M/s. RENAULT INDIA P. LTD., MUMBAI v. JT. CIT (TDS) Rg. 3, MUMBAI

ITA 7457/MUM/2007 | 2006-2007
Pronouncement Date: 31-05-2010 | Result: Allowed

Appeal Details

RSA Number 745719914 RSA 2007
Assessee PAN TOBER2007C
Bench Mumbai
Appeal Number ITA 7457/MUM/2007
Duration Of Justice 2 year(s) 5 month(s) 16 day(s)
Appellant M/s. RENAULT INDIA P. LTD., MUMBAI
Respondent JT. CIT (TDS) Rg. 3, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted K
Tribunal Order Date 31-05-2010
Date Of Final Hearing 21-04-2010
Next Hearing Date 21-04-2010
Assessment Year 2006-2007
Appeal Filed On 14-12-2007
Judgment Text
ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI K BENCH MUMBAI BEFORE SHRI PRAMOD KUMAR AND SHRI V DURGA RAO ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 RENAULT INDIA PRIVATE LIMITED .APPELLANT CHINTAMANI PLAZA B WING OFFICE NO. 524-526 ANDHERI KURLA ROAD CHAKALA ANDHERI (EAST) MUMBAI 400 099 VS. JOINT COMMISSIONER OF INCOME TAX - TDS RANGE 3 MUMBAI . RESPONDENT APPELLANT BY : SHRI F V IRANI RESPONDENT BY : SHRI R K SAHU O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CALLED I NTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 5 TH OCTOBER 2007 CONFIRMING PENALTY OF RS 11 53 768 IMPOSED ON THE ASSESSEE UNDER SECT ION 271 C OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2006- 07. 2. THE ASSESSEE BEFORE US IS A WHOLLY OWNED INDIAN SUBSIDIARY OF A FRENCH COMPANY BY THE NAME OF RENAULT SAS FRANCE. I T WAS INCORPORATED ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 PAGE 2 OF 7 ON 14 TH NOVEMBER 2005 AND THUS THE YEAR BEFORE US REPRESE NTED ITS FIRST YEAR OF BEING IN BUSINESS. ON 9 TH JUNE 2006 A REFERENCE WAS RECEIVED BY THE ASSESSING OFFICER FROM THE CENTRAL BOARD OF DI RECT TAXES ALONG WITH EMPLOYMENT CONTRACT OF MS JENNIFER WRIGHT- AN EXPAT RIATE EMPLOYEE WORKING WITH THE ASSESSEE AND AN UNDERTAKING GIVEN BY THE ASSESSEE COMPANY TO BEAR INDIAN TAX LIABILITY OF THE SAID EX PATRIATE EMPLOYEE. WHEN ASSESSING OFFICER ATTEMPTED TO ASCERTAIN THE DETAIL S OF TAX WITHHOLDINGS IN RESPECT OF THE SAID EMPLOYEE AND THE DATES ON WHICH THE SAME WERE DEPOSITED WITH THE GOVERNMENT THE ASSESSEE ON 30 TH JUNE 2006 SUBMITTED THAT IT WILL SHORTLY DEPOSIT THE APPROPRI ATE TAXES FOR MS WRIGHT. OBVIOUSLY THIS DID NOT SATISFY THE ASSESSING OFFIC ER. ON 10 TH JULY 2006 THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAU SE AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS ASSESSEE IN DEFA ULT UNDER SECTION 201 R.W.S 192 OF THE ACT. IN REPLY TO THE SAID LETTER THE ASSESSEE PAID THE DUE TAXES ALONGWITH APPLICABLE INTEREST UNDER SECTION 201(1A) ON 18 TH JULY 2006 AND ON THE SAME DATE ADVISED THE ASSESSING OFFICER THE FACT OF HAVING SO PAID TAXES AND INTEREST. 3. ON THESE FACTS THE ASSESSING OFFICER MADE A REF ERENCE TO THE JOINT COMMISSIONER OF INCOME TAX FOR CONSIDERING IMPOSITI ON OF PENALTY UNDER SECTION 271 C. LEARNED JOINT COMMISSIONER OF INCOME TAX ACCORDINGLY REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY PENAL TY UNDER SECTION 271 ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 PAGE 3 OF 7 C NOT BE IMPOSED ON THE ASSESSEE FOR FAILURE TO DED UCT TAX AT SOURCE. IN THE PROCEEDINGS THAT FOLLOWED IT BECAME CLEAR THAT MS WRIGHT WAS RECEIVING SALARY IN TWO PARTS ONE PART IN INDIAN RUPEES W HICH WAS PAID IN INDIA AND THE OTHER PART IN EUROS WHICH WAS PAID IN HER BANK ACCOUNT IN FRANCE. WHILE THE ASSESSEE EMPLOYER DULY DEDUCTED T HE TAXES IN RESPECT OF THE INDIAN COMPONENT NO TAXES WERE DEDUCTED IN RES PECT OF THE AMOUNT PAID IN FRANCE. IT WAS ONLY AFTER INITIATION OF ENQ UIRY PROCEEDINGS THAT THE ASSESSEE EMPLOYER DEPOSITED THE TAXES IN RESPECT OF THE LATTER COMPONENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THE ASSESSEE EMPLOYER WAS BEARING THE INDIAN TAX LIABILITY OF THE EXPATRI ATE EMPLOYEE. THE ASSESSEE EMPLOYER HOWEVER CONTENDED THAT (A) IT I S NOT A QUESTION OF FAILURE TO DEDUCT THE TAX AT SOURCE AT BEST THERE IS ONLY SOME DELAY IN PAYING THE SAME; AND THAT (B) THERE WAS A REASONABL E CAUSE FOR SUCH A DELAY AND ACCORDINGLY IN VIEW OF THE PROVISIONS OF SECTION 273 B THE PENALTY WAS NOT LEVIABLE. NONE OF THESE SUBMISSIONS IMPRESSED THE LEARNED JOINT COMMISSIONER OF INCOME TAX. HE NOTED THAT ON CE THE ASSESSEE DEDUCTS TAX FROM OTHER PAYMENTS AND IN FACT PART O F PAYMENTS MADE TO THE EMPLOYEE CONCERNED ALSO IT CANNOT BE OPEN TO HIM T O CLAIM THAT IT WAS BECAUSE OF INITIAL ESTABLISHMENT PROBLEMS THAT THE ASSESSEE COULD NOT DISCHARGE HIS OBLIGATIONS. IT WAS ALSO NOTED THAT T HE ASSESSEE HAD DEPOSITED THE TAXES ONLY AFTER A SHOW CAUSE NOTICE WAS SERVED UPON HIM. LEARNED JOINT COMMISSIONER OF INCOME TAX PROCEEDED TO IMPOSE PENALTY UNDER SECTION 271 C. AGGRIEVED ASSESSEE CARRIED TH E MATTER IN APPEAL ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 PAGE 4 OF 7 BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE ASS ESSEE IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS A LSO THE APPLICABLE LEGAL POSITION. 5. ONE OF THE ARGUMENTS THAT HAS BEEN RAISED BY THE LEARNED COUNSEL IS THAT THERE IS NO DELAY IN DEDUCTION OF TAX AT SOURC E INASMUCH AS THE TAX HAS BEEN DULY DEDUCTED ON 31 ST MARCH 2006. EVEN IF THE TAX IS DEPOSITED LATE THAT FACT BY ITSELF CANNOT BE A REASON ENOUGH FOR IMPOSITION OF PENALTY UNDER SECTION 271 C. IT IS THUS SUBMITTED THAT FOR THIS SHORT REASON ALONE THE PENALTY IS NOT SUSTAINABLE IN LAW. OUR ATTENTIO N WAS ALSO INVITED TO THE STATEMENTS OF TAX DEDUCTION FILED IN THE PAPER-BOOK WHICH SHOW THE DATE OF TAX DEDUCTION AS 31 ST MARCH 2006. WE SEE SUBSTANCE IN THIS PLEA. IN CA SE THE TAX IS ACTUALLY DEDUCTED ON 31 ST MARCH 2006 THE ASSESSEE CANNOT BE VISITED WITH PENALTY UNDER SECTION 271 C FOR THE AL LEGED LAPSE OF NON DEDUCTION OF TAX AT SOURCE. IT WAS INDEED NOT OPEN TO THE AUTHORITIES BELOW TO BRUSH ASIDE THIS PLEA OF THE ASSESSEE ON THE GRO UND THAT THERE IS IN ANY EVENT A DELAY IN DEPOSITING THE TAXES. THE FAILURE OF NON DEDUCTION OF TAX AT SOURCE IS ONE THING AND FAILURE IN NOT DEPOSITING WITH THE GOVERNMENT IN ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 PAGE 5 OF 7 TIME IS ANOTHER AND THESE FAILURES FOLLOW DIFFERE NT CONSEQUENCES. A PENALTY UNDER SECTION 271 C CAN ONLY BE LEVIED WHEN THERE IS A LAPSE ON THE PART OF THE ASSESSEE IN DEDUCTING TAX AT SOURCE WITHIN PRESCRIBED TIME; THAT IS ALL THAT THE ASSESSING OFFICER HAS TO EXAMI NE WHILE ADJUDICATING UPON WHETHER OR NOT PENALTY IS LEVIABLE UNDER SECTI ON 271 C. THE AUTHORITIES BELOW HAVE CLEARLY FAILED TO EVEN EXAMI NE THIS ASPECT OF THE MATTER. WE THEREFORE REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE THIS ASPECT OF THE MATTER AND IN CASE T AXES ARE ACTUALLY FOUND TO HAVE BEEN DEDUCTED IN TIME THE PENALTY IS TO BE DELETED. IN THIS VIEW OF THE MATTER WE SEE NO NEED TO ADJUDICATE AT THIS S TAGE ON OTHER ARGUMENTS OF THE ASSESSEE. 6. FOR THE REASONS SET OUT ABOVE THE MATTER IS REM ITTED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION IN THE LI GHT OF ABOVE OBSERVATIONS. 7. IN THE RESULT THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST DAY OF MAY 2010. SD/XX SD/XX ( V D RAO) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; 31 ST DAY OF MAY 2010. ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 PAGE 6 OF 7 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT MUMBAI 4. THE COMMISSIONER (APPEALS) MUMBAI 5. DEPARTMENTAL REPRESENTATIVE - BENCH MUMB AI 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI ITA NO. 7457/MUM/07 ASSESSMENT YEAR 2006-07 PAGE 7 OF 7 DATE INITIAL 1. DRAFT DICTATED ON 26.5.2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 28.5.2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 28.5.2010 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 28.5.2010 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 28.5.2010 SR.PS/PS 6. DATE OF PRONOUNCEMENT 31.5.2010 SR.PS 7. FILE SENT TO THE BENCH CLERK 31.5.2010 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER