- (1.) These appeals are filed by the Revenue challenging the common order passed by the Income Tax Appellate Tribunal, Cochin Bench in ITA Nos. 385/Coch/2011 and 391/Coch/2011.
(2.) Briefly stated the relevant facts are that the respondents are Partners of a firm M/s. Muthoot Estate Investments. They had drawn funds from the firm over and above their respective capital and paid interest to the firm on the amounts overdrawn by them. Accordingly, respondent in ITA No. 139/13 paid a sum of Rs. 1,39,00,000/- and the respondent in ITA No. 177/13 paid a sum of Rs. 6,28,28,000/- as interest to the firm. Both of them did not deduct tax at source on the interest paid by them and noticing this as a violation of Section 194A of the Income Tax Act, 1961 (hereinafter, the 'Act', for short) the Joint Commissioner of Income Tax levied penalty under Section 271C. Accordingly, Rs. 15,69,664/- and Rs. 70,49,302/- were levied as penalty on the respondents in ITA Nos. 139/13 and 177/13, respectively. The penalty orders were confirmed by the Commissioner (Appeals). The further appeals filed before the Tribunal were allowed and the impugned order was passed holding that the relief entertained by the assessees that they were not liable to deduct tax at source on the interest paid by them to the partnership firm can be considered as a reasonable cause as contemplated under Section 273B of the Act. The Tribunal also took note of the fact that the firm had included the interest it had received in its return of income and that since the firm had declared loss, it was not liable to pay any tax and hence there was no revenue loss. It was on these grounds the Tribunal set aside the order passed, deleted the penalty levied under Section 271C of the Act and allowed the appeals. It is this order, which is challenged by the Revenue in these appeals and the questions of law formulated are: 1. Whether, on the facts and in the circumstances of the case, the tribunal is right in law and fact in cancelling the penalty levied under Sec. 271C 2. Whether, on the facts and in the circumstances of the case and also in the light of the specific exemption provided in section 194A(3)(iv) to such income credited or paid by a firm to a partner of the firm, the assessee is reasonably entitled to entertain the belief that payment of interest by the partners to the firm is similar or similarly placed 3. Whether, on the facts and in the circumstances of the case and in the absence of an issue of debate being raised by the assessee, the Tribunal is right in law and fact in introducing the concept of debate in the order and is not the order based on a "debatable issue" extraneous and perverse -
(3.) We heard the senior Standing Counsel for the Revenue and also the learned senior counsel for the respondent assessees.;