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P.N. Parashar, Judicial Member

1. This appeal, preferred by the assessee, is directed against the CIT(A)'s order dated 4-12-2000 relating to F.Y. 1998-99.

2. Shri Shashi Bhushan Gupta, Advocate appeared for the assessee whereas Shri Prahlad Singh Sr. DR appeared for the Revenue.

3. The assessee has taken only one ground in this appeal to challenge the sustenance of levy of penalty at Rs. 14,78,864/- Under Section 271C of the Income-tax Act. The facts concerning this matter are that Mr. W.G. Holt was working as Managing Director of the assessee company, namely, M/s Kinetics Technology (India) Ltd., since 27th April, 1998. Vide resolution passed by the Board of Directors Shri Holt was sent to work with the company from Netherlands by the other company KTIB. V. (now Technip Benelux B.V.), which company held 50% shares in the assessee company.

4. A survey was conducted Under Section 133A of the Income-tax Act in the office premises of the company and during the survey statement of Mr. Hold, Managing Director, was recorded in which he denied about receipt of any salary, allowance, perquisites or benefits outside India for the services rendered in India. But, during the survey proceedings and in proceedings Under Section 201, Mr. Holt and the company accepted the fact that besides getting salary in India, he was also in receipt of overseas salary from KTIB V. The amount so received in F.Y. 1998-99 was at Rs. 40,10,037/-. The assessee agreed that the said overseas salary income be clubbed for TDS purposes. Accordingly, the ITO concerned passed order Under Section 201 & 211(1A), determining the short deduction of tax for F.Y. 1998-99 at Rs. 12,28,680/-. As the default committed Under Section 201, also attracted penalty Under Section 271C. A show cause notice was issued to the company to show cause as to why penalty Under Section 271C be not levied for the default committed by it in making short deduction of tax.

131 ITR 680(All);

132 ITR 125;

32 ITR 677.

9. We have carefully considered the entire material on record. The agreement between M/s Kinetics Technology (India ) Ltd. And Mr. W.G. Holt is available at pages 35 to 39 of the paper book and as per this agreement in the meeting dated 23-7-1998 of the Board of Directors Mr. Holt was appointed as Managing Director of the company for three years. As per Clause 2 of this agreement vide letter dated 10-9-1998 the Central Government approved the appointment of Mr. Holt as Managing Director on the terms and conditions contained I that letter. A copy of this letter dated 10-9-1998 on the subject - Approval of Central Government Under Sections 269, 198/309 and 637AA of the Companies Act, has been filed by the assessee and is available at pages 1 to 3 of the paper book. As per this letter, the salary of Rs. 1,00,000/- per month was approved, besides other perquisites as approved by the Board/Members of the Company. There is no dispute that on the payment of salary as approved by the Central Government, the assessee was deducting tax. So far as the other, salary earned by Mr. Holt outside India from another company is concerned, there was no legal responsibility on the assessee company, which was a separate juristic person to deduct tax at source on such salary. It is a different matter that in view of the discussion held in the meeting with the Addl. Commissioner of Income-tax as per letter dated 6-3-2000 on record, the assessee company agreed to bear the interest Under Section 201(1A), but so far as the question of penalty Under Section 271C is concerned, there was no default on the part of the assessee company, because it was not even aware of any salary being paid abroad by KTIB V. to Mr. Holt. Therefore, there was no short coming in the deduction of tax and deposit thereof in respect of salary and perquisite paid to Mr. Holt in India by the assessee company. It may be pointed out that as the assessee was not liable to deduct TDS on salary paid abroad to the expatriate employee, there was no liability on the assessee Under Section 192(1) & (2). It may also be pointed out that in the show cause notice issued Under Section 271C, the assessee was required to show as to why it failed to deduct tax at source. As there was no liability of the assessee to deduct tax, there was no violation as mentioned in the notice and on this ground the assessee challenged even the validity of the notice.

16. In the result, assessee's appeal stands allowed.

CORRIGENDUM The aforesaid appeal was filed by the assessee, challenging the confirmation of penalty Under Section 271C of the Income-tax Act. However, while going through the Tribunal's order dated 22-12-2004, rendered in the above captioned appeal, we find that instead of mentioning the section as "271C" it has been wrongly typed as "271(1)(c)". The mistake being typographical and apparent on the face of the record, we rectify the same by passing this corrigendum. Accordingly, we direct that in Tribunal's order dated 22-12-2004, rendered in ITA No. 957/Del/01 instead of Section "271(1)(c)", wherever it occurs in the order, be read as "271C".