M/s. Navnirman Highway Projects Pvt. Ltd., Delhi V. DCIT, New Delhi

ITA 117/DEL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1553 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 06-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RINKU SINGH SENIOR
• Keywords: TDS; Set aside
• Section: 14A; 201(1); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.117/DEL./2017 (ASSESSMENT YEAR : 2012-13) M/S. NAVNIRMAN HIGHWAY PROJECT PVT. LTD., VS. DCIT, CIRCLE 18(1), C/O BAJPAI & COMPANY, NEW DELHI. 602, ANSAL BHAWAN, 16, K.G. MARG, NEW DELHI 110 001. (PAN : AADCN2058F) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHASHWAT BAJPAI, ADVOCATE REVENUE BY : MS. RINKU SINGH, SENIOR DR DATE OF HEARING : 22.08.2019 DATE OF ORDER : 03.09.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. NAVNIRMAN HIGHWAY PROJECT PVT. LTD ., (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 10.10.2016 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEAL S)-6, NEW DELHI QUA THE ASSESSMENT YEAR 2012-13 ON THE GROUND S INTER ALIA THAT :- ITA NO.117/DEL./2017 2 1. THAT THE ORDER PASSED BY THE ID. CIT(A) IS CO NTRARY TO FACTS AND BAD IN LAW. 2. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLDING THE DECISION OF THE ASSESSING OFFICER TO DISALLOW THE EXPENDITURE O F RS.18,40,032, ON ACCOUNT OF BANK GUARANTEE COMMISSION. 3. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS GROSSLY MISCONSTRUED CBDT N OTIFICATION NO. 56/2012 DATED 31.12.12 AND ERRED IN HOLDING THA T THE SCHEME PRESUPPOSES THAT A PAYMENT NOTIFIED UNDER THIS NOTI FICATION WAS NOT EXEMPT EARLIER. 4. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS GROSSLY FAILED TO CONSIDER THE OBJECT BEHIND THE NOTIFICATION WHICH WAS TO REDUCE THE HAR DSHIP AND COMPLIANCE BURDEN TO THE DEDUCTEE. 5. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS FAILED TO FOLLOWED THE JUDGMENT OF THE MUMBAI ITAT IN KOTAK SECURITIES LTD. V. DCIT, [2012 ] 18 TAXMANN.COM 48 (MUM.) WHICH SQUARELY COVERS THE ISS UE HOLDING THAT BANK GUARANTEE COMMISSION IS NOT LIABLE TO TDS UNDER SECTION 194H. 6. THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FAILED TO CONSIDER THAT A BENEF ICIAL CIRCULAR AND/OR INTERPRETATION SHOULD BE APPLIED RETROSPECTI VELY. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ASSESSING OFFICER (AO) DISALLOW ED BANK GUARANTEE COMMISSION UNDER SECTION 14A (IA) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) ON THE GROUND THAT UNDER NEW SCHEME WHICH CAME INTO FORCE W.E.F. 01.01.2013, PAY MENTS IN THE NATURE OF THOSE MENTIONED IN NOTIFICATION NO.56/201 2 ARE NOT COVERED WITHIN THE DEFINITION OF INTEREST U/S 2(28A ) OF THE ACT AND AS SUCH, EXEMPTION PROVIDED U/S 194A(3)(III) IS NOT AVAILABLE TO SUCH PAYMENT. SO, THE ASSESSEE WAS REQUIRED TO DED UCT THE TDS ON ITA NO.117/DEL./2017 3 THE BANK GUARANTEE COMMISSION/FEE OF RS.18,40,332/- DEBITED TO PROFIT & LOSS ACCOUNT AND THE SAME IS, THEREFORE, D ISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITION BY DISMI SSING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME U P BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. LD. AR FOR THE ASSESSEE BY RELYING UPON THE ORDE R PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS KOTAK SECURITIES LTD. VS. DCIT, TDS CIRCLE 2 (1), MUMBAI (2012) 14 ITR (T) 495 (MUMBAI-TRIB.) CONTENDED THAT BANK GUARANTEE COMMISSION PARTAKES CHARACTER OF INTEREST U/S 2(28A ) OF THE ACT AND AS SUCH, ADDITION IS NOT LIABLE TO BE SUSTAINED . HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ORDER PASSED BY THE LD. CIT (A) BUT HAS NOT CONTROVERTED THE DECISI ON RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL BY BRINGING ON RECORD ANY OTHER DECISION CONTRARY TO IT. ITA NO.117/DEL./2017 4 6. COORDINATE BENCH OF THE TRIBUNAL DECIDED THE IDE NTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FI NDINGS :- 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS, AND WHE N WE LOOK AT THE CONNOTATIONS OF EXPRESSION COMMISSION OR BROKE RAGE IN ITS COGNATE SENSE, AS IN THE LIGHT OF THE PRINCIPLE OF NOSCITUR A SOCIIS AS WE ARE OBLIGED TO, IN OUR CONSIDERED VIEW, SCOPE OF EXPRESSION COMMISSION, FOR THIS PURPOSE, WILL BE CONFINED TO AN ALLOWANCE, RECOMPENSE OR REWARD MADE TO AGENTS, FACTORS AND BR OKERS AND OTHERS FOR EFFECTING SALES AND CARRYING OUT BUSINES S TRANSACTIONS AND SHALL NOT EXTEND TO THE PAYMENTS, SUCH AS BANK GUARANTEE COMMISSION, WHICH ARE IN THE NATURE OF FEES FOR SE RVICES RENDERED OR PRODUCT OFFERED BY THE RECIPIENT OF SUCH PAYMENT S ON PRINCIPAL TO PRINCIPAL BASIS. EVEN WHEN AN EXPRESSION IS STATUTO RILY DEFINED UNDER SECTION 2, IT STILL HAS TO MEET THE TEST OF C ONTEXTUAL RELEVANCE AS SECTION 2 ITSELF STARTS WITH THE WORDS IN THIS ACT ( I.E. INCOME TAX ACT), UNLESS CONTEXT OTHERWISE REQUIRES, AND, THE REFORE, CONTEXTUAL MEANING ASSUMES SIGNIFICANCE. EVERY DEFI NITION IN THE INCOME TAX ACT MUST DEPEND ON THE CONTEXT IN WHICH THE EXPRESSION IN SET OUT, AND THE CONTEXT IN WHICH EXPRESSION CO MMISSION APPEARS IN SECTION 194H, I.E. ALONGWITH THE EXPRESS ION BROKERAGE, SIGNIFICANTLY RESTRICTS ITS CONNOTATIONS. THE COMMO N PARLANCE MEANING OF THE EXPRESSION COMMISSION THUS DOES NO T EXTEND TO A PAYMENT WHICH IS IN THE NATURE OF FEES FOR A PRODUC T OR SERVICE; IT MUST REMAIN RESTRICTED TO, AS HAS BEEN ELABORATED A BOVE, A PAYMENT IN THE NATURE OF REWARD FOR EFFECTING SALES OR BUSI NESS TRANSACTIONS ETC. THE INCLUSIVE DEFINITION OF THE EXPRESSION CO MMISSION OR BROKERAGE IN EXPLANATION TO SECTION 194 H IS QUITE IN HARMONY WITH THIS APPROACH AS IT ONLY PROVIDES THAT ANY PA YMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACT ING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PRO FESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYI NG OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES IS INCLUDIBLE IN THE SCOPE OF MEANING OF COMMISSION OR BROKERAGE. THER EFORE, WHAT THE INCLUSIVE DEFINITION REALLY CONTAINS IS NOTHING BUT NORMAL MEANING OF THE EXPRESSION COMMISSION OR BROKERAGE . IN THE CASE OF SOUTH GUJARAT ROOFING TILES MANUFACTURERS ASSOCI ATION VS STATE OF GUJARAT [(1976) 4 SCC 601], HONBLE SUPREME COUR T WERE IN SEISIN OF A SITUATION IN WHICH AN EXPRESSION, NAMEL Y PROCESSING, WAS GIVEN AN INCLUSIVE DEFINITION, BUT THEIR LORDSH IPS WERE OF THE VIEW THAT THERE COULD BE NO OTHER MEANING OF PROC ESSING BESIDES WHAT IS STATED AS INCLUDED IN THAT EXPRESSION AND THAT THOUGH INCLUDE IS GENERALLY USED IN INTERPRETATION CLAUS E AS A WORD OF ENLARGEMENT, IN SOME CASES CONTEXT MIGHT SUGGEST A DIFFERENT INTENTION. THEIR LORDSHIPS THEN CONCLUDED THAT THO UGH THE EXPRESSION USED IN THE DEFINITION CLAUSE IS INCLUD ES, IT SEEMS TO US THAT THE WORD INCLUDES HAS BEEN USED HERE IN THE SAME SENSE OF MEANS; THIS IS THE ONLY CONSTRUCTION THAT THE WOR D CAN BEAR IN THIS CONTEXT. IN OTHER WORDS, AN INCLUSIVE DEFINITION, AS THEIR LORDSHIPS ITA NO.117/DEL./2017 5 NOTED, DOES NOT NECESSARILY ALWAYS EXTEND THE MEANI NG OF AN EXPRESSION. WHEN INCLUSIVE DEFINITION CONTAINS ORDI NARY NORMAL CONNOTATIONS OF AN EXPRESSION, IN OUR CONSIDERED VI EW, EVEN AN INCLUSIVE DEFINITION HAS TO BE TREATED AS EXHAUSTIV E. THAT IS THE SITUATION IN THE CASE BEFORE US AS WELL. EVEN AS DE FINITION OF EXPRESSION COMMISSION OR BROKERAGE, IN EXPLANATIO N TO SECTION 194 H, IS STATED TO BE EXCLUSIVE, IT DOES NOT REALL Y MEAN ANYTHING OTHER THAN WHAT HAS BEEN SPECIFICALLY STATED IN THE SAID DEFINITION. THEREFORE, AS HELD BY THE COORDINATE BENCHES IN A N UMBER OF CASES INCLUDING SRL RANBAXY LTD VS ACIT (ITA NO. 434/DEL/ 11; ORDER DATED 16.12.2011), FOSTERS INDIA LTD VS ITO (117 TT J 346), AND AJMER ZILA DUGDH UTPADAK SANGH LTD VS ITO (34 SOT 2 16), PRINCIPAL AGENT RELATIONSHIP IS A SINE QUA NON FOR INVOKING THE PROVISIONS OF SECTION 194 H. IN THE CASE BEFORE US, THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK ISSUI NG THE BANK GUARANTEE AND THE ASSESSEE. WHEN BANK ISSUES THE BA NK GUARANTEE, ON BEHALF OF THE ASSESSEE, ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAYMENT OF A SPECIFIED AMOUNT TO, ON DEMAND, THE BENEFICIARY, AND IT IS IN CONSIDERATION OF THIS COM MITMENT, THE BANK CHARGES A FEES WHICH IS CUSTOMARILY TERMED AS BANK GUARANTEE COMMISSION. WHILE IT IS TERMED AS GUARANTEE COMMI SSION, IT IS NOT IN THE NATURE OF COMMISSION AS IT IS UNDERSTOOD I N COMMON BUSINESS PARLANCE AND IN THE CONTEXT OF THE SECTION 194H. THIS TRANSACTION, IN OUR CONSIDERED VIEW, IS NOT A TRANS ACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCT ION REQUIREMENTS UNDER SECTION 194H. WE ARE, THEREFORE, OF THE CONSI DERED VIEW THAT THE CIT(A) INDEED ERRED IN HOLDING THAT THE ASSESSE E WAS INDEED UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER S ECTION 194 H FROM PAYMENTS MADE BY THE ASSESSEE TO VARIOUS BANKS . AS WE HAVE HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT T AX AT SOURCE UNDER SECTION 194 H, THE QUESTION OF LEVY OF INTEREST UND ER SECTION 201(1A) CANNOT ARISE. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE QUASH THE IMPUGNED DEMANDS UNDER SECTION 201(1) AND 201(1A) R.W.S. 194 H . WE, THEREFORE, ALSO SEE NO NEED TO DEAL WITH OTHER PERI PHERAL LEGAL ISSUES RAISED BY THE ASSESSEE. 7. SO, FOLLOWING THE DECISION RENDERED BY THE COORD INATE BENCH OF THE TRIBUNAL, WHEN THE BANK HAS ISSUED BANK GUAR ANTEE ON BEHALF OF THE ASSESSEE THERE IS NO PRINCIPAL AGENT RELAT IONSHIP BETWEEN THE BANK AND THE ASSESSEE WHICH IS A MANDATORY COND ITION FOR INVOKING THE PROVISIONS CONTAINED U/S 194H AND IN T HESE CIRCUMSTANCES, THE ASSESSEE WAS NOT LIABLE TO DEDUC T TAX AT SOURCE ITA NO.117/DEL./2017 6 U/S 194H FROM PAYMENT OF BANK GUARANTEE COMMISSION TO THE BANK. MOREOVER, BANK GUARANTEE COMMISSION ALSO PARTAKES T HE CHARACTER OF INTEREST U/S 2(28A) OF THE ACT AND AS SUCH, EXEM PTION PROVIDED U/S 194A(3)(III) IS AVAILABLE TO THE ASSESSEE QUA S UCH PAYMENT. SO, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS ERRED IN NOT FOLLOWING THE DECISION RENDERED BY THE COORDINATE B ENCH OF THE TRIBUNAL IN KOTAK SECURITIES LTD. (SUPRA) ON THE GROUND THAT THE DECISION OF KOTAK SECURITIES LTD. (SUPRA) IS NOT APPLICABLE HAVING BEEN PRONOUNCED BEFORE THE ISSUE OF NOTIFICATION NO .56/2012 DATED 31.12.2012 BECAUSE ORDINARILY ANY PROVISION OF THE STATUTE HAS TO BE READ HAVING PROSPECTIVE EFFECT AND NOT HAVING RETRO SPECTIVE EFFECT UNLESS IT IS SPECIFICALLY PROVIDED. SO, WHEN THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK AND THE ASSESSE E, DEDUCTION OF TAX AT SOURCE ON COMMISSION OR BROKERAGE IS NOT REQ UIRED FOR. CONSEQUENTLY, ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS ORDERED TO BE DELETED, THUS THE APPEAL F ILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 3 RD DAY OF SEPTEMBER, 2019. SD/- SD/- (PRASHANT MAHARISHI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 3 RD DAY OF SEPTEMBER, 2019 TS ITA NO.117/DEL./2017 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-6, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.