B.C Patel, C.J:— The Revenue has filed this appeal, inter alia, agitating that the order made by the Tribunal is perverse. The Division Bench while admitting the matter on May 16, 2001, framed the question as under:
“Whether the Tribunal was right in cancelling the penalty imposed under section 271C of the Income-tax Act, 1961 ?”
2. It is required to be noted that the matter relates to the financial years 1989-90, 1990-91, 1991-92, 1992-93, 1993-94 and 1994-95 for which sepa-rate appeals were filed before the Income-tax Appellate Tribunal and sur-prisingly, only one composite appeal is preferred here. The Revenue ought to have preferred separate appeals.
3. The office (Registry) is directed to treat this matter for the financial year 1989-90 and for the other financial years, to give separate numbers for each appeal. The Revenue is directed to pay the amount of court fees which shall be deposited within a period of 15 days from today.
4. With a view to see that there is no delay, we are disposing of the matter by this common judgment.
5. The assessee, a non-resident company, incorporated in Japan having its head office in Tokyo, is before the court. The company set up Anpara B Thermal Power Project office in India for execution of the contract for con-struction of a thermal power station in Uttar Pradesh. The project was completed in 1994 and was handed over to the Government of Uttar Pradesh. The project office was at New Delhi. The company brought some Japanese technicians to India having expertise in construction of the power plant and these technicians were paid monthly salary in Indian currency. The tax was deducted at source and was deposited in accordance with sec-tion 192 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). It may be noted that these technicians or personnel were paid salary and other perquisites in accordance with the terms of their contract. The rele-vant term reads as under:
“Income chargeable under the head ‘Salaries’ rendered in India; and retention/continuation paid in Japan.”
6. The Revenue came out with the version that the salary was paid to the Japanese experts in Japan for the work carried out in India. It was stated that part of the salary was paid in India and in Indian currency as well. It also transpires that later on, the assessee paid the amount claimed by the Revenue with interest which was required to be deducted by way of TDS. It is, thereafter, the question of penalty arose and the Assessing Officer as well as the Commissioner of Income-tax (Appeals) held that the assessee is liable to pay the penalty in view of the provisions contained in section 271C of the Act, against which the assessee preferred appeals and the Tri-bunal, on appreciation of the material placed before it, came to the con-clusion that the penalty was not required to be levied as there was reason-able cause for the non-deduction of TDS. The Tribunal held as under:
“In the present case, admittedly, the Department has neither treated the assessee-company in default under section 201(1) nor it levied any penalty for non-deduction and payment of tax under the proviso to section 201(1) read with section 221 of the Income-tax Act. The assessee-company also paid interest suo motu as required under section 201(1A) for the delayed payment. It is therefore inferred that there existed good and sufficient reasons for non-deduction of tax at source from the said amount in Japan. Had there been no good and sufficient reasons for non-deduction of such tax and payment thereof, the Revenue would have treated the assessee-company in default and levied penalty under section 221 of the Income-tax Act. Moreover, the payment of the amount of short tax deduction and interest thereon was a mitigating factor for not taking action under section 221. When no action has been taken by the Revenue for levy of penalty under section 221 and delay in payment of tax has been fully compensated by payment of interest no further action is justified under section 271C of the Income-tax Act, looking to the ratio of the aforecited decisions of the hon'ble jurisdictional Delhi High Court.”
7. The Tribunal independently examined the matter on the facts as well as on law and arrived at a conclusion, which reads as under:
“Considering all the facts and circumstances discussed above we are of the considered view that there existed a reasonable cause for not deducting the tax at source from the payments made to expatri-ates in Japan within the meaning of section 273B and accordingly no penalty under section 271C is exigible.”
8. It is this later part of the judgment which has compelled the Revenue to agitate the cause before this court.
9. The Tribunal has considered all the pros and cons in detail in a judg-ment running into 90 pages. The Tribunal has considered all the material that was placed on the record. The Tribunal in para. 8.31 of its judgment, arrived at a conclusion, which is as under:
“We also find that the expatriate employees deputed to India and working on project or in liaison office were liable to tax for the salary paid to them. We note that the Revenue in the individual cases of expatriate employees had neither made any investigation about the salary, if any, paid to them in Japan nor the question of subjecting the salary paid to them in Japan was considered and decided on merits for taxation in India in their individual cases and the position being so the general managers acting as disbursing officers in both offices nei-ther had details about the salary paid to each of the expatriate emplo-yees in Japan nor were aware about its taxability in India and their responsibility for deduction of tax as per the provisions of the Chapter XVII-B. There is no material available on record to prove the facts otherwise. The general managers were, therefore, under the bona fide belief that the salary and perquisites paid to expatriate employees in India as per the terms of their deputation, only were taxable in India and tax thereon was to be deducted as per the provisions of Chapter XVII-B There is no material brought on record by the Revenue to establish and prove that the general managers were in the knowledge about the details of payments made in Japan to expatriate employees and their taxability in India and in the absence of any such material there was a good and sufficient reason available for not deducting the tax at source from the salary and perquisite paid in India over and above that already deducted and paid in Government account.”
10. In para. 8.32, the Tribunal held as under:
“Admittedly, the assessee-company paid retention/continuation pay to expatriate employees in Japan in addition to the salary and perquisite paid in India. It has been claimed on behalf of the company before the lower authorities that retention/continuation pay paid to expatriate employees in Japan is not taxable in India and the provi-sions of Chapter XVII-B relating to TDS are not applicable to such payments. Such claim was made as per the legal opinion obtained from their Internal Legal Cell. The authorities below sought inde-pendent evidence in support of such claim but nothing could be filed. According to learned counsel for the assessee-company, since the legal opinion was given by their Internal Legal Cell and it was not obtained from any outside expert, there could be no independent evi-dence in support of such claim made as insisted by the lower authori-ties. Based on such legal opinion, the assessee-company had a bona fide belief that retention/continuation pay paid in Japan to expatriate employees deputed to India is not taxable in India and accordingly the provisions of Chapter XVII-B are not applicable. According to learned counsel for the assessee, this constituted a reasonable cause and the cause so shown should have been objectively considered on merits by the lower authorities in the light of the explanation offered. The assessee-company was required to prove the existence of a rea-sonable cause by preponderance of probability only and not by way of adducing any proof beyond reasonable doubt. We find that the ‘rea-sonable cause’ so shown and the explanation offered has not been considered on merits by the lower authorities while levying/uphold-ing the penalty under section 271C. We, however, find that the lower authorities were rather highly influenced in levying/upholding the penalty by the alleged non-co-operation in furnishing details of salary or denial of payment of salary in Japan and the ultimate payment of tax and interest was not suo motu but was as a result of investigations and efforts made by the Assistant Commissioner of Income-tax. In our considered view, these facts no doubt adversely affected the waiver of interest/penalty under section 273A but so far as the levy of penalty under section 271C is concerned these are extraneous consi-derations as what the revenue authorities are required to consider while levying such penalty is existence of reasonable cause for non-deduction of tax at source and the reasonable cause as shown by the assessee-company has not been properly appreciated and deliberated by the lower authorities.”
11. The arguments with regard to retention has been considered by the Tribunal in detail and is supported by the decision of the Gujarat High Court in the case of CIT v. S.G Pgnatale, [1980] 124 ITR 391. The Tribunal has, in great detail, examined the facts and all the material on record and has arrived at a conclusion. It is not possible for us to say that the finding recorded by the Tribunal is perverse. Therefore, the appeal is disposed of against the Revenue and in favour of the assessee.