THE COMMISSIONER OF INCOME TAX, V. M/S SUN MICROSYSTEMS INDIA PVT LTD

ITA/1049/2008

AI Insights

The case involves three appeals by the Commissioner of Income Tax, International Taxation, against M/s. Sun Microsystems India Pvt. Ltd., concerning the non-deduction of TDS on payments made to a company in Singapore for the assessment years 2000-01 and 2001-02. The primary legal question was whether penalties under Section 271C of the I.T. Act, 1961, were justifiably imposed for non-deduction of tax at source. The Tribunal had previously found that there was no liability to deduct tax at source, a decision which the revenue challenged in these appeals. The High Court's decision affirmed the Tribunal's ruling, emphasizing the absence of a deliberate attempt to evade tax by the assessee and the immediate corrective actions taken once the issue was identified.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728961 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-09-2014
• Assessment Year: misc
• Other Referred Cases: ITA No.35/2010
• Laws Referred To: I.T.Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A SHANKAR; M LAVA
• Assessee Lawyers: K V ARAVIND
• Keywords: Income tax appellate tribunal; International Taxation; Non-deduction; Penalty; TDS
• Section: 271C; 260-A

Judgement Text

"IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 22ND DAY OF SEPTEMBER 2014 PRESENT: THE HON'BLE MR.JUSTICE N.KUMAR AND THE HON'BLE MRS.JUSTICE RATHNAKALA ITA NO.1049 OF 2008 C/W. ITA NO.1051 OF 2008 ITA NO.1052 OF 2008 BETWEEN: 1. The Commissioner of Income Tax, International Taxation, Rashtrothana Bhavan, Nrupatunga Road, Bangalore. 2. The Additional Commissioner of Income Tax International Taxation, Rashtrothana Bhavan, Nrupatunga Road, Bangalore. …COMMON APPELLANTS (By Sri.K.V.Aravind, Advocate) : : 2 AND: M/s.Sun Microsystems India Pvt. Ltd., 6th Floor, Divyashree Chambers, Off Langford Road, Bangalore – 560 025. ...COMMON RESPONDENT (By Sriyuths. A Shankar and M.Lava, Advocates) ITA 1049/2008 is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 26.06.2008 passed in ITA No.445/BNG/2006, for the Assessment Year 2001-02 praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the Income Tax Appellate Tribunal, Bangalore, in ITA No.445/BNG/2006 dated 26.06.2008, confirming the order of the Appellate Commissioner and the order passed by the Additional Commissioner of Income Tax, International Taxation, Bangalore, in the interest of justice and equity. ITA 1051/2008 is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 26.06.2008 passed in ITA No.446/BNG/2006, for the Assessment Year 2000-01 praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the Income Tax Appellate Tribunal, Bangalore, in ITA No.446/BNG/2006 dated 26.06.2008, confirming the order of the Additional Commissioner of Income Tax International Taxation, Bangalore, in the interest of justice and equity. ITA 1052/2008 is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 26.06.2008 passed in ITA No.551/BNG/2006, for the Assessment Year 2000-01 praying to formulate the substantial questions of law stated : : 3 therein and allow the appeal and set aside the order passed by the Income Tax Appellate Tribunal, Bangalore, in ITA No.551/BNG/2006 dated 26.06.2008, confirming the order of the Assistant Commissioner of Income Tax, International Taxation, Bangalore, in the interest of justice and equity. These Appeals coming on for Admission, this day, N.KUMAR, J., delivered the following: J U D G M E N T These three appeals are preferred by the revenue challenging the order passed by the Tribunal setting aside the order imposing penalty for failure to deduct TDS. 2. The substantial question of law which is raised in these appeals is as under: “Whether the Tribunal was correct in holding that no penalty under Section 271C of the Act can be levied on the assessee for non- deduction of tax in respect of payments made by the assessee to its company at Singapore as the issue of deducting tax had not settled? : : 4 3. The material on record discloses that when the auditors of the company pointed out that the TDS is not deducted and paid to the revenue, immediately TDS was deducted and it was paid to the revenue. The explanation offered was that they were under the bonafide belief that the TDS is not required to be deducted. In fact in one of the cases in ITA No.35/2010 decided on 02.06.2014, the appeal preferred by the revenue challenging the finding of the Tribunal that there is no liability to deduct tax at source came to be dismissed at the stage of admission itself. 4. In the given circumstance, the Tribunal was of the view that there is no deliberate intention in not deducting or not paying the tax and the explanation offered is acceptable and therefore it has set aside the order. We do not find any justification to interfere with the well considered order passed by the Tribunal as the conduct of the assessee do not lead to the conclusion that there was : : 5 any attempt on the part of the assessee to avoid deducting TDS and remitting the same to the revenue. Accordingly, the substantial question of law is answered in favour of the asseessee and against the revenue. No merits. Appeals are dismissed. Sd/- JUDGE Sd/- JUDGE Prs* "