Maharashtra State Electricity ... vs Department Of Income Tax
- CitationITA No. 3997/Mum/2013
Ratio decidendi
The rule this decision rests on
Where the basis for levying a penalty under section 271C ceases to exist because the underlying tax-deduction liability has been held not to arise in an order of the Tribunal, the penalty levied on that basis cannot be sustained, and its cancellation by the first appellate authority is confirmed.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
DCIT (TDS) - 2(1) M/s. Maharashtra State Electricity Room No. 702, 7th Floor Distribution Co. Ltd. Smt. K.G. Mittal Ayurvedic Vs. 1st Floor, Prakashgad, Anand Hospital Bldg., Charni Road Kanekar Marg, Bandra (E) Mumbai 40002 Mumbai 400051 PAN - AAECM2933K Appellant Respondent
Appellant by: Shri Surinder Jit Singh Respondent by: Shri K.K. Ved
Date of Hearing: 05.03.2015 Date of Pronouncement: 05.03.2015
ORDER
Per D. Manmohan, V.P.
This appeal by the Revenue is directed against the order passed by CIT(A) 14, Mumbai and it pertains to A.Y. 2009-10.
2. Penalty levied by the AO under section 271C of the Income Tax Act, 1961, cancelled by the CIT(A), is the subject matter of dispute before us.
3. Assessee is engaged in the business of distribution of electricity within the state of Maharashtra. Assessee-company is fully owned by Government of Maharashtra. Assessee was not deducting tax at source on the 'wheeling and transmission charges' paid to MSETCL and Power Grid Corporation of India Ltd. AO, therefore, initiated proceedings under section 201(1)/201(1A) of the Act as in his opinion the aforementioned charges are in the nature of rent and under section 194J of the Act assessee is liable to deduct tax at source. Simultaneously penalty proceedings were initiated under section 271C of the Act.
4. On an appeal filed by the assessee against applicability of section 194J, the learned CIT(A) observed that tax is deductible under section 194-I 2 ITA No. 3997/Mum/2013 M/s. Maharashtra State Electricity Distribution Co. Ltd.
of the Act, ignoring the contentions of the assessee that there is a reasonable cause. In the meantime assessee filed an appeal before the ITAT, Mumbai Benches contending, inter alia, that assessee is not required to deduct tax at source under section 194-I of the Income Tax Act. The Tribunal, in turn, held that assessee is not liable to deduct tax at source (ITA No. 2872/Mum/2010 dated 27.06.2012). Since the very basis for levying penalty does not exist, the learned CIT(A) cancelled the penalty levied under section 271C of the Act.
5. Revenue, however, preferred an appeal against cancellation of penalty, which has come up for hearing before us. We have considered the rival submissions and carefully perused the record. It is not in dispute that the very basis for levy of penalty ceased to exist in the light of the order of the ITAT (supra). Such being the case, we do not find any infirmity in the order of the CIT(A) in cancelling the penalty levied under section 271C of the Act. We, therefore, confirm the order of the CIT(A).
6. In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 5th March, 2015.
Sd/- Sd/ (Chandra Poojari) (D. Manmohan) Accountant Member Vice President
Mumbai, Dated: 5th March, 2015
Copy to:
1. The Appellant 2. The Respondent 3. The CIT(A) - 14, Mumbai 4. The CIT- (TDS), Mumbai City 5. The DR, "B" Bench, ITAT, Mumbai
By Order
//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.
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