MICROAD INDIA PRIVATE LIMITED,DELHI V. DCIT CIRCLE - 16(2), DELHI

ITA 4715/DEL/2024

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Microad India Pvt. Ltd., an Indian subsidiary of a Japanese conglomerate, appealed against a penalty imposed by the NFAC for non-deduction of TDS on payments made to its associated enterprises in Japan and Singapore for online advertisements. The Assessing Officer initially made an addition of Rs. 94,84,079 under section 40(a)(i) for non-deduction of TDS, which was later reduced to Rs. 50,19,782 by the CIT(A). Both parties accepted the CIT(A)'s decision without further appeal. However, the department later imposed a penalty under section 271(1)(c) for concealment of income, which the Tribunal found unjustified, citing the absence of a deliberate intent to conceal income and the professional assessments provided in Forms 15CA and 15CB.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712542 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Assessee Lawyers: NIKHIL KHANNA
• Keywords: Difference of opinion; Transfer pricing; TDS; Double taxation relief; Recovery proceedings
• Section: 143(3); 271(1)(c)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘E’: NEW DELHI) BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No:- 4715/Del/2024 Assessment Year: 2015-16 Microad India Pvt. Ltd, 29, Patparganj Industrial Area, Delhi-110092. Vs. NFAC, Delhi. PAN No:AAICM3667L APPELLANT RESPONDENT Assessee by : Sh. Nikhil Khanna, CA Revenue by : Sh. Dheeraj Kumar Jain, Sr. DR Date of Hearing : 15.07.2025 Date of Pronouncement : 31.07.2025 ORDER PER ANUBHAV SHARMA, JM: This appeal has been preferred by the Assessee against the order dated 14.08.2024 of National Faceless Appeal Centre, Delhi, [hereinafter referred to as ‘NFAC / CIT(A)’] in Appeal No. NFAC/2014-15/10101940 arising out of an appeal beforeit against the order dated 11.02.2022 passed u/s 271(1)(c) of the Income Tax Printed from counselvise.com ITA No.-4715/Del/2024 Microad India Pvt. Ltd. 2 Act, 1961 (hereinafter referred as ‘the Act’) by the National Faceless Assessment Centre, Delhi for Assessment Year 2015-16. 1.1 The assessee has raised the following grounds: “ 1. Without prejudice to other grounds, and with due respect, the learned Assessing Officer erred in levying a penalty of Rs. 15.06 Lacs on the amount of addition i.e Rs. 50.19 lacs as mere Rejection of the explanation/contention raised by the assessee company cannot lead to the conclusion that there has been any concealment of material facts. 2. With due respect, the learned Assessing Officer erred in levying a penalty of Rs. 15.06 Lacs on the amount of addition i.e Rs. 50.19 lacs on account of non-deduction of TDS. On the facts and in the circumstances of the case, the addition pertains to an amount on which there is a difference of opinion, not concealment. Mere difference of opinion/taking a position contrary to the view taken by the AO cannot amount to the assessee company concealing facts material to the computation of income. 3. Without prejudice to other grounds, and with due respect, the learned Assessing officer erred in levying a penalty u/s 271(1)(c). On the facts and in the circumstances of the case, the department had also accepted the verdict of the CIT(A) and the fact that department did not appeal against the original order of CIT(A) laid the fact there was no concealment of income and the department accepted the technical nature of the transactions on which TDS wasn't deducted as laid out in the CIT(A) orders. 4. Without prejudice to other grounds, and with due respect, the learned Assessing Officer erred in levying a penalty of Rs. 15.06 Lacs on the amount of addition i.e. Rs. 50.19 lacs as there was no conscious and deliberate intent on the part of the assessee to hide of conceal the income in as fin avoid the imposition of tax thereon, i e, element of mens rea (guilty mind) that is a must to levy penalty did not exist. 5. Without prejudice to other grounds, and with due respect, the learned Assessing Officer erred in levying a penalty of Rs. 15.06 Lacs on the amount of addition i.e. Rs. 50.19 lacs as an Addition to income/rejection of claim for certain expenditure/disallowance of a Printed from counselvise.com ITA No.-4715/Del/2024 Microad India Pvt. Ltd. 3 debatable claim itself does not lead to an inference of concealment or furnishing of inaccurate particulars of income. 6. Without prejudice to other grounds, and with due respect, the learned Assessing Officer erred in levying a penalty of Rs. 15.06 Lacs on the amount of addition i.e. Rs. 50.19 lacs as the mere fact that the assessee firm has not filed appeal with the Tribunal against the orders of the AO/CIT(A) in will not render the provisions of section 271(1)(c) of the Act applicable to the case 7. Without prejudice to other grounds, and with due respect, the learned Assessing Officer be directed to stay the demand and immediately stop recovery proceedings till disposal of this appeal given the ground mentioned above.” 2. Heard and perused the records. The appellant is an Indian Company engaged in the business of selling internet-based advertisement to its clients. The appellant is a fully owned Indian subsidiary of a Japanese conglomerate. During the course of the year, the appellant sourced the advertisements that it sold to its clients- from its Japan and Singapore based Associated Enterprises (AEs) that in turn procured them from third party platforms like Google. Facebook etc. During the course of 143(3) assessment, the learned Assessing Officer made the addition/disallowance of Rs. 94,84,079 u/s 40 (a) (i) on account of non-deduction of TDS u/s 195 for payments made by the appellant to its AE(s) for purchase of online advertisement on third party platforms after deeming them Fees for Technical services. The appellant submitted that the Printed from counselvise.com ITA No.-4715/Del/2024 Microad India Pvt. Ltd. 4 aforesaid transactions were in nature of purchase of online advertisements from AEs, and were covered under Article 7 of Business Profits of the respective DTAAs with Japan and Singapore, thus not liable to TDS deduction. The appellant preferred an appeal against this order of assessment to delete this addition. The learned CIT(A) after hearing the submissions of the appellant partially allowed the appeal and reduced the amount of disallowance from Rs. 94,84,079 to Rs. 50,19,782. It allowed all purchases of advertisements from Japan (with which the assessee had a signed agreement) but disallowed the Purchases from Singapore (with which there was no formal agreement) Both, the Assessee as well as the Department accepted the order of CIT(A) and did not appeal against the order of CIT(A). However, the department after 3 years, passed an order of penalty against the Assessee u/s 271(1)c for concealment of income/furnishing inaccurate details on the reduced amount of addition. 3. Now what we find is that as a matter of fact, during the course of assessment itself, relevant Form 15CAs were duly filed wherein assessee had explicitly mentioned relevant provisions of the Income Tax Act and relevant DTAAs as the reasons for non-deduction of Printed from counselvise.com ITA No.-4715/Del/2024 Microad India Pvt. Ltd. 5 TDS on the aforesaid expense amounts remitted from India. This considered view was further corroborated on the basis of Certificates in Form 15CBs issued by professionally qualified Chartered Accountants for making such remittances. These 15C as and 15CBs were filed for all transactions, be it from Japan or Singapore. No penal action was taken under TDS sections against the Asesssee nor were any steps taken by the department to tax the amounts received by Microad Singapore entity. The fact that online advertisements brought from abroad are not taxable under the provisions of the Income Tax act read with the relevant Double Taxation Avoidance Agreements is corroborated by introduction of Equalization Levy (popularly known as Google Tax) from April 1, 2016 as laid u/s 165 of the Finance Act 2016 (and not Income Tax Act) to tax such transactions explicitly. Thus we find that the addition pertains to an amount on which there was a difference of opinion, and attributing concealment or inaccurate furnishing of facts, is not justified. The fact that the learned CIT(A) allowed a quantum of transactions itself proves that there is a difference of opinion between the AO, Assessee and the Learned CIT(A) towards how to the aforesaid transactions ought to be treated from TDS Printed from counselvise.com ITA No.-4715/Del/2024 Microad India Pvt. Ltd. 6 perspective. The grounds are sustained and appeals is allowed. The impugned penalty is quashed. Order pronounced in the Open Court on 31.07.2025 Sd/- Sd/- (S RIFAUR RAHMAN) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 31/07/2025. Pooja/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "