ACIT, Bangalore V. M/s Trident Automobiles (P) Ltd., Bangalore

ITA 1508/BANG/2013

• Counselvise Citation: 150821114 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: PINGAL KHAN; PRASHANTH B K S

Judgement Text

ITA NOS.1508 TO 1510/BANG/2013 & C.O.NOS.22 TO 24/B ANG/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NOS. 1508 TO 1510/BANG/2013 ASSESSMENT YEARS : 2009-10, 2010-11 & 2011-12 ASST.COMMISSIONER OF INCOME TAX (TDS), CIRCLE-18(2), NO.403, 4 TH FLOOR, HMT BHAVAN, BANGALORE-32 VS. M/S.TRIDENT AUTOMOBILES (P)LTD., NO.1, SANKEY ROAD, LOWER PALACE ORCHARDS, BANGALORE-560 03. PAN : AAACT9391C APPELLANT RESPONDENT C.O.NOS. 22 TO 24/BANG/2015 IN ITA NOS. 1508 TO 1510/BANG/2013 ASSESSMENT YEARS : 2009-10, 2010-11 & 2011-12 M/S.TRIDENT AUTOMOBILES (P)LTD., NO.1, SANKEY ROAD, LOWER PALACE ORCHARDS, BANGALORE-560 03. PAN : AAACT9391C VS. ASST.COMMISSIONER OF INCOME TAX (TDS), CIRCLE-18(2), NO.403, 4 TH FLOOR, HMT BHAVAN, BANGALORE-32 CROSS-OBJECTOR RESPONDENT ASSESSEE BY : SHRI PINGAL KHAN & PRASHANTH B.K. ADVOCATES REVENUE BY : DR.P.K.SRIHARI, ADDL CIT DATE OF HEARING : 18.03.2015 DATE OF PRONOUNCEMENT : 20.03.2015 O R D E R PER BENCH: ITA NOS. 1508 TO 1510/BANG/2013 ARE APPEALS BY THE REVENUE AGAINST THE ORDER DATED 14.08.2013 OF CIT(A)-V, BANGALORE, RELA TING TO AY 09-10 TO 11-12. THE ASSESSEE HAS FILED C.O.NOS. 22 TO 24/BANG/2015 AGAI NST THE VERY SAME ORDERS OF ITA NOS.1508 TO 1510/BANG/2013 & C.O.NOS.22 TO 24/B ANG/2015 2 THE CIT(A). THE CROSS-OBJECTIONS FILED BY THE ASSE SSEE ARE ONLY SUPPORTIVE OF THE ORDER OF THE CIT(A). 2. THE APPEALS BY THE REVENUE AND CROSS-OBJECTION BY THE ASSESSEE ARISE OUT OF AN ORDER OF THE ACIT (TDS), CIRCLE 18(2), BANGALORE, ( AO) PASSED U/S.201(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 (ACT) TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURCE. THE ASSES SEE IS A DEALER IN PURCHASE AND SALE OF CARS. THE ASSESSEE HAS CREDIT CARD/DEBIT C ARD ACCEPTING FACILITY WITH HDFC BANK, WHO HAS PROVIDED CREDIT CARD SWIPING MACHINE/ INSTRUMENT TO THE ASSESSEE. CUSTOMERS OF THE ASSESSEE WHEN THEY MAKE PAYMENT TO THE ASSESSEE FOR AVAILING SERVICES OR EFFECTING PURCHASES FROM THE ASSESSEE W HEN THEY PAY BY CREDIT CARD, THE CARD SWIPING MACHINE IS USED. HDFC BANK COLLECTS M ONEY FROM PAYING BANK OF THE CUSTOMERS WHO USE THE CREDIT CARD AND GIVES CREDIT TO THE ACCOUNT OF THE ASSESSEE AFTER DEDUCTING SERVICE CHARGES (DISCOUNT CHARGE) T HEREON. 3. ACCORDING TO THE AO THE AMOUNT RETAINED BY HDFC BANK WAS NOTHING BUT A COMMISSION PAID BY THE ASSESSEE TO HDFC BANK AND TH EREFORE THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE ON SUCH AMOUNT RETAI NED BY HDFC BANK. THE AO REFERRED TO THE AGREEMENT BETWEEN THE ASSESSEE AND HDFC BANK IN WHICH IT HAS BEEN PROVIDED THAT IN CONSIDERATION OF HDFC BANK RE NDERING THE SERVICE OF PROCESSING PAYMENT FOR THE ASSESSEE, THE ASSESSEE S HALL PAY HDFC BANK, A CERTAIN SUM WHICH IS REFERRED TO AS ME COMMISSION IN THE SAID AGREEMENT. ACCORDING TO THE AO IT WAS CLEAR FROM THE SAID AGREEMENT THAT TH E AMOUNT RETAINED BY HDFC BANK WAS IN THE NATURE OF COMMISSION AND THEREFORE THE A SSESSEE OUGHT TO HAVE DEDUCTED ITA NOS.1508 TO 1510/BANG/2013 & C.O.NOS.22 TO 24/B ANG/2015 3 TAX AT SOURCE ON THE AMOUNT RETAINED BY HDFC BANK A S PER THE PROVISIONS OF SEC.194-H OF THE ACT. 4. THE PLEA OF THE ASSESSEE WAS THAT AS PER THE DE FINITION OF COMMISSION OR BROKERAGE AS PER THE PROVISIONS OF SEC.194H OF THE ACT, THE HDFC BANK WAS NOT ACTING ON BEHALF OF THE ASSESSEE WHEN IT COLLECTED PAYMENTS FROM THE BANKERS OF THE CUSTOMERS OF THE ASSESSEE WHO USE CREDIT CARDS AND THAT HDFC BANK DOES NOT RENDER ANY SERVICE TO THE ASSESSEE BUT SERVICES ARE RENDERED TO THE CUSTOMERS OF THE ASSESSEE WHO USE CREDIT/DEBIT CARDS TO MAKE PAY MENTS. 5. THE AO REJECTED THE PLEA OF THE ASSESSEE HOLDIN G THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH HDFC BANK FOR INSTALLATION OF SWI PING MACHINE AT ITS PREMISES AND THE AGREEMENT PROVIDES THAT THE CONSIDERATION T O BE PAID BY THE ASSESSEE TO HDFC BANK WAS COMMISSION AND THEREFORE THE PROVISIO NS OF SEC.194-H OF THE ACT WERE ATTRACTED. 6. ON APPEAL BY THE ASSESSEE, THE CIT(A) FOLLOWING THE DECISION OF THE HONBLE ITAT HYDERABAD BENCH IN THE CASE OF DCIT VS. VAN MAGNA R ETAIN (P) LTD. ITA NO.905/HYD/2011 ORDER DATED 10.4.2012 HELD THAT THE PAYMENT IN QUESTION WAS IN THE NATURE OF BANK CHARGES AND HENCE THE PROVISIONS OF SEC.194-H OF THE ACT WERE NOT ATTRACTED. THE ORDER U/S.201(1) & 201(1A) OF T HE ACT WAS CANCELLED BY THE CIT(A). AGGRIEVED BY THE ORDER OF THE CIT(A) THE R EVENUE HAS FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. ITA NOS.1508 TO 1510/BANG/2013 & C.O.NOS.22 TO 24/B ANG/2015 4 7. BEFORE US THE LEARNED DR RELIED ON THE ORDER OF THE AO AND REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE GROUNDS OF APPEAL F ILED BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDE R OF THE CIT(A). 8. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS. THE PROVISIONS OF SEC.194-H OF THE ACT, IN SO FAR AS IT RELEVANT FOR THE PRESENT APPEAL, READ AS FOLLOWS: SECTION 194H: COMMISSION, BROKERAGE, ETC. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF OCTOBER, 1991 BUT BEFORE THE 1ST DAY OF JUNE, 1992, TO A RESIDENT , ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFER RED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT OF S UCH INCOME IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHE R MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF T EN PER CENT. (2) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APP LY (A) TO SUCH PERSONS OR CLASS OR CLASSES OF PERSONS AS THE CENTRAL GOVERNMENT MAY, HAVING REGARD TO THE EX TENT OF INCONVENIENCE CAUSED OR LIKELY TO BE CAUSED TO THEM AND BEING SATISFIED THAT IT WILL NOT BE PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, BY NOTIFICATION IN THE OFFICIAL GAZETTE , SPECIFY IN THIS BEHALF; (B) WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR BY THE PERSON REFERRED TO IN SUB-SECTION (1) TO THE ACCOUNT OF, OR TO, THE PAYEE, DOES NOT EXCEED TWO THOUSAND FIVE HU NDRED RUPEES. EXPLANATION : FOR THE PURPOSES OF THIS SECTION, - (I) 'COMMISSION OR BROKERAGE' INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON AC TING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PRO FESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELL ING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING; ITA NOS.1508 TO 1510/BANG/2013 & C.O.NOS.22 TO 24/B ANG/2015 5 (II) 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERE D BY A PERSON IN THE COURSE OF CARRYING ON A LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECH NICAL CONSULTANCY OR INTERIOR DECORATION OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA; 9. THE QUESTION WHETHER THE PAYMENTS ON ACCOUNT OF CREDIT CARD CHARGES SHOULD BE TREATED AS COMMISSION WITHIN THE MEANING OF SEC.194 H OF THE ACT CAME UP FOR CONSIDERATION BEFORE THE HONBLE ITAT, HYDERABAD, I N THE CASE OF DCIT VS. VAN MAGNA RETAIN (P) LTD. (SUPRA) AND IT WAS HELD AS FO LLOWS: 4. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTAT IVE 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 ON ACCOU NT 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 ACCOUN T OF THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE IN TERMS OF S.194H OF THE ACT, WHILE MAKING THE SAID COMMISSION PAYMENTS. IT WAS THE C ONTENTION OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE ASSE SSEE ONLY RECEIVES THE PAYMENT FORM THE BANK/CREDIT CARD COMPANIES CONCERN ED, AFTER DEDUCTION OF COMMISSION THEREON, AND THUS, THIS IS ONLY IN THE N ATURE OF A POST FACTO ACCOUNTING AND DOES NOT INVOLVE ANY PAYMENT OR CRED ITING OF THE ACCOUNT OF THE BANKS OR ANY OTHER ACCOUNT BEFORE SUCH PAYMENT BY THE ASSESSEE. CONSIDERING THESE SUBMISSION OF THE ASSESSEE, THE C IT(A) ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AMOUNT O F RS.16,34,000 ON THE FOLLOWING REASONING- 9.8 ON GOING THROUGH THE NATURE OF TRANSACTIONS, I FIND CONSIDERABLE MERIT IN THE CONTENTION OF THE APPELLANT THAT COMMI SSION PAID TO THE CREDIT CARD COMPANIES CANNOT BE CONSIDERED AS FALLI NG WITHIN THE PURVIEW OF S.194H. EVEN THOUGH THE DEFINITION OF T HE TERM COMMISSION OR BROKERAGE USED IN THE SAID SECTION IS AN INCLUS IVE DEFINITION, IT IS CLEAR THAT THE LIABILITY TO MAKE TDS UNDER THE SAID SECTION ARISES ONLY WHEN A PERSON ACTS BEHALF OF ANOTHER PERSON. IN TH E CASE OF COMMISSION RETAINED BY THE CREDIT CARD COMPANIES HO WEVER, IT CANNOT BE SAID THAT THE BANK ACTS ON BEHALF OF THE MERCHAN T ESTABLISHMENT OR THAT EVEN THE MERCHANT ESTABLISHMENT CONDUCTS THE T RANSACTION FOR THE BANK. THE SALE MADE ON THE BASIS OF A CREDIT CARD I S CLEARLY A TRANSACTION OF THE MERCHANTS ESTABLISHMENT ONLY AND THE CREDIT CARD COMPANY ONLY FACILITATES THE ELECTRONIC PAYMENT, FO R A CERTAIN CHARGE. THE COMMISSION RETAINED BY THE CREDIT CARD COMPANY IS THEREFORE IN THE NATURE OF NORMAL BANK CHARGES AND NOT IN THE NATURE OF COMMISSION/BROKERAGE FOR ACTING ON BEHALF OF THE ME RCHANT ESTABLISHMENT. ACCORDINGLY, CONCLUDING THAT THERE W AS NO REQUIREMENT ITA NOS.1508 TO 1510/BANG/2013 & C.O.NOS.22 TO 24/B ANG/2015 6 FOR MAKING TDS ON THE COMMISSION RETAINED BY THE C REDIT CARD COMPANIES, THE DISALLOWANCE OF RS.16,34,000 IS DELE TED.. WE FIND NO INFIRMITY IN THE ABOVE REASONING GIVEN B Y THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJE CT THE GROUNDS OF THE REVENUE WHICH ARE DEVOID OF MERIT. 10. SIMILAR VIEW HAS BEEN EXPRESSED BY SEVERAL BEN CH OF ITAT IN THE FOLLOWING CASES: 1. M/S.TATA TELESERVICES LTD. VS. DCIT ITA NO.393- 396/BANG/11 ORDER DATED 27.11.2012 2. ITO (TDS) VS. M/S.JET AIRWAYS ITA NO.7439-41/MU M/2010 ORDER DATED 17.7.2013, 3. M/S.GEMS PARADISE VS. ACIT ITA NO. 746/JP/2011 ORDER DATED 2.2.2012. 11. IN LIGHT OF THE AFORESAID DECISIONS, WE ARE OF THE VIEW THAT PAYMENTS TO BANKS ON ACCOUNT OF UTILIZATION OF CREDIT CARD FACILITIES WO ULD BE IN THE NATURE OF BANK CHARGE AND NOT IN THE NATURE OF COMMISSION WITHIN THE MEAN ING OF SEC.194H OF THE ACT. THE SAME CANNOT ALSO BE SAID TO BE IN THE NATURE OF PRO FESSIONAL SERVICES AS SERVICES RENDERED BY BANKS IS NEITHER A SERVICE SPECIFIED IN THE SECTION NOR NOTIFIED. THE CBDT BY NOTIFICATION U/S.197A OF THE ACT VIDE NOTIF ICATION NO.56/2012 DATED 31.12.2012 SPECIFIED THAT CREDIT/DEBIT CARD COMMISS ION FOR TRANSACTION BETWEEN THE MERCHANT ESTABLISHMENT AND ACQUIRER BANK NEED NOT B E SUBJECT TO TDS. THE REVENUE HAS ARGUED BEFORE US THAT BEFORE THE SAID N OTIFICATION SUCH CHARGES WERE SUBJECT TO TDS. WE ARE OF THE VIEW THAT THE NOTIFI CATION IS ONLY RECOGNITION OF THE POSITION AS IT ALWAYS PREVAILED AND AS INTERPRETED BY SEVERAL DECISIONS RENDERED BY THE DIFFERENT BENCHES OF ITAT. THE NOTIFICATION TH EREFORE CANNOT BE THE BASIS ON WHICH IT CAN BE SAID THAT THE AMOUNT RETAINED BY HD FC BANK WAS IN THE NATURE OF COMMISSION WITHIN THE MEANING OF SEC.194-H OF THE A CT. FOR THE REASONS GIVEN ABOVE, WE CONFIRM THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE AND DISMISS THE APPEALS OF THE REVENUE. ITA NOS.1508 TO 1510/BANG/2013 & C.O.NOS.22 TO 24/B ANG/2015 7 12. THE CROSS OBJECTIONS OF THE ASSESSEE ARE ONLY SUPPORTIVE OF THE ORDER OF THE CIT(A) AND ARE THEREFORE DISMISSED AS NOT MAINTAINA BLE. 13. IN THE RESULT, APPEALS AS WELL AS THE CROSS-OB JECTIONS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2015. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 20 TH MARCH, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.