Home Income tax Corporate Income tax Jaipur ITAT Eliminates Penalty Imposed for Default of Not Deducting TDS on Foreign Remittances

Jaipur ITAT Eliminates Penalty Imposed for Default of Not Deducting TDS on Foreign Remittances

Jaipur ITAT Eliminates Penalty Imposed for Default of Not Deducting TDS on Foreign Remittances
Jaipur ITAT's Order for Isys Softech Pvt. Ltd.

The penalty imposed for the default in not deducting the TDS on the international remittances has been eliminated by the Jaipur Bench of Revenue Tax Appellate Tribunal (ITAT).

The bench of Sandeep Gosain (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) has adopted that the taxpayer has intentionally not bypassed TDS and there’s no rebellious conduct on the taxpayer’s portion.

The ITO has issued an order below Part 143(3) of the Revenue Tax Act, 1961. On the time of scrutiny proceedings, it was revealed that within the revenue and loss account, the taxpayer’s firm has debited an quantity below the heading ‘Software program License and Set-up Expenses’ which was credited to M/s BJW Consulting Service LLC and Follow Forces- Anesthesia Billing Software program.

Based on Part 195(1) of the Revenue Tax Act, 1961, anybody accountable for paying curiosity or another sum chargeable to a non-resident or international firm should deduct earnings tax on the relevant charges when crediting the earnings or making fee, whichever occurs first.

Nonetheless, the taxpayer firm doesn’t make the TDS throughout the credit score fee. Therefore the AO has not permitted the quantity.

After an attraction, the Revenue Tax Appellate Tribunal concluded that the fee made by the taxpayer fell below the definitions of royalty as per u/s. 9(1)(vi) and Article 13(2) of the Indo-US DTAA. The taxpayer was thought of in default for not paying TDS, resulting in a discover u/s. 271C of the Act issued on March 22, 2018. Regardless of the assessee’s response, the Assessing Officer upheld the default, deeming the taxpayer responsible for penalty below part 271C. Subsequently, the Further Commissioner of Revenue Tax (TDS) imposed a penalty of Rs. 11,46,838 on the assessee for this lapse.

The assessee argued that they hadn’t deducted TDS in good religion. Furthermore, the penalty was imposed after a lapse of 4 years, which exceeds the permissible timeline. In the course of the evaluation, the Assessing Officer (AO) thought of the assessee’s clarification and didn’t provoke penalty proceedings. Moreover, for the reason that payer had no Everlasting Institution (PE) or company settlement, the sum paid wasn’t taxable in India.

Nonetheless, the division argued that admitting non-deduction of TDS below bona fide doesn’t allow waiving the penalty below the legislation.

The tribunal noticed that the penalty imposition wasn’t justified because the assessee had an inexpensive trigger for the failure and the income had already dismissed the assessee’s declare for non-deduction of tax.

Consequently, the ITAT dominated that the penalty imposition was nullified as a result of real and justifiable causes behind not deducting TDS.


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