Deputy Director of IT (International Taxation) v. Satellite Television Asian Region Ltd.

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The Tax Publishers2013 TaxPub(DT) 0384 (Mum-Trib) : (2013) 049 (II) ITCL 0273 INCOME TAX ACT, 1961 --Penalty under section 271C--Non-deduction of TDS Bona fide belief of assessee--Assessee and the channel companies were non-resident companies. Assessee made payments to channel companies for procurement of advertising time and claimed as deduction. It was under a bona fide belief that no tax was deductible at source under section 195 as payment was made to a non-resident company from a non-resident company and, therefore, it did not deduct any tax at source. Assessing officer while making assessment under section 143(3), held that the channel companies had business connection in India and undertook business operations in India, hence, they were taxable in India. Therefore, assessee was required to deduct tax at source under section 195 and as no tax was deducted, he disallowed the payment under section 40(a)(i). Assessee had deposited the tax immediately after passing of assessment order. By this time, no order under section 201(1A) was passed by treating assessee was 'assessee is in default' by assessing officer and the penalty was levied after expiry of eight years for delayed payment of tax. Assessee had also made an application under section 197 and it was after passing of these orders under section 197 that assessing officer had passed the order under section 143(3) wherein it was held that assessee was liable to deduct TDS. *Held:* Assessee was definitely under the bona fide belief that there was no requirement to deduct TDS on the payment made by a non-resident to a non-resident under section 195. Even the telecasting of signals by Satellite companies in India was not a source of income in India or business connection in India. Belief entertained by assessee was based on correct principles of law which stood reaffirmed by judicial pronouncements. If assessee had a bona fide belief that it was not required to deduct tax at source even if the amount was held taxable later on, it will not result in levy of penalty under section 271C. Income Tax Act, 1961, Section 271C Income Tax Act, 1961, Section 195 In the ITAT, Mumbai L Bench P.M. Jagtap, A.M. & Amit Shukla, J.M. DDIT (IT) v. Satellite Television Asian Region Ltd. ITA Nos. 6473 to 6475 (Mum.) of 2009 A.Ys. 2000-01 to 2002-03 6 July, 2012 *Decision:* In assessees favour. ORDER These are bunch of three appeals filed by the department against consolidated order dated 22-9-2009, passed by the Commissioner (Appeals)-11, Mumbai in relation to penalty proceedings under section 271C for the assessment year 2000-01, 2001-02 & 2002-03. Since the common issues are involved in all the three appeals, therefore, all the three appeals are being disposed off by this common order. For the sake of ready reference, grounds of appeal in ITA No. 6473/M/2009 (assessment year 2000-01), which are common in all the three appeals, are reproduced herein below : SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0384 (Mum-Trib) : (2013) 049 (II) ITCL 0273

INCOME TAX ACT, 1961

--Penalty under section 271C--Non-deduction of TDS Bona fide belief of assessee--Assessee and the channel companies were non-resident companies. Assessee made payments to channel companies for procurement of advertising time and claimed as deduction. It was under a bona fide belief that no tax was deductible at source under section 195 as payment was made to a non-resident company from a non-resident company and, therefore, it did not deduct any tax at source. Assessing officer while making assessment under section 143(3), held that the channel companies had business connection in India and undertook business operations in India, hence, they were taxable in India. Therefore, assessee was required to deduct tax at source under section 195 and as no tax was deducted, he disallowed the payment under section 40(a)(i). Assessee had deposited the tax immediately after passing of assessment order. By this time, no order under section 201(1A) was passed by treating assessee was 'assessee is in default' by assessing officer and the penalty was levied after expiry of eight years for delayed payment of tax. Assessee had also made an application under section 197 and it was after passing of these orders under section 197 that assessing officer had passed the order under section 143(3) wherein it was held that assessee was liable to deduct TDS. Held: Assessee was definitely under the bona fide belief that there was no requirement to deduct TDS on the payment made by a non-resident to a non-resident under section 195. Even the telecasting of signals by Satellite companies in India was not a source of income in India or business connection in India. Belief entertained by assessee was based on correct principles of law which stood reaffirmed by judicial pronouncements. If assessee had a bona fide belief that it was not required to deduct tax at source even if the amount was held taxable later on, it will not result in levy of penalty under section 271C.

Income Tax Act, 1961, Section 271C

Income Tax Act, 1961, Section 195

In the ITAT, Mumbai L Bench

P.M. Jagtap, A.M. & Amit Shukla, J.M.

DDIT (IT) v. Satellite Television Asian Region Ltd.

ITA Nos. 6473 to 6475 (Mum.) of 2009

A.Ys. 2000-01 to 2002-03

6 July, 2012

Decision: In assessees favour.

ORDER

These are bunch of three appeals filed by the department against consolidated order dated 22-9-2009, passed by the Commissioner (Appeals)-11, Mumbai in relation to penalty proceedings under section 271C for the assessment year 2000-01, 2001-02 & 2002-03. Since the common issues are involved in all the three appeals, therefore, all the three appeals are being disposed off by this common order. For the sake of ready reference, grounds of appeal in ITA No. 6473/M/2009 (assessment year 2000-01), which are common in all the three appeals, are reproduced herein below :