It has been recently held by the Hon'ble High Court of
Delhi in the case ofCIT v M/s AIR Liquide India
Holdingsreported in 2015-TIOL-2808-HC-DEL-IT
that no penalty under Section 271C of the Income Tax Act, 1961 can
be levied against the Assesee and he cannot be held an Assesse in
default when there was nothing brought on record by the Department
to show that the Respondent had been intimated by the expatriate
employees about the remuneration received by them from
Brief facts of the case :
The fact leading to filing of the appeal by the revenue was that
the Respondent was a wholly owned Indian subsidiary of Air Liquid
France (ALF), a French multinational company. The Indian company
has both Indian as well as expatriate employees on its pay rolls. A
survey was conducted in the premises of the Respondent by the
Department u/s 133A on a suspicion that multinational corporations
were evading taxes on salary and allowances paid by them to the
expatriate staff outside India. During the survey it was found that
2 employees were deputed by ALF to look after the Indian operations
who were paid remuneration both by Indian company as well as ALF.
TDS was deducted by the Respondents on the salaries paid by them to
the said two persons, however no tax was deducted at source on the
salaries paid to them by the parent company i/e ALF in terms of
Section 192 read with S. 9 (1)(ii) of the Act. Accordingly, penalty
proceedings u/s 271C were initiated against the Respondent.
The Additional Commissioner of Income Tax (TDS) and CIT
(Appeals) dismissed the appeals filed by the respondent while
rejecting the explanation offered by the respondent that it was
unaware of the payment of salary by ALF to the expatriate employee
and therefore, did not deduct tax.
However, the Hon'ble ITAT
made a fact finding that there was no material on record to show
that the respondent had been intimated by the expatriate employees
about the remuneration being received by them from ALF. It noted
"Neither in the course of search under Section 133A nor
subsequent thereto in evidence was found by the Department to this
It was further noticed by the ITAT that after the search
operation under Section 133A and discussion with the income tax
authorities, the Respondent having become aware of the taxability
of the remuneration received by the expatriate employees from ALF
obtained the details and concurrence of ALF for the payment of tax
dues. After completing necessary formalities and by arrangement
with ALF, the Respondent commenced depositing not only the TDS but
also the interest for the delay. Thus, both Sections 192(1) and
192(2) stood complied with by the Respondent even before penalty
was levied under Section 271C of the Act by the order dated 17th
The Hon'ble ITAT observed that a duty to deduct tax at
source from salary received by an expatriate employee from the
'other employer' could arise only when the employee himself
furnishes the details in that regard to the company in India with
which he was employed.
On appeal before the Hon'ble High Court, the Court in the
light of the factual findings of the ITAT and relying on a similar
case of CIT v Marubeni India (P) Ltd. reported in  294 ITR
157 (Del), accordingly dismissed the appeals filed by the
The Duty to deduct TDS with regards an expatriate arises, only
when he himself furnishes the details regards the other
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Cummins Inc. is a foreign company, rendering services in respect of desktop/laptop software license and internet mail facilities to its Indian associated enterprises, i.e. CIL and CSSL which were paying IT charges provided by the taxpayer.
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