2013 (1) TMI 507 - AT - Income Tax

Non deduction of TDS on equipment hire charges paid to the doctors - levy of interest under section 201(1A) - penalty u/s 271C - Held that - Not in dispute that before the A.O. it was submitted that the assessee was under the bonafide belief that in respect of equipment hire charges paid to doctors the assessee was not liable to deduct TDS as the payment to doctors was in the nature of reimbursement of expenses. In the absence of any contrary material placed on record by the Revenue to show that the bonafide belief shown by the assessee is found to be false or untrue and keeping in view that the reimbursement of charges paid by the assessee do not have any element of income respectfully following the decisions of All India J.D. Educational Society 2010 (11) TMI 668 - DELHI HIGH COURT Eli Lilly & Company (India) Pvt. Ltd. 2009 (3) TMI 33 - SUPREME COURT & Hindustan Steel Ltd. vs. State of Orissa 1969 (8) TMI 31 - SUPREME COURT hold that there was a reasonable cause that the assessee was under the bonafide belief that he is not liable to deduct tax at source - uphold the order passed by the CIT(A) in deleting the penalty - in favour of assessee.

Summary

Issues:
Penalty imposition under section 271-C of the Income Tax Act for non-deduction of TDS on equipment hire charges paid to doctors by a charitable trust running a hospital and research center in Mumbai for the assessment years 2007-08 and 2008-09.

Analysis:
The appeals by the Revenue were directed against separate orders passed by the ld. CIT(A)-14, Mumbai for the assessment years 2007-08 and 2008-09. The common issue involved in both appeals was the penalty imposition under section 271-C of the Income Tax Act for non-deduction of TDS on various payments, including equipment hire charges to doctors. The A.O. held the assessee to be in default and imposed penalties for both years. The assessee contended that there was a reasonable cause for not deducting TDS on equipment hire charges due to a lack of awareness of the amendment in the definition of rent. The ld. CIT(A) relied on case laws and held that the assessee had a reasonable cause, deleting the penalties imposed by the A.O.

For the assessment year 2007-08, the ld. CIT(A) referred to relevant case laws, including CIT vs. Eli Lilly and Co. (India) Pvt. Ltd. and CIT vs. Schell International, to support the decision that the assessee had a reasonable cause for non-deduction of TDS. The A.O. had imposed a penalty, but the ld. CIT(A) overturned this decision based on the assessee's reasonable cause and lack of malafide intention.

Similarly, for the assessment year 2008-09, the ld. CIT(A) followed the decision made for the previous year and deleted the penalty imposed by the A.O. The Revenue challenged these decisions, arguing that the penalties should be restored based on a different decision. However, the assessee's representative defended the position, emphasizing the nature of payments made to doctors and the lack of intentional non-compliance.

The Tribunal carefully considered the submissions and found that the assessee had a reasonable cause for not deducting TDS on equipment hire charges. Referring to relevant case laws, including Eli Lilly and Co. (India) P. Ltd. and Hindustan Steel Ltd., the Tribunal upheld the ld. CIT(A)'s decision to delete the penalties for both assessment years. The Tribunal concluded that the bonafide belief of the assessee and the nature of charges paid did not warrant penalty imposition under section 271-C of the Income Tax Act. The appeals by the Revenue were dismissed, affirming the decisions made by the ld. CIT(A).

In summary, the Tribunal ruled in favor of the assessee, considering the reasonable cause for non-deduction of TDS on equipment hire charges paid to doctors and the lack of malafide intention. The decisions were supported by relevant case laws, and the penalties imposed by the A.O. were deemed unjustified based on the circumstances presented by the assessee.