT ENGAGED IN DEVELOPMENT AND TRANSFER OF TECHNICAL AND TRANSFER OF PLAN OR TECHN ICAL DESIGN AND THAT M/S. AEC TECHNOLOGY LTD. HAS NOT MADE AVAILABLE ANY TECHNICAL KNOW-HOW ETC. TO THE ASSESSEE. THIS PAYMENT IS IN THE NATURE OF BUSINESS INCOME OF M/S. AEC TECHNOLOGY LTD. AND IN ABSENCE O F PE (PERMANENT ESTABLISHMENT), SUCH INCOME IS NOT TAXABLE IN INDIA. (II) PAYMENT TO LYE SINGAPORE PTE. LTD. IS FOR PROV IDING ENGINEERING SERVICES AND THESE SERVICES DO NOT QUAL IFY AS M/S. LEIGHTON WELSPUN CO.P.L 5 FTS WITHIN ARTICLE 12(4)(C) OF INDIA- SINGAPORE TRE ATY. (III) PAYMENTS TO INSIGHT TECHNOLOGY SOLUTION PTE. LTD. AND Q.A. SOFTWARE AND SOFTWARE ONE PTE. LIMITED ARE FOR PURCHASE OF SHRINK WRAPPED SOFTWARE AND HENCE, IT IS NOT LIABLE FOR TAXATION IN INDIA. 3.4. IT WAS FURTHER SUBMITTED BY THE ASSESSEE DURING TH E PENALTY PROCEEDINGS THAT IN ALL THESE CASES TDS WAS NOT DEDUCTED IN VIEW OF THE CERTIFICATE ISSUED BY THE C A, IN THIS REGARD, AT THE TIME OF MAKING REMITTANCES AND THERE FORE, PENALTY SHOULD NOT HAVE BEEN LEVIED FOR NOT DEDUCTI NG THE TDS, ON THE BASIS OF CAS CERTIFICATE. THE ASSESSEE RELI ED UPON THE VARIOUS JUDGMENTS IN ITS SUPPORT TO DEMONSTRATE THA T ISSUES INVOLVED WERE DECIDED IN FAVOUR OF THE ASSESSEE OR THESE WERE AT LEAST DEBATABLE, AND IN ANY CASE THERE WAS REASO NABLE CAUSE FOR NOT DEDUCTING TDS, AND THEREFORE, THIS CASE WAS NOT LIABLE FOR LEVY OF PENALTY U/S 271C. 3.5. BUT THE JDIT DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND HE LEVIED THE PENALTY U/S 271C FOR AN AGGREGATE AMOUNT OF RS. 11,55,280/-. 3.6. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFO RE THE LD. CIT(A) AND THERE ALSO DETAILED SUBMISSIONS WERE MADE IN THE APPELLATE ORDER PASSED BY THE LD. CIT(A). HE RE FERRED TO THE FACTS OF THE CASE. BEING AGGRIEVED THE REVENUE HAS FILED AN APPEAL BEF ORE US DURING THE COURSE OF HEARING DETAILED ARGUMENTS HAV E BEEN M/S. LEIGHTON WELSPUN CO.P.L 6 MADE BY THE LD. DR. IT HAS BEEN SUBMITTED BY HIM TH AT ORDER PASSED U/S.201, HOLDING THE ASSESSEE IN DEFAULT WAS NOT CHALLENGED BY THE ASSESSEE, THEREBY ACCEPTING THE F AILURE ON THE PART OF THE ASSESSEE. THUS, NOW, WHEN THE PENAL TY HAS BEEN LEVIED, THE ASSESSEE IS TRYING TO MAKE OUT CAS E THAT THE IMPUGNED PAYMENTS WERE NOT SUBJECT TO DEDUCTION OF TDS. THESE ARGUMENTS ARE AFTER THOUGHT IN VIEW OF CLEAR POSITION OF LAW. IT WAS FURTHER SUBMITTED THAT THE ARGUMENT OF DEBATABLE ISSUE IS NOT AVAILABLE TO THE ASSESSEE AS HE HAS A CCEPTED THE ORDER U/S 201, HOLDING THE ASSESSEE IN DEFAULT. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS NOT BEEN ABLE TO DEMONS TRATE THE REASONABLE CAUSE AND THAT ASSESSEES CASE DOES NOT FIT INTO THE SCOPE OF REASONABLE CAUSE. IT HAS BEEN FURTHER SUBM ITTED THAT SOME OF THE CASES RELIED UPON BY THE LD. COUNSEL PE RTAIN TO THE PENALTY U/S. 271(1)(C) WHICH IS NOT COMPARABLE TO SECTION 271C, SINCE THERE IS NO MENTION OF SECTION 271(1)(C ) IN THE SECTION 273B. IT WAS FURTHER SUBMITTED THAT THERE I S NO PROVISION OF RELYING UPON CAS CERTIFICATE U/S 195. HE HAS RELIED UPON SECTION 195(2), TO SUBMIT THAT THE ASSE SSEE HAS TO STRICTLY COMPLY WITH THE PROVISIONS OF SECTION 195 AND HE CANNOT JUSTIFY HIS FAILURE IN DEDUCTION OF TDS BY R ELYING UPON ANY CAS CERTIFICATE, IN VIEW OF SPECIFIC AND CLEAR PROVISIONS OF SECTION 195. IT WAS, THUS, REQUESTED BY THE LD. DR THAT PENALTY WAS RIGHTLY LEVIED BY THE AO AND THEREFORE, IT SHOU LD BE CONFIRMED, AND ORDER OF LD. CIT(A) SHOULD BE REVERS ED. 3.7. ON THE OTHER HAND, LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT PENALTY WAS UNJUSTIFIED AND ILLEGAL IN VIEW OF THE FACTS OF THIS CASE AND CLEAR POSITION OF LAW. I T HAS BEEN SUBMITTED BY HIM THAT ALL THE IMPUGNED PAYMENTS CAN BE PUT INTO TWO CATEGORIES I.E. PAYMENTS TOWARDS: M/S. LEIGHTON WELSPUN CO.P.L 7 (I) ENGINEERING AND DRAUGHTING SERVICES PROVIDED BY AEC . (II) PAYMENTS FOR PURCHASE OF SHRINK WRAPPED SOFTWARE (I .E. STANDARD COMPUTER SOFTWARE) 3.8. DETAILED ARGUMENTS HAVE BEEN MADE BY THE LD. COUNS EL WITH RESPECT TO ALL THE AFORESAID FIVE PAYMENTS TO ARGUE THAT: A) THE ISSUE INVOLVED WITH REGARD TO DEDUCTIBILITY OF TDS ON THE IMPUGNED PAYMENTS IS HIGHLY DEBATABLE, B) THE ASSESSEE HAD BONAFIDE BELIEF WHILE MAKING PAYME NT WITHOUT DEDUCTING TDS, MORE SO BY RELYING UPON CAS CERTIFICATE C) IN ANY CASE THE ASSESSEE HAD A REASONABLE CAUSE AND THIS CASE IS COVERED BY SECTION 273B. HE HAS RELIED UPON VARIOUS JUDGMENTS TO SHOW THAT THE ISSUE INVOLVED I S DEBATABLE. 3.9. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES, SUBMISSIONS MADE, MATERIAL PLACED BEFORE US FOR OUR CONSIDERATION AND JUDGMENTS RELIED UPON BY BOTH THE SIDES. THE SOLITARY ISSUE, WHICH WE HAVE BEEN CALLED UPON TO DECIDE, IS THAT WHETHER IN THE GIVEN FACTS OF THE CASE WHET HER PENALTY LEVIED U/S 271C BY THE AO FOR THE ALLEGED FAILURE O F THE ASSESSEE IN DEDUCTION OF TAX AT SOURCE ON FIVE FORE IGN REMITTANCES, HAS BEEN RIGHTLY DELETED BY LD. CIT(A) . IN THIS REGARD, BEFORE DISCUSSING THE FACTS OF THIS CASE, I T IS NOTED BY US THAT PENALTY U/S 271C CAN BE LEVIED SUBJECT TO S ECTION 273B. IT PROVIDES THAT NO PENALTY SHALL BE IMPOSED ON THE M/S. LEIGHTON WELSPUN CO.P.L 8 PERSON OR THE ASSESSEE AS A CASE MAY BE FOR ANY FAI LURE RENDERED TO IN THE SAID PROVISIONS IF HE PROVES THA T THERE WAS REASONABLE CAUSE FOR THE SAID FAILURE. THEREFORE, IF ASSESSEE IS ABLE TO MAKE OUT THAT THERE WAS A REASONABLE CAUSE FOR HIS FAILURE IN DEDUCTION OF TAX AT SOURCES THEN POSITIO N OF LAW IS VERY CLEAR THAT PENALTY U/S 271C SHALL NOT BE LEVIE D. THUS, BEFORE LEVYING THE PENALTY, THE CONCERNED AUTHORITY IS REQUIRED TO FIND OUT IF THERE WAS A REASONABLE CAUSE ON TH E PART OF THE ASSESSEE. IT HAS BEEN HELD IN VARIOUS JUDGMENTS THA T REASONABLE CAUSE AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN OR PREVENT A PERSON OF AVERAGE INTE LLIGENCE AND ORDINARY PRUDENCE, FROM TAKING ACTION WHICH SAI D PERSON WOULD HAVE TAKEN IN THE NORMAL CIRCUMSTANCES, BUT F OR THE SAID CAUSE. IT CAN BE DESCRIBED AS A PROBABLE CAUSE , AND IT MEANS AN HONEST BELIEF FOUNDED UPON REASONABLE GROU NDS OF THE EXISTENCE OF A STATE OF CIRCUMSTANCES, WHICH, A SSUMING THEM TO BE TRUE WOULD REASONABLY LEAD ANY ORDINARY PRUDENT AND CAUTIOUS MAN, PLACED IN THE POSITION OF THE PER SON CONCERNED, TO COME TO THE CONCLUSION THAT THE SAME WAS THE RIGHT THING TO DO. 3.10. IN THIS REGARD WE CAN TAKE REFERENCE FROM THE JUDG MENT OF HONBLE DELHI HIGH COURT IN THE CASE OF WOODWARD GOVERNOR INDIA (P.) LTD. V. CIT (253 ITR 745) (DELHI) RELEVA NT PARA OF THE SAID JUDGMENT IS REPRODUCED BELOW: 'LEVY OF PENALTY UNDER SECTION 271C IS NOT AUTOMATIC. BEFORE LEVYING PENALTY, THE CONCERNED OFFICER IS RE QUIRED TO FIND OUT THAT EVEN IF THERE WAS ANY FAILURE REFERRE D TO IN THE M/S. LEIGHTON WELSPUN CO.P.L 9 CONCERNED PROVISION THE SAME WAS WITHOUT A REASONAB LE CAUSE. THE INITIAL BURDEN IS ON THE ASSESSED TO SHO W THAT THERE EXISTED REASONABLE CAUSE WHICH WAS THE REASON FOR THE FAILURE REFERRED TO IN THE CONCERNED PROVISION. THEREAFTER THE OFFICER DEALING WITH THE MATTER HAS TO CONSIDER WHETHER THE EXPLANATION OFFERED BY THE ASS ESSEE OR THE PERSON, AS THE CASE MAY BE, AS REGARDS THE R EASON FOR FAILURE, WAS ON ACCOUNT OF REASONABLE CAUSE. 'REASONABLE CAUSE' AS APPLIED TO HUMAN ACTION IS TH AT WHICH WOULD CONSTRAIN A PERSON OF AVERAGE INTELLIGE NCE AND ORDINARY PRUDENCE. IT CAN BE DESCRIBED AS A PRO BABLE CAUSE. IT MEANS AN HONEST BELIEF FOUNDED UPON REASO NABLE GROUNDS, OF THE EXISTENCE OF A STATE OF CIRCUMSTAN CES, WHICH ASSUMING THEM TO BE TRUE, WOULD REASONABLY LE AD ANY ORDINARY PRUDENT AND CAUTIOUS MAN, PLACED IN TH E POSITION OF THE PERSON CONCERNED, TO COME TO THE CO NCLUSION THAT SAME WAS THE RIGHT THING TO DO. THE CAUSE SHOW N HAS TO BE CONSIDERED AND ONLY IF IT IS FOUND TO BE FRIV OLOUS, WITHOUT SUBSTANCE OR FOUNDATION, THE PRESCRIBED CONSEQUENCES WILL FOLLOW.' 3.11. WE FURTHER NOTED FROM THE PERUSAL OF VARIOUS JUDGM ENTS THAT WHAT WOULD CONSTITUTE REASONABLE CAUSE CANNO T BE LAID DOWN WITH PRECISION AND THAT THE QUESTION AS TO WHE THER THERE WAS A REASONABLE CAUSE OR NOT FOR THE ASSESSEE NOT TO DEDUCT TAX AT SOURCE AT ALL OR UNDER SOME PARTICULAR PROVI SIONS THAN PRESCRIBED IS A QUESTION OF FACT WHICH IS REQUIRED TO BE ASCERTAINED IN THE FACTS AND CIRCUMSTANCES OF EACH CASE. 3.12. IN THE AFORESAID POSITION OF LAW WE HAVE ANALYSED FACTS OF THIS CASE, AS BROUGHT BEFORE US. IT IS NOTED THAT A S PER THE AO M/S. LEIGHTON WELSPUN CO.P.L 10 THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE FIVE REMITTANCES PARTICULARS OF WHICH HAVE BEEN NARRATED IN THIS ORDER ABOVE. FOR ANALYZING THE OBLIGATION OF THE AS SESSEE UNDER THE LAW TO DEDUCT TDS ON THESE PAYMENTS, WE CAN PUT THESE PAYMENTS INTO TWO CATEGORIES I.E. 1) PAYMENTS MADE FOR ENGINEERING AND DRAUGHTING SERVICES (I.E. DESIGN AN D DRAFTING SERVICES) AND 2) PAYMENTS MADE FOR PURCHASE OF SHRI NK WRAPPED SOFTWARE (I.E. A STANDARD COMPUTER SOFTWARE ). 3.13. AS FAR AS FIRST CATEGORY OF PAYMENT IS CONCERNED, THESE WERE MADE TO TWO PARTIES NAMELY AEC TECHNOLOG Y LTD., UK AND LYE SINGAPORE PTE. LTD., SINGAPORE. TH E ASSESSEE HAS SUBMITTED THAT HE WAS UNDER BONA FIDE BELIEF THAT THESE TWO PAYMENTS ARE NOT LIABLE FOR DEDUCTIO N OF TAX AT SOURCE UNDER THE INCOME TAX LAW OF OUR COUNTRY, FOR THE REASON THAT NATURE OF PAYMENT OF THESE SERVICES IS NOT FTS , AS PER INDIA-UK DTAA AND INDIA UK DTAA, FOR THE REASONS TH AT AS PER ARTICLE 13/12 OF THE FTS, THERE IS A MAKE AVAI LABLE CONDITION. IT HAS BEEN SUBMITTED THAT AS PER TERMS OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THESE P ARTIES, THE ASSESSEE IS CHARGED MERELY TO USE THE DESIGN SERVIC ES PROVIDED BY THE SERVICES PROVIDERS AND THAT THE ASSESSEE IS NOT ELIGIBLE TO APPLY TECHNOLOGY CONTAINED THEREIN. ON THE OTHER HAND, TO MAKE PAYMENTS OF THESE SERVICES TAXABLE IN INDIA, I NTO FORM OF FTS OR OTHERWISE, THE DEVELOPMENT AND TRANSFER OF TECHNICAL PLAN OR TECHNICAL DESIGN SERVICES SHOULD BE MADE AVAILABLE TO THE ASSESSEE IN SUCH A WAY IN WHICH THE ASSESSEE SHOULD BE IN A POSITION TO APPLY THE TECHNOLOGY CONTAINED IN THE TECHNICAL M/S. LEIGHTON WELSPUN CO.P.L 11 SERVICES AVAILED BY THE ASSESSEE FROM THESE PARTIES . IN ABSENCE OF THE SAME, THE PAYMENTS CANNOT BE CATEGORISED AS FTS UNDER THE TREATY LAW, AND CONSEQUENTLY, THERE WOULD ARISE NO OBLIGATION TO DEDUCT TAX AT SOURCE. 3.14. IT HAS BEEN SUBMITTED BY THE ASSESSEE THAT ON THIS ISSUE CLEAR LAW WAS NOT AVAILABLE, AND THEREFORE, ASSESSE E ADOPTED ONE OF THE VIEWS AVAILABLE IN A BONAFIDE MANNER. TH E SUBMISSIONS OF THE ASSESSEE WAS REJECTED BY THE AO ON THE GROUND THAT THERE WAS NO DEBATE ON THIS ISSUE, AND THE ASSESSEE WAS CLEARLY LIABLE TO DEDUCT TAX AT SOURCE . 3.15. WE HAVE ANALYSED THIS CONTROVERSY. IN OUR CONSIDER ED OPINION, NOT MUCH IS REQUIRED TO BE DELIBERATED TO SAY THAT WHETHER A PARTICULAR SERVICE ENTAILS MAKE AVAILABL E FACILITY OR NOT, CANNOT BE DECIDED UNDER THE STRAIGHT JACKET FO RMULA. THERE WOULD ALWAYS BE VARIOUS IFS AND BUTS IN DEC IDING THIS FACTOR AND THIS ISSUE WILL HAVE TO BE DECIDED IN TH E GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AFTER A LONG DRAWN PR OCESS. IT IS FURTHER NOTED BY US THAT THERE IS HUGE CONTROVERSY ARISING BEFORE VARIOUS COURTS WITH RESPECT TO THESE ISSUES. LD. COUNSEL OF THE ASSESSEE HAS DRAWN OUR ATTENTION ON CLAUSE 4 (C) OF ARTICLE 12 OF INDIA- SINGAPORE TREATY, WHICH DEAL W ITH ROYALTIES AND FEE FOR TECHNICAL SERVICES. CLAUSE 4(C) PROVIDE S THAT THE TERM FEE FOR TECHNICAL SERVICES EXCLUDES FROM ITS DEFINITION ANY SERVICE THAT DOES NOT ENABLE THE PERSON ACQUIRI NG THE SERVICES TO APPLY THE TECHNOLOGY CONTAINED THEREIN. M/S. LEIGHTON WELSPUN CO.P.L 12 3.16. IT IS FURTHER NOTED BY US THAT THE UNDISPUTED FACT IS THAT THERE WAS A CAS CERTIFICATE, AND RELYING UPON THE SAME ONLY THE ASSESSEE TOOK A VIEW THAT IT WAS NOT LIABLE TO DEDUCT TAX AT SOURCE ON THE PAYMENTS MADE TO THESE TWO PARTIES. 3.17. SIMILARLY, WITH REGARD TO PAYMENTS MADE TO REMAINI NG THREE PARTIES FOR PURCHASE OF SHRINK WRAPPED SOFTWA RE (I.E. STANDARD COMPUTER SOFTWARE), THE TDS WAS NOT DEDUCT ED BY THE ASSESSEE FOR THE REASON THAT THE IMPUGNED PAYMENTS WERE FOR A COPYRIGHTED ARTICLE, I.E. THEY WERE GOODS AND, THEREFORE, SUCH PAYMENTS WERE NOT NATU RE OF ROYALTIES AS PER THE INCOME TAX ACT AS WELL AS RESPECTIVE DTAAS. RATHER THESE WERE TO BE TREATED AS SALE OF GOODS AND WERE TREATED TAXABLE AS BUSINESS PROFITS. 3.18. IT IS NOTED THAT THERE IS HUGE CONTROVERSY ON THIS ISSUE, AND THEREFORE, ASSESSEE PLACED RELIANCE ON T HE JUDGMENTS WHICH WERE IN ITS FAVOUR INCLUDING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TA TA CONSULTANCY SERVICES 271 ITR 401. IT IS NOTED BY US THAT VARIOUS HIGH COURTS AND BENCHES OF THE TRIBUNAL HAV E TAKEN CONTRADICTORY STANDS ON THIS ISSUE. THE ASSES SEE HAS FURNISHED LIST OF VARIOUS CASES FOR AND AGAI NST THE ASSESSEE, ON THIS ISSUE. APPARENTLY, ASSESSEE ADOPT ED ONE OF THE VIEWS AVAILABLE. M/S. LEIGHTON WELSPUN CO.P.L 13 3.18. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO ACCEPT THE STAND OF THE AO THAT NO CONTROVERSY W AS INVOLVED ON THE OBLIGATION OF THE ASSESSEE FOR DEDU CTION OF TDS ON THE IMPUGNED PAYMENTS AND THAT VIEW TAKEN BY THE ASSESSEE WAS NOT ONE OF THE POSSIBLE VIEW AN D WAS NOT BONAFIDE VIEW, AND ACCORDINGLY THERE COULD NOT HAVE BEEN ANY REASONABLE CAUSE FOR NON-DEDUCTION OF TDS ON THE IMPUGNED PAYMENTS. IN OUR CONSIDERED OPINION, THE DECISION WITH REGARD TO THE OBLIGATION OF THE ASSESSEE FOR DEDUCTION OF TDS ON THE AFORESAID PAYMENTS WAS HIGHLY DEBATABLE, IN THE GIVEN FACTS O F THE CASE AND LEGAL SCENARIO DISCUSSED ABOVE. THE VIEW ADOPTED BY THE ASSESSEE BASED UPON THE CERTIFICATE OF THE C.A., WAS ONE OF THE POSSIBLE VIEWS AND CAN BE SAID TO BE BASED UPON BONAFIDE BELIEF OF THE ASSESSEE. THEREFORE, UNDER THESE CIRCUMSTANCES WE CAN HOLD TH AT THERE WAS REASONABLE CAUSE AS ENVISAGED U/S 273B FO R NOT DEDUCTING TAX AT SOURCE BY THE ASSESSEE ON THE AFORESAID PAYMENTS, AND THEREFORE, THE ASSESSEE WAS NOT LIABLE FOR LEVY OF PENALTY U/S 271C, AND THEREF ORE, THE LD. CIT(A) HAS RIGHTLY DELETED THE SAME. WE UPH OLD THE ORDER OF LD. CIT(A) AND DISMISS THE GROUNDS RAI SED BY THE REVENUE IN ITS APPEAL. M/S. LEIGHTON WELSPUN CO.P.L 14 4 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2015. SD/- (SAKTIJIT DEY ) SD/- (ASHWANI TANEJA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 30/11/2015 CTX? P.S/. .. !'#$%&%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A)- , MUMBAI 5. #$% &' , &' ) , / DR, ITAT, MUMBAI 6. %*+ , / GUARD FILE. / BY ORDER, # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI