Redington Distribution Pte. Ltd. Vs ACIT (ITAT Chennai)
Assessee, a Singapore-based subsidiary of Redington (India) Ltd., filed appeals against penalty levied u/s 270A(2) for alleged under-reporting of income attributable to its alleged PE in India.
A survey u/s 133A at Redington (India) Ltd. in Dec 2017 revealed a “Dollar Business” team handling USD transactions for Indian customers. AO concluded that Assessee had both fixed place & dependent agent PE in India. Substantial profits (nearly 90%) were attributed to such PE across AYs 2017-18 to 2020-21, resulting in large additions. These were partly upheld by DRP/ITAT, but Assessee simultaneously opted for MAP under India-Singapore DTAA, which led to significant downward adjustment (>80% reduction) & corresponding relief in Singapore to avoid double taxation.
AO levied penalty u/s 270A on the final adjusted income (post-MAP), alleging under-reporting. CIT(A) confirmed the levy.
Tribunal’s findings:
- Penalty proceedings are distinct & not automatic. Use of “may” in Sec 270A shows discretion.
- Sec 270A(6)(a) carves out exception where Assessee offers bonafide explanation & discloses material facts.
- Existence of PE was a debatable issue, already admitted as substantial question of law by High Court.
- Assessee had disclosed all material facts & acted under bonafide belief (supported by judicial precedents like E-Funds IT Solutions & Morgan Stanley).
- MAP resolution itself showed that authorities “agreed to disagree” on PE existence; additions were settled on ad-hoc basis, further proving the issue was subjective & estimative.
- Citing CIT v. Liquid Investment & Trading Co. (Del HC) & Tribunal’s own earlier orders (including Raytheon Co.), it was held that such debatable issues cannot trigger penalty.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
