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Income Tax Appellate Tribunal, DELHI BENCH “F”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
ORDER PER H.S. SIDHU : JM
The Revenue has filed this Appeal against the impugned Order of the Ld. CIT(A)-42, New Delhi relevant to assessment year 2008-09.
The grounds raised read as under:-
“1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in quashing / deleting the penalty u/s. 271(1)(c) & 271AA of the I.T. Act.
2. The appellant craves to add, amend,
modify, or alter any grounds of appeal at the time or before the hearing of the appeal.”
3. Ld. Counsel of the assessee at the outset submitted that the ground raised by the revenue relates to the order of the Ld. CIT(A) in quashing / deleting the penalty u/s. 271(1)(c) and 271AA of the I.T. Act. He further submitted that Ld. CIT(A) has passed a consolidated order for deleting the penalties levied by the AO u/s. 271(1)(c) and 271AA of the I.T. Act. However, the Revenue has filed a separate appeal before the Tribunal vide challenging the deletion of penalty levied u/s. 271AA. Therefore, this appeal should be confined to the deletion of penalty u/s. 271(1)(c) of the I.T. Act. He further submitted that on identical facts and circumstances in assessee’s case for the assessment year 2006-07 the Tribunal vide order dated 23.2.2018 in ITA No. 3417/Del/2015 has dismissed the appeal of the Revenue, hence, the issue involved in the present appeal is squarely covered by the aforesaid decision and therefore, respectfully following the aforesaid precedent, the appeal of the Revenue may be dismissed.
3.1 Ld. Counsel of the assessee also submitted that assessee filed its return of income for the assessment year 2008-09 showing income of Rs. 37,93,300/-. The assessment order u/s. 143(3) of the I.T. Act, 1961 was passed on 29.12.2008 at an income of Rs. 507,114,396/-. The additions were made on account of profits attributable to PE Rs. 455,171,917/- and IPLC charges (Taxable@10%) Rs. 4,81,48,179/-.
The Tribunal decided the assessee’s appeal vide order dated 10.5.2013 in in which ITAT upheld that Assessee has a Permanent Establishment (PE) in India. This PE is in the form of fixed place PE. The Tribunal attributed 15% profits generated by the assessee to the Indian PE. On the third issue of taxability of IPLC charges as Equipment Royalty the payment is considered not taxable in the hands of the assessee.
Referring to the appeal filed by the Assessee before the Hon’ble Delhi High Court and vice versa against the order of the Tribunal, Ld. Counsel of the assessee drew our attention to the following questions of law that have been admitted by the Hon’ble Delhi High Court vide its Order dated 04.02.2015.
"The following questions of la arise in ITA Nos.3 and 4/2014: (9) Whether the Income Tax Appellate
Tribunal was correct in law and on facts in holding that the assessee had a fixed place
Permanent Establishment (PE) in terms of Article 5( I ) of the Indo US Tax Treaty?
(10) Whether in view of the nature of transaction which was procuring of computer software (IT enabled services) within the meaning of Section 1OA of the Act from its Indian Subsidiary for the purposes of export any income could accrue or arise in the hands of the assessee in India in view of clause (b) of Explanation 1 of Sub-Section) of Section 9 of the Act read with Article 7(4) of the Indo
US Tax Treaty?
The following substantial questions of law arise in 680 and 681/2014:
(13) Did the ITAT err in reducing the quantum of profit attributable to the Permanent Establishment (PE). in the circumstances of the case;
(14) Was the method of calculated profit adopted by the ITAT justified and correct;
(15) Whether the Revenue is correct in contending that the payments made on account of software expenses is royalty and whether the Revenue is justified in arguing that the findings of the ITAT of ? link charges? not being royalty are justified.
ADMIT
List for hearing on 29th April, 2015.”
Also referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Liquid Investment and Trading Co. vide dated 05.10.2010, he submitted that the Hon'ble High Court in the said decision has held that when substantial question of law is admitted by the Hon'ble High Court, the issue becomes debatable and, therefore, no penalty u/s. 271(1)(c) is leviable. He accordingly submitted that in view of the above legal position and in view of the earlier decision of the ITAT in assessee’s case for the assessment 2006-07, as aforesaid, the penalty u/s 271(1)(c) cannot be levied.
Ld. DR on the other hand supported the order of the Assessing Officer.
After hearing both the sides, we find the ld. CIT(A) while deleting the penalty levied by the Assessing Officer u/s 271(1)(c) has observed that the Hon'ble High Court has admitted the substantial question of law. Therefore, it is clear that the issue is subject to different interpretation. We do not find any infirmity in the order of the ld. CIT(A). As mentioned earlier, the Hon'ble High Court has already admitted the substantial question of law which has already been reproduced in the preceding paragraphs.
Therefore, in view of the decision of the Hon'ble High Court in the case of Liquid Investment and Trading Co. (supra), according to which, penalty cannot be levied when substantial question of law has been framed and admitted, therefore, in absence of any contrary material brought to our notice. Also exactly on identical and similar facts in assessee’s own case for the assessment year 2006-07 the Tribunal vide order dated 23.2.2018 in has dismissed the appeal of the Revenue.
Therefore, we do not find any infirmity in the order of the ld. CIT(A), hence, the same is upheld and the ground raised by the Revenue is dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on 22/06/2018.