Case Law Details
Coordinate Bench of ITAT in the assessee’s own case for A.Y. 2001-02 vide order in ITA 2493/Mum/2012 dated 07.04.2017 has upheld the CIT(A)’s finding that keeping in view the principle of mutuality the assessee is not required to deduct tax at source on payments to KPMG International and (ii) Revenue has not challenged the order of the CIT(A)-10, Mumbai dated 29.02.2012 deleting the penalty levied under section 271C of the Act for A.Y. 2001-02; we are of the considered view that since the very basis for levy and upholding of penalty under section 271C of the Act by the authorities below for assessment years 2000- 01 and 2002-03 to 2004- 05 does not survive, the orders levying/upholding the aforesaid penalty are not sustainable.
Full Text of the ITAT Order is as follows:-
These appeals by the assessee are directed against the orders of the CIT(A)-XXXIII, Mumbai dated 31.03.2008 for assessment years 2001- 02, 2002- 03 to 2004- 05, confirming the levy of penalty under section 271C of the Income Tax Act, 1961 (in short ‘the Act’).
2. The facts of the dispute, briefly, are as under: –
2.1 The assessee firm, set up in India under the Indian Partnership Act, 1932 with the permission of the Secretariat of Industrial Approvals, Ministry of Industry, Government of India and the Reserve Bank of India, is a member of the KPMG International, a Verein (i.e. an association) established under the laws of the Swiss Confederation with its Headquarters in the Netherlands. The assessee had entered into a Licence Agreement and a Membership agreement both dated 01.10.1998 with KPMG International and also entered into separate sub- licence agreements with other member entities in India of KPMG International. Pursuant to the aforesaid licence, sub-licence and membership agreement the assessee made remittances to KPMG International in respect of contribution towards share of costs (i.e. cash calls), reimbursement of charges towards intuition of computer based banking, bank guarantees, professional indemnity insurance, etc. in respective years as these charges arose, without deduction of tax at source as the same were, in the assessee’s opinion, not chargeable to tax. The Assessing Officer (AO) issued show cause notices for the assessment years under consideration (i.e. 2000- 01 and 2002- 03 to 2004- 05) requiring the assessee to explain why the said amounts were paid/ remitted to the NRI, KPMG International without deducting tax at source. After considering the assessee’s explanation, the AO passed orders under section 201(1) and 201(1A) of the Act all dated 06.03.2007 for the assessment years in question, holding the assessee to be an assessee in default for not deducting tax at source while making the aforesaid payments to KPMG International which constituted Royalty. The AO also simultaneously issued notices dated 06.03.2007 calling upon the assessee as to why penalty under section 271C of the Act should not be levied in its case for the four assessment years under consideration for failure to deduct tax at source under section 195 of the Act in respect of payments to KPMG International which were in the nature of royalty. According to the submissions made before us, no appeals were preferred by the assessee in these four assessment years against the orders passed under sections 201(1) and 201(1A) of the Act dated 06.03.2007. Subsequently, the AO took up penalty proceedings under section 271C of the Act and after considering the assessee’s contentions and explanations, the AO proceeded to levy penalty under section 271C of the Act vide orders dated 19.09.2007 for the four impugned assessment years.
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