Koninklijke DSM NV,, Pune v. DDIT (IT)-I ,, Pune

CO 61/PUN/2011 | 2006-2007
Pronouncement Date: 15-07-2013 | Result: Dismissed

Appeal Details

RSA Number 6124523 RSA 2011
Assessee PAN AACCK2575R
Bench Pune
Appeal Number CO 61/PUN/2011
Duration Of Justice 1 year(s) 10 month(s)
Appellant Koninklijke DSM NV,, Pune
Respondent DDIT (IT)-I ,, Pune
Appeal Type Cross Objection
Pronouncement Date 15-07-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 15-07-2013
Date Of Final Hearing 19-11-2012
Next Hearing Date 19-11-2012
Assessment Year 2006-2007
Appeal Filed On 14-09-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE: SHRI G. S. PANNU ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 978 / P N/ 20 1 1 ASSESSMENT YEAR : 200 6 - 07 DY. DIRECTOR OF INCOME TAX (IT) - I 60/61 ERANDWANE PRAPTIKAR SADAN KARVE ROAD PUNE VS. M/S. KONINKLIJKE DSM NV C/O DSM ENGINEERING PLASTICS (I) PVT. LTD. UNIT 401/402 NSG IT PARK OFF ITI ROAD AUNDH PUNE (APPELLANT) (RESPONDENT) PAN NO. AACCK2575R CO NO. 61 /PN/20 1 1 (ARISING OU T OF ITA NO. 978 /PN/201 1 ) ASSESSMENT YEAR : 200 6 - 07 M/S. KONINKLIJKE DSM NV C/O DSM ENGINEERING PLASTICS (I) PVT. LTD. UNIT 401/402 NSG IT PARK OFF ITI ROAD AUNDH PUNE ( CROSS OBJECTOR ) PAN NO. AACCK2575R DY. DIRECTOR OF INCOME TAX (IT) - I 60/61 E RANDWANE VS. PRAPTIKAR SADAN KARVE ROAD PUNE ( APPELLANT IN THE APPEAL ) A SSESSEE BY: SHRI REJENDRA AGIWAL RE VENUE BY: MS. RA J IV HARIT ORDER P ER R.S. PADVEKAR JM : - THE REVENUE HAS FILED THE APPEAL CHALLENGING THE IMPUGNED O RDER OF THE LD. CIT(A) - I PUNE DATED 29 - 12 - 2010 FOR THE A.Y. 200 6 - 07 DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE INCOME - TAX ACT. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GRO UNDS IN THE APPEAL: 1. THE LEARNED CIT(A) ERRED IN LAW AND FACTS OF THE CASE IN DELETING THE PENALTY OF RS. 25 00 000/ - LEVIED U/S. 271(L)(C). 2. THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSEE HAD NOT DISCLOSED THE INCOME IN THE RETURN OF INCOM E FILED BY IT. 3. THE LEARNED CIT(A) ERRED IN LAW AND FACTS OF THE CASE IN IGNORING THE FACT THAT EVEN DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD 2 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG NOT DISCLOSED THE TRUE NATURE OF INCOME RECEIVED BY WAY OF FEE FOR TECHNICAL SERVICES. 4. THE LEARNED CIT( A) ERRED ON FACTS OF THE CASE IN IGNORING THE FINDING OF THE ASSESSING OFFICER THAT THE ENTIRE CONDUCT OF THE ASSESSEE AND ITS MODUS OPERAND I SHOWS THAT THE ASSESSEE HAD NO BONA FIDE BELIEF THAT ITS INCOME IS NON - TAXABLE IN INDIA. 5. THE LEARNED CIT(A) ER RED IN LAW AND FACTS OF THE CASE IN RELYING UPON THE DECISION HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2101) 322 ITR 158 (SC) AS THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE DECISION RELIED UPON. 2. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE COMPANY IS INCORPORATED IN NETHERLANDS AND TAX RESIDENT OF NETHERLANDS AS PER THE D OUBLE T AXATION A VOIDANCE AGREEMENT ( DTA A ) BETWEEN INDIA AND NETHERLANDS. DSM ENGINEERING PLAS TICS (INDIA) PRIVATE LIMITED (DEPIPL) DSM ANTI INFECTIVES INDIA LIMITED (DAIIL) DSM NUTRITIONAL PRODUCTS INDIA PRIVATE LIMITED (DNPIPL) WHICH WAS FORMERLY KNOWN AS RSA VITAMINS PRIVATE LIMITED ARE AFFILIATED COMPANIES OF THE ASSESSEE. THE ASSESSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2006 - 07 ELECTRONICALLY ON 24 - 10 - 2006 DECLARING TOTAL INCOME AT RS. NIL. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE ACT ON 31 - 12 - 2008 DETERMINING TOTAL INCOME AT RS.2 34 13 380/ - . THE ASSESSING OFFICER ALSO INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT AGAINST THE ASSESSEE. THE ASSESSEE HAS RECEIVED CORPORATE SERVICE COST FROM DAIIL AND CONSIDERATION IN RESPECT OF C - ICT SERVICES FROM DEPIPL DAIIL A ND DNPIPL WHICH HAVE BEEN CLAIMED AS NOT LIABLE TO TAX IN INDIA TAKING THE SUPPORT OF DTAA BETWEEN THE INDIA AND NETHERLANDS. 3. THE INCOME RECEIVED FROM ITS AFFILIATE S IN INDIA IS AS UNDER: SR. NO. NAME OF THE AFFILIATE COMPANY AMOUNT (INR) 1 DEP IPL 3 0 47 741 2 DAI IL 1 88 83 073 3 DNP IPL 14 72 566 TOTAL 2 34 13 380 3 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG THE ASSESSING OFFICER ASKED THE ASSESSEE WHY THE SAID INCOME SHOULD NOT BE TAXED IN INDIA WHICH WERE IN RESPECT OF C - ICT SERVICES AS WELL AS CORPORATE SERVICES WHICH WERE IN THE NATURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SEC. 9(1)(VII) OF THE INCOME - TAX ACT 1961 AND ALSO COVERED IN ARTICLE 12 OF THE DTAA BETWEEN INDIA AND NETHERLANDS. THE ASSESSEE TRIED TO JUSTIFY ITS CLAIM OF NON - TAXABILITY OF THOSE INCOMES IN INDIA. ACCORDING TO THE INFORMATION GIVEN BY THE ASSESSEE C - ICT CHARGES REPRESENTED COST INCURRED BY THE ASSESSEE ON SHARE OF E - MAIL NETWORK AND INTRANET CHARGES. THE ASSESSING OFFICER EXAMINED THE AGREEMENT BETWEEN THE ASSESSEE AND ITS AFFILIATES MORE PARTIC ULARLY BETWEEN DEP IPL . AFTER EXAMINING THE AGREEMENT BETWEEN THE ASSESSEE AND ITS AFFILIATES THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE WAS NOT ONLY PROVIDING THE BASIC IT SERVICES SUCH AS E - MAIL NETWORK AND INTRANET CHARGES BUT MUCH MORE THAN T HAT WHICH IS THE IT INFRASTRUCTURE TO HAVE ACCESS TO THOSE FACILITIES. THE ASSESSING OFFICER HELD THAT THE SERVICES RENDERED BY THE ASSESSEE WERE BROADLY CATEGORIZED AS - NETWORK APPLICATION SERVICES WIDE AREA NETWORK SERVICE LOCAL INFRASTRUCTURE SERVICE - DESKTOP/LAPTOP LOCAL INFRASTRUCTURE SERVICE - LAN. HE HELD THAT ALL THOSE SERVICES ARE TECHNICAL IN NATURE AND HENCE THE PAYMENTS MADE FOR THOSE SERVICES ARE COVERED UNDER THE FEES FOR TECHNICAL SERVICES (FTS) . HE HAS ALSO NOTED THAT THE ASSESSEE ALSO CHARGED FOR THE LICENSES OF THE SOFTWARES. IT IS FURTHER OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT SOLD THOSE SOFTWARES BUT ONLY LICENSED TO ITS INDIAN AFFILIATES FOR USE. HENCE HE HELD THAT THE SAID PAYMENTS CONSTITUTE ROYALTY. THE A SSESSING OFFICER ALSO EXAMINED THE TREATY /DTAA BETWEEN THE INDIA AND NETHERLANDS MORE PARTICULARLY ARTICLE 12 AND HELD THAT IN RESPECT OF THE C - ICT SERVICES THOSE ARE IN THE NATURE OF THE TECHNICAL SERVICES AND INCOME RECEIVED FROM RENDERING THOSE SERVICES ARE FTS UNDER THE DTAA. 4 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG 4. IN RESPECT OF CORPORATE SERVICES THE ASSESSING OFFICER EXAMINED THE AGREEMENT BETWEEN THE ASSESSEE AND ITS AFFILIATES AND CONCLUDED THAT THE ASSESSEE WAS RENDERING TECHNICAL AND CONSULTANCY SERVICES. THE ASSESSING OFFICER FINA LLY REJECTED THE CONTENTION OF THE ASSESSEE THAT THE INCOME FROM C - ICT SERVICES AND CORPORATE SERVICES IS NOT TAXABLE IN INDIA AND HELD THAT THOSE SERVICES ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES WITHIN THE MEANING OF SEC. 9(1)(VII) OF THE INCOME - TAX ACT AND ALSO COVERED IN ARTICLE 12 OF THE DTA A BETWEEN THE INDIA AND NETHERLANDS AND HENCE THOSE INCOMES ARE TO BE TAX ED AS FEES FOR TECHNICAL SERVICES (FTS) AT 10% AS PROVIDED UNDER ARTICLE 12 OF THE DTA A BETWEEN INDIA AND NETHERLANDS. THE ASSESSING OFFICER THEREFORE BROUGHT TO TAX SUM OF RS.2 34 13 380/ - . THE ASSESSEE DID NOT CONTEST THE ASSESSMENT ORDER. THE ASSESSING OFFICER ISSUED THE SHOW CAUSE NOTICE TO THE ASSESSEE WHY THE PENALTY SHOULD NOT BE LEVIED U/S. 271(1)(C) OF THE ACT. 5. THE ASSES SEE FILED HIS REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER WHICH IS SUMMARIZED IN THE PENALTY ORDER AS UNDER: 1. (A) THAT DSM NV HAD DISCLOSED ALL THE RELEVANT FACTS AND DETAILS OF THE TRANSACTIONS OF RECEIPT OF THE C - ICT SERVICES AND CO RPORATE SERVICES ALONGWITH ITS TECHNICAL BASIS FOR NON - TAXABILITY IN THE NOTES TO RETURN OF INCOME WHICH WERE SUBMITTED WITH THE TAX OFFICE. ON THE FACTS DSM NV HAS NOT SUBMITTED ANY INACCURATE PARTICULARS EITHER AT THE TIME OF SUBMISSION OF THE TAX RETU RN OR DURING THE ASSESSMENT PROCEEDINGS. FURTHER THERE WAS NO CONCEALMENT OF ANY OF THE FACTS. (B) THAT AFTER HAVING DISCLOSED ALL THE RELEVANT FACTS DSM NV ADOPTED A TECHNICAL AND LEGAL POSITION AS REGARDS NON - TAXABILITY OF THE RECEIPT UNDER THE PROV ISIONS OF THE INDIA - NETHERLANDS TAX TREATY READ WITH THE PROVISIONS OF THE ACT. DSM NV ALSO RELIED ON THE JUDICIAL PRECEDENTS AND ALSO DISCLOSED THE BASIS IN ITS RETURN OF INCOME. ACCORDINGLY THERE WAS A BONAFIDE BELIEF ABOUT THE CLAIM MADE BY DSM NV IN I TS TAX RETURN AND THERE WAS NO SUPPRESSION OF FACTS AND HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME OR HAS CONCEALED ANY INCOME. (C) THAT THE NON - ACCEPTANCE OF A BONAFIDE TECHNICAL VIEW OF THE ASSESSEE BY THE ASSESSING OFFICER DOES NOT AMOUNT T O FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. DSM 5 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG NV'S TECHNICAL POSITION WAS NOT ACCEPTED BY YOUR GOOD SELF BASED ON AN ALTERNATE TECHNICAL VIEW. THE LEGAL PROVISIONS OF THE LAW COULD HAVE MULTIPLE INTERPRETATIONS AND NON - ACCE PTANCE OF ONE OF THE POSSIBLE TECHNICAL VIEWS ADOPTED BY THE TAX PAYER BY THE REVENUE SHOULD NOT BE REGARDED AS DSM NV FURNISHING INACCURATE PARTICULARS OF INCOME. (D) THAT DSM NV HAS ALREADY PAID ALL THE TAXES DUE UPON THE ASSESSMENT AND THERE IS NO INTE NTION TO AVOID PAYMENT OF ANY TAXES. FURTHER DSM NV HAS COOPERATED WITH THE REVENUE IN RESPECT OF ALL THE COMPLIANCES UNDER THE PROVISIONS OF THE ACT. (E) THAT DSM NV CONTINUES TO BELIEVE THAT ITS TECHNICAL POSITION OF NON - TAXABILITY OF RECEIPTS FROM C - I CT SERVICES AND CORPORATE SERVICES IN INDIA IS IN ACCORDANCE WITH THE PROVISIONS OF THE LAW. HOWEVER WITH A VIEW TO AVOID ANY LITIGATION IN INDIA (INCLUDING THE COST OF LITIGATION) IT HAS DECIDED NOT TO PREFER AN APPEAL TO THE COMMISSIONER OF INCOME - TAX (APPEALS) AGAINST THE ORDER OF ASSESSMENT. THIS DECISION TO NOT APPEAL SHOULD NOT BE CONSTRUED BY REVENUE AS A DOUBT IN THE BONAFIDE BELIEF OF THE TECHNICAL POSITION REPORTED IN THE TAX RETURN BY DSM NV. WITHOUT PREJUDICE TO THIS FACT BASED ON THE VARIOUS COURT DECISIONS TECHNICALLY NON - FILING OF APPEAL SHOULD NOT HAVE ANY RELEVANCE ON THE PENALTY PROCEEDINGS UNDER SECTION 271(L)(C) OF THE ACT. 2. AS PER THE NOTICE UNDER SECTION 274 OF THE ACT THE PENALTY PROCEEDINGS HAVE BEEN INITIATED AGAINST THE ASSESS EE FOR 'FURNISHING OF INACCURATE PARTICULARS' OR 'CONCEALMENT OF THE PARTICULARS OF INCOME . THE EXPRESSION FURNISHING OF INACCURATE PARTICULARS OF INCOME HAS NOT BEEN DEFINED UNDER THE ACT. THE ORISSA HIGH COURT IN THE CASE OF CIT VS INDIAN METAL AND FERR O ALLOYS LIMITED [1995] 211 ITR 35 (REFER ANNEXURE 1) HELD THAT 'THE EXPRESSION 'HAS CONCEALED THE PARTICULARS OF INCOME' AND 'HAS FURNISHED INACCURATE PARTICULARS OF INCOME' HAVE NOT BEEN DEFINED EITHER IN SECTION 271(L)(C) OR ELSEWHERE IN THE ACT IN FUR NISHING HIS RETURN OF INCOME AN ASSESSEE IS REQUIRED TO FURNISH PARTICULARS AND ACCOUNTS ON WHICH SUCH RETURNED INCOME HAS BEEN ARRIVED AT. THESE MAY BE THE PARTICULARS AS PER HIS BOOKS OF ACCOUNTS IF HE HAS SO MAINTAINED OR >N ANY OTHER BASIS UPON WHICH HE HAD ARRIVED AT THE RETURNED FIGURE OF INCOME. ANY INACCURACY MADE IN SUCH BOOKS OF ACCOUNTS OR OTHERWISE WHICH RESULTED IN KEEPING OFF OR HIDING A PORTION OF HIS INCOME IS PUNISHABLE AS FURNISHING INACCURATE PARTICULARS OF HIS INCOME . 3 . IN THE DECIS ION OF SUPREME COURT IN THE CASE OF T. ASHOK PAI V C IT (292 ITR 11) (REFER ANNEXURE 2) IT WAS HELD AS FOLLOWS: THE TERM 'INACCURATE' AS DEFINED IN THE WEBSTER'S DICTIONARY IS AS FOLLOWS: 'NOT ACCURATE NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOU S; AS AN ACCURATE STATEMENT COPY OR TRANSCRIPT'. THUS IT SIGNIFIES A DELIBERATE ACT OR OMISSION ON THE PART OF THE ASSESSEE. SUCH DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. 4 . DSM NV SUBMIT S THAT IT HAS NOT MADE ANY INACCURACY IN ITS BOOKS OF ACCOUNTS OR OTHERWISE WHICH RESULTED IN KEEPING OF FOR HIDING A PORTION OF HIS INCOME. FURTHER AS REGARDS FACTS IT HAS SUBMITTED ALL 6 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG THE PARTICULARS WHICH ARE CORRECT AND HAS ALSO ADOPTED A LEGAL VIEW WHICH WAS FULLY DISCLOSED IN THE TAX RETURN. 5 . FURTHER AS REGARDS 'CONCEALMENT' OF INCOME IT SUGGESTS DELIBERATE ACT ON THE PART OF THE ASSESSEE. THE WORD 'CONCEAL' HAS BEEN DERIVED FROM THE LATIN WORD 'CONCELARE' WHICH IMPLIES 'TO HIDE'. SEVERAL COURTS HAVE RELIED ON THIS DICTIONARY MEANING OF THE WORD 'CONCEALMENT' AND HAVE HELD THAT IT IS IMPLICIT IN THE WORD 'CONCEAL' THAT THERE HAS BEEN A DELIBERATE ACT ON THE PART OF THE ASSESSEE. 6 . SPECIFICALLY SOME OF THE OBSERVATIONS OF THE SUPREME COURT AND HI GH COURTS DEFINING THE TERM 'CONCEALMENT' HAVE BEEN EXTRACTED BELOW FOR YOUR KIND CONSIDERATION: (A) IN THE CASE OF K.C. BUILDERS V ACIT (265 ITR 562) (REFER ANNEXURE 3) THE SUPREME COURT HAS HELD THAT: 'THE MEANING OF THE WORD 'CONCEALMENT' AS FOUND IN S HORTER OXFORD ENGLISH DICTIONARY THIRD EDITION VOLUME I IS AS FOLLOWS 'IN LAW THE INTENTIONAL SUPPRESSION OF TRUTH OR FACT KNOWN TO THE INJURY OR PREJUDICE OF ANOTHER'. 'THE WORD 'CONCEALMENT' INHERENTLY CARRIED WITH IT THE ELEMENT OF MENS REA. THERE FORE THE MERE FACT THAT SOME FIGURE OR SOME PARTICULARS HAVE BEEN DISCLOSED BY ITSELF EVEN IF IT TAKES OUT THE CASE FROM THE PURVIEW OF NON - DISCLOSURE IT CANNOT BY ITSELF TAKE OUT THE CASE FROM THE PURVIEW OF FURNISHING INACCURATE PARTICULARS. MERE OMISS ION FROM THE RETURN OF AN ITEM OF RECEIPT DOES NEITHER AMOUNT TO CONCEALMENT NOR DELIBERATE FURNISHING OF INACCURATE PARTICULARS OF INCOME UNLESS AND UNTIL THERE IS SOME EVIDENCE TO SHOW OR SOME CIRCUMSTANCES FOUND FROM WHICH IT CAN BE GATHERED THAT THE OM ISSION WAS ATTRIBUTABLE TO AN INTENTION OR DESIRE ON THE PART OF THE ASSESSEE TO HIDE OR CONCEAL THE INCOME SO AS TO AVOID THE IMPOSITION OF TAX THEREON.' (B) IN THE CASE OF INDIAN CINE AGENCIES V DCIT (275 ITR 430) (REFER ANNEXURE 4) THE MADRAS HIGH COUR T HELD THAT: '..... .AS LONG AS THERE IS NOTHING TO SHOW THAT THE ASSESSEE CONCEALED THE INCOME WITH A DISHONEST INTENT OR HAD FURNISHED INACCURATE PARTICULARS EITHER DELIBERATELY OR AS A RESULT OF GROSS NEGLIGENCE WHICH WAS NOT CAPABLE OF BEING REGARDED A S AN INNOCENT ACT PENALTY IS NOT TO BE LEVIED. WE CANNOT AGREE WITH THE SUBMISSION MADE FOR THE REVENUE THAT INTENT HAS NO PLACE AT ALL IN SECTION 27L(L)(C] OF THE ACT. THE WORD 'CONCEAL' AS DEFINED IN THE CONCISE OXFORD DICTIONARY AS 'NOT ALLOWED TO BE S EEN; HIDE; KEEP SECRET; PREVENT FROM DOING KNOWN.' CONCEALMENT IMPLIES THE EXISTENCE OF A DELIBERATE INTENT TO PREVENT RELEVANT FACTS FROM BECOMING KNOWN. NO PENALTY CAN BE LEVIED IF THERE IS NOTHING TO SHOW THAT THE ASSESSEE CONCEAL THE INCOME WITH DISHON EST INTENTION' (EMPHASIS ADDED BY US) (C) SIMILAR VIEWS HAVE BEEN EXPRESSED AGAIN BY THE HONOURABLE SUPREME COURT IN THE CASE OF T. ASHOK PAI VS CIT (292 ITR 11) (REFER ANNEXURE 2) AS FOLLOWS: '22. 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INACCURATE PART ICULARS' CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO DELIBERATE ACT ON THE PART OF THE ASSESSEE.' (EMPHASIS ADDED BY US) 7 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG 7 . DSM NV'S VIEW IS THAT THE INCOME FROM THE C - ICT SERVICES AND CORPORATE SERVICES IS NOT TAXABLE IN INDIA AND DISCLOSED THE SA ME IN THE NOTES TO THE RETURN. SUBSEQUENTLY DSM NVFILED ITS TECHNICAL VIEWS ON NON - TAXABILITY OF THE SAID INCOME DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS IT IS SUBMITTED THAT DSM NV MADE COMPLETE DISCLOSURE OF ITS VIEWS ON ITS TREATMENT OF INCOM E IN THE RETURN OF INCOME AND HENCE THERE WAS NO ATTEMPT TO HIDE THIS FACT FURTHER THERE IS NO FINDING BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT THE EXPLANATIONS OFFERED BY DSM NV WERE FALSE. 8 . ACCORDINGLY IN LIGHT OF THE FACTUAL POSITION TH AT FULL DISCLOSURE WAS MADE BY DSM NV OF ITS TECHNICAL POSITION ON TAXABILITY OF THE INCOME AND THE FACT THAT THERE IS NO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT AND IN LIGHT OF THE ABOVE JUDICIAL PRECEDENTS IT IS SUBMITTED THAT NO P ENALTY IS LEVIABLE UNDER SECTION 271(L)(C). 9. DSM NV SUBMITS THAT WHERE ANY DEDUCTION OR CLAIM IS MADE IN THE RETURN UNDER A BONAFIDE BELIEF SUCH ACT CANNOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME OR SAID TO BE CONCEALMENT OF INCO ME . IN THIS REGARD RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: (A) THE SUPREME COURT IN THE CASE OF CEMENT MARKETING CO OF INDIA LTD. V ACIT (124 ITR 15) (REFER ANNEXURE 5) HAS OBSERVED THAT '...NOW IT IS DIFFICULT TO SEE HOW THE ASSESSEE COULD BE SAI D TO HAVE FILED 'FALSE' RETURNS WHEN WHAT THE ASSESSEE DID NAMELY NOT INCLUDING THE AMOUNT OF FREIGHT IN THE TAXABLE TURNOVER WAS UNDER A BONA FIDE BELIEF THAT THE AMOUNT OF FREIGHT DID NOT FORM PART OF THE SALE PRICE AND WAS NOT INCLUDIBLE IN THE TAXA BLE TURNOVER...' IN THE ABOVE CASE IT WAS HELD THAT WHERE THE ASSESSEE DID NOT INCLUDE A PARTICULAR ITEM IN THE TAXABLE TURNOVER UNDER A BONA FIDE BELIEF THAT HE IS NOT LIABLE TO INCLUDE IT IT WOULD NOT BE RIGHT TO CONDEMN THE RETURN AS A 'FALSE' RETURN INVITING IMPOSITION OF PENALTY. THE HONOURABLE SUPREME COURT ALSO HELD THAT IF AN ALTERNATIVE VIEW IS TAKEN THEN EVEN WHERE ASSESSEES HAVE A BONA FIDE VIEW OF HOW TAXES SHOULD BE COMPUTED ASSESSEES WOULD HAVE TO PAY TAXES BASED ON THE OTHER VIEW UNDER TH E APPREHENSION OF BEING HELD LIABLE FOR PENALTY IN CASE HIS CONTENTION IS ULTIMATELY FOUND BY THE COURT TO BE NOT ACCEPTABLE AND THIS COULD SURELY NOT HAVE BEEN INTENDED BY THE LEGISLATURE. (B) THE CALCUTTA HIGH COURT IN THE CASE OF CIT V DHOOLIE TEA CO LT D (231 ITR 65) (REFER ANNEXURE 6) HAS HELD THAT WHERE THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT HIS INCOME IS NOT TAXABLE AND HE FAILED TO DISCLOSE SUCH INCOME UNDER A BONAFIDE BELIEF NO PENALTY SHOULD BE IMPOSED. (C) THE ABOVE PRINCIPLE OF NON - LEVY O F PENALTY IN CASE OF A BONAFIDE CLAIM WAS ALSO UPHELD IN THE CASES OF CIT V SUDHIRKUMAR CHOTTUBHAI (250 ITR 528) (REFER ANNEXURE 7) CIT V A.D. KOHLI 8 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG (273 ITR 223) (DEL) (REFER ANNEXURE 8) AND CIT V INDIAN METALS & FERRO ALLOYS LTD (211 ITR 35) (ORI) (REFE R ANNEXURE 1). (D) IN THE CASE OF VELAYUDHAN NAIR V ITO (84 ITD 227) (BANG) (REFER ANNEXURE 9) THE ASSESSEE WAS PAID SALARY ALONG WITH TRAVELING CONVEYANCE AND FOOD ALLOWANCES. FOR THE SAID ASSESSMENT YEAR THE ASSESSEE FIFED HIS RETURN OF INCOME ON THE B ASIS OF THE FORM 16 ISSUED BY HIS EMPLOYER WHICH DID NOT INCLUDE REIMBURSEMENTS. HOWEVER ON THE BASIS OF ADVICE THE ASSESSEE'S EMPLOYER PAID THE DIFFERENCE BY WAY OF TAX DEDUCTED AT SOURCE AND ALSO PAID INTEREST THEREON. HOWEVER THE ASSESSING OFFICER IS SUED A NOTICE UNDER SECTION 148 TO THE ASSESSEE FOR CONCEALMENT OF INCOME. IT WAS HELD THAT THE ASSESSEE DID NOT INCLUDE THE ITEMS IN THE TAXABLE BRACKET UNDER A BONAFIDE BELIEF THAT HE WAS NOT LIABLE TO DO SO. THEREFORE THE ASSESSEE WAS HELD TO BE NOT L IABLE TO PAY PENALTY. (E) IN THE CASE OF EMILIO RUIZ BERDEJO V DCIT (118 TTJ 971)(PUNE) (REFER ANNEXURE 10) IT WAS HELD THAT PENALTY SHOULD NOT BE LEVIED WHEN THE ASSESSEE HAS A BONAFIDE BELIEF THAT INCOME IS NOT TAXABLE IN INDIA. (F) IN THE CASE OF CIT V LAKHANI INDIA LIMITED (ITA NO 678 OF 2008) (P&H) (REFER ANNEXURE 11) IT WAS HELD THAT PENALTY CANNOT BE LEVIED FOR MERE CLAIMING A DEDUCTION WHERE THERE IS NO CONCEALMENT OF INCOME OR INFORMATION FROM ASSESSING OFFICER. 10. ACCORDINGLY DSM NV WAS AND CO NTINUES TO BELIEVE THAT C - ICT SERVICES AND CORPORATE SERVICES ARE NOT TAXABLE WHICH WAS DISCLOSED THE NOTES TO RETURN AND WAS ALSO UNDER BONAFIDE BELIEF ABOUT THE POSITION BASED ON THE EXTERNAL ADVICE AND THE JUDICIAL PRECEDENTS. ALSO THIS POSITION HAS BE EN EXPLAINED BY DSM NV DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THROUGH DETAILED SUBMISSIONS . ACCORDINGLY IT IS SUBMITTED BASED ON THE JUDICIAL OPINIONS EXPRESSED IN THE DECISIONS REFERRED TO ABOVE AND GIVEN DSM NV'S BONA FIDE BELIEF THAT THE C - IC T SERVICES AND CORPORATE SERVICES ARE NOT LIABLE TO TAX NO PENALTY IS LEVIABLE ON DSM NV. 11. MERE REJECTION OF THE ASSESSEE'S CLAIM DOES NOT AUTOMATICALLY LEAD TO PENALTY IT IS NOW A WELL - SETTLED JUDICIAL PRINCIPLE THAT DEBATABLE ADDITIONS OR DISALLOWANC ES OR MERE REJECTION OF CLAIM OF THE ASSESSEE SHOULD NOT ENTAIL LEVY OF PENALTY. THIS HAS BEEN HELD IN VARIOUS DECISIONS INCLUDING THE FOLLOWING: (A) THE ORISSA HIGH COURT IN THE CASE OF CIT V INDIAN METALS & FERRO ALLOYS LTD [1995] (211 ITR 35) (REFER AN NEXURE 1) HAS HELD THAT WHERE THE ASSESSEE HAS ADOPTED A PARTICULAR LEGAL CLAIM AND THE LEGAL CLAIM HAS NOT BEEN ACCEPTED IT CANNOT BE SAID THAT THE ASSESSEE CONCEALED ANY INCOME OR FURNISHED ANY INCORRECT INFORMATION. THE RULING FURTHER SAYS THAT WHERE T HE ASSESSEE BASED ON THE JUDICIAL PRECEDENTS MAKES A BONAFIDE CLAIM UNDER A LAW THOUGH THE CLAIM IS REJECTED NO PENALTY CAN BE LEVIED FOR CONCEALMENT OR FURNISHING OF INCORRECT INFORMATION. ( B) THE BOMBAY HIGH COURT IN THE CASE OF CIT V SHIVLAL DESAI AND SONS [1978] (114 ITR 377) (REFER ANNEXURE 12) HELD THAT MERE 9 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG DISALLOWANCE IN THE ASSESSMENT PROCEEDINGS SHOULD NOT RESULT INTO LEVY OF PENALTY UNDER SECTION 271(L)(C). ( C) THE BOMBAY HIGH COURT IN THE CASE OF CIT V JOGIBHAI MANGALBHAI [1992] (193 ITR 404) (REFER ANNEXURE 13) HELD THAT ONCE THE ASSESSEE HAS DISCLOSED RELEVANT PARTICULARS MERE NON - ACCEPTANCE OF THE CLAIM BY THE DEPARTMENT DOES NOT BRING THE ASSESSEE WITHIN THE PURVIEW OF SECTION 271 (L)(C). ( D) IN THE CASE OF CIT V DEVI DAYAL ALUMINIUM INDU STRIES (PVT) LTD [1988] (171 ITR 683) (REFER ANNEXURE 14) THE ALLAHABAD HIGH COURT HELD THAT MERELY BECAUSE THE EXPLANATION GIVEN BY THE ASSESSEE HAS BEEN REJECTED BY THE DEPARTMENT PENALTY CANNOT BE LEVIED UNDER SECTION 271 IF THE ASSESSEE HAS FURNISHED ALL THE DETAILS AND DID NOT CONCEAL ANYTHING. ( E) IN THE CASE OFLTO V BURMAH SHELL OIL STORAGE AND DISTRIBUTING CO. OF INDIA LTD (163 ITR 496) (CAL) (REFER ANNEXURE 15) IT WAS HELD THAT 'THE REJECTION OF THE LEGAL CONTENTIONS RAISED BEFORE THE INCOME - TAX OFFICER COULD NOT BE SAID TO CONSTITUTE MATERIAL WHICH COULD LEAD TO THE SATISFACTION OF THE AUTHORITIES CONCERNED THAT THE RESPONDENT COMPANY HAD CONCEALED ITS INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF ITS INCOME'. THE COURT ALSO OBSERVED THAT CL AIM OF THE ASSESSEE FOR THE DEDUCTION BASED ON THE LEGAL CONTENTIONS FORWARDED BY IT WOULD NOT RESULT INTO CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. ( F) THE HON'ABLE AHMEDABAD TRIBUNAL IN THE CASE OFDCIT V AIMS INDUSTRIES LTD (I TA NO 594 TO 596/AHD/2007) (REFER ANNEXURE 16) HELD AS FOLLOWS: 'IT IS A WELL SETTLED PROPOSITION OF LAW THAT CONCEALMENT CAN BE OF FACTS ALONE AND NOT OF CONCLUSIONS TO BE DRAWN FROM FACTS. THERE IS NO DISPUTE IN THE INSTANT CASE THAT AIR MATERIAL FACTS H AVE BEEN FULLY DISCLOSED. IT IS ONLY A DIFFERENT CONCLUSION WHICH HAS BEEN DRAWN BY THE ASSESSES AND BY THE A.O ON THE BASIS OF THE SAME SET OF FACTS. THE DISALLOWANCES/ADDITIONS HAVE BEEN MADE ON A PARTICULAR VIEW BEING ADOPTED BY THE A.O WITH REGARD TO T HE DEDUCIBILITY OF INTEREST ON CAPITAL BORROWED FOR INVESTMENT IN SHARES OF A GROUP CONCERN. THE FACT THAT CIT(A) 4 AIMS INDUSTRIES LTD AND THE ITAT HAVE ALSO DIFFERED ON THIS ISSUE CLEARLY SHOWS THAT MORE THAN ONE VIEW WAS POSSIBLE IN THE MATTER. THE COU RTS HAVE CONSISTENTLY HELD THAT DISALLOWANCE OF A DEBATABLE OR EVEN MISCONCEIVED CLAIM MAY NOT LEAD TO IMPOSITION OF PENALTY U/S 271(L)(C) PROVIDED THERE WAS NO CONCEALMENT OR FURNISHING OR INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE ALL THE PRI MACY FACTS HAVE BEEN DISCLOSED. THE CONTROVERSY HAS ARISEN ONLY AS A RESULT OF DIFFERENT CONCLUSIONS BEING DRAWN FROM THE SAME SET OF FACTS.' (EMPHASIS ADDED BY US) ( G) THE SPECIAL LEAVE PETITION OF REVENUE AGAINST THE DELHI HIGH COURT ORDER IN THE CONTEXT OF 271 (1 )(C) WAS DISTINGUISHED IN THE CASE OF CIT V. E. I DUPONT (SLP) (REFER ANNEXURE 17) WHEREIN IT WAS HELD THAT IT WAS AN INACCURATE COMPUTATION OF TAXABLE INCOME 10 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG UNDER THE PROVISIONS OF THE ACT AND ON APPLICATION OF WRONG LAW BY THE ASSESSEE. IT D OES NOT APPEAR THAT THE ASSESSEE FURNISHED INACCURATE PARTICULARS NOR DID THE ASSESSEE CONCEALED THE INCOME BUT MERELY APPLIED E INACCURATE LEGAL POSITION IN ITS RETURN. ( H) RELIANCE IS ALSO PLACED ON THE RECENT DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF CIT V K.K.PATEL FOUNDATION [SPECIAL LEAVE TO APPEAL (CIVIL) CC 17165/2008] (REFER ANNEXURE 18) PASSED ON 7 JANUARY 2009 WHEREIN THE APEX COURT BY A SPEAKING ORDER DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT AGAINST NON - LEVY O F PENALTY UNDER SECTION 271(L)(C) OF THE ACT BY ITS OBSERVATION IN THE ORDER THE HON'BLE SUPREME COURT EXPLICITLY HELD THAT IMPOSITION OF PENALTY UNDER SECTION 271 (L)(C) OF THE ACT WAS NOT WARRANTED ON THE PECULIAR FACTS OF THE CASE. THIS DECISION ONCE A GAIN EMPHASIZES THE FACT THAT PENALTY IS NOT AUTOMATIC AND FACTS OF A CASE CAN JUSTIFY NON - LEVY OF PENALTY ( I) THE HON'BLE SUPREME COURT BENCH CONSISTING OF 3 JUDGES IN THE CASE OF HINDUSTAN STEEL LIMITED V STATE OF ORISSA (83 ITR 26) (REFER ANNEXURE 19) DEALING WITH SALES TAX ACT CONCLUDED THAT WHERE PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE 12. NO PENALTY WHERE THERE IS EXISTENCE OF MORE THAN ONE VIEW REGARDING TAXABILITY IT IS ALSO SUBMITTED THAT A REJECTION OF THE POSITION ADOPTED BY THE ASSESSES BY FO LLOWING A DIFFERENT INTERPRETATION WHEN MORE THAN ONE VIEW IS POSSIBLE DOES NOT JUSTIFY LEVY OF PENALTY. THIS PRINCIPLE HAS BEEN UPHELD IN THE FOLLOWING JUDICIAL PRECEDENTS: ( A) IN THE CASE OF CIT V CALCUTTA CREDIT CORPORATION LTD (166 ITR 29) (CAL) (REFER ANNEXURE 20) NO CASE FOR LEVYING PENALTY HAD BEEN MADE OUT AS TWO OPINIONS WERE ARRIVED AT ON THE SAME FACTS. ( B) THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V AMAR NATH [1998] (230 ITR 619) (REFER ANNEXURE 21) WHERE TWO VIEWS ARE POSSIBLE ON A PARTICULA R ISSUE NO INFERENCE OF CONCEALMENT OF PENALTY CAN BE DRAWN AND PENALTY SHOULD NOT BE LEVIED IN SUCH CASES. ( C) SIMILAR VIEW WAS UPHELD BY THE CALCUTTA HIGH COURT IN THE CASE IF CIT V JAGABANDHU PRASANNA KUMAR RUPLAL SEN PODDAR [1982] (133 ITR 156) (REFER ANNEXURE 22). ( D) IN THE CASE OF EMILIO RUIZ BERDEJO V DCIT (118 TTJ 971)(PUNE) (REFER ANNEXURE 10) IT WAS HELD THAT MANY SUCH BELIEFS ARE NOT FREE FROM DOUBT FROM THE TAXABILITY PERSPECTIVE AND THEREFORE PENALTY UNDER SECTION 271 (L)(C) IS NOT LEVIABLE . 11 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG 13. DSM NV HAS PLACED RELIANCE ON VARIOUS JUDICIAL PRECEDENTS TO CONCLUDE THAT THE C - ICT SERVICES AND CORPORATE SERVICES ARE NOT LIABLE TO TAX AS PER THE PROVISIONS OF THE INDIA - NETHERLANDS TAX TREATY. FURTHER DSM NV HAS MENTIONED THAT THE AGREEMENTS I N RESPECT OF THE SERVICES ARE COMPREHENSIVE IN NATURE AND THE ACTUAL SERVICES PROVIDED TO THE INDIAN AFFILIATE ENTITIES OF DSM DO NOT MAKE AVAILABLE ANY TECHNICAL KNOWLEDGE EXPERIENCE SKILL KNOW - HOW OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSF ER OF A TECHNICAL PLAN OR TECHNICAL DESIGN. HOWEVER YOUR GOOD SELF HAS TAKEN A DIFFERENT TECHNICAL VIEW ON THE TAXABILITY C - ICT SERVICES AND CORPORATE SERVICES. 6. IN SUM AND SUBSTANCE THE ASSESSEE PLEADED THAT IT HAS SHOWN ALL THE DETAILS IN RESPECT OF ITS RECEIPTS IN INDIA IN THE NOTES TO THE RETURN OF INCOME AND THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE INCOME FROM THE AFFILIATES WERE NOT TAXABLE. THE CONTENTION OF THE ASSESSEE DID NOT FIND FAVOUR AT THE ASSESSING OFFICER AND THE ASSESSING OF FICER LEVIED THE PENALTY OF RS.25 LACS VIDE ORDER DATED 30 - 06 - 2009. THE ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE LD. CIT(A) AND THE LD. CIT(A) DELETED THE ENTIRE PENALTY. THE OPERATIVE PART OF THE FINDINGS OF THE LD. CIT(A) IS AS UNDER: AFTER CA REFULLY CONSIDERING THE LAW SETTLED BY THE HON'BLE SUPREME COURT IN THE JUDGMENT QUOTED ABOVE AND APPLYING IT TO THE FACTS OF THE CASE IT IS OBSERVED THAT THE APPELLANT WHICH IS A FOREIGN COMPANY ESTABLISHED IN NETHERLANDS HAD RECEIVED PAYMENTS FROM ITS INDIAN ASSOCIATE COMPANIES FOR CERTAIN SERVICES SINCE APPROXIMATELY A.Y. 2002 - 03 WHICH WERE CLAIMED NOT TAXABLE IN INDIA IN THE RETURNS FILED IN INDIA TO CLAIM REFUND OF TAXES DEDUCTED AT SOURCE BY ITS ASSOCIATE COMPANIES. UPTO A.Y. 2005 - 06 WHEN THE PHYSICAL RETURNS WERE ALLOWED TO BE FILED BY CORPORATE ASSESSEES THE APPELLANT COMPANY WHILE FILING THE RETURNS HAD ENCLOSED A DETAILED NOTE EXPLAINING HOW AND WHY THE RECEIPTS HAVE BEEN CLAIMED AS NON - TAXABLE. IN THE A.Y. 2006 - 07 WHEN FIL ING OF RETURN BY CORPORATE IN ELECTRONIC MEDIA WAS MADE MANDATORY AND THE PROCEDURE WAS LAID THAT THE NOTES AND OTHER DETAILS CAN BE FILED BEFORE THE ASSESSING OFFICER WHEN NOTICE U/S 143(2) IS ISSUED NO ILL INTENTION CAN BE INFERRED FROM TH E ELECTRONIC FILING OF RETURNS AS WAS MADE BY THE ASSESSING OFFICER MORE SO WHEN IN THE EARLIER ASSESSMENT YEARS THE APPELLANT IS SEEN TO HAVE FILED THE DETAILED EXPLANATION IN A NOTE ANNEXED WITH THE RETURN. ON THE ISSUE OF DIVERGENCE OF VIEW ON 12 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG T AXABILITY AMONG THE AFFILIATE COMPANIES AND THE APPELLANT IT CAN BE SEEN THAT THE ARGUMENT OF APPELLANT THAT DEDUCTION U/S 195 / 197 IS TENTATIVE AND IS NOT BINDING AT THE TIME OF ASSESSMENT IS LEGALLY CORRECT. IT CAN ONLY INDICATE THAT THE VIEW OF TAXABI LITY IS SUPPORTED BY THE ACTION OF DEDUCTORS. FURTHERMORE AFFILIATES AND THE PRINCIPAL COMPANY CANNOT BE ASSUMED TO HAVE NO DIFFERENT VIEW ON ONE ISSUE SO FAR AS THE TAXABILITY IS CONCERNED. BOTH ARE LEGALLY INDEPENDENT. IT CAN ONLY ESTABLISH THAT THE APPELLANT WAS AWARE ABOUT THE VIEW OF TAXABILITY. HOWEVER IN THAT CIRCUMSTANCE ALSO IT HAS TO BE SEEN WHETHER THE VIEW TAKEN WAS BONAFIDE OR NOT. IN CASES WHERE DIVERGENCE IN VIEW IS POSSIBLE IT WILL BE INCORRECT TO SAY THAT BY CLAIMING REFUND INAC CURATE PARTICULARS WERE FILED OR THE VIEW WAS NOT BONAFLDE. WHETHER THE CLAIM T MADE BY THE APPELLANT REGARDING TAXABILITY OF RECEIPTS IS CORRECT OR NOT IS NOT BEFORE THIS OFFICE HOWEVER THE ONLY RELEVANT ISSUE RELATING TO THE SAID CLAIM IS WHETHER THE AP PELLANT HAD BONAFIDE BELIEF IN RESPECT OF THE SAID CLAIM OR NOT AND WHETHER THE APPELLANT HAS FILED ALL THE RELEVANT PARTICULARS WITH THE RETURN OR NOT. SO FAR AS THE CLAIM IS EONCERNED IT IS SEEN THAT THE CLAIM IN A.Y. 2003 - 04 WAS ACCEPTED BY THE ASSESSI NG OFFICER IN AN ASSESSMENT ORDER PASSED AFTER SCRUTINY U/S 143(3) OF THE I.T. ACT AND THEREFORE THE CLAIM OF THE APPELLANT THAT THIS SHOULD BE TAKEN AS AN EVIDENCE OF BONAFIDE BELIEF LOOKS CORRECT. THE ASSESSING .OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SCRUTINY IN THIS ASSESSMENT YEAR CAME TO A DIFFERENT VIEW AND IT WAS DETERMINED THAT THE RECEIPTS ARE TAXABLE IN INDIA. THEREFORE IN THE FACTS OF THE CASE THE CONTENTION OF THE APPELLANT THAT THE ASSESSING OFFICER CAME TO A CONCLUSION DIFFERENT FROM THAT OF HIS PREDECESSOR TAKEN IN EARLIER ASSESSMENT YEAR ON THE SAME SET OF FACTS LOOKS CORRECT. THE APPELLANT HAS ALSO SHOWN THAT THE RELEVANT MATERIALS WERE SUPPLIED AS AND WHEN CALLED FOR AND THERE WAS NO OMISSION OR COMMISSION IN FILING OF PARTICULARS OF INCOME. THE CLAIM OF THE APPELLANT THAT THE DECISION OF THE ASSESSING OFFICER MADE IN THIS ASSESSMENT YEAR WAS ACCEPTED TO AVOID PROTRACTED LITIGATION INCLUDING THE COST OF LITIGATION AND THE APPELLANT AGREED TO THE STAND OF THE ASSESSING OFFICER IN OT HER YEARS ALSO TO GET THE ISSUE SETTLED AMICABLY ON THE ASSURANCE OF THE ASSESSING OFFICER THE ISSUE IS PURELY LEGAL IN NATURE WHICH WILL NOT ENTAIL LEVYING OF VALUE IS NOT ATTACHED TO THIS ARGUMENT OR CONTENTION OF THE APPELLANT THE CASE OF THE APPELLANT LOOKS COVERED BY THE PRINCIPLE LAID BY THE SUPREME COURT IN RELIANCE PETRO PRODUCTS (P) LTD. QUOTED SUPRA. THE HON'BLE COURT HAS CLEARLY HELD THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE 13 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG FA CTS CLEARLY SUGGEST THAT THE ASSESSING OFFICER HAS CONCLUDED THE FILING OF THE INACCURATE PARTICULARS OF INCOME MAINLY IN VIEW OF EXPLANATION 1 OF THE SEC. 271(1)(C). THE INTERPRETATION GIVEN IN THE JUDGMENT QUOTED ABOVE SHOW THAT THE INFERENCE DRAWN BY TH E ASSESSING OFFICER IS INCORRECT. THE FACTS ANALYZED BY THE ASSESSING OFFICER TO INFER APPLICABILITY OF 271 (1)(C) READ WITH EXPLANATION 1 CAN BE SEEN PROPERLY MET BY THE APPELLANT IN THEIR SUBMISSIONS. PENALTY THEREFORE IS HELD TO BE NOT LEVIABLE. N O W THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO CONSIDERED THE PRECEDENTS ON WHICH RELIANCE IS PLACED BY THE ASSESSEE. THE ASSESSEE IS INCORPORATED IN NETHERLANDS AND HIS TAX RE SIDENT OF NETHERLAND AS PER THE DTA A BETWEEN INDIA AND NETHERLANDS. THE ASSESSEE HAS NO OFFICE IN INDIA BUT ARE HAVING VARIOUS AFFILIATES ENTIT IES. T HE ASSESSEE RECEIVED CERTAIN PAYMENTS FROM INDIAN AFFILIATES FOR RENDERING C - ICT AND CORPORATE SER VICES. THE ASSESSEE INTERPRETED THE PROVISIONS OF DTA A AND IT WAS UNDER THE BONAFIDE BELIEF THAT THE PAYMENTS RECEIVED FOR PROVIDING THE ABOVE SERVICES TO THE INDIAN AFFILIATES ARE NOT TAXABLE IN INDIA. THE LEARNED COUNSEL SUBMITS THAT THE ASSESSEE HAS F ILED E - RETURN FOR THE A.Y. 2006 - 07 AS IT WAS MADE COMPULSORY . T HE SOFTWARES IN WHICH THE E - RETURNS WERE FILED THERE WAS NO PROVISION FOR ATTACHING ANY NOTES WHICH WAS OTHERWISE AVAILABLE WHILE FILING THE RETURN IN THE PHYSICAL FORM. THE CBDT C IRCULAR NO . 9/2006 DATED 10 - 10 - 2006 STATED THAT NO ENCLOSURES INCLUD ING COMPUTATION OF INCOME/NOTES FINANCIAL STATEMENT ETC. SHOULD BE FILED WITH E - RETURN AND THE SAID DOCUMENTS AND NOTES WERE TO BE FILED AT THE TIME OF ASSESSMENT . HE FURTHER SUBMITS THAT E - RETUR N WAS FILED AS PER THE INSTRUCTION OF THE CBDT AND HENCE IT CANNOT BE PRESUMED THAT THE ASSESSEE HAS FURNISHED INACCURATE INCOME OF HIS INCOME OR CONCEAL THE PARTICULARS OF INCOME. HE ARGUES THAT TO AVOID THE COST INVOLVED IN THE PROTRACTOR LITIGATION A SSESSMENT ORDER WAS ACCEPTED AND THE ASSESSEE DID NOT CONTEST IT. HE FURTHER SUBMITS THAT ACCEPTANCE OF THE ASSESSMENT ORDER DOES NOT SUO 14 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG MOTO MAKE ANY PRESUMPTION AGAINST THE ASSESSEE BECAUSE THERE WERE MANY REASONS FOR SETTLING THE ISSUE AT THE ASSESSME NT STAGE. HE SUBMITS THAT AS PER THE FACTS ON RECORD IT IS INTERPRETATION OF THE TREATY BETWEEN INDIA AND NETHERLANDS WHICH HAS BEEN ACCEPTED BY THE ASSESSEE AND ALL THE RECEIPTS ARE DULY REFLECTED IN ITS BALANCE SHEET AND BOOKS OF ACCOUNT AND HE PLEADED FOR CONFIRMING THE ORDER OF THE LD. CIT(A). WE HAVE ALSO HEAD THE LD. CIT DR. 8. THE ONE ADMITTED FACT IN THIS CASE IS THAT THE ASSESSEE IS NON - RESIDENT AND RECEIVED CERTAIN PAYMENTS FROM ITS INDIAN AFFILIATES TOWARDS PROVIDING CERTAIN SERVICES. THE CL AIM OF THE ASSESSEE IS THAT THE NATURE OF THOSE SERVICES CANNOT BE TREATED AS RENDERING THE TECHNICAL SERVICES AND HENCE THE PAYMENT RECEIVED CANNOT BE TREATED AS FEES FOR RENDERING TECHNICAL SERVICES. THE ASSESSING OFFICER HAS GONE FURTHER BY HOLDING THA T IN VIEW OF THE ARTICLE 12 OF THE DTAA BETWEEN THE INDIA AND NETHERLANDS T HE FEES FOR TECHNICAL SERVICES AND ROYALTY ARE TAXABLE IN THE COUNT R Y OF SOURCE. IN OUR OPINION THE PENALTY ORDER ITSELF DEMONSTRATE THAT IT IS ONLY THE INTERPRETATION OF LAW AND TREATY WHICH RESULTED INTO TAXATION OF THOSE INCOME/RECEIPTS. THE LD. CIT(A) PLACED HIS RELIANCE FOR ALLOWING THE RELIEF TO THE ASSESSEE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC). IN OU R OPINION HE HAS RIGHTLY APPLIED THE PRINCIPLES LAID DOWN IN THE SAID CASE. IN THE PRESENT CASE ALSO THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE WHICH APPEARS TO BE BONAFIDE CASE . H ENCE IN OUR OPINION NO INTERFERENCE IS REQUIRED IN THE OR DER OF THE LD. CIT(A) DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER. IT IS PERTINENT TO NOTE THAT THERE WAS A TDS IN THIS CASE ON THE PAYMENTS MADE TO THE ASSESSEE. WE THEREFORE DISMISS ALL THE GROUNDS TAKEN BY THE REVENUE. 9. NOW WE TAKE UP TH E CROSS OBJECTION FILED BY THE ASSESSEE. THE LEARNED COUNSEL FAIRLY SUBMITTED THAT THOUGH CERTAIN GRIEVANCES ARE 15 ITA NO. ITA NO. 600 /PN/201 2 & CO NO. 18 /PN/201 3 SHRI BHARAT DHANPAL PATIL SINDHUDURG RAISED AGAINST THE OBSERVATION BUT EFFECTIVELY NOTHING HAS BEEN DECIDED AGAINST THE ASSESSEE BY LD. CIT(A) . WE FIND THAT THE CROSS OBJECTION FLED BY THE ASSESS EE IS ONLY ON THE ACADEMIC GROUND S AND CROSS OBJECTION IS NOT CONTEMPLATED FOR DOING THE ACADEMIC EXERCISE. IN OUR OPINION THE CROSS OBJECTION IS INFRUCTUOUS AND NOT MAINTAINABLE. ACCORDINGLY ALL GROUNDS TAKEN BY THE ASSESSEE IN THE C ROSS OBJECTION ARE DISMISSED. 10. IN THE RESULT THE REVENUES APPEAL AS WELL AS THE ASSESSEES CROSS OBJECTION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 15 - 07 - 2013 SD/ - SD/ - (G.S. PANNU) (R.S. P ADVEKAR) ACCOUNTANT M EMBER JUDICIAL MEMBER RK/PS PUNE DATED : 15 TH JULY 2013 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - I PUNE 4 THE CIT - I PUNE 5 THE DR ITAT B BENCH PUNE. 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE