Woodward Governors India (P) Ltd. Vs CIT & Ors. (Delhi High Court)
Delhi High Court reviewed the case of Woodward Governors India (P) Ltd. vs. CIT & Ors., wherein the company challenged the penalty imposed under Section 271C of the Income Tax Act, 1961. The dispute arose from the company’s failure to properly deduct TDS on the salary of an expatriate employee, leading to a penalty of ₹27,68,844. The petitioner contended that the payment was made by a non-resident company and that the deeming provision of Section 9(1)(ii) of the Act should not automatically establish an obligation under Section 192 to deduct TDS. The Commissioner of Income Tax rejected the company’s appeal, upholding the penalty.
The petitioner argued that under Section 273B of the Act, the penalty should not be imposed if a reasonable cause for non-compliance existed. The company’s legal counsel asserted that the Commissioner failed to assess the existence of reasonable cause before confirming the penalty. The revenue department maintained that the petitioner was given the opportunity to present its case and that liability under Section 192 was applicable, making the penalty justified.
The High Court analyzed Sections 271C and 273B, emphasizing that penalty imposition is not automatic. It held that the provision under Section 273B provides relief if an assessee proves the existence of a reasonable cause. Citing judicial precedents such as Orient Paper & Industries Ltd. v. State of Orissa (AIR 1991 SC 672) and T.R. Thandar v. Union of India (AIR 1996 SC 1643), the Court reiterated that a “non-obstante” clause gives overriding effect to the specific provision it precedes. Consequently, the absence of reasonable cause is a prerequisite for penalty imposition under Section 271C.
