ITO (TDS) 3(4), MUMBAI V. TRENT HYPERMARKET LTD, MUMBAI

ITA 174/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92736 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2015
• Appeal Filed By: Department
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 07-01-2014
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: NITESH JOSHI; K M MODI
• Section: 11; 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI R. C. SHARMA , ACCOUNTANT MEMBER AND MS. SUSHMA CHO WLA , JUDICIAL MEMBER ITA NO S . 1 73 & 174 /MUM/2014 ASSESSMENT YEAR S : 2010 - 11 & 2011 - 12 ITO (TDS) 3(4) 10 TH FLOOR, R. NO. 1011 SMT K.G. MITTAL AAYURVEDIC HOSPITAL BUILDING CHARNI ROAD. MUMBAI 400 002 .(APPELLANT) VS. TRENT HYPERMARKET LTD. TAJ BUILDING 2 ND FLOOR, 210 D.N. ROAD FORT MUMBAI 400 001 PAN:AACCT 9803 D (RESPONDENT) ITA NO S . 175 & 176 /MUM/2014 ASSESSMENT YEAR S : 2010 - 11 & 2011 - 12 ITO (TDS) 3(4) 10 TH FLOOR, R. NO. 1011 SMT K.G. MITTAL AAYURVEDIC HOSPITAL BUILDING CHARNI ROAD. MUMBAI 400 002 ` .(APPELLANT) VS. TRIBHOVANDAS BIMJI ZAVERI LTD. 241/43, ZAVERI BAZAR, MUMBAI 400 002 PAN: AACCI 1782 P (RESPONDENT) ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 2 APPELLANT BY : SHRI NEIL PHILIP RESPONDENT BY : SHRI NITESH JOSHI & K.M. MODI DATE OF HEARING : 1 1 .06.2015 DATE OF PRONOUNCEMENT : 11 .06.2015 O R D E R PER SUSHMA CHO WLA , J M : OUT OF THESE BUNCH OF FOUR APPEALS, TWO APPEAL S FILED BY THE REVENUE IN THE CASE OF TRENT HYPERMARKET LTD. ARE AGAINST SEPARATE ORDERS OF CIT(A) - 13, MUMBAI BOTH DATED 30.10.2013 RELATING TO ASSESSMENT YEAR S 2010 - 11 & 2011 - 12 AGAINST ORDER PAS SED UNDER SECTION 201(1) AND 201(1A) OF THE ACT. 2. FURTHER, THE REVENUE IN ITA NO. 175 AND 176/MUM/2014 IN THE CASE OF M/S. TRIBHOVANDAS BHIMJI ZAVERI LTD. HAS FILED APPEAL AGAINST THE SEPARATE ORDERS OF CIT(A) - 13, MUMBAI DATED 30.10.2013 RELATING TO AS SESSMENT YEAR S 2010 - 11 & 2011 - 12 AGAINST DEMAND RAISED UNDER SECTION 201(1) AND INTEREST CHARGED UNDER SECTION 201(1A) OF THE I.T ACT. 3. BOTH THE APPEAL S RELATING TO THE SAME ASSESSEE ON SAME ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACT S IN ITA NO. 173/MUM/2014 TO ADJUDICATE THE ISSUE. 4. COMMON GROUNDS OF APPEAL HAVE BEEN RAISED IN ALL THE APPEAL AND THE GROUNDS OF APPEAL IN ITA NO. 173/MUM/2014 READ AS UNDER: - (I) 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT NO TDS WAS DEDUCTIBLE U/S.194H BY THE ASSESSEE COMPANY ON THE AMOUNT HELD BY THE BANKS/CREDIT CARD AGENCIES AS SERVICE CHARGES IN RESPECT OF CREDIT CARD SERVICES PROVIDED AND BY FURTHER HOLDING THAT THE BANK/CREDIT CARD AGENCIES ARE NOT AGENCIES OF THE ASSESSEE AND THEREBY CLEARLY IGNORING THE FACT THAT IN THE ENTIRE ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 3 PROCESS OF FACILITATION OF CREDIT CARD, THE BANK IS NOTHING BUT A CONSTRUCTION AGENT FOR THE ASSESSEE COMPANY AND NOTHING ELSE, (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN FAILING TO APPRECIATE THE REAL AND TRUE NATURE OF THE RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND BANK/CREDIT CARD AGE NCIES. (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN FAILING TO APPRECIATE THAT IN SUBSTANCE AND IN FACT RELATIONSHIP BETWEEN THE ASSESSEE CO MPANY AND BANK/CREDIT CARD AGENCIES WAS IN THE NATURE OF PRINCIPAL A ND AGENTS RELATIONSHIP AND THEREFORE, THE LD. CIT(A) ERRED IN NOT UPHOLDING THE AO'S CONCLUSION OF BRINGING THE CHARGES TO THE ASSESSEE COMPANY BY THE BANK/CREDIT CARD AGENCIES WITHIN THE PURVIEW OF SECTION 194H OF THE I.T. ACT, 1961.' 5. THE ISSUE ARISIN G IN THE PRESENT APPEAL IS WHETHER THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194H OF THE ACT ON THE AMOUNT HELD BY THE BANK/CREDIT CARD AGENCIES AS SERVICE CHARGES, IN RESPECT OF CREDIT CARD SERVICES PROVIDED BY THE ASSESSEE. 6. BRIEFL Y IN THE FACTS OF THE PRESENT CASE THE ASSESSEE WAS A RETAIL MERCHANT ENGAGED IN THE BUSINESS OF INTERNET SERVICE PROVIDED . S URVEY UNDER SECTION 133 A OF THE ACT WAS CONDUCTED ON M/S. HDFC BANK LTD. THE POS T SURVEY ENQUIRIES REVEALED THAT THERE WE RE VARIOU S PLAYERS INVOLVED IN CREDIT CARD TRANSA CTION . F IRST WAS, THE CREDIT CAR D HOLDER I.E. CUSTOMER, SECOND WAS THE CREDIT CARD ISSU ING BANK , THIRD WAS CREDIT CARD ACQUIRING BANK, IE. HDFC BANK , FO U RTH WAS RETAIL MERCHANT THAT IS THE ASSESSEE AND FIFTH WAS THE BILL SETTLING AGENCY THAT IS BSA. THE AO FURTHER OBSERVED THAT THE ISSUING BACK ISSUED CREDIT CARD TO A CUSTOMER , WHEREAS ACQUIRING BACK PROVIDED SWIPING MACHINE TO RETAIL MERCHANT S AND BILL SETTLING AGENCY WHICH IS VISA/MASTER CARD FACILITATES TRANSFER R E D BILL AMOUNT. THE AO SHOW CAUSE THE ASSESSEE TO EXPLAIN THE FOLLOWING : - 2.2. WHEN A RETAIL MERCHANT SWIPES A CREDIT CARD FOR RECEIVING PAYMENT FROM CUSTOMERS THE BILL DETAILS AND AMOUNT ARE FORWARDED TO THE ACQUIRING BANK WHICH MAKES PAYMENT OF THE BIL L AMOUNT TO THE RETAIL MERCHANT AND WITHHOLDS ITS DISCOUNT IN NAT URE OF COMMISSION FOR PROVIDING SERVICES TO THE RETAIL MERCHANT. THE ACQUIRING BANK THEN THROUGH BSA RECOVERS THE BILL AMOUNT FROM THE ISSUING BANK. THUS, THE ACQUIRING BANK FACILITATES ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 4 RECOV ERY OF BILL AMOUNT ON BEHALF OF RETAIL MERCHANT FOR WHICH IT CHARGES DISCOUNT IN NATURE OF COMMISSION. THE ACQUIRING BANK RENDERS SERVICES FOR RECOVERY OF THE BILL AMOUNT TO THE RETAIL MERCHANT AND HENCE ACTS AS AGENT OF THE RETAIL MERCHANT. THEREFORE, THE DISCOUNT IN NATURE OF COMMISSION WITHHELD BY THE ACQUIRING BANK WHILE MAKING PAYMENT TO THE RETAIL MERCHANT SHOULD BE SUBJECTED TO TDS AS STIPULATED UNDER THE PROVISIONS OF CHAPTER XVII - B @10% U/S.L94H OF THE I T ACT. T HE AO FURTHER NOTED THAT AS THE A CQUIRING BANK THAT IS HDFC HAD WITHHELD TRANSACTION CHARGES I.E. CREDIT CARD COLLECTION CHARGES WHILE MAKING PAYMENT OF THE BILL AMOUNT OF SAL ES CARRIED OUT THROUGH CREDIT CARDS , TO THE ASSESSEE COMPANY, WHICH WAS NOT SUBJECTED TO TAX DE D U CTED AT SOURCE, A SSESSEE WAS ASKED TO EXPLAIN AS TO WHY IT SHOULD NOT BE TREATED AS ASSESSEE IN DEFAULT UNDER SECTION 201(1) AND 201(1A) OF THE I.T. ACT. THE AO AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE WAS OF THE VIEW THAT AS PER EXPLANATION TO SECTION 194H OF THE ACT, COMMISSION OR BROKERAGE INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY . THE ASSESSEE THUS WAS TREATED AS ASSESSEE IN DEFAULT IN TERMS OF SECTION 201(1) AND 201(1A) OF THE ACT FOR NON DEDUCTION OF TDS ON PAYMENT OF COMMISSION AND NON - PAYMENT OF INTEREST THEREON. THUS, DEMAND UNDER SECTION 201(1) OF THE ACT WAS RAISED AT RS.16,47,685/ - AND INTEREST UNDER SECTION 201(1A) OF THE ACT WAS CHARGED AT RS.5,93,167/ - . 7. BEFORE THE CIT(A) THE CLAIM OF THE ASSESSEE WAS THAT THERE WAS NO PRI NCIPAL AGENCY RELATIONSHIP, AS THE BANK DID NOT ACT AT EITHER ON BEHALF OF THE MERCHANT ESTABLISHMENT OR EVEN ON BEHALF OF THE CREDIT CARD COMPANY. THE TRANSACTION WAS BETWEEN PRINCIPAL TO PRINCIPAL AND THERE WAS NO NEED FOR DEDUCTION OF TAX AT SOURCE FROM THE SAID TRANSACTION CHARGES WITH HELD BY THE ACQUIRING BANK HDFC AND HENCE THE DEMAND RAISED UNDER SECTION 201(1) AND INTEREST CHARGE D UNDER SECTION 201(1A) SHOULD BE CANCELED. THE CIT(A) NOTED THAT THE MUMBAI BENCH OF TRIBUNAL IN JET AIRWAYS ( INDIA ) LTD . REPORTED IN (2013) 36 TAXMAN.COM 379 ( MUMBAI TRIBUNAL ) AND BANGALORE BENCH OF TRIBUNAL IN TATA TELLY SERVICES LTD. (2013) 140 ITD 451 (BANGALORE) HAD ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 5 DECIDED SIMILAR ISSUE AND HELD THAT THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE OUT OF COMMISSION R ETAINED BY THE CREDIT CARD COMPANY, WHICH WAS IN THE NATURE OF NORMAL BANK CHARGES AND NOT IN THE NATURE OF COMMISSION/BROKERAGE. 8. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A). 9. THE LD. A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE HONBLE DELHI HIGH COURT IN CIT VS. JDS APPARELS PVT. LTD. REPORTED IN (2015) 370 ITR 454 (DEL). IT WAS FURTHER POINTED OUT BY THE LD. A.R. FOR THE ASSESSEE THAT THE ISSUES IS ALSO CO VERED BY THE RATIO LAID DOWN BY MUMBAI BENCH OF TRIBUNAL IN ITO (TDS) VS. JET AIRWAYS (INDIA) LTD. (SUPRA). 10. WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE RECORD. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION TO APPLICABILITY OF THE PROVISION OF SECTION 194H OF THE ACT. THE ASSESSEE WAS A RETAIL MERCHANT ENGAGED IN THE BUSINESS OF INTERNET SERVICE PROVIDE S. P URSUANT TO THE SURVEY UNDER SECTION 133A OF THE ACT ON M/S. HDFC BANK LTD . , THE AO RECEI VED INFORMATION THAT WHEN A RETAIL MERCHANT SWIPES CREDIT CARD FOR RECEIVING PAYMENT FROM THE CUSTOMERS, BILL DETAILS WERE FORWARDED TO THE ACQUIRING BANK I.E. HDFC, WHICH IN TURN MAKES TH E PAYMENTS OF THE BILL AMOUNT TO THE RETAIL MERCHANT, AFTER WITH HOLD ING DISCOUNT. THE AO WAS OF THE VIEW THAT THE AMO UNT EARNED BY THE ACQUIRING BANK THAT IS HDFC BANK WAS IN THE NATURE OF COMMISSION/BROKERAGE, WHICH WAS ELIGIBLE FOR TAX DEDUCTION AT SOURCE UNDER THE PROVISION OF SECTION 194H OF THE ACT. S INCE THE ASSESSEE IN THE PRESENT CASE HAD NOT DEDUCTED THE TAX AT SOURCE UNDER SECTION 194H OF THE ACT ON THE AMOUNTS WITH HELD BY THE ACQUIRING BANK I.E. HDFC BANK, THE ASSESSEE WAS HELD TO BE IN DEFAULT AND DEMAND WAS RAISED UNDER SECTION 201(1) OF THE ACT AND INTEREST WAS CHARGED UNDER SECTION 201(1A) OF THE ACT. 11 . WE FIND THAT SIMILAR ISSUE AS TO THE NATURE OF THE AMOUNTS WITH HELD BY THE ACQUIRING BANK I.E. HDFC BANK LTD. AND ITS DEDUCTION WHILE COMPUTING THE ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 6 INCOME IN THE HANDS OF THE RETAIL MERCHANT AROSE BEFORE THE DELHI HIGH COURT IN CIT VS. JDS APPARELS PVT. LTD. (SUPRA). THE HONBLE HIGH COURT AFTER CONSIDERING VARIOUS JUDICIAL PROCEEDING HELD AS UNDER : - 14. CONTENTION COULD BE RAISED THAT PAYMENT RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY FOR ANY SERVICES IN COURSE OF BUYING OR SELLING OF GOODS NEED NO T ARISE OUT OF A CONTRACT OF AGENCY OR FROM A RELATIONSHIP OF A PRINCIPAL AND AN AGENT. THE SAID CONTENTION HAS TO BE REJECTED IN VIEW OF THE AFORESAID JUDGMENTS, WHICH POSITIVELY HOLD THAT THE THREE SEPARATE CONDITIONS WHEN TAX AT SOURCE IS REQUIRED TO BE DEDUCTED WOULD ONLY APPLY PROVIDED THE RECIPIENT IS ACTING ON BEHALF OF ANOTHER, I.E. RELATIONSHIP OF A PRINCIPAL AND AN AGENT EXISTS AND NOT OTHERWISE. THIS INTERPRETATION HAS BEEN CONSISTENT AND UNIFORMLY APPLIED WHILE INTERPRETING CLAUSE (I) OF THE EXP LANATION TO SECTION 194H OF THE ACT. APPROPRIATE IN THIS REGARD WOULD BE TO REFER TO THE DECISION OF THE HIGH COURT OF DELHI IN COMMISSIONER OF INCOME TAX VERSUS IDEA CELLULAR LIMITED, (2010) 325 ITR 148 (DELHI) WHEREIN EXPLANATION CLAUSE (I) TO SECTION 19 4H OF THE ACT HAD COME UP FOR CONSIDERATION AND ON INTERPRETATION IT WAS HELD THAT IT WOULD APPLY ONLY IF PAYMENT WAS RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR (I) SERVICES RENDERED (NOT BEING PROFESSI ONAL) AND (II) FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO AN ASSET, VALUABLE ARTICLE OR THING. THE JUDGMENT RECORDS THAT THE COUNSEL FOR BOTH THE PARTIES, I.E. THE REVENUE AND THE ASSESSEE, HA D AGREED THAT THE ELEMENT OF AGENCY WAS TO BE ESTABLISHED IN ALL THE AFORESAID CIRCUMSTANCES (SEE PAGE 156 PLACITUM 9 OF THE ITR CITATION). THUS, THIS CONTENTION IF RAISED WOULD NOT STAND JUDICIAL SCRUTINY ON THE PRINCIPLES OF CONSISTENCY AND CERTAINTY. EV EN OTHERWISE, THE VIEW EXPOUNDED AND ACCEPTED IS PLAUSIBLE, BESIDES BEING REASONABLE. 15. APPLYING THE ABOVE CITED CASE LAW TO THE FACTUAL MATRIX OF THE PRESENT CASE, WE FEEL THAT SECTION 194H OF THE ACT WOULD NOT BE ATTRACTED. HDFC WAS NOT ACTING AS AN AGENT OF THE RESPONDENT - ASSESSEE. ONCE THE PAYMENT WAS MADE BY HDFC, IT WAS RECEIVED AND CREDITED TO THE ACCOUNT OF THE RESPONDENT - ASSESSEE. IN THE PROCESS, A SMALL FEE WAS DEDUCTED BY THE ACQUIRING BANK, I.E. THE BANK WHOSE SWIPING MACHINE WAS USED. ON SW IPING THE CREDIT CARD ON THE SWIPING MACHINE, THE CUSTOMER WHOSE CREDIT CARD WAS USED, GOT ACCESS TO THE INTERNET GATEWAY OF THE ACQUIRING BANK RESULTING IN THE REALIZATION OF PAYMENT. SUBSEQUENTLY, THE ACQUIRING BANK REALIZED AND RECOVERED THE PAYMENT FRO M THE BANK WHICH HAD ISSUED THE CREDIT CARD. HDFC HAD NOT UNDERTAKEN ANY ACT ON 'BEHALF' OF THE RESPONDENT - ASSESSEE. THE RELATIONSHIP BETWEEN HDFC AND THE RESPONDENT - ASSESSEE WAS NOT OF AN AGENCY BUT THAT OF TWO INDEPENDENT PARTIES ON PRINCIPAL TO PRINCIPA L ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 7 BASIS. HDFC WAS ALSO ACTING AND EQUALLY PROTECTING THE INTEREST OF THE CUSTOMER WHOSE CREDIT CARD WAS USED IN THE SWIPING MACHINES. IT IS NOTICEABLE THAT THE BANK IN QUESTION OR THEIR EMPLOYEES WERE NOT PRESENT AT THE SPOT AND WERE NOT ASSOCIATED WITH BU YING OR SELLING OF GOODS AS SUCH. UPON SWIPING THE CARD, THE BANK MADE PAYMENT OF THE BILL AMOUNT TO THE RESPONDENT - ASSESSEE. THUS, THE RESPONDENT ASSESSEE RECEIVED THE SALE CONSIDERATION. IN TURN, THE BANK IN QUESTION HAD TO COLLECT THE AMOUNT FROM THE BA NKERS OF THE CREDIT CARD HOLDER. THE BANK HAD TAKEN THE RISK AND ALSO REMAINED OUT OF ~ POCKET FOR SOMETIME AS THERE WOULD BE A TIME GAP BETWEEN THE DATE OF PAYMENT AND RECOVERY OF THE AMOUNT PAID. 16. THE AMOUNT RETAINED BY THE BANK IS A FEE CHARGED BY T HEM FOR HAVING RENDERED THE BANKING SERVICES AND CANNOT BE TREATED AS A COMMISSION OR BROKERAGE PAID IN COURSE OF USE OF ANY SERVICES BY A PERSON ACTING ON BEHALF OF ANOTHER FOR BUYING OR SELLING OF GOODS. THE INTENTION OF THE LEGISLATURE IS TO INCLUDE AND TREAT COMMISSION OR BROKERAGE PAID WHEN A THIRD PERSON INTERACTS BETWEEN THE SELLER AND THE BUYER AS AN AGENT AND THEREBY RENDERS SERVICES IN THE COURSE OF BUYING AND/OR SELLING OF GOODS. THIS HAPPENS WHEN THERE IS A MIDDLEMAN OR AN AGENT WHO INTERACTS ON BEHALF OF ONE OF THE PARTIES, HELPS THE BUYER/SELLER TO MEET, OR PARTICIPATES IN THE NEGOTIATIONS OR TRANSACTIONS RESULTING IN THE CONTRACT FOR BUYING AND SELLING OF GOODS. THUS, THE REQUIREMENT OF AN AGENT AND PRINCIPAL RELATIONSHIP. THIS IS THE EXACT PU RPORT AND THE RATIONALE BEHIND THE PROVISION. THE BANK IN QUESTION IS NOT CONCERNED WITH BUYING OR SELLING OF GOODS OR EVEN WITH THE REASON AND CAUSE AS TO WHY THE CARD WAS SWIPED. IT IS NOT BOTHERED OR CONCERNED WITH THE QUALITY, PRICE, NATURE, QUANTUM ET C. OF THE GOODS BOUGHT/SOLD. THE BANK MERELY PROVIDES BANKING SERVICES IN THE FORM OF PAYMENT AND SUBSEQUENTLY COLLECTS THE PAYMENT. THE AMOUNT PUNCHED IN THE SWIPING MACHINE IS CREDITED TO THE ACCOUNT OF THE RETAILER BY THE ACQUIRING BANK, I.E. HDFC IN TH IS CASE, AFTER RETAINING A SMALL PORTION OF THE SAME AS THEIR CHARGES. THE BANKING SERVICES CANNOT BE COVERED AND TREATED AS SERVICES RENDERED BY AN AGENT FOR THE PRINCIPAL DURING THE COURSE OF BUYING OR SELLING OF GOODS AS THE BANKER DOES NOT RENDER ANY S ERVICE IN THE NATURE OF AGENCY. 12. FURTHER THE MUMBAI BENCH OF TRIBUNAL IN ITO (TDS) VS. JET AIRWAYS (INDIA) LTD. HAD LAID DOWN SIMILAR PROPOSITION OBSERVING AS UNDER: - 9. WE HAVE CAREFULLY CONSIDERED THE S UBMI SS ION OF TH E L D. R E PR ESENTATIVE FOR THE PARTIES AND THE ORDER OF THE O F THE AUTHORITIES BELOW. WE HAVE ALSO CAREFULL Y CON SIDERED TH E PROVI S ION OF SECTION 194 H OF THE ACT. WE OBSERVE THAT THE SIMILAR ISSUE HAS BEEN CONSIDERED BY THE JAIPUR BENCH OF THE TRIBUNAL IN THE A E OF GEMS PARADISE (SUPR A) AND ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 8 THE TRIBUNAL HELD VIDE PARAGRAPH 27 OF THE SAID ORDER THAT THE PRO V I S IONS OF SECTION 194H OF THE ACT ARE NOT APPLICABLE AS THE BANKS MAKE PAYMENTS TO THE ASSESSEE AFTER DEDUCTING CERTAIN FEES AS PER THE TERMS AND CONDITIONS IN THE CREDIT CARD AND IT IS NOT A COMMISSION BUT A FEE DEDUCTED BY THE BANKS. THE SAID PARAGRAPH 27 OF THE ORDER IS REPRODUCED BELOW: '27. AFTER CONSIDERING THE ORDERS OF THE AO AND ID. C I T (A), WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS REGARD. SECTION 194H IS APPLICABL E WHERE ANY COMMISSION HAS BEEN PAID BY THE PRINCIPAL TO THE COMMISSION AGENT. THIS IS NOT A CASE OF COMMISSION AGENT AS ASSESSEE SOLD ITS GOOD THROUGH CREDIT CARD AND ON PRESENTATION OF BILL ISSUED AGAINST CREDIT CARD, THE BANK MA KES PAY MENT TO THE ASSESS EE AFTER DEDUCTING AGREED FEES AS PER TERMS AND CONDITIONS IN CASE OF CREDIT CARD. THI S I S NOT A COMMISSION PAYMENT BUT A FEES DEDUCTED BY THE BANK. IF THERE IS AN AGREEMENT. THAT I AGREEMENT BETWEEN THE CREDIT CARDHOLDER AND THE BANK. BANK IS A PRINCIPAL AND TO SPREAD OV E R IT BUSINESS, A SCHEME IS FLOATED BY BANK I.E. ISSUANCE OF CREDIT CARDS. BANK ISSUES CREDIT CARD TO TH E VARIOUS CUSTOMERS WHO PURCHASE THE VARIOUS CREDIT CARDS ON THE AGREED TERMS AND CONDITION . ON F THE MAJOR CONDITION IS THAT IF CREDIT CARD HOLDER DOES NOT MAKE PAYMENT WITHIN THE PRESCRIB ED IN LIMIT THEN THEY CHARGE 2% PENAL AMOUNT OF BILL WHICH IS RAISED BY THE SHOP KEEPER AGAINST SALE OF ITS ITEMS THROUGH CREDIT CARD. BANK CANNOT REFUSE THE PAYMENT TO THE SHOP KEEPER WHO SALE THEIR G THROUGH CREDIT CARD. ONLY IN THOSE CASES WHERE GOODS ARE FOUND DAMAGED AND CREDIT CARD HOL DER INFORM THE BANK THAT THE MATERIAL PURCHASED BY THEM IS DAMAGED OR DEFECTIVE AND REQUEST TH E NOT TO MAKE THE PAYMENT, IN SUCH CASES ONLY BANK CAN WITHHOLD THE PAY MENT, OTHERWISE THE BAN K HAS TO MAKE THE PAYMENT TO THE SHOP KEEPER. THEREFORE, IN OUR CONSIDERED VIEW, THERE IS NO SUCH R ELATION BETWEEN THE BANK AND THE SHOP KEEPER WHICH ESTABLISHES THE RELATIONSHIP OF A PRINCIPAL COMMISSION AGENT. TECHNICALLY IT MAY BE WRITTEN THAT BANK WILL CHARGE CERTAIN PERCENTAG E COMMISSION BUT THIS IS NOT A COMMISSION BECAUSE ASSESSEE SELLS ITS GOODS AGAINST CREDIT CARD. ON PRESENTATION OF BI L L S , THE BANK HAS TO MAKE THE PAYMENT. IT IS NOT THE CASE THAT BANK HAS ADVISED IS THE ASS ESSEE TO SELL THEIR GOODS TO ITS CUSTOMERS THEN HE WILL PAY THE COMMISSION. IT IS REVERSED IN A SITUATION AS BANK ISSUED CREDIT CARDS TO THE CREDIT CARD HOLDERS ON CERTAIN FEES OR WHATEVER TH E CASE MAY BE AND THE CARD HOLDER PURCHASES MATERIAL FROM THE MA RKET THROUGH HIS CREDIT CARD WI THOUT MAKING ANY PAYMENT AND THAT SHOP KEEPER PRESENTS THE BILL TO THE BANK AGAINST WHOSE CREDIT CAR D GOODS WERE SOLD AND ON PRESENTATION OF BILL AS STATED ABOVE THE BANK MAKES THE PAYMENT. TH EREFORE IN OUR CONSIDERED VIEW, P ROVISIONS OF SECTION 194H ARE NOT ATTRACTED IN ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 9 THIS TYPE OF TRAN SACTION THEREFORE, WE HOLD THAT ADDITION MADE AND CONFIRMED BY LD. CIT (A) WAS NOT JUSTIFIED. ACCORDING LY, THE ADDIT ION MADE AND CONFIRMED BY LD. CI T (A) IS DELETED.' 10. WE OBSERVE THAT THE SAID ISSUE WAS AGAIN CONSIDERED BY THE JAIPUR BENCH OF THE TRIBUNAL IN TH E CASE OF BHANDARI JEWELLERS (SUPRA) AND FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, THE TRIBUN AL PARAGRAPH 7 OF THE SAID ORDER AGAIN HELD THAT THE PROVISIONS OF SE CTION 194H OF TH E ACT ARE NOT AT TRACTE D IN THIS TYPE OF TRANSACTIONS. IT WAS HELD THAT NO TDS IS REQUIRED TO BE DEDUCTED ON THE FEES CHARG E D BANK ON CREDIT CARD TRANSACTIONS. WE ALSO OBSERVE THAT THE SIMILAR ISSUE AGAIN COME UP B EFORE HYDERABAD BENCH OF THE TRIBUNAL IN T HE CASE OF VAH MAGNA RETAIL (P.) LT D. (SUPRA) AND THE TRI VIDE PARAGRAPH 4 OF THE SAID ORDER DISMISSED THE APPEAL OF THE DEPARTMENT BY HOLDING THAT THE RETAINED BY THE PRINCIPAL CONTRACTOR FROM THE PAYMENTS MADE TO THE CONTRACTING PERSONS AND THERE WAS NO REQUIREMENT FOR MAKING TDS ON THE AMOUNT. THE SAID PARAGRAPH 4 OF THE DAIS ORDER DISMISSED THE APPEAL OF THE DEPARTMENT BY HOLDING THAT THE AMOUNT RETAINED BY THE PRINCIPAL CONTRACTOR FROM THE PAYMENTS MADE TO THE CONTRACTING PERSONS AND THERE WAS NO REQUI REMENT FOR MAKING TDS ON THE AMOUNT. THE SAID PARAGRAPH 4 OF THE ORDER READS 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 TRADING IN CONSUMER GOODS. ASSESSEE CLAIMED DEDUCTION OF RS.16,34, 000/ - ON ACCOUNT OF COMMISSION PAID TO THE CREDIT CARD COMPANIES, WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER IN TERMS OF S.40(A)(IA) ON ACCOUNT OF THE FAILU RE 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 CONTENTION OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE ASSESSEE ONLY RECEIVES THE PAYMENT FORM THE BANK/CREDIT CARD CO MPANIES CONCERNED, AFTER DEDUCTION OF COMMISSION THEREON, AND THUS, THIS IS ONLY IN THE NATURE OF A POST FACTO 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. CO NSIDERING 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 REASONING: '9.8 ON GOING THROUGH THE NATURE OF TRANSACTIONS, I FIND CONSIDERABLE MERIT IN THE CONTENTI ON OF THE APPELLANT THAT COMMISSION PAID TO THE CREDIT CARD COMPANIES CANNOT BE CONSIDERED AS FALLING WITH IN THE PURVIEW OF S.194H. EVEN THOUGH THE DEFINITION OF THE TERM 'COMMISSION OR BROKERAGE' USED IN THE SAID SECTION IS AN INCLUSIVE DEFINITION, IT IS CLEAR THAT THE LIABILITY TO MAKE TDS UNDER THE SAID SECTION ARISES ONLY WHEN A PERSON ACTS ON BEHALF OF ANOTHER PERSON. IN THE CASE OF COMMISSION RETAINED BY THE CREDIT CARD COMPANIES HOWEVER, IT CANNOT BE ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 10 SAID THAT THE BANK ACTS ON BEHALF OF THE MERCHANT ESTABLISHMENT OR THAT EVEN THE MERCHANT ESTABLISHMENT CONDUCTS THE TRANSACTION FOR THE BANK. THE SALE MADE ON THE BASIS OF A CREDIT CARD IS CLEARLY A TRANSACTION OF THE MERCHANTS ESTABLISHMENT ONLY AND THE CREDIT CARD COMPANY ONLY FACILITATES THE ELECTRON IC PAYMENT, FOR 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 MERCHANT ESTABLISHMENT. ACCORDINGLY, CONCLUDING THAT THERE WAS NO REQUIREMENT FOR MAKING TDS ON THE 'COMMISSION RETAINED BY THE CREDIT CARD COMPANIES, THE DISALLOWANCE OF RS.16,34,000/ - IS DELETED .... ' WE FIND NO INFIRMITY IN THE ABOVE REASONING GIVEN BY THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE REVENUE WHICH ARE DEVOID OF MERIT.' WE ALSO OBSERVE THAT THE BANGALORE BENCH OF THE TRIBUNAL BY FOLLOWING THE SAID DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL HAS HELD THAT THE PAYMENTS MADE TO THE BANKS O N ACCOUNT OF UTILIZATION OF CREDIT CARD FACILITIES WOULD BE IN THE NATURE OF BANK CHARGES AND NOT IN THE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE ACT AND HENCE NO TDS IS REQUIRED TO BE DEDUCTED U/S 194 H OF THE ACT. IN VIEW OF THE ABO VE WE HOLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO - ORDINATE BENCHES OF THE TRIBUNAL WE UPHOLD THE ORDER OF THE ID. CIT(A) AND REJECT THE GROUNDS 0.1 TO 3 TAKEN BY THE DEPARTMENT FOR ALL T HE THREE ASSESSMENT YEARS UNDER CONSIDERATION. 13. THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CIT VS. JDS APPARELS PVT. LT D. , WHEREIN THE ISSUE WAS THOUGH IN RESPECT OF ALLOWABILITY OF EXPENSES, WHI CH WAS DISALLOWED FOR NOT COMPLYING WITH THE PROVISION OF SECTION 194H OF THE ACT AND CONSEQUENTLY DISALLOWED BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE ACT. FURTHER THE MUMBAI BENCH OF TRIBUNAL IN ITO (TDS) VS. JET AIRWAYS (INDIA) LTD. (SUPRA) HAS LAID DOWN IDENTICAL PROPOSITION AND FOLLOWING THE SAME PARITY OF REASONING WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCTION OF TAX AT SOURCE OUT OF THE AMOUNTS WITH HELD BY THE ACQUIRING BANK I.E. HDFC BANK LTD AND CONSEQUENTLY FOR SUCH NON DEDUCTI ON OF TAXES AT SOURCE, NO DEMAND CAN BE RAISED UNDER SECTION 201(1) OF THE ACT AND NO INTEREST CAN BE CHARGED UNDER SECTION 201(1A) ITA NOS. 173 & 174 /MUM/2014 ITA NOS. 175 & 176 /MUM/2014 ASSESSMENT YEARS: 2010 - 11 & 2011 - 12 11 OF THE ACT FOR SUCH DEFAULT. UPHOLDING THE ORDER OF THE CIT(A) WE DISMISS THE GROUND OF APPEAL RAISED BY THE ASSESSEE. 14. THE FACTS AND ISSUE IN ITA NO. 174/MUM/2014 ARE IDENTICAL TO THE FACTS AND ITA NO. 173/ MUM/2014 OUR DECISION IN ITA NO. 173/MUM/2014 SHALL APPLY MUTATIS MUTANDIS TO ITA NO. 174/MUM/2014. 15. FURTHER IN THE CASE OF THE ASSESSEE M/S. TRIBHOVANDAS BHIMJI ZA VERI LTD. REVENUE HAS RAISED IDENTICAL ISSUE AND OUR DECISION IN ITA NO. 173/MUM/2014 SHALL APPLY MUTATIS MUTANDIS TO ITA NO. 175 & 176/MUM/2014. 16. IN THE RESULT ALL THE FOUR APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONO UNCED IN THE OPEN COURT ON THIS 11 TH DAY OF JUNE, 2015 . SD/ - SD/ - ( R. C. SHARMA ) ( SUSHMA CHO WLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 11 .06.2015 *SRIVASTAVA COPY T O: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH // TRUE COPY // BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.