Section 10(8A), read with section 271(1)(c), of the Income-tax Act, 1961

IT : Where assessee received certain amount from Asian Development Bank for rendering engineering consultancy services, in view of fact that assessee was under a bona fide belief that said amount was exempt from tax in terms of agreement between parties and having regard to obligation of Government to bear tax on behalf of assessee, AO could not pass penalty order under section 271(1)(c) taking a view that amount in question was taxable in assessee's hands
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[2015] 55 taxmann.com 407 (Delhi)
HIGH COURT OF DELHI
LEA International Ltd.
v.
Assistant Director of Income-tax*
SANJIV KHANNA AND V. KAMESWAR RAO, JJ.
IT APPEAL NO. 17 OF 2014†
SEPTEMBER  3, 2014
Section 10(8A), read with section 271(1)(c), of the Income-tax Act, 1961 - Consultant - Assessment year 2005-06 - Assessee was a foreign compay based in Canada - During relevant period, assessee was engaged in providing engineering consultancy services - Assessee received certain amount under a contract with Asian Development Bank (ADB), for providing consultancy service - In return of income, said amount was claimed as exempt from tax - Assessing Officer held that amount received from ADB was not exempt and was added to return income - He also passed penalty order under section 271(1)(c) - Tribunal noted that application for exemption under section 10(8A) was filed by assessee with Additional Secretary, Department of Economic Affairs, Ministry of Finance, Government of India, after filing of return and issue of notice under section 143(2) which showed lack of bona fides on part of assessee - Accordingly, penalty order was confirmed - It was noted that assessee was under bona fide belief that receipt was exempt on basis of agreement entered into between parties and having regard to obligation of Government of India to bear cost of any taxes etc. in India on behalf of assessee - Even otherwise, in return of income itself, assessee had taken care and caution to reveal full material facts relating to money received from ADB - Whether on facts, it was not a fit case for imposition of penalty and, thus, impugned order passed by Tribunal was to be set aside - Held, yes [Paras 9 and 10][In favour of assessee]
Ved Jain and Pranjal Srivastava, Advs. for the Appellant. Sanjeev Sabharwal, Sr. Adv., Ruchir Bhatia and Ms. Swati Thapa for the Respondent.