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2018 (6) TMI 1314 - AT - Income TaxPenalty u/s. 271(1)(c) & 271AA - additions made on account of profits attributable to PE and IPLC charges (Taxable@10%) - 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 - Held that - the issue is subject to different interpretation. No 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 in the case of Liquid Investment and Trading Co. (2010 (10) TMI 1021 - DELHI HIGH COURT), 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. - decided against revenue.
Issues:
Appeal against deletion of penalties u/s. 271(1)(c) & 271AA of the I.T. Act for assessment year 2008-09. Analysis: 1. The appeal was filed by the Revenue against the deletion of penalties u/s. 271(1)(c) & 271AA of the I.T. Act for the assessment year 2008-09. The counsel of the assessee argued that the issue of penalty deletion was already covered by a previous decision of the Tribunal in the assessee's case for the assessment year 2006-07, where the appeal of the Revenue was dismissed. The counsel contended that the penalty u/s. 271(1)(c) cannot be levied based on the legal position established by the earlier decision and the admission of substantial questions of law by the Hon'ble High Court. 2. The Tribunal, in its decision, upheld that the assessee had a Permanent Establishment (PE) in India in the form of a fixed place PE. It attributed 15% of the profits generated by the assessee to the Indian PE. Additionally, the Tribunal ruled that the IPLC charges were not taxable as Equipment Royalty in the hands of the assessee. The decision was based on the assessment order passed under section 143(3) of the I.T. Act, 1961, which included significant additions to the income of the assessee. 3. The counsel of the assessee referred to the questions of law admitted by the Hon'ble Delhi High Court, which included issues related to the existence of a fixed place PE, taxability of income in India, and the nature of payments made for software expenses. The counsel highlighted that the admission of substantial questions of law by the High Court made the issue debatable, leading to the conclusion that no penalty u/s. 271(1)(c) should be levied. 4. After considering the arguments from both sides, the Tribunal upheld the deletion of penalties by the ld. CIT(A). The Tribunal noted that the substantial questions of law admitted by the High Court indicated a different interpretation of the issue, making it debatable. Citing the precedent set by the decision in the case of Liquid Investment and Trading Co., the Tribunal concluded that in the absence of contrary material, the penalty cannot be levied. The Tribunal also referred to the previous decision in the assessee's case for the assessment year 2006-07, where a similar appeal by the Revenue was dismissed. 5. Consequently, the Tribunal dismissed the appeal filed by the Revenue against the deletion of penalties u/s. 271(1)(c) & 271AA of the I.T. Act for the assessment year 2008-09. The decision was based on the legal position established by the admission of substantial questions of law and the previous decision in the assessee's case for the assessment year 2006-07. Judgment: The appeal by the Revenue against the deletion of penalties u/s. 271(1)(c) & 271AA of the I.T. Act for the assessment year 2008-09 was dismissed by the Tribunal based on the legal position established by the admission of substantial questions of law and the previous decision in the assessee's case for the assessment year 2006-07.
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