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TMI Blog2012 (7) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (AY 2000-01), which are common in all the three appeals, are reproduced herein below :- "1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the penalty u/s. 271C for non deduction of tax at source. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that the assessee had a bonafide belief that the channel companies are not taxable in India and hence tax was not required to be deducted on payment made to channel companies. 3. The appellant prays that the order of the ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2 . Brief facts of the case as culled out from the records are that the assessee 'Star Limited' is a company incorporated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being made for the purpose of airtime, therefore, before making the payments to said Channel Companies, it was under a bonafide belief that no tax is deductible at source under section 195 as the payment was made to a non-resident company from a non-resident company in respect of its transaction with a Channel Companies for procuring procurement of advertising time as their companies were not taxable in India. 2.2 The assessment of the assessee company for the assessment years in question were completed by the Assessing officer under Section 143(3), wherein it was held that the channel companies have business connection in India and further they undertake business operations in India, hence, they are taxable in India. Thus, according to the Assessing Officer, tax was required to be deducted at source by the assessee from the credits/payments made to the Channel Companies under section 195 of the Act. Since, the tax was not deducted and paid to the Government, the Assessing Officer disallowed the cost of advertising airtime procured by the assessee from the Channel Companies under the provisions of section 40(a)(i). Against the said order, the assessee preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, cured the defect, the levy of penalty cannot be stopped; ( iv ) Levy of penalty under section 271C of the Act operates by operation of law and accordingly, there is no requirement of order under section 201 of the Act before levy of penalty; ( v ) Show cause notice dated March 9, 2006 was for default under section 201(1) of the Act and 201(IA) of the Act and any mention of levy of penalty in the said notice has no relevance since the AO did not have jurisdiction to either initiate penalty proceeding or levy the penalty; accordingly, the time limit for levy of penalty under section 271C of the Act should run from the show cause notice dated February, 9, 2008. As a result, the order for levy of penalty under section 271C of the Act is not time barred; and ( vi ) The appellant has introduced the abstract concept of 'outright sale of advertisement airtime' and has tried to confuse the Revenue department. The intention of the appellant is to make the issue artificially complicated. 3. Before the CIT(A), the assessee had made detail submissions primarily on these grounds that :- ( i ) penalty proceedings are barred by limitation; ( ii ) there was bonafide be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT v. Eli Lilly and Company Private Limited, reported in 312 ITR 225, has held that liability for Penalty under section 271C of the Act can be fastened only if there is no good and sufficient reasons for not deducting tax at source. 3.2 Finally the CIT(A) has concluded his order after observing that in this case there is difference of opinion on three questions of law :- "( a ) Whether the payment by a non-resident made outside India requires application of 195 of the Act and whether such payment is chargeable to tax under the Income Tax Act. ( b ) Whether application is required to be made under section 195(2) of the Act by a taxpayer even where the payment to be made by him of any sum to another non-resident which is not chargeable to tax in India. In other words, even in respect of income not chargeable to tax, whether permission of Assessing Officer u/s 195(2) of the Act is necessary. ( c ) Whether the Channel Companies, recipient of payment, have a business connection in India and whether their income is taxable in India." Accordingly, he deleted the penalty on the ground that the assessee had a genuine bonafide belief and had reasonable cau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in the case of Asia Satellite Telecommunications Co. Ltd. v. Director of Income-tax , reported in [2011] 332 ITR 340 (Delhi). From these case laws, it has been submitted before us, that there cannot be any doubt that the belief entertained by the assessee was based on correct principles of law which has now stands reaffirmed by the judicial pronouncements. Ld. Counsel further submitted that failure to make an application under Section 195(2) does not render the gross amount taxable as held by the Assessing Officer and this view is fully supported by the decision of the Hon'ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. Commissioner of Income-tax , reported in 327 ITR 456. Lastly, on the issue of bonafide belief, he has relied upon catena of case laws including that of Hon'ble Supreme Court in the case of CIT v. Eli Lilly and Company Private Limited ( supra ). 5. Learned Senior DR submitted that, deductor cannot file application under Section 197 and recourse for the assessee was to file application under Section 195(2), which has not been done. The law was always very clear and the assessee has even admitted its default. All the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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