Khazana Jewllery Private Limited, CHENNAI V. ACIT, CHENNAI

ITA 1831/CHNY/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6034 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AWYIT RAKSHIT IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Gift
• Section: 201(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . , !' # $! # % . &' , ) + , [ BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./ I.T.A.NOS.1829, 1830, 1831, 1832 & 1833/MDS/2014 / ASSESSMENT YEARS : 2009-10, 2010-11, 2011-12, 2012-13 & 2013-2014. M/S. KHAZANA JEWELLERY PRIVATE LIMITED, NO.252-A, T.T.K. ROAD, ALWARPET, CHENNAI 600 018. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, TDS CIRCLE I, CHENNAI. [PAN AAACK 2564Q ] ( -. / APPELLANT) ( /0-. /RESPONDENT) / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI. AWYIT RAKSHIT, IRS, JCIT /DATE OF HEARING : 31-08-2017 ! /DATE OF PRONOUNCEMENT : 13-10-2017 1 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED AGAINST A CONSOLIDATED ORDER DATED 30.4.2014 OF LD. COMMISSI ONER OF INCOME- ITA NOS.1829-1833/MDS/2014. :- 2 -: TAX (APPEALS) VII, CHENNAI, DATED 30.04.2014 FOR THE IMPUGNED ASSESSMENT YEARS. 2. ASSESSEE HAS ALTOGETHER RAISED FOURTEEN GROUNDS. T HROUGH THESE GROUNDS, WHAT IS ASSAILED BY THE ASSESSEE IS APPLICATION OF SECTION 201(1) AND 201(1A) OF THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT) FOR NON DEDUCTION OF TAX, ON INCENTIVES GIV EN UNDER VARIOUS SALES PROMOTION SCHEMES AND ON BANK CHARGES PAID FO R FACILITATING THE DEBIT AND CREDIT CARDS PAYMENTS BY CUSTOMERS. 3. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSI NESS OF JEWELLERY RETAILING WAS SUBJECTED TO AN INSPECTION BY THE TDS WING OF THE DEPARTMENT. IT WAS NOTED BY THE TDS WING OF THE DEPARTMENT THAT ASSESSEE WAS NOT DEDUCTING TAX ON BENEFITS GIVEN TO ITS CUSTOMERS ENROLLED IN CERTAIN PROMOTIONAL SCHEMES. THERE WER E THREE SCHEMES RUN BY THE ASSESSEE IN ITS BUSINESS OF JEWELLERY TR ADING, WHICH WERE CALLED GOLD SAVINGS SCHEME, GOLDEN DELIGHT SCHEME AND GOLD ACCUMULATION PLAN. A CUSTOMER REGISTERED IN GOLD SA VINGS SCHEME HAD TO PAY 15 MONTHLY INSTALMENTS OF H500/- PER MONTH O R MULTIPLES THEREON. ON COMPLETION OF THE 15 MONTHS THE TOTAL I NSTALMENTS WERE REDEEMED AGAINST GOLD ORNAMENTS ALONGWITH A BONUS G OLD EQUIVALENT TO ONE MONTHS INSTALMENT VALUE. WHEN THE MONTHLY INSTALMENTS WERE RECEIVED FROM A CUSTOMER IN THIS SCHEME, IT WAS CR EDITED TO A LEDGER ITA NOS.1829-1833/MDS/2014. :- 3 -: ACCOUNT IN THE BOOKS OF THE ASSESSEE IN EACH CUSTOM ERS NAME. UPON THE COMPLETION OF THE SCHEME PERIOD, AN INVOICE WA S RAISED ON THE CUSTOMER WHEREIN AGAINST THE TOTAL SALE PRICE OF TH E GOLD ORNAMENTS SELECTED BY THE CUSTOMER, INSTALMENTS RECEIVED AND SCHEME DISCOUNT WERE DEDUCTED. IF THE CUSTOMER CHOSE TO PURCHASE GOLD ORNAMENTS IN EXCESS OF WHAT HE WAS ENTITLED TO, THE BALANCE AMOU NT AFTER ADJUSTMENT OF THE INSTALMENTS AND SCHEME DISCOUNT HAD TO BE PAID BY HIM. GOLDEN DELIGHT SCHEME WAS ALSO SIMILAR TO THE ABOVE, THE ONLY NOTABLE DIFFERENCE BEING THE AMOUNT OF MINIMUM INST ALMENT WHICH WERE H1,000/- OR MULTIPLES THEREOF AND SLIGHT DIF FERENCE IN THE INCENTIVE. IN BOTH THESE SCHEMES, PRICE OF THE GO LD WAS THAT WHICH PREVAILED ON THE DATE ON WHICH THE INVOICE WAS RAIS ED VIZ. AFTER THE END OF THE STIPULATED PERIOD. 4. IN THE THIRD SCHEME CALLED GOLD ACCUMULATION PLAN, THE SCHEME PERIOD WAS 12 MONTHS AND THE MINIMUM MONTH LY INSTALMENT H1,000/- OR MULTIPLES THEREOF. THE DIFFERENCE BET WEEN THE EARLIER TWO SCHEMES AND THIS SCHEME PRIMARILY WAS IN THE WAY IN WHICH INSTALMENTS WERE CREDITED IN THE CUSTOMERS ACCOUNT . IN GOLD ACCUMULATION PLAN, WEIGHT OF GOLD EQUIVALENT TO TH E INSTALMENTS WERE CREDITED IN THE ACCOUNT OF EACH CUSTOMER. BENEFIT RECEIVED BY A CUSTOMER IN THIS SCHEME, WAS CREDIT OF GOLD EQUIVAL ENT OF 80% OF ONE INSTALMENT AT THE END OF THE SCHEME. CUSTOMER WAS ENTITLED TO GOLD ITA NOS.1829-1833/MDS/2014. :- 4 -: JEWELLERY EQUIVALENT TO THE TOTAL ACCUMULATED GOLD CREDIT IN THEIR ACCOUNT ALONGWITH THE JEWELLERY EQUIVALENT TO T HE 80% VALUE OF ONE INSTALMENT, AT THE END OF THE SCHEME. 5. THE LD. ASSESSING OFFICER WAS OF THE OPINION THAT G OLD ORNAMENTS GIVEN IN EXCESS OF WHAT WAS THE CUMULAT IVE INSTALMENTS RECEIVED DURING THE PLAN PERIOD, WAS IN THE NATURE OF INTEREST FALLING WITHIN THE DEFINITION OF THAT TERM U/S. 2(28A) OF T HE ACT. AS PER THE LD. ASSESSING OFFICER ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE AS REQUIRED UNDER SECTION 194A OF THE ACT ON SUCH INTE REST. SHOW CAUSE NOTICES WERE ISSUED TO THE ASSESSEE AS TO WHY IT SHOULD NOT BE CONSIDERED AS ONE IN DEFAULT U/S. 201(1) OF THE AC T AND WHY INTEREST SHOULD NOT BE LEVIED U/S. 201(1A) OF THE ACT ON SUC H EXCESS/. REPLY OF THE ASSESSEE WAS THAT WHAT WERE TRANSACTED THROUGH THESE SCHEMES WERE ONLY DEFERRED SALES. AS PER THE ASSESSEE WHA T WAS RECEIVED FROM THE CUSTOMERS WERE ONLY DUES AGAINST SALE OF G OLD AND NOT ANY DEPOSIT OR LOAN. CONTENTION OF THE ASSESSEE WAS TH AT GOLD ORNAMENTS WERE GIVEN TO THE CUSTOMER UNDER A CONTRACT FOR SAL E AND NONE OF THE CUSTOMERS WERE ENTITLED TO ANY REFUND OF AMOUNTS GIVEN BY THEM. AS PER THE ASSESSEE, MONTHLY INSTALMENTS WERE IN TH E NATURE OF CONSIDERATION AGAINST THE SALE AGREEMENTS. FURTHE R, AS PER ASSESSEE THESE WERE ONLY INCENTIVE SCHEMES FOR CUSTOMERS AND NOT GIVEN AS COMPENSATION FOR TIME VALUE OF THE MONEY. ASSESSEE ALSO POINTED OUT ITA NOS.1829-1833/MDS/2014. :- 5 -: THAT THE DIFFERENCE BETWEEN TOTAL AMOUNT RECEIVED F ROM THE CUSTOMER AND MATURITY VALUE AS PER THE SCHEMES WERE ACCOUNTE D AS DISCOUNT IN ITS BOOKS AND CHARGED AS SALES PROMOTION IN ITS F INANCIAL STATEMENTS. THUS AS PER THE ASSESSEE THEY WERE NOT LIABLE TO DEDUCT ANY TAX AT SOURCE ON SUCH DISCOUNTS. 6. HOWEVER, LD. ASSESSING OFFICER WAS NOT IMPRESSED BY THE ABOVE ARGUMENTS. ACCORDING TO HIM, SPECIFIC NATUR E OF THE GOODS THAT WERE SOLD WERE NEVER MENTIONED AT THE TIME OF ENTER ING INTO AGREEMENT WITH THE CUSTOMERS AND THEREFORE THESE CO ULD NOT BE CONSIDERED AS FORWARD CONTRACTS. AS PER LD. ASSE SSING OFFICER, CONTRACT OF SALE HAPPENED ONLY AT THE END OF THE SC HEME PERIOD AND TILL THAT DATE THE INSTALMENTS RECEIVING WERE ONLY A MEANS OF FINANCING. FURTHER, AS PER LD. ASSESSING OFFICER YEAR, EAR-MA RKING OF GOLD EQUIVALENT TO EACH INSTALMENT IN THE INDIVIDUAL ACC OUNT OF THE CUSTOMER DID NOT VEST ANY RIGHT IN THE CUSTOMER TO RECEIVE SUCH GOLD THEN AND THERE. AS PER THE LD. ASSESSING OFFICER, THE CUSTO MER COULD GET THE GOLD ONLY AFTER CONTRIBUTION OF THE VERY LAST INSTA LMENT. LD. ASSESSING OFFICER ALSO NOTED THAT TREATMENT IN THE BOOKS OF A CCOUNTS WAS NOT CONCLUSIVE OF THE NATURE OF THE TRANSACTION. ACCO RDING TO HIM, INCENTIVE THOUGH GIVEN IN THE FORM OF GOLD ORNAME NTS WERE NOTHING BUT THE TIME VALUE FOR MONEY GIVEN BY THE CUSTOMERS THROUGH MONTHLY ITA NOS.1829-1833/MDS/2014. :- 6 -: INSTALMENTS. LD. ASSESSING OFFICER MADE AN ANALYSI S OF THE GOLD SAVING SCHEME AND GOLD ACCUMULATION PLAN AS UNDER:- TAKING THE GOLD SAVING SCHEME FOR INSTANCE, A MON THLY PAYMENT OF H500 IS TO BE PAID FOR 15 MONTHS. THE APPROPRIATE METHOD OF CALCULATING THE RATE OF INEREST IS TO LOOK AT THE S CHEME AS ONE WHICH YIELDS H500 AFTER A RECURRING PAYMENT OF H500 FOR 1 5 TIMES. THE FORMULA ADOPTED IS 500 1 = [(500X15XR /100) + (500X 14 X R/100)+... + (500 X 2X R/100) + (500 X 1 X R/100)] 500 =5 X R X [15+14+13+...... +2+1] R = (100/120) PER MONTH R = 10% PER ANNUM. THIS RATE OF INTEREST IS HIGHER THAN THE SAVINGS RA TE CURRENTLY OFFERED BY SATE BANK OF INDIA (8.75%). THE ASSESSE E- COMPANY IS THUS INDULGING IN SECURING DEPOSITS FROM CUSTOMERS WITH THE PROMISE OF AN APPROXIMATE GURATN EED RETURN OF 10% PER ANNUM WHICH IS HIGHER THAN THE SA VINGS RATE AT SBI.AN ANALYSIS OF THE GOLD ACCUMULATION PL AN SHOWS THAT THE RATE OF RETURN IS HIGHER IN THIS SCHEME. 800 2 = [(1000X11X R /100) + (1000X 10 X R/100)+... + (1000 X 2 X R/100) + (1000 X 1 X R/100)] 800 =10 X R X [11+10+9+...... +2+1] 3 R =10 X R X [11 +10+9+..............2+1] 3 R =(80 /66) PER MONTH R = 14.5% PER ANNUM. AS PER LD. ASSESSING OFFICER, THE ASSESSEE, IF IT HAD TAKEN FUNDS FROM A FINANCIAL INSTITUTION IT WOULD HAVE ENDED UP PAYI NG SUBSTANTIAL INTEREST AND THEY WERE SAVING INTEREST BY TAKING DEPOSITS FROM CUSTOMERS. HE ITA NOS.1829-1833/MDS/2014. :- 7 -: THUS CAME TO A CONCLUSION THAT ASSESSEE COMPANY WAS MAKING PAYMENTS TO ITS CUSTOMERS OUT OF AN OBLIGATION CREA TED TOWARDS THEM BY VIRTUE OF TERMS AND CONDITIONS OF THE PROMOTION SCHEMES. ACCORDING TO HIM, SUCH OBLIGATION CAME WITHIN THE DEFINITION OF INTEREST U/S. 2(28A) OF THE ACT. RELYING ON THE JU DGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF VISWAPRIYA FINANCIAL SERVICES AND SECURITIES LTD VS. CIT 258 ITR 496 , LD. ASSESSING OFFICER HELD THAT FINANCIAL INCENTIVES OFFERED BY THE ASSESSEE WERE N OTHING BUT INTEREST ON PAYMENTS RECEIVED FROM CUSTOMERS. LD. ASSESSIN G OFFICER ALSO TOOK A VIEW THAT INCENTIVES WOULD ALSO FALL WITHIN THE MEANING OF OTHER CHARGES SPECIFIED U/S. 2(28A) OF THE ACT. SINCE A SSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE AS REQUIRED UNDER SECTION 194A OF THE COMMISSIONER OF INCOME TAX, LD. ASSESSING OFFICER C ONSIDERED THE ASSESSEE AS ONE IN DEFAULT AND DIRECTED THE ASSESSE E TO PAY TAX AT THE RATE OF 10% ON THE INCENTIVES GIVEN IN EXCESS OF H5 ,000/-. HE ALSO DIRECTED THE ASSESSEE TO PAY INTEREST U/S. 201(1A) OF THE ACT. 7. APART FROM THE ABOVE, LD. ASSESSING OFFICER ALSO NO TED THAT ASSESSEE HAD MADE PAYMENTS TO BANKS FOR FACILITATIN G CREDIT AND DEBIT CARD PAYMENTS THROUGH POINT OF SALE MACHINES KEPT I N ITS PREMISES. AS PER LD. ASSESSING OFFICER SUCH PAYMENTS WERE FEES FOR TECHNICAL SERVICES AND WAS LIABLE FOR DEDUCTION OF TAX AT S OURCE U/S. 194J OF THE ACT. THOUGH ASSESSEE RELIED ON CBDT INSTRUCTION N O.56/2012, DATED ITA NOS.1829-1833/MDS/2014. :- 8 -: 31.12.2012. LD. ASSESSING OFFICER WAS OF THE OPINIO N THAT THE SAID INSTRUCTION CAME INTO EFFECT ONLY FROM 01.01.2013 A ND COULD NOT BE APPLIED TO PAYMENTS MADE PRIOR TO THAT DATE. HE C ONSIDERED THE ASSESSEE AS ONE IN DEFAULT FOR NOT DEDUCTING TDS O N SUCH PAYMENTS EFFECTED TO BANKS AS WELL AND DIRECTED THE ASSESSEE TO DEPOSIT TAX AT THE RATE OF 10% ON SUCH PAYMENTS ALONGWITH INTEREST AS SPECIFIED U/S. 201(1A) OF THE ACT. 8. AGGRIEVED, THE ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). CONTENTION OF THE ASSESSEE BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) WER E AS UNDER:- (I) ADVANCE RECEIVED FROM CUSTOMERS WERE NOT IN NATURE OF MONEY BORROWED OR DEBTS INCURRED OR DEPOSITS OR A CLAIM OR RIGHT OF SIMILAR KIND. (II) THERE WAS NO CREDIT OF ANY INCENTIVE IN THE CUSTOME RS ACCOUNT BUT ONLY DISCOUNT GIVEN ON THE INVOICE VAL UE. (III) ASSESSEE WAS UNDER AN OBLIGATION TO GIVE DISCOUNT A S PER TERMS OF CONTRACT AND NOT ON ACCOUNT OF ANY BORROWINGS OR DEBT. (IV) FACTS IN THE CASE OF VISWAPRIYA FINANCIAL SERVICES AND SECURITIES LTD (SUPRA) DECIDED BY THE JURISDICTIONAL HIGH COURT WERE ENTIRELY DIFFERENT AND DID NOT APPLY T O A GOLD INCENTIVE SCHEME. HOWEVER, LD. COMMISSIONER OF INCOME TAX (APPEALS) W AS NOT IMPRESSED BY THE ABOVE ARGUMENTS. ACCORDING TO HIM , BOARDS CIRCULAR NO.202, DATED 05.07.1976 EXPLAINED THE SCOPE OF THE DEFINITION OF ITA NOS.1829-1833/MDS/2014. :- 9 -: INTEREST U/S. 2(28A) OF THE ACT. ACCORDING TO HIM, THIS CIRCULAR CLEARLY INDICATED THAT INTEREST INCLUDED ANY TYPE OF OBLIG ATION AND EVEN SERVICE FEE OR OTHER CHARGES ON CREDIT FACILITIES. AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS), CUSTOMERS WER E ENTITLED FOR GIFTS AND BONUS ON THE MATURITY OF THESE SCHEME, A ND SUCH GIFTS AND BONUS WERE NOTHING BUT INTEREST. 9. COMING TO THE ISSUE OF PAYMENTS MADE TO BANKS FOR FACILITATING CREDIT AND DEBITS CARD PAYMENTS THROU GH POINT OF SALE MACHINE AT ASSESSEES PREMISES. LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THESE WERE RIGHTLY CONSIDERED A S TECHNICAL SERVICES LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S. 194J OF THE ACT. WITH THESE OBSERVATIONS, LD. COMMISSIONER OF INCOME TAX (APPEA LS) DISMISSED THE APPEALS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS. 10. NOW BEFORE US, THE LD. AUTHORISED REPRESENTATIVE S TRONGLY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBM ITTED THAT ASSESSEE WAS RECEIVING MONEY BASED ON CONTRACTS ENTERED WITH THE CUSTOMERS AND AS PER THESE CONTRACTS, ASSESSEE WAS LIABLE TO GIVE GOLD JEWELLERY AT THE END OF THE RESPECTIVE SCHEME ALONGWITH INCEN TIVES. NOTHING OTHER THAN GOLD WAS GIVEN TO THE CUSTOMERS NOR WERE THE CUSTOMERS ELIGIBLE FOR ANY REFUND OF MONEY. THE INSTALLMENT RECEIVED WERE ONLY ADVANCE PAYMENTS AGAINST CONTRACTS. AS PER LD. AUT HORISED ITA NOS.1829-1833/MDS/2014. :- 10 -: REPRESENTATIVE WHEN GOLD WAS GIVEN TO THE CUSTOMER, ADVANCES AS ALSO THE INCENTIVES WERE DEDUCTED FROM THE INVOICE PRICE. FURTHER, AS PER LD. AUTHORISED REPRESENTATIVE AT NO POINT OF TI ME CUSTOMERS ACCOUNT WAS CREDITED WITH ANY INTEREST. THUS, ACCO RDING TO HIM, LOWER AUTHORITIES FELL IN ERROR IN TREATING THE DISCOUNTS GIVEN BY THE ASSESSEE AS INTEREST U/S. 2(28A) OF THE ACT. AS PER THE LD . AUTHORISED REPRESENTATIVE ASSESSEE WAS NOT LIABLE TO DEDUCT T AX U/S. 194A OF THE ACT ON SUCH DISCOUNTS. 11. COMING TO THE ISSUE OF NON DEDUCTION OF TAX ON PAYM ENTS EFFECTED TO THE BANKS, LD. AUTHORISED REPRESENTATIV E SUBMITTED THAT ISSUE STOOD SQUARELY COVERED BY JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JDS APPARELS PVT. LTD (ITA NO. 608/2014, DATED 18.11.2014). ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE WH EN A POINT OF SALE MACHINE WAS USED BY THE CUSTOMERS, W HAT WAS CREDITED BY THE CONCERNED BANKS IN ASSESSEES ACCOUNT WAS AM OUNTS AFTER DEDUCTING THE BANK CHARGES. ARGUMENT OF THE LD. AS SESSING OFFICER WAS THAT SUCH BANK CHARGES WERE NOT FOR ANY TECHNIC AL SERVICES RENDERED BY THE BANK. THUS, ACCORDING TO HIM, SEC. 194J OF THE ACT HAD NO APPLICABILITY ON SUCH PAYMENTS. 12. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONGL Y SUPPORTING THE ORDERS OF THE LOWER AUTHORITIES SUBM ITTED THAT LD. ITA NOS.1829-1833/MDS/2014. :- 11 -: ASSESSING OFFICER HAD CLEARLY WORKED OUT AND DEMONS TRATED THAT INCENTIVES WERE THE EQUIVALENT OF THE INTEREST DUE ON INSTALMENTS RECEIVED FROM THE CUSTOMERS. WHAT THE ASSESSEE REC EIVED WAS DEPOSITS/LOANS ON MONTHLY BASIS WHICH WERE REPAID T HROUGH GOLD JEWELLERY AT THE END OF THE PERIOD ALONGWITH EQUIVA LENT JEWELLERY FOR THE INTEREST COMPONENT. ACCORDING TO THE LD. DEPAR TMENTAL REPRESENTATIVE JUST BECAUSE COMPONENT WAS GIVEN AS GOLD JEWELLERY WOULD NOT TAKE IT OUT OF THE AMBIT OF INTEREST U/S. 2(28A) OF THE ACT. AS PER LD. DEPARTMENTAL REPRESENTATIVE THE SAID DEFINI TION WAS WIDE ENOUGH TO INCLUDE THESE TYPES OF INCENTIVES ALSO. 13. COMING TO THE ASPECT OF DEDUCTION OF TDS ON PAYMENT S EFFECTED TO BANKS, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT BANKS WERE RENDERING TECHNICAL SERVICES TO THE ASSE SSEE BY ENABLING THE ASSESSEE TO ACCEPT CREDIT/DEBIT CARDS PAYMENTS . HENCE, ACCORDING TO HIM, ASSESSEE WAS OBLIGED TO DEDUCT TDS ON SUCH PAYMENTS U/S. 194J OF THE ACT. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT LOWER AUTHORITIES WERE JUSTIFIED IN CONSIDERING THE ASSESSEE TO BE IN DEFAULT U/S. 201(1) OF THE ACT AND ALSO LEVIED INT EREST U/S. 201(1A) OF THE ACT. 14. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. FIRST WE TAKE UP T HE QUESTION WHETHER ASSESSEE WAS LIABLE TO DEDUCT TAX ON THE INCENTIVES GIVEN TO ITS ITA NOS.1829-1833/MDS/2014. :- 12 -: CUSTOMERS UNDER VARIOUS GOLD SCHEMES. THE SECTIONS APPLIED BY THE LD. ASSESSING OFFICER TO HOLD THAT ASSESSEE WAS LIA BLE TO DEDUCT TDS ON SUCH INCENTIVES OR WHAT WAS TERMED BY THE ASSESSEE AS DISCOUNT, ARE 194A AND 2(28A) OF THE ACT. BOTH THESE SECTIONS ARE REPRODUCED HEREUNDER:- SECTION 194A OF THE ACT :- (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INCOME BY WAY OF INTEREST OTHER THAN INCOME BY WAY OF INTERES T ON SECURITIES, SHALL AT THE TIME OF CREDIT OF SUCH INCOME TO THE A CCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE. PROVIDED THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FA MILY, WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BU SINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LI MITS SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURI NG THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INTEREST IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME- TAX UNDER THIS SECTION. EXPLANATION FOR THE PURPOSES OF THIS SECTION, WHERE ANY INCOME BY WAY OF INTEREST AS AFORESAID IS CREDITED TO ANY ACCOUNT, WHETHER CALLED 'INTEREST PAYABLE ACCOUNT' OR 'SUSPE NSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF TH E PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE A ND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. (3) THE PROVISIONS OF SUB-SECTION (1) SHALL NOT APP LY-- (I) 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 ACCOUN T OF, OR TO, THE PAYEE, 5DOES NOT EXCEED (A) TEN THOUSAND RUPEES, WHERE THE PAYER IS A BANKI NG COMPANY TO WHICH THE BANKING REGULATION ACT, 1949 ( 10 OF ITA NOS.1829-1833/MDS/2014. :- 13 -: 1949) APPLIES (INCLUDING ANY BANK OR BANKING INSTIT UTION, REFERRED TO IN SECTION 51 OF THAT ACT) ; (B) TEN THOUSAND RUPEES, WHERE THE PAYER IS A CO-OP ERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANK ING ; (C) TEN THOUSAND RUPEES, ON ANY DEPOSIT WITH POST O FFICE UNDER ANY SCHEME FRAMED BY THE CENTRAL GOVERNMENT AND NOT IFIED BY IT IN THIS BEHALF ; AND (D) FIVE THOUSAND RUPEES IN ANY OTHER CASE : PROVIDED THAT IN RESPECT OF THE INCOME CREDITED OR PAID IN RESPECT OF--(A) TIME DEPOSITS WITH A BANKING COMPANY TO WHI CH THE BANKING REGULATION ACT, 1949 (10 OF 1949), APPLIES (INCLUDING ANY BANK OR BANKING INSTITUTION REFERRED TO IN SECT ION 51 OF THAT ACT) ; OR(B) TIME DEPOSITS WITH A CO-OPERATIVE SOCI ETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING;(C) DEPOSITS WI TH A PUBLIC COMPANY WHICH IS FORMED AND REGISTERED IN INDIA WIT H THE MAIN OBJECT OF CARRYING ON THE BUSINESS OF PROVIDING LON G-TERM FINANCE FOR CONSTRUCTIONS OR PURCHASE OF HOUSES IN INDIA 1F OR RESIDENTIAL PURPOSES AND WHICH IS ELIGIBLE FOR DEDUCTION UNDER CLAUSE (VIII) OF SUB-SECTION (1) OF SECTION 36,THE AFORESAID AMOUNT SHALL BE COMPUTED WITH REFERENCE TO THE INCOME CREDITED OR P AID BY A BRANCH OF THE BANKING COMPANY OR THE CO-OPERATIVE S OCIETY OR THE PUBLIC COMPANY, AS THE CASE MAY BE ; (III) TO SUCH INCOME CREDITED OR PAID TO-- (A) ANY BANKING COMPANY TO WHICH THE BANKING REGULA TION ACT, 1949 (10 OF 1949), APPLIES, OR ANY CO-OPERATIVE SOC IETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING (INC LUDING A CO- OPERATIVE LAND MORTGAGE BANK), OR (B) ANY FINANCIAL CORPORATION ESTABLISHED BY OR UND ER A CENTRAL, STATE OR PROVINCIAL ACT, OR (C) THE LIFE INSURANCE CORPORATION OF INDIA ESTABLI SHED UNDER THE LIFE INSURANCE CORPORATION ACT, 1956 (31 OF 195 6), OR (D) THE UNIT TRUST OF INDIA ESTABLISHED UNDER THE U NIT TRUST OF INDIA ACT, 1963 (52 OF 1963), OR (E) ANY COMPANY OR CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF INSURANCE, OR (F) SUCH OTHER INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTITUTIONS, ASSOCIATIONS OR BODIES WHICH THE CENT RAL ITA NOS.1829-1833/MDS/2014. :- 14 -: GOVERNMENT MAY, FOR REASONS TO BE RECORDED IN WRITI NG, NOTIFY IN THIS BEHALF IN THE OFFICIAL GAZETTE ; (IV) TO SUCH INCOME CREDITED OR PAID BY A FIRM TO A PARTNER OF THE FIRM ; (V) TO SUCH INCOME CREDITED OR PAID BY A CO-OPERATI VE SOCIETY TO A MEMBER THEREOF OR TO ANY OTHER CO-OPERATIVE SOCIETY ; (VI) TO SUCH INCOME CREDITED OR PAID IN RESPECT OF DEPOSITS UNDER ANY SCHEME FRAMED BY THE CENTRAL GOVERNMENT AND NOT IFIED BY IT IN THIS BEHALF IN THE OFFICIAL GAZETTE ; (VII) TO SUCH INCOME CREDITED OR PAID IN RESPECT OF DEPOSITS (OTHER THAN TIME DEPOSITS MADE ON OR AFTER THE 1ST DAY OF JULY, 1995) WITH A BANKING COMPANY TO WHICH THE BANKING REGULAT ION ACT, 1949 (10 OF 1949), APPLIES (INCLUDING ANY BANK OR B ANKING INSTITUTION REFERRED TO IN SECTION 51 OF THAT ACT) ; (VIIA) TO SUCH INCOME CREDITED OR PAID IN RESPECT O F,-- (A) DEPOSITS WITH A PRIMARY AGRICULTURAL CREDIT SOC IETY OR A PRIMARY CREDIT SOCIETY OR A CO-OPERATIVE LAND MORTG AGE BANK OR A CO-OPERATIVE LAND DEVELOPMENT BANK ; (B) DEPOSITS (OTHER THAN TIME DEPOSITS MADE ON OR A FTER THE 1ST DAY OF JULY, 1995) WITH A CO-OPERATIVE SOCIETY, OTH ER THAN A CO- OPERATIVE SOCIETY OR BANK REFERRED TO IN SUB-CLAUSE (A), ENGAGED IN CARRYING ON THE BUSINESS OF BANKING ; (VIII) TO SUCH INCOME CREDITED OR PAID BY THE CENTR AL GOVERNMENT UNDER ANY PROVISION OF THIS ACT OR THE INDIAN INCOM E-TAX ACT, 1922 (11 OF 1922), OR THE ESTATE DUTY ACT, 1953 (34 OF 1953), OR THE WEALTH-TAX ACT, 1957 (27 OF 1957), OR THE GIFT- TAX ACT, 1958 (18 OF 1958), OR THE SUPER PROFITS TAX ACT, 1963 (1 4 OF 1963), OR THE COMPANIES (PROFITS) SURTAX ACT, 1964 (7 OF 1964 ), OR THE INTEREST-TAX ACT, 1974 (45 OF 1974). (IX) TO SUCH INCOME CREDITED OR PAID BY WAY OF INTE REST ON THE COMPENSATION AMOUNT AWARDED BY THE MOTOR ACCIDENTS CLAIMS TRIBUNAL WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE AGGREGATE OF THE AMOUNTS OF SUCH INCOME CRE DITED OR PAID DURING THE FINANCIAL YEAR DOES NOT EXCEED FIFTY THO USAND RUPEES. (X) TO SUCH INCOME WHICH IS PAID OR PAYABLE BY AN I NFRASTRUCTURE CAPITAL COMPANY OR INFRASTRUCTURE CAPITAL FUND OR A PUBLIC SECTOR COMPANY 6OR SCHEDULED BANK IN RELATION TO A ZERO CO UPON BOND ISSUED ON OR AFTER THE 1ST DAY OF JUNE, 2005, BY SU CH COMPANY OR FUND OR PUBLIC SECTOR COMPANY 6OR SCHEDULED BANK ; ITA NOS.1829-1833/MDS/2014. :- 15 -: EXPLANATION 1. FOR THE PURPOSES OF CLAUSES (I), (V II) AND (VIIA), 'TIME DEPOSITS' MEANS DEPOSITS (EXCLUDING RECURRING DEPOSITS) REPAYABLE ON THE EXPIRY OF FIXED PERIODS. (4) THE PERSON RESPONSIBLE FOR MAKING THE PAYMENT R EFERRED TO IN SUB-SECTION (1) MAY, AT THE TIME OF MAKING ANY DEDU CTION, INCREASE OR REDUCE THE AMOUNT TO BE DEDUCTED UNDER THIS SECT ION FOR THE PURPOSE OF ADJUSTING ANY EXCESS OR DEFICIENCY ARISI NG OUT OF ANY PREVIOUS DEDUCTION OR FAILURE TO DEDUCT DURING THE FINANCIAL YEAR. SECTION 2(28A) OF THE ACT:- (28A) 'INTEREST' MEANS INTEREST PAYABLE IN ANY MANN ER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED (INCLUDING A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INC LUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF THE MONEY S BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILISED ; FOR APPLYING SEC. 194A OF THE ACT ON THE INCENTIVES GIVEN BY THE ASSESSEE ON ITS VARIOUS GOLD SCHEMES, LD. AO HAS R ELIED ON THE DEFINITION OF INTEREST U/S. 2(28A) OF THE ACT. INT EREST HAS BEEN DEFINED IN SEC. 2(28A) OF THE ACT. THERE ARE TWO LIMBS T O THE DEFINITION. FIRST LIMB IS INTEREST PAYABLE IN ANY MANNER FOR MONEYS BORROWED OR DEBT INCURRED. MONEYS BORROWED OR DEBT INCURRED CAN IN CLUDE A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION AS WELL. THE SECOND LIMB IS AN INCLUSIVE ONE AND COVERS ANY SERVICE FEE, OR OTHER CHARGE IN RESPECT OF MONEYS BORROWED, OR DEBT INCURRED OR IN RESPECT OF AN UNUTILIZED CREDIT FACILITY. NOW, WE NEED TO HAVE A LOOK ON THE GOLD SCHEMES OF THE ASSESSEE TO CONSIDER WHETHER WHAT THE ASSESSEE CALL AS ITA NOS.1829-1833/MDS/2014. :- 16 -: INCENTIVES/DISCOUNTS WILL FALL WITHIN ABOVE DEFINI TION. TERMS AND CONDITIONS OF GOLDEN DELIGHT SCHEME WHICH ADMITTE DLY IS SIMILAR TO THE GOLD SAVING SCHEME READ AS UNDER:- 1. THE MONTHLY SUBSCRIPTION VALUE MUST BE PAID CONTINUOUSLY TOR 15 MONTHS. 2. AFTER HAVING PAID THE SUBSCRIPTION FOR 15 MONTHS, THE MEMBER CAN PURCHASE JEWELLERY FOR THE MATURITY VALUE ON OR AFTER THE MATURITY DATE. 3. CASH WILL NOT BE REFUNDED UNDER ANY CIRCUMSTANCES. -4. MONTHLY INSTALLMENTS TO BE PAID BEFORE THE LAST WORKING DAY OF THE MONTH (25TH OF THE MONTH FOR CHEQUE/DD PAYMENTS)FAILING WHICH, THE SCHEME WILL B E EXTENDED BY A MONTH TOR EVERY DEFAULTS, IF ANY. 5 . ADDITIONAL INSTALMENTS PAID IN A MONTH WILL BE ACCOUNTED ONLY AGAINST SUBSEQUENT MONTHS AND NOT AGAINST EARLIER DEFAULTS, IT ANY. 6. NO BONUS OR CASH INCENTIVE WILL BE PAID ON PRE- CLOSURE OF SCHEME BY THE MEMBERS AND THEY WILL BE ENTITLED TO TAKE GOLD JEWELLERY ONLY FOR THE AMOUNT THEY HAVE PAID (AFTER DEDUCTION THE VALUE OF GIFT). 7. VALUE ADDITION (MAKING CHARGES AND WASTAGE) AND VAT CHARGES ARE AS APPLICABLE. 8 PAYMENTS CAN BE MADE ONLY THROUGH CASH, ECS, CREDIT CARD, LOCAL CHEQUES OR DEMAND DRAFT DRAWN I N FAVOUR OF 'KHAZANA JEWELLERY PRIVATE LIMITED'. EXTR A BANK CHARGES AS APPLICABLE FOR EVERY BOUNCED TRANSACTION . 9. SCHEME CAN BE REDEEMED OR CLOSED ONLY IN THE SHOWROOM WHERE THE CUSTOMER HAS ENROLLED . ITA NOS.1829-1833/MDS/2014. :- 17 -: 10 THE MEMBERSHIP CARD IS NOT TRANSFERABLE. 11. CUSTOMER HAS TO BRING THE MEMBERSHIP CARD EVER Y MONTH WHILE MAKING PAYMENTS. ORIGINAL CARD HAS TO BE RETURNED AT THE TIME OF CLOSURE OF THE SCHEME. 12. SHOWROOM TO BE INTIMATED IMMEDIATELY IN CASE OF LOSS OF MEMBERSHIP CARD. TERMS AND CONDITIONS OF THE GOLD ACCUMULATION PLAN READS AS UNDER:- 1. THIS SCHEME IS VALID FOR A PERIOD OF 12 MONTHS AN D IS NOT TRANSFERABLE. 2. THE MONTHLY SUBSCRIPTION VALUE MUST BE PAID CONTIOU SLY FOR 11 MONTHS 3. AFTER HAVING PAID THE SUBSCRIPTION FOR 11 MONTHS, T HE MEMBER CAN PURCHASE JEWELRY FOR THE MATURITY VALUE ON OR AFTE R THE MATURITY DATE. 4. ON PAYMENT OF EVERY MONTHLY INSTALLMENT, GOLD GET A CCUMULATED AT THE PREVAILING 22 CARAT GOLD RATE APPLICABLE ON THE DATE OF EACH INSTALLMENT PAYMENT 5. ONLY CASH, CREDIT OR DEBIT CARD PAYMENTS WILL BE AC CEPTED. 6. NO BONUS IS APPLICABLE TO THIS SCHEME ON PRE-CLOSUR E 7. ADDITIONAL INSTALLMENT PAID IN A MONTH WILL BE ACCO UNTED ONLY AGAINST SUBSEQUENT MONTHS AND NOT AGAINST EARLIER D EFAULTS, IF ANY. 8. MATURITY DATE FOR REDEMPTION WILL GET EXTENDED BY A MONTH FOR EVERY DEFAULT IN THE MONTHLY INSTALLMENT PAYMENT. 9. MEMBER IS ALLOWED TO PURCHASE ONLY /DIAMOND ORNAME NTS AND SILVER ARTICLES ONLY AT THE STORE WHERE HE/SHE IS E NROLLED. MEMBERS CANNOT PURCHASE GOLD COINS UNDER THIS SCHEME. 10. THIS A JEWELLERY PURCHASE SCHEME AND UNDER ANY CIRCUMSTANCES, CASH REFUND IS NOT ALLOWED. 11. MATURITY VALUE IS BASED ON APPLICATION 22 CARAT GOL D RATE ON THE DATE OF CLOSURE OR REDEMPTION OF THE SCHEME AND MAY BE MORE OR OTHERWISE THAN THE AMOUNT PAID BY THE MEMBER. 12. BONUS WILL BE 80% OF THE FIRST MONTH INSTALLMENT AM OUNT ON SUCCESSFUL COMPLETION OF THE SCHEME. 13. KHAZANA DOE NOT GUARANTEE OR ASSURE APPRECIATION IN THE GOLD VALUE UNDER THIS SCHEME 14. VALUE ADDITION (MAKING CHARGE AND WASTAGE) AND VAT CHARGES ARE EXTRA 15. ANY DISPUTES SHALL BE SETTLED SUBJECT TO CHENNAI JU RISDICTION. ITA NOS.1829-1833/MDS/2014. :- 18 -: IN BOTH SCHEMES THERE IS A CLEAR CONDITION THAT CA SH WILL NOT BE REFUNDED UNDER ANY CIRCUMSTANCES. IT IS CLEARLY ST ATED THAT CUSTOMERS WERE ENTITLED ONLY FOR GOLD ORNAMENTS AT THE END OF THE SCHEME PERIOD. ONE SPECIMEN INVOICE RAISED UNDER THE SAID SCHEME I S ALSO PLACED ON RECORD. THE SAID INVOICE IS VERBATIM REPRODUCED HE REUNDER:- QTY DESCRIPTION PURITY GROSS WT (GRAMS) NET WT (GRAMS) RATE V.A. AMOUNT 1 5 GMS COINS 24 KARAT 5.000 5.000 3248.00 162.40 VAT 1% 16402.40 164.02 1 5.000 5.000 TOTAL 16566.00 MSNO : O1C1644 ADVANCE SCHEME 15000.00 MSNO. SCHEME DISCOUNT 400.00 MS NO. SCHEME DISCOUNT 1000.00 CASH 166.00 (RUPEES SIXTEEN THOUSAND FIVE HUNDRED AND SIXTY SIX ONLY) (EMP-S: GOVERDANA CHARRY/C:53/N: SERVER) E & O.E. TIN NO.: 28790164971 (04-03-2015 19: 22: 42) WHAT WE FIND IS THAT AGAINST THE INVOICE RAISED FO R GOLD SOLD AT THE END OF THE SCHEME, ADVANCE GIVEN BY THE CUSTOMERS A S ALSO THE VALUE OF THE INCENTIVE /DISCOUNTS WERE DEDUCTED. CONTENTI ON OF THE ASSESSEE THAT THERE WERE NO CREDIT OF INCENTIVE IN ACCOUNT O F ANY CUSTOMER WHO HAD REGISTERED UNDER THE SCHEMES, HAS NOT BEEN DIS PUTED BY THE ITA NOS.1829-1833/MDS/2014. :- 19 -: REVENUE. TERMS AND CONDITIONS CLEARLY INDICATE TH AT INSTALMENT RECEIVED BY THE ASSESSEE BASED ON THE SCHEMES WERE NEITHER MONEY BORROWED NOR A DEBT NOR A DEPOSIT. THESE WERE ADV ANCES GIVEN BY THE CUSTOMERS FOR PURCHASING JEWELLERY, AFTER THE E ND OF OF SCHEME PERIOD. EXCEPT FOR HIS/HER RIGHT TO GET GOLD JEWELL ERY, THE CUSTOMER HAD NO CLAIM ON THE ASSESSEE NOR WAS THE ASSESSEE U NDER ANY OTHER OBLIGATION TO THEM. THUS IN OUR OPINION THE INCENT IVES/ DISCOUNTS DO NOT FIT WITHIN FIRST LIMB OF THE DEFINITION OF INTE REST GIVEN IN SECTION 2(28A) OF THE ACT. 15. NOW COMING TO THE SECOND LIMB OF THE DEFINITION OF INTEREST U/S. 2(28A), IT IS OBVIOUSLY ENACTED TO ROPE IN SE RVICE FEE, OR OTHER CHARGE IN RESPECT OF THE MONEYS BORROWED, OR DEBT I NCURRED, OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN U TILIZED. AS ALREADY MENTIONED BY US, INCENTIVES /DISCOUNTS GIVEN BY THE ASSESSEE TO ITS CUSTOMERS CAN NEVER BE CONSIDERED AS MONEY BORROWE D OR DEBT INCURRED. THE QUESTION OF THE AMOUNTS BEING CONSID ERED AS SERVICE OR CHARGE ON MONEY BORROWED THEREFORE DOES NOT ARISE. 16. COMING TO THE THIRD SCHEME CALLED GOLD ACCUMULATION PLAN SCHEME WHAT WERE CREDITED TO THE RESPECTIVE CUSTOME RS ACCOUNTS WERE EQUIVALENT GOLD WEIGHT FOR THE INSTALMENTS. WHEN TH E CUSTOMERS EVENTUALLY PURCHASED GOLD AT THE TIME OF THE SCHEM E, THEY WERE ITA NOS.1829-1833/MDS/2014. :- 20 -: GIVEN A BONUS OF 80% OF ONE INSTALMENT, THAT TOO I N GOLD ONLY. THIS DIFFERENCE IN THE SCHEME IN OUR OPINION WILL NOT MA KE ANY CHANGE ON THE NATURE OF THE INCENTIVES. 17. COMING TO THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF VISWAPRIYA FINANCIAL SERVICES AND SECURITIES LTD (S UPRA) RELIED ON BY THE LD. ASSESSING OFFICER, THE COMPANY THERE WAS ENGAGED IN RETAIL FINANCE SERVICE WHERE THE INVESTORS WERE GUA RANTEED 1.5% RETURN ON THEIR MONTHLY DEPOSITS. SUCH RETURNS WER E PAID EVERY MONTH TO THE INVESTORS. INVESTORS WERE ALSO ENTITLED TO THE PRINCIPAL AMOUNT AT THE END OF THE SCHEME PAID. HONBLE JURISDICTIO NAL HIGH COURT HELD SUCH RETURNS TO BE NOTHING BUT INTEREST. HOWEVER, IN GOLD SCHEMES CONDUCTED BY THE ASSESSEE, THERE WERE NO MONTHLY PA YMENT OF RETURNS IN CASH NOR WAS THE SCHEME MEMBERS ENTITLED TO GET THEIR MONEY BACK. THUS FACTS OF THE CASE BEFORE HONBLE JURISDICTIONA L HIGH COURT WERE VASTLY DIFFERENT. 18. SCHEMES FLOATED BY THE ASSESSEE AT THE BEST COULD BE CONSIDERED AS A MARKETING STRATEGY FOR INCREASING ITS SALES BY ATTRACTING CUSTOMERS THROUGH THESE SCHEMES. CUSTOME RS WHO WANTED TO PURCHASE JEWELLERY AND WHO HAD NO ENOUGH MONEY A T ONE GO OPTED FOR THESE SCHEMES. THE SCHEME ENSURED THAT CUSTOME RS REMAINED WITH THE ASSESSEE AND EVENTUALLY PURCHASED THE GO LD JEWELLERY. IN OUR ITA NOS.1829-1833/MDS/2014. :- 21 -: OPINION, GOLD GIVEN OVER AND ABOVE THE VALUE OF THE INSTALMENTS, WOULD NOT COME WITHIN THE DEFINITION OF INTEREST U NDER SECTION 2(28A) OF THE ACT. THESE COULD ONLY BE CONSIDERED AS INCE NTIVE/ DISCOUNT. WE ALSO FIND THAT ASSESSEE HAD NEVER CREDITED THE ACC OUNT OF THE CUSTOMER WITH ANY INCENTIVE BUT ONLY DEDUCTED SUCH INCENTIVE FROM THE INVOICE VALUE. THOUGH TREATMENT IN BOOKS OF ACCOUNTS MAY NOT BE A DECIDING FACTOR ON ASPECTS OF TAXATION, I T WILL HAVE A STRONG BEARING ON WHAT THE ASSESSEE HAD IN MIND WHILE E NTERING INTO A TRANSACTION. IN TAKING THIS VIEW WE ARE FORTIFIED BY THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT VS. WOODWARD GOVERNOR (INDIA) LTD 312 ITR 254 . THUS, WE ARE OF THE OPINION THAT ASSESSEE WAS NOT LIABLE TO DEDUCT TAX U/S. 194A OF THE ACT ON SUCH DISCOUNTS/INCENTIVES OFFERED TO ITS CUSTOMERS. 19. COMING TO THE NEXT ISSUE REGARDING PAYMENTS EFFECTE D TO BANKS FOR FACILITATING CREDIT/DEBIT CARDS PAYMENTS FOR THE CUSTOMERS OF THE ASSESSEE, THROUGH POINT OF SALE TERMINALS INS TALLED IN THE PREMISES OF THE ASSESSEE, WHAT WE FIND IS THAT A SIMILAR ISS UE HAD COME UP BEFORE THE HONBLE DELHI HIGH COURT IN THE CASE OF JDS APPARELS PVT. LTD (SUPRA ). PARAS 15 AND 16 OF THE JUDGMENTS ARE REPRODUCED HEREUNDER:- 15. APPLYING THE ABOVE CITED CASE LAW TO THE FACT UAL MATRIX OF THE PRESENT CASE, WE FEEL THAT SECTION 194H OF THE ACT WOULD NOT ITA NOS.1829-1833/MDS/2014. :- 22 -: BE ATTRACTED. HDFC WAS NOT ACTING AS AN AGENT OF TH E RESPONDENT-ASSESSEE. ONCE THE PAYMENT WAS MADE BY H DFC, IT WAS RECEIVED AND CREDITED TO THE ACCOUNT OF THE RES PONDENT- ASSESSEE. IN THE PROCESS, A SMALL FEE WAS DEDUCTED BY THE ACQUIRING BANK, I.E. THE BANK WHOSE SWIPING MACHINE WAS USED. ON SWIPING THE CREDIT CARD ON THE SWIPING MACHINE, THE CUSTOMER WHOSE CREDIT CARD WAS USED, GOT ACCESS TO THE INTER NET GATEWAY OF THE ACQUIRING BANK RESULTING IN THE REALISATION OF PAYMENT. SUBSEQUENTLY, THE ACQUIRING BANK REALISED AND RECOV ERED THE PAYMENT FROM THE BANK WHICH HAD ISSUED THE CREDIT C ARD. HDFC HAD NOT UNDERTAKEN ANY ACT ON 'BEHALF' OF THE RESPO NDENT- ASSESSEE. THE RELATIONSHIP BETWEEN HDFC AND THE RES PONDENT- ASSESSEE WAS NOT OF AN AGENCY BUT THAT OF TWO INDEP ENDENT PARTIES ON PRINCIPAL TO PRINCIPAL BASIS. HDFC WAS A LSO ACTING AND EQUALLY PROTECTING THE INTEREST OF THE CUSTOMER WHO SE 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 BUYING OR SELLING OF GOODS AS SUCH. UPON SWIPING THE CARD, THE BANK MADE PAYMENT OF THE BILL AMOUNT TO THE RESPONDENT- ASSESSEE. THUS, THE RESPO NDENT ASSESSEE RECEIVED THE SALE CONSIDERATION. IN TURN, THE BANK IN QUESTION HAD TO COLLECT THE AMOUNT FROM THE BANKERS 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 CHARGE D BY THEM 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 FO R BUYING OR SELLING OF GOODS. THE INTENTION OF THE LEGISLATURE IS TO INCLUDE AND TREAT COMMISSION OR BROKERAGE PAID WHEN A THIRD PER SON INTERACTS BETWEEN THE SELLER AND THE BUYER AS AN AG ENT AND THEREBY RENDERS SERVICES IN THE COURSE OF BUYING AN D/OR SELLING OF GOODS. THIS HAPPENS WHEN THERE IS A MIDDLEMAN OR AN AGENT WHO INTERACTS ON BEHALF OF ONE OF THE PARTIES, HELP S THE BUYER/SELLER TO MEET, OR PARTICIPATES IN THE NEGOTI ATIONS OR TRANSACTIONS RESULTING IN THE CONTRACT FOR BUYING A ND SELLING OF GOODS. THUS, THE REQUIREMENT OF AN AGENT AND PRINCI PAL RELATIONSHIP. THIS IS THE EXACT PURPORT AND THE RAT IONALE BEHIND THE PROVISION. THE BANK IN QUESTION IS NOT CONCERNE D WITH BUYING OR SELLING OF GOODS OR EVEN WITH THE REASON AND CAU SE AS TO WHY THE CARD WAS SWIPED. IT IS NOT BOTHERED OR CONCERNE D WITH THE QUALITY, PRICE, NATURE, QUANTUM ETC. OF THE GOODS B OUGHT/SOLD. THE BANK MERELY PROVIDES BANKING SERVICES IN THE FO RM OF PAYMENT AND SUBSEQUENTLY COLLECTS THE PAYMENT. THE AMOUNT ITA NOS.1829-1833/MDS/2014. :- 23 -: PUNCHED IN THE SWIPING MACHINE IS CREDITED TO THE A CCOUNT OF THE RETAILER BY THE ACQUIRING BANK, I.E. HDFC IN THIS C ASE, AFTER RETAINING A SMALL PORTION OF THE SAME AS THEIR CHAR GES. THE BANKING SERVICES CANNOT BE COVERED AND TREATED AS S ERVICES RENDERED BY AN AGENT FOR THE PRINCIPAL DURING THE C OURSE OF BUYING OR SELLING OF GOODS AS THE BANKER DOES NOT R ENDER ANY SERVICE IN THE NATURE OF AGENCY. THAT APART, POINT OF SALE MACHINES WHICH ARE WITHI N THE PREMISES OF THE ASSESSEE TRANSMITS THE DEBIT/CREDIT CARD INFOR MATION TO THE BANKERS, WITHOUT ANY HUMAN INTERVENTION. HUMAN I NTERVENTION IF AT ALL THERE, IS ONLY ON THE PART OF THE ASSESSEE WH EN HE ENABLES THE CUSTOMER TO SWIPE HIS/HER DEBIT/CREDIT CARD. WE C ANNOT SAY THAT ANY TECHNICAL SERVICES WAS RENDERED BY THE BANK WHEN CU STOMERS OF THE ASSESSEE SWIPED THEIR DEBIT/CREDIT CARDS IN POINT OF SALE MACHINES, INSTALLED IN THE PREMISES OF THE ASSESSEE. THE ACT OF THE CUSTOMER ONLY FACILITATED TRANSFERRING MONEY FROM CUSTOMERS ACCOUNT TO ASSESSEES ACCOUNT. TECHNICAL SERVICES HAS BEEN ASS IGNED THE SAME MEANING AS GIVEN IN EXPLANATION (2) TO CLAUSE (VII) OF SUB SECTION 1 OF 9, THROUGH EXPLANATION (B) TO SEC. 194J OF THE ACT. THE SAID EXPLANATION IS REPRODUCED HEREUNDER:- FOR THE PURPOSES OF THIS CLAUSE, 'FEES FOR TECHNI CAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LU MP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL O R OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJ ECT UNDERTAKEN BY THE RECEPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER T HE HEAD 'SALARIES'. ITA NOS.1829-1833/MDS/2014. :- 24 -: BY FACILITATING PAYMENTS THROUGH POINT OF SALE MAC HINE, WE CANNOT SAY THAT BANK HAD PROVIDED ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES TO THE ASSESSEE. IN OUR OPINION, SEC. 194 J OF THE ACT COULD NOT HAVE BEEN APPLIED ON THE CHARGES DEDUCTED BY TH E BANKERS FROM THE ACCOUNTS OF THE ASSESSEE. ASSESSEE WAS NOT LIAB LE TO DEDUCT TAX UNDER THE SAID SECTION ON SUCH CHARGES. 20. IN THE RESULTS, ORDERS OF THE LOWER AUTHORITIES FO R ALL THE ASSESSMENT YEARS ARE SET ASIDE. BOTH THE CHARGE UN DER SECTION 201(1) AND LEVY OF INTEREST UNDER SECTION 201(1A) OF THE A CT ARE DELETED. 21. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWE D. ORDER PRONOUNCED ON FRIDAY, THE 13TH DAY OF OCTOBE R, 2017, AT CHENNAI. SD/- SD/- ( # $! # % . &' ) ( DUVVURU RL REDDY ) ) / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 13 TH OCTOBER, 2017 KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF