Taxability of secondment receipts: ITAT deletes Section 271(1)(c) & 270A Penalty

IBM Canada Limited Vs DCIT (International Taxation) (ITAT Bangalore)

In the case of IBM Canada Limited vs. DCIT (International Taxation) heard at ITAT Bangalore, the issue at hand revolved around the imposition of penalties under sections 271(1)(c) and 270A of the Income Tax Act (ITA) in various assessment years. The penalties fell into different categories based on the circumstances under which they were levied.

Category ‘A’ involved penalties under section 271(1)(c) where the original return under section 139(1) of the ITA had not been filed, and receipts were offered for taxation in the return filed under section 148 of the ITA. This category included cases of IBM Canada Limited for assessment years 2013-14 and 2016-17, along with IBM China Hongkong Limited and IBM Israel Limited.

Category ‘B’ encompassed penalties under section 271(1)(c) where the original return under section 139(1) had not been filed, and receipts were offered for taxation during reassessment proceedings. Assessees falling under this category included IBM Deutschland GMBH, IBM Canada Limited, IBM Osterreich Internale Buromaschinen Gesellschaft MBH, and IBM Del Peru SAC.

Category ‘C’ dealt with penalties under section 271(1)(c) where the original return under section 139(1) had been filed, but secondment-related receipts were only offered for taxation in the return filed under section 148 of the ITA. This category involved companies like Compagnie IBM France, IBM Australia, IBM Corporation, and IBM Japan Limited.

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