DCIT, CIRCLE-1(1)(1), SURAT V. AKANSHA SHIP BREAKING PVT. LTD, SURAT

ITA 112/SRT/2020

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2463 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-02-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 11-06-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SITA RAM MEENA
• Keywords: Retrospective amendment; TDS; Set aside
• Section: 40(a)(ia); 40a(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No.112/SRT/2020 (Ǔनधा[रणवष[ / Assessment Years: (2010-11) (Virtual Court Hearing) The DCIT, Circle-1(1)(1), Surat. Vs. Akansha Ship Breaking Pvt. Ltd., 1 st Floor, Dhamanwal Complex, Opp. Rajkumar Theater, Udhna, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AACCA2307F (Assessee) (Respondent) Assessee by : Shri Rohit Vijayvargia, CA Revenue by : Shri Sita Ram Meena, Sr. DR स ु नवाईकȧतारȣख/ Date of Hearing : 11/02/2022 घोषणाकȧतारȣख/Date of Pronouncement : 28/02/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2010-11, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-1, [in short “the ld. CIT(A)”] in Appeal No. CIT(A), Surat-1/10577/2016-17 dated 14.02.2020, which in turn arises out of an assessment order passed by the Assessing Officer under section 143 r.w.s. 147 of the Income Tax Act, 1961 [hereinafter referred to as the “Act”], dated 28.03.2016. 2. Grounds of appeal raised by the revenue are as follows: “1. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the disallowance of Rs.39,52,119/- made under section 40(a)(ia) of the IT Act on account of non-deduction of TDS, according to the provisions of section 194H of the Act, on Bank Guarantee commission charged by the bank on behalf of assessee for the line of credit facility extended by it, holding that the payment made to the bank in the nature of commission for extending the line of credit facility is not in the nature of commission and therefore the provisions of Section 194H are not applicable to such payments, without appreciating that in the assessee's case the bank charge has the character of commission? Page | 2 ITA.112/SRT/2020/AY.2010-11 Akansha Ship Breaking Pvt. Ltd. 2. Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the disallowance of Rs.39,52,119/- made under section 40(a)(ia) of the IT Act holding that notification of the CBDT in which the assessing officer has relied for his decision is of clarificatory in nature hence has to be applied retrospectively ignoring the fact that the CBDT in its Notification No.56/2012 dated 31/12/2012 has mentioned that TDS provisions are exempted on payment of Bank guarantee commission from 01.01.2013 and there is no specific mention regarding retrospective effect? 3. It is therefore, prayed that the order of the Ld CIT(A) may be set aside and that of assessing officer may be restored to the above extent. 4. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 3. Succinct facts are that assessee before us is a Private Limited Company. The main source of the assessee company for the year under consideration is from shop breaking business and wholesale trading of nylon chips and filter. During the assessment proceedings, the assessing officer noticed that assessee has paid Rs.39,52,119/-, as Bank Guarantee Commission for the Bank Guarantee to Punjab National Bank for letter credit facility utilized, however no TDS was made. The assessing officer observed that as per Boards Notification no. 56/2012 dated 31.12.2012, w.e.f, 01.01.2013 certain payments made to bank were exempted from TDS. So the assessing officer was of view that prior to 01.01.2013, the TDS has to be deducted on these payments by assessee to bank. Therefore, assessing officer noted that assessee was required to deduct TDS u/s 194H of the Act. Since, the assessee failed to deduct the TDS therefore, assessing officer made addition of Rs.39,52,119/- under section 40(a) (ia) of the Act. 4. On appeal, ld CIT(A) deleted the addition made by the assessing officer. Aggrieved, the Revenue is in appeal before us. 5. Learned DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. Page | 3 ITA.112/SRT/2020/AY.2010-11 Akansha Ship Breaking Pvt. Ltd. 6. On the other hand, the Learned Counsel for the assessee defended the order passed by the ld. CIT(A). 7. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel for the assessee, we find that the issue involved in the present appeal is no longer res integra. The question as to whether Bank Guarantee paid to nationalized bank is covered u/s 194H of the Act for TDS obligation, was considered by various judicial forums across India. The assessing officer noticed that the assessee has paid Rs.39,52,119/- as Bank Guarantee Commission for the Bank Guarantee to Punjab National Bank for letter credit facility utilized, however no TDS was made. The assessing officer observed that as per Boards Notification no. 56/2012 dated 31.12.2012, w.e.f, 01.01.2013 certain payments made to bank were exempted from TDS. So, the assessing officer was of view that prior to 01.01.2013 the TDS has to make on these payments by assessee to bank. Thus, assessing officer has opined that assessee was required to make TDS u/s 194H of the Act. It can be seen that assessing officer is guided by the opinion that the above circular exempts the Bank Guarantee Commission or Guarantee fee from TDS w.e.f. 1 st January 2013; hence prior to that, the assessee is obligated to deduct tax on the same. However, it can be seen that the notification, is of clarificatory nature and hence has to be applied retrospectively. Identical issue was before the Coordinate Bench of ITAT Delhi in the case of Omkareshwar Properties Ltd. in ITA No.1823/Del/2015 dtd. 21.01.2019,wherein it was held that: "such a circular was brought, to reduce hardship and compliance cost of assessee then it cannot be held that any such payments made prior to the said circular which was causing hardship to the assessee should continue. It is a well settled position, that CBDT circular removing the hardship in favour of the assessee has to be treated as retrospective. 8. The Coordinate Bench of ITAT Delhi in the case of PRL Projects & Infrastructure Ltd, in ITA 5010/Del/2015, wherein the facts in brief are that Page | 4 ITA.112/SRT/2020/AY.2010-11 Akansha Ship Breaking Pvt. Ltd. assessing officer made identical disallowance u/s. 40a(ia) of Bank Guarantee Commission paid to ICICI Bank for the reason that payments made prior to 01.01.2013 is liable for TDS, however, Coordinate Bench of ITAT Delhi deleted the addition observing as follows: "We have heard the rival submissions and have perused the material on record. Regarding the disallowance of Rs.4019608/- u/s. 40(a)(ia) of the Act, it has been that this issue is covered in favour of the assessee by order of ITAT Mumbai Bench in the case of Kotak Securities Limited vs. DCIT (TDS)(supra) wherein the Mumbai Bench of the ITAT has held that there is no principal agent relationship between the bank issuing the bank guarantee of the assessee. The Mumbai Bench has noted that when the bank issues a bank guarantee on behalf of the assessee, all it does is to accept the commitment of making payment of a specified amount to the beneficiary on demand and it is in consideration of this commitment that the hank charges of fee which is termed as bank guarantee commission. The ITAT Mumbai Bench has further noted that it is termed as 'guarantee commission. The same is not in the nature of commission as it is understood in common business parlance and in context of section 194H. The ITAT Mumbai Bench, went to hold that no TDS was deductible on such, bank guarantee commission. It is seen that the Ld. CIT(A) also has relied on this order of ITAT Mumbai Bench, while allotting relief to the assessee and, further, during the course of proceedings before us, the department, could not point out any contrary judgement which could give relief to the department on this issue. Accordingly, we refuse to interfere on this issue and, uphold, the adjudication of the Ld. CIT(A).” 9. Thus, we note that there is no obligation on the assessee to deduct TDS on the Bank Guarantee Commission, hence the impugned disallowance u/s 40a(ia) of the Act was rightly deleted by ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 10.In the result, appeal filed by the Revenue is dismissed. Order is pronounced in the open court on 28/02/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Page | 5 ITA.112/SRT/2020/AY.2010-11 Akansha Ship Breaking Pvt. Ltd. lwjr /Surat / Ǒदनांक/ Date: 28/02/2022 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat