Indian Kanoon - Search engine for Indian Law

The captioned Stay Applications by the assessee seek stay on the recovery of the outstanding demands relating to penalty u/s 271C of the Act imposed by the income-tax authorities on account of the failure of the assessee to deduct requisite tax at source u/s 194H of the Income Tax Act, 1961 (in short "the Act") for assessment years 2007-08 to 2010-11. The details of the amount of outstanding demands for captioned four assessment years are as under :-

              Assessment Year              Penalty Demand u/s 271C
                  2007-08                                ,,551/-
                  2008-09                                80,78,569/-
                  2009-10                              6,35,25,863/-
                  2010-11                              6,43,36,230/-

2. At the time of hearing, the Ld. Representative for the assessee contended that assessee is in the business of providing telecom services across India and the income-tax authorities held that assessee was liable to deduct TDS on discounts allowed to the pre-paid SIM card distributors in terms of section 194H of the Act. Initially, the Assessing Officer held the assessee-in-default u/s 201(1)/201(1A) of the Act for not deducting tax at source on discount allowed to pre-paid distributors as according to him it was in the nature of commission falling within the purview of section 194H of the Act. It was pointed out that appeals of the assessee relating to the orders passed by the Assessing Officer u/s 201(1)/201(1A) of the Act were still pending for adjudication before the Tribunal and the stand of the assessee was that the impugned discount allowed to pre-paid distributors could not be considered as commission in terms of section 194H of the Act. It was also pointed out that having regard to certain judicial precedents even if the impugned discount allowed to the pre-paid distributors was to be considered as commission yet it did not fall for consideration in terms of section 194H of the Act. Prima-facie, it was sought to be made out that the assessee has a good case to succeed on its plea that it has not defaulted in any manner with respect to the application of section 194H of the Act qua the impugned amounts, and thus the impugned penalties levied u/s 271C of the Act would not survive.

148) (Delhi HC) Piramal Healthcare Ltd. vs. ACIT (21 9-May-12 taxmann.com 225) (Trib.-Mumbai) CIT vs. Piramal Healthcare Ltd. 16-Jan-13 (Bom HC) (ITA Nos.1427, 1428, 1545, 1622 of 2012 and 15 of 2013 Decision of Karnataka High Court 14-Aug-14 (ITA Nos.637-644, 256-263, 158-163 of 2013) wherein it was held in favour of the telecom companies like Bharti Airtel Ltd., Vodafone Essar South Ltd., and Tata Teleservices Ltd. in a bunch of appeals filed by them against the revenue to demonstrate that at the relevant point of time when assessee was to deduct the tax at source, the judicial pronouncements prevailing were in favour of the proposition that no tax was deductible in terms of section 194H of the Act qua the impugned payments. Therefore, it is sought to be pointed out that under these circumstances, assessee had a good prima-facie case to demonstrate that if at all there was a failure to deduct the tax at source u/s 194H of the Act, such failure was for a reasonable cause and therefore no penalty u/s 271C of the Act is leviable. Coming to the quantum of outstanding demand, the Ld. Representative pointed out that the CIT(A) in para 19 of his order has directed the Assessing Officer to allow appropriate relief to the assessee by applying the judgement of the Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage P. Ltd. vs. CIT, (2007) 293 ITR 226 (SC). As per the Ld. Representative, the CIT(A) has held that assessee could not be treated as an assessee-in-default where the TDS Officer is satisfied that the recipient of income has paid the requisite taxes. To the aforesaid extent, no penalty u/s 271C of the Act could be levied. The Ld. Representative pointed out that the Assessing Officer has not given appeal effect to the aforesaid direction of the CIT(A). In the course of the hearing, a Tabulation has been furnished which is purported to be the working of the demand which would remain payable once the appeal effect is granted qua the aforesaid direction of the CIT(A). The Tabulation shows that the following position of outstanding demand would emerge :-

4. In sum and substance, the Ld. Representative for the assessee pointed out that assessee has a good prima-facie case to succeed with respect to the appeals pending with the Tribunal on the issue of levy of penalty u/s 271C of the Act and therefore the outstanding demands be stayed and the appeals of the assessee be heard on an out-of-turn basis.

5. On the other hand, the Ld. CIT-DR has not disputed the factual matrix brought out by the Ld. Representative for the assessee but it was contended that the efficacy of the penalty levied u/s 271C of the Act, which stands confirmed by the CIT(A), can be tested only after it is crystallized as to whether or not assessee was required to deduct the tax at source u/s 194H of the Act. The appeals relating to the quantum proceedings against the orders passed u/s 201(1)/201(1A) of the Act are in the course of hearing before the Tribunal and according to the Ld. CIT-DR, the merits of the issue shall only be appraised therein.