DCIT, NEW DELHI vs. M/S. CONVERGYS CUSTOMER MANAGEMENT GROUP INC., GURGAON

PDF · subscribers
ITA 3417/DEL/2015Status: DisposedITAT Delhi23 February 2018AY 2006-074 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order deleting the penalty. It reasoned that since the High Court had admitted substantial questions of law, the issue was debatable, making penalty under Section 271(1)(c) not leviable.

What were the facts?

The Revenue appealed the deletion of a penalty levied under Section 271(1)(c) of the Income Tax Act. The penalty was related to additions made to the assessee's income concerning a Permanent Establishment (PE) and software/IPLC charges.

What were the issues?

Whether penalty under Section 271(1)(c) can be levied when substantial questions of law have been admitted by the High Court.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “F”, NEW DELHI

Before: SHRI R. K. PANDA & SMT. BEENA A. PILLAI

For Appellant: Shri Ravi Sharma, Adv. &, Shri Mudit Sharma
For Respondent: Shri Atiq Ahmad, Sr.DR, Shri Ravi Sharma, Adv. &, Shri Mudit Sharma

O R D E R

PER R. K. PANDA, AM :

1.

This appeal filed by the Revenue is directed against the order dated 02.03.2015 of the CIT(A)- 42, New Delhi relating to assessment year 2006-07.

2.

Deletion of penalty of Rs.23,90,093/- by the ld. CIT(A) which was levied by the Assessing Officer u/s 271(1)(c) of the I.T. Act, 1961 is the only issue raised by the Revenue in the grounds of appeal

3. Ld. counsel for 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 submitted that the ld.

CIT(A) has passed a consolidated order for deleting the penalties levied by the Assessing Officer 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.

4.

Ld. counsel for the assessee at the outset submitted that the assessee filed its return of income for the assessment year 2006-07 showing income of Rs.40,006,350/-. The assessment order u/s 143(3) of the I.T. Act, 1961 was passed on 29.12.2008 at an income of Rs.2,944,673,964/-. The additions were made on account of profits attributable to PE Rs.2,844,567,544/-, Software (Taxable @ 15%) Rs.6,817,878/- and IPLC Charges (Taxable @ 10%)

Rs.53,282,192/-.

5.

The Tribunal decided the assessee’s appeal vide order dated 10.05.2013 in and ITA No.1376/Del/2012 in which the Tribunal held that the 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 India PE. On the issue of taxability of software (taxable @ 15%) the Tribunal held it to be not taxable in the hands of assessee. On the third issue of taxability of IPLC charges as Equipment Royalty the payment is considered not taxable in the hands of the assessee.

6.

Referring to the appeal filed by the assessee before the Hon’ble High Court and vice-versa against the order of the Tribunal, he drew the attention of the Bench to the following questions of law that have been admitted by the Hon’ble High Court :-

“The following questions of law arise in 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(1) 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 10A 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 (1) 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 ITA Nos.679, 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.”

7.

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 penalty u/s 271(1)(c) cannot be levied.

8.

Ld. DR on the other hand supported the order of the Assessing Officer.

9.

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, we do not find any infirmity in the order of the ld. CIT(A). Accordingly, the same is upheld and the grounds raised by the Revenue are dismissed.

10.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open Court on this 23rd February, 2018.

More judgments on Section 271(1)(c)

All 25,141 judgments and leading authorities on Section 271(1)(c) →

Recent GST High Court judgments

Search GST case law →