Income Tax penalty cannot be invoked without relevant documents substantiating business activities: ITAT

Income Tax Appellate Tribunal

Income Tax Appellate Tribunal (ITAT): The Coram of Shamim Yahya, Accountant Member and Narender Kumar Choudhary, Judicial Member, observed that under the Income Tax Act penalty can’t be invoked without relevant documents which substantiate business activities.

Factual Background

M/s GSA Gestions Sportives Automobiles provides the rights to services of qualified motor racing drivers to teams participating in the Federation One 211 Championship. For AY-2012-13, the AO referred to various letters/notes issued to the assessee which remained unresponded.

The AO noted that the assessee is in receipt relating to Indian Grand Prix which was received in connection with business liable to tax @ 40%. Further, he opined that the facts and material indicate to the existence of Permanent Establishment of assessee in terms of Article 5 of India-Switzerland Double Taxation Avoidance Agreement.

Analysis and Decision

Coram had put up a question to counsel for the assessee as to whether the racing car driver in the case before the Tribunal is a driver simplicitor or is he a technical expert. The Counsel could not give a cogent reply, nor he could rebut the proposition that the racing car driver was not a technical expert person.

Moreover, the reference by DRP to OECD commentary in the context of the model tax treaty that the formula one driver was athlete was also germane and had to be considered.

Coming to the AO order passed pursuant to the DRP order, Tribunal noted that there are two limbs. In the first limb, the DRP had accepted that the assessee had no PE existence and the DRP had accepted that the racing car driver came and performed for only three days in India.

Further, a query was raised as to the actual duration of the drivers’ stay in India, the time taken for preparation, finalization and conclusion and the certificate of the said drivers’ arrival in India and departure in relation to the event. But the counsel for assessee was not able to provide any such detail.

Tribunal found that the aforesaid was a crucial aspect and had not been examined by the Revenue authorities below, hence the Coram deemed it proper to remit the file to the AO to examine the issue.

Further, the Tribunal while allowing the appeal granted an opportunity to give the submissions before the AO.

The above-said order applies mutatis mutandis to AY-2013-14. [GSA Gestions Sportives Automobiles SA v. DCIT, ITA No. 1950/Del/2016, decided on 13-5-2022]


ASSESSEE BY: Shri Jay Savla, Sr. Advocate

REVENUE BY: Ms. Meenakshi Singh, CIT DR

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