DCIT (OSD) 8(2), MUMBAI V. HOTEL LEELAVENTURES LTD, MUMBAI

ITA 150/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100794 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH K JOTWANI
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H MUMBAI . . , , BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER . / ITA NO.150/MUM/2014 / ASSESSMENT YEAR 2010-11 DY. COMMISSIONER OF INCOME TAX (OSD)-8(2), R.NO.218, AAYKAR BHAVAN, MK ROAD, MUMBAI 400059 / VS. M/S. HOTEL LEELAVENTURES LTD. THE LEELA KEMPINSKI, SAHAR, ANDHERI (EAST), MUMBAI 400 059 ./ ./ PAN/GIR NO. :AAACH 3167J ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI SUNIL KUMAR SINGH RESPONDENT BY SHRI PRAKASH K. JOTWANI ' #$ / DATE OF HEARING : 10/06/2015 ' #$ / DATE OF PRONOUNCEMENT : 19/08/2015 / O R D E R PER G.S.PANNU, A.M: THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE AND IS DIRECTED AGAINST THE IMPUGNED APPELLATE ORDER DATED 01/10/2013 PAS SED BY CIT(A)-17, MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2010-11, W ITH REFERENCE TO THE ASSESSMENT ORDER DATED 10/12/2012 PASSED IN TERMS O F SECTION 143(3) OF THE INCOME TAX ACT, 1961(THE ACT). 2. IN THIS APPEAL, ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE SOLITARY GRIEVANCE IS WITH REGARD TO THE ACTION OF THE CIT(A) IN DELETING AN ADDITION OF RS.1,96,68,165/- MADE BY TH E AO BY INVOKING SECTION 40(A)(IA) OF THE ACT. . / ITA NO.150/MUM/2014 / ASSESSMENT YEAR 2010-11 2 3. IN BRIEF, THE RELEVANT FACTS ARE THAT RESPONDENT ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF COMPANIES ACT 1956 AND, IS INTER-ALIA, ENGAGED IN THE BUSINESS OF SETTING-UP OF AND RUNNIN G OF 5-STAR DELUXE HOTELS. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOT ICED THAT ASSESSEE DID NOT DEDUCT TAX AT SOURCE UNDER SECTION 194H OF THE ACT IN RELATION TO COMMISSION PAID TO THE BANKS ON PROCESSING OF CREDIT CARD TRAN SACTIONS. AS A CONSEQUENCE, THE AO DISALLOWED THE CORRESPONDING EXPENDITURE OF RS.1,96,68,165/- BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT . THE CIT(A) HAS SINCE DELETED THE ADDITION BY HOLDING THAT THE COMMISSION PAID TO THE BANKS FOR PROCESSING OF CREDIT CARD PAYMENTS DOES NOT FALL WITHIN THE PURVI EW OF TAX DEDUCTION AT SOURCE UNDER SECTION 194H OF THE ACT. IN COMING TO SUCH DECISION, CIT(A) FOLLOWED THE DECISION OF HIS PREDECESSOR IN ASSESS EES OWN CASE FOR THE ASSESSMENT YEAR 2009-10. AGAINST SUCH A DECISION, REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING, IT WAS A COMMON GROUND B ETWEEN THE PARTIES THAT THE ORDER OF CIT(A) FOR ASSESSMENT YEAR 2009-10, W HICH HAS BEEN RELIED UPON BY CIT(A) IN THE CURRENT YEAR HAS SINCE BEEN AFFIR MED BY THE TRIBUNAL VIDE ITS ORDER IN ITA NO.2703/MUM/2013, DATED 30/6/2015. IN THIS CONTEXT, THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL DATED 30/6/2015 (SUPRA) IS AS UNDER: 6. IN THIS CONTEXT, BRIEF FACTS ARE THAT THE ASSES SING OFFICER NOTICED THAT ASSESSEE HAS PAID COMMISSION TO BANKS ON CREDIT CAR D TRANSACTIONS AMOUNTING TO RS. 6,34,22,030/-, WITHOUT DEDUCTION OF TAX AT SOUR CE U/S 194H OF THE ACT. THE CLAIM OF THE ASSESSEE WAS THAT IN TERMS OF AGREEMEN T WITH BANKS, THE PAYMENTS MADE BY THE CUSTOMERS BY CREDIT/DEBIT CARDS WERE PR OCESSED BY THE BANKS. IN CONSIDERATION OF THE BANKS AGREEING TO RENDER SUCH PAYMENT PROCESSING SERVICES, ASSESSEE WAS PAYING COMMISSION TO VARIOUS BANKS WHI CH WAS IN THE NATURE OF BANK CHARGES; AND SUCH EXPENDITURE COULD NOT BE CO NSIDERED AS COMMISSION SO AS TO FALL WITHIN THE PROVISIONS OF SECTION 194H OF THE ACT. HOWEVER, THE ASSESSING OFFICER DISAGREED WITH ASSESSEE, AS ACCORDING TO HI M, THE BANKS WERE CHARGING COMMISSION ON PROVIDING CREDIT CARD SERVICES TO THE ASSESSEE AND SUCH COMMISSION PAYMENTS WERE LIABLE FOR DEDUCTION OF TA X AT SOURCE U/S 194H OF THE ACT, AND, SINCE THE ASSESSEE DID NOT DEDUCT THE REQ UISITE TAX AT SOURCE, THE CORRESPONDING EXPENDITURE OF RS. 6,34,22,030/- WAS DISALLOWED IN TERMS OF SECTION 40(A)(IA). . / ITA NO.150/MUM/2014 / ASSESSMENT YEAR 2010-11 3 7. THE CIT(A) HAS DISAGREED WITH THE ASSESSING OFFI CER AND ON THE BASIS OF THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF VAH MAGNA RETAIL (P) LTD, DATED 10.04.2012 , HE HELD THAT THE PAYMENTS MADE TO THE BANKS FOR CREDIT CARD SERVICES WAS OUTSIDE THE PURV IEW OF DEDUCTION OF TAX U/S 194H AND, THEREFORE, THE IMPUGNED SUM COULD NOT BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). 8. AT THE TIME OF HEARING, THE LD. DR HAS NOT ASSAI LED THE ABOVE DECISION OF CIT(A), ON THE BASIS OF ANY DECISION CONTRARY TO TH AT OF THE HYDERABAD BENCH OF THE TRIBUNAL FOLLOWED BY THE CIT(A). APART THEREFRO M, THE LD. REPRESENTATIVE FOR THE RESPONDENT-ASSESSEE RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JDS APPARELS P. LTD. [ 2015] 370 ITR 454 (D ELHI) AND THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. JET AIRWAYS (INDIA) LTD [2014] 147 ITD 133 (MUM) IN SUPPORT OF THE CONCLUSION DRAWN BY THE CIT(A). 9. WE HAVE CONSIDERED THE RIVAL STANDS AND FIND THA T THE ISSUE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF JDS APPARELS P. LTD. (SUPRA). AS PER THE HONBLE DELHI HIGH COURT, PAYMENT OF COMMISSION TO BANKS WITH REGARD TO THE PROCESSING O F CREDIT CARD TRANSACTIONS WAS NOT LIABLE TO BE CONSIDERED AS A COMMISSION W ITHIN THE MEANING OF SECTION 194H OF THE ACT. ACCORDING TO THE HONBLE HIGH COUR T, THE BANK DOES NOT ACT AS AN AGENT OF THE ASSESSEE WHILE PROCESSING THE CREDIT C ARD PAYMENTS AND A CHARGE COLLECTED BY THE BANK FOR SUCH SERVICE DOES NOT AMO UNT TO COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT. IN VIEW OF THE AFORESAID JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF JDS APPARELS P. LTD . (SUPRA), WE HEREBY AFFIRM THE CONCLUSION OF THE CIT(A) TO THE EFFECT THAT THE IMP UGNED DISALLOWANCE MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 40(A)(IA) IS UNSUSTAINABLE. THUS, REVENUE FAILS ON THIS GROUND ALSO 4.1 FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BE EN RENDERED IN IDENTICAL CIRCUMSTANCES, THE IMPUGNED ORDER OF CIT(A) ON THE AFORESAID ASPECT IS HEREBY AFFIRMED AND ACCORDINGLY THE REVENUE FAILS. 5. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/08/2015 ' *+ ,- 19/08/2015 ' SD/- SD/- ( / SANJAY GARG ) ( . . / G.S.PANNU ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * MUMBAI; , DATED 19/08/2015 . / ITA NO.150/MUM/2014 / ASSESSMENT YEAR 2010-11 4 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 0# ( ) / THE CIT(A)- 4. 0# / CIT 5. 12 #34 , $ 34 , * / DR, ITAT, MUMBAI 6. 5 / GUARD FILE. / BY ORDER, 1# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , * / ITAT, MUMBAI . . ./ VM , SR. PS