2023 (12) TMI 1043 - HC - Income Tax

Penalty levied u/s 271(1)(c) - undisclosed income taxable as royalty - assessee earned revenues from two streams i.e. web hosting and domain registration charges and offered revenue from web hosting services to tax in the return filed for the relevant AYs but did not offer to tax its income from domain registration services for the reason that it was under a bonafide belief that this income is not chargeable to tax - HELD THAT - Insofar as these appeals were concerned, the question of law, as framed, was answered in favour of the respondent/assessee and against the appellant/revenue by this Court in 2023 (12) TMI 718 - DELHI HIGH COURT reads as follows Whether on the facts of the case and in law, the Income Tax Appellate Tribunal in short, Tribunal erred in holding that the income received by the appellant as a consideration for providing domain name registration services amounted to royalty‟ under Section 9(1)(vi) of the Income Tax Act, 1961 ? Given the position that the respondent/assessee before us has succeeded in the aforementioned appeals, the penalty imposed in the instant appeal cannot be sustained. Therefore, the impugned order, in our opinion, requires no interference.

Summary

Issues involved:
The appeal concerns Assessment Year (AY) 2014-15. The Tribunal was called upon to adjudicate the legal tenability of two separate orders dated 30.09.2019 passed by the Commissioner of Income Tax (Appeals) [in short, "CIT(A)"�], whereby, he had deleted the penalty amounting to Rs. 1,97,31,721/- and Rs. 4,95,98,366/-, levied under Section 271(1)(c) of the Income-tax Act, 1961 [in short, "the Act"�], for AY 2013-14 and AY 2014-15.

Details of the Judgment:

Adjudication by Tribunal:
The Tribunal observed that the issue involved in the appeal was debatable and relied on the fact that quantum appeals were pending in the Court. The Tribunal noted that the assessee earned revenues from web hosting and domain registration charges but did not offer income from domain registration services for taxation, believing it was not chargeable. The penalty imposed by the Assessing Officer (AO) was deleted by the CIT(A) based on detailed observations and findings. The Tribunal found the issue to be debatable as the position in law was not settled, and the penalty for both AYs was deemed non-exigible.

Quantum Appeals Outcome:
Quantum appeals filed by the respondent/assessee for AYs 2013-14, 2014-15, and 2015-16 were answered in favor of the respondent/assessee and against the appellant/revenue. The Court framed a question of law regarding whether the income received for providing domain name registration services amounted to "royalty"� under Section 9(1)(vi) of the Income Tax Act, 1961. As the respondent/assessee succeeded in the appeals, the penalty imposed in the instant appeal could not be sustained.

Conclusion:
The Court found that the impugned order required no interference, and therefore, the appeal was closed. The application for condonation of delay was deemed inefficacious and closed. The parties were instructed to act based on the digitally signed copy of the order.