The assessee did not deduct TDS on payments to a foreign entity under an offshore contract, relying on professional advice that no income accrued in India. Penalty under S.271C was imposed, but the Commissioner (Appeals) and Tribunal deleted it. The Court dismissed Revenue’s appeal, holding no substantial question of law arose. The facts showed the assessee acted on legal opinions from reputable advisors and the foreign entity had sought an advance ruling. Such circumstances constituted reasonable cause for non-deduction and justified deletion of the penalty.(AY.  1996-97, 1997-98)