Appeal details
Counselvise Citation
[2015] 123 COUNSELVISE.COM (IT) 1774 (ITAT-VISAKHAPATNAM)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 2 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
11-12-2015
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2009-2010
Appeal Filed On
27-09-2013
Judgement Text
ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.115/VIZAG/2013 ( / ASSESSMENT YEAR : 2009-10 ) DCIT CIRCLE - 2(1) VIJAYAWADA VS. SRI VADLAMUDI VENKATA RAO VIJAYAWADA [ PAN: ABIPV 6678G ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) C.O. NO.77/VIZAG/2013 (ARISING OUT OF I.T.A.NO.115/VIZAG/2013) ( / ASSESSMENT YEAR : 2009-10 ) SRI VADLAMUDI VENKATA RAO VIJAYAWADA VS. DCIT CIRCLE - 2(1) VIJAYAWADA ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR '(& ) / RESPONDENT BY : SHRI G.V.N. HARI, AR ) - / DATE OF HEARING : 03.11.2015 ) - / DATE OF PRONOUNCEMENT : 11.12.2015 ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE REVENUE AND THE CROSS A PPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), VIJAYAWAD A DATED 3.12.2012. 2. THE GROUNDS RAISED BY THE DEPARTMENT ARE (A) TO (G) RELATING TO DISALLOWANCE U/S 40(A)(IA) OF THE INCOME-TAX ACT, 1 961 (HEREINAFTER CALLED AS THE ACT). FACTS ARE IN BRIEF THAT THE ASSESSEE IS A TRADER IN GOLD, SILVER AND DIAMOND JEWELLERY IN THE NAME AND STYLE OF M/S. ANJANEYA JEWELLERY FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.1,34,66,200/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER ASSESSMENT WAS COMPL ETED U/S 143(3) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE A. O. HAS OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.16,87,297/ - IN THE PROFIT & LOSS ACCOUNT TOWARDS THE CREDIT CARD COMMISSION PAI D TO BANKERS. WHEN THE A.O. ASKED THE ASSESSEE, STATED THAT IT WAS A B ANK CHARGE DEDUCTED BY THE BANKS ON THE SALES MADE THROUGH CREDIT CARDS . THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS TO DEDUCT TDS U/S 194H OF THE ACT. THEREFORE, THE A.O. HAS DISALLOWED AN AMOUNT OF RS. 16,87,297/- U/S 40(A)(IA) OF THE ACT. THE ASSESSEE CARRIED THE MAT TER IN APPEAL BEFORE THE CIT(A). THE LD. CIT(A) BY FOLLOWING THE SPECIA L BENCH DECISION IN ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 3 THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT DELETED THE ADDITION MADE BY THE A.O. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ISSUE INVOLVED IN THIS APPEAL HAS BEEN COVERED BY THE ORD ER OF THE COORDINATE BENCH OF THE TRIBUNAL ITA 527/BANG/2015 FOR THE A.Y . 2011-12 IN THE CASE OF ADISHWAR INDIA LTD. DATED 30.7.2015 AND SUP PORTED THE ORDER PASSED BY THE CIT(A). 4. ON THE OTHER HAND, THE LD. D.R. HAS SUPPORTED TH E ORDER PASSED BY THE A.O. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE O NLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER THE TDS PROVISIONS APPLIES I N THE CASE OF CREDIT CARD COMMISSION PAID. THE VERY SAME ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S . ADISHWAR INDIA LTD. (SUPRA) HAS HELD THAT TDS PROVISIONS HAS NO APPLICA TION WHERE CREDIT CARD COMMISSION IS PAID. RELEVANT PORTION IS EXTRA CTED AS UNDER: 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. AT PARA-3.4 OF ITS ORDER, THIS TRIBUNAL IN THE CASE OF TATA TELESERVICES PVT. LTD., (SUPRA) HAD HELD AS UNDER; 4. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DIRECT RETAIL TR ADING IN CONSUMER GOODS. ASSESSEE CLAIMED DEDUCTION OF RS.16,34,000 O N ACCOUNT OF COMMISSION PAID TO THE CREDIT CARD COMPANIES, WHICH HAS BEEN D ISALLOWED BY THE ASSESSING OFFICER IN TERMS OF S.40(A)(IA) ON ACCOUNT OF THE F AILURE OF THE ASSESSEE TO ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 4 DEDUCT TAX AT SOURCE IN TERMS OF S.194H OF THE ACT, WHILE MAKING THE SAID COMMISSION PAYMENTS. IT WAS THE CONTENTION OF THE A SSESSEE BEFORE THE LOWER AUTHORITIES THAT THE ASSESSEE ONLY RECEIVES T HE PAYMENT FORM THE BANK/CREDIT CARD COMPANIES CONCERNED, AFTER DEDUCTI ON OF COMMISSION THEREON, AND THUS, THIS IS ONLY IN THE NATURE OF A POST FACT O ACCOUNTING AND DOES NOT INVOLVE ANY PAYMENT OR CREDITING OF THE ACCOUNT OF THE BANKS OR ANY OTHER ACCOUNT BEFORE SUCH PAYMENT BY THE ASSESSEE. CONSID ERING THESE SUBMISSION OF THE ASSESSEE, THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AMOUNT OF RS.16,34,000 ON THE FOLLOWING REASONI NG- 9.8. ON GOING THROUGH THE NATURE OF TRANSACTIONS, I FIND CONSIDERABLE MERIT IN THE CONTENTION OF THE APPELLA NT THAT, COMMISSION PAID TO THE CREDIT CARD COMPANIES CANNOT BE CONSIDERED AS FALLING WITHIN THE PURVIEW OF S.194H. EVEN THOU GH THE DEFINITION OF THE TERM 'COMMISSION OR BROKERAGE' USED IN THE S AID SECTION IS AN INCLUSIVE DEFINITION, IT IS CLEAR THAT THE LIABI LITY TO MAKE TDS UNDER THE SAID SECTION ARISES ONLY WHEN A PERSON AC TS BEHALF OF ANOTHER PERSON. IN THE CASE OF COMMISSION RETAINED BY THE CREDIT CARD COMPANIES HOWEVER, IT CANNOT BE SAID THAT THE BANK ACTS ON BEHALF OF THE MERCHANT ESTABLISHMENT OR THAT EVEN T HE MERCHANT ESTABLISHMENT CONDUCTS THE TRANSACTION FOR THE BANK . THE SALE MADE ON THE BASIS OF A CREDIT CARD IS CLEARLY A TRANSACT ION OF THE MERCHANTS ESTABLISHMENT ONLY AND THE CREDIT CARD CO MPANY ONLY FACILITATES THE ELECTRONIC PAYMENT, FOR A CERTAIN C HARGE. THE COMMISSION RETAINED BY THE CREDIT CARD COMPANY IS T HEREFORE IN THE NATURE OF NORMAL BANK CHARGES AND NOT IN THE NA TURE OF COMMISSION/BROKERAGE FOR ACTING ON BEHALF OF THE ME RCHANT ESTABLISHMENT. ACCORDINGLY, CONCLUDING THAT THERE W AS NO REQUIREMENT FOR MAKING TDS ON THE 'COMMISSION RETAI NED BY THE CREDIT CARD COMPANIES, THE DISALLOWANCE OF RS.1 6,34,000 IS DELETED..... WE FIND NO INFIRMITY IN THE ABOVE REASONING GIVEN B Y THE C1T(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUN DS OF THE REVENUE WHICH ARE DEVOID OF MERIT.' 8. WE FIND THAT THE FACT MATRIX HERE IS EXACTLY SIM ILAR TO THAT IN M/S TAT TELESERVICES PVT. LTD. WE THEREFORE, FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A).' 6. THE LD. COUNSEL FOR THE ASSESSEE FURTHER RELIED ON THE ITA NO.657/VIZAG/2014 FOR A.Y. 2010-11 DATED 22.7.2015 IN THE CASE OF MUKUNDARA ENGINEERS & CONTRACTORS WHEREIN THE COORD INATE BENCH OF ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 5 THE TRIBUNAL HAS CONSIDERED THE ISSUE IN RESPECT OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT OBSERVED AS UNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT SPECIAL BENCH VISAKHAPATNAM AND ALSO IN THE LIGHT OF THE VIEW EXP RESSED BY THE HONBLE A.P. HIGH COURT IN THE CASE OF JANAPRIYA ENGINEERIN G SYNDICATE, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT CANNOT BE MADE APPLICABLE IN RESPECT OF THE AMOUNTS ALREADY P AID BEFORE 31 ST MARCH. IN OTHER WORDS, THE A.O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE AMOUNTS PAYABLE AFTER 31 ST MARCH. WITH THESE OBSERVATIONS, GROUND NO.3 OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED . 7. IN VIEW OF THE ABOVE DECISIONS OF THE COORDINATE BENCH, WE RESPECTFULLY FOLLOWING THE SAME WE FIND NO INFIRMIT Y IN THE ORDER PASSED BY LD. CIT(A). THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 8. SO FAR AS BANK GUARANTEE CHARGES OF RS.3,62,472/ - WAS DEBITED TO P&L ACCOUNT THE A.O. WAS OF THE OPINION THAT TDS WAS NOT DEDUCTED AND IT HAS TO BE DEDUCTED AND MADE DISALLO WANCE U/S 40(A)(IA) OF THE ACT. ON APPEAL, THE LD. CIT(A) BY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA) DELE TED THE ADDITION MADE BY THE A.O. ON APPEAL BY THE REVENUE, THE ASS ESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL SQ UARELY COVERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN ITA 205/VIZ AG/2015 IN THE ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 6 CASE OF M/S. EFFTRONIC SYSTEMS PVT. LTD. DATED 6.3. 2014, WHEREIN THE HONBLE TRIBUNAL HAS OBSERVED AS UNDER: AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE F IRST APPELLATE AUTHORITY HAS FOLLOWED THE DECISION OF THE MUMBAI B ENCH OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LIMITED V. DCIT REPORTED IN (2012) 50 SOT 158 (MUMBAI) AND DELETED THE DISALLOW ANCE IN QUESTION. 3. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LIMITED (SUPRA) HELD AS FOLLOWS:- THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK ISSUING THE BANK GUARANTEE AND THE ASSESSEE. WHEN BANK ISSUES THE BANK GUARANTEE, ON BEHALF OF THE ASSESSE E, ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAYMENT OF A SPECIFIED AMOUNT TO, ON DEMAND, THE BENEFICIARY, AN D IT IS IN CONSIDERATION OF THIS COMMITMENT, THE BANK CHARGES A FEES WHICH IS CUSTOMARILY TERMED AS BANK GUARANTEE COMM ISSION. WHILE IT IS TERMED AS GUARANTEE COMMISSION, IT IS NOT IN THE NATURE OF COMMISSION AS IT IS UNDERSTOOD IN COMMO N BUSINESS PARLANCE AND IN THE CONTEXT OF THE S. 194H. THIS T RANSACTION, IS NOT A TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCTION REQUIREMENTS UNDER S. 194H. CIT( A) INDEED ERRED IN HOLDING THAT THE ASSESSEE WAS INDEED UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER S. 194H FR OM PAYMENTS MADE BY THE ASSESSEE TO VARIOUS BANKS. AS SESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194H, THE QUESTION OF LEVY OF INTEREST U/S 201(1A) CANNOT ARI SE. CONCLUSION: WHEN THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEE N BANK ISSUING BANK GUARANTEE AND ASSESSEE, TRANSACTION BE TWEEN THEM IS NOT TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT TAX DEDUCTION UNDER S.194H. 4. RESPECTFULLY FOLLOWING THE ORDER IN THE CASE OF KOTAK SECURITIES LIMITED (SUPRA), WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 7 9. WE FIND THAT THE ISSUE IS SQUARELY COVERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE ABOVE CASE AND WE FIND NO INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). EVEN OTHERWISE THE ISSUE IS COVERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUPRA). AS CONSIDE RED BY THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF MUKUNDARA ENGINEERS & CONTRACTORS (SUPRA), IN VIEW OF THE ABO VE, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 10. IN SO FAR AS DISALLOWANCE OF DISCOUNTS IS CONCE RNED, THE A.O. HAS DISALLOWED THE ENTIRE AMOUNT DEBITED TO THE P&L ACCOUNT. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS IT IS EXPLAINE D THAT WHEN THE BILL AMOUNT IS RS.1,01,100/- THE BILL WILL BE SETTL ED AT RS.1 LAKH, HENCE, THE BALANCE AMOUNT OF RS.1,100/- IS TREATED AS DISCOUNT WHICH IS THE METHOD OF ACCOUNTING FOLLOWED CONSISTENTLY. THIS SUBMISSIONS WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT THE S AME WAS NOT REFLECTED IN SALE BILLS. ON APPEAL THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE TUNE OF RS.50,000/- INSTEAD OF RS.3,44,425/-. WE FIND THAT THE LD. CIT(A) BY FOLLOWING THE TEST OF P REPONDERANCE OF POSSIBILITIES RESTRICTED DISALLOWANCE FROM RS.3,44, 425/- TO RS.50,000/-. IN OUR OPINION IN THE INTEREST OF JUS TICE DISALLOWANCE TO THE EXTENT OF RS.1 LAKH MEETS THE ENDS OF JUSTICE. ACCORDINGLY, THE ITA NO.115/VIZAG/2013 & CO 77/VIZAG/2013 VADLAMUDI VENKATA RAO, VIJAYAWADA 8 ADDITION IS RESTRICTED TO RS.1 LAKH INSTEAD OF RS.5 0,000/- AS RESTRICTED BY THE CIT(A). IN VIEW OF THE ABOVE, THIS GROUND O F APPEAL RAISED BY THE REVENUE IS PARTLY ALLOWED. 11. THE CROSS OBJECTION NO.77/VIZAG/2013 FILED BY T HE ASSESSEE ONLY SUPPORTS THE ORDER OF THE LD. COMMISSIONER. T HEREFORE, THE C.O. FILED BY THE ASSESSEE IS DISMISSED IN VIEW OF THE A BOVE DECISION. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND THE C.O. FILED BY THE ASSESSEE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11 TH DEC15. SD/- SD/- ( . . . . ) ( . ) ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 3 / DATED : 11 TH DEC15 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT THE DCIT, CIRCLE-2(1), VIJAYAWADA 2. '(& / THE RESPONDENT SRI VADLAMUDI VENKATA RAO, PROP. ANJANEYA JEWELLERY , D.NO.39-3-1, MG ROAD, VIJAYAWADA 3. 5 / THE CIT, VIJAYAWADA 4. 5 () / THE CIT(A), VIJAYAWADA 5. ' , , / // / DR, ITAT, VISAKHAPATNAM 6 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM
