ACIT, Jaipur V. LATALA CONSTRUCTION COMPANY, Jaipur

ITA 194/JPR/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1995 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 26-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: MAHENDRA GARGIEYA DHK
• Keywords: Rejection of books of accounts; Business income; Depreciation; Business expenditure
• Section: 44AD; 43B; 201(1); 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH HKKXPUN] YS[ KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI BHAGCHAND, AM VK;DJ VIHY LA-@ ITA NO. 194/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. THE ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE-5, JAIPUR. CUKE VS. M/S. LATALA CONSTRUCTION CO., B-19, TRANSPORT NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABFL 1873F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL. CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADVOCATE) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 21.12.2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 07/03.2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 22 ND DECEMBER, 2014 OF LD. CIT (A)-2,JAIPUR FOR THE AS SESSMENT YEAR 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF MATERIAL EXPENSES OF RS. 19,49, 612/- MADE BY THE AO. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF MATERIAL EXPENSES OF LABOUR EXP ENSES OF RS. 13,65,356/- MADE BY THE AO. (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF VEHICLE EXPENSES OF RS. 23,85,2 03/- MADE BY THE AO. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE 2 DISALLOWANCE OUT OF TELEPHONE EXPENSES OF RS. 24,08 5/- MADE BY THE AO. (V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF INTEREST FROM FDRS OF RS. 25,34 ,962/- MADE BY THE AO. (VI) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION U/S 41 OF RS. 4,44,645/- MADE BY THE AO. (VII) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OUT OF HOUSE RENT OF RS. 98,400/- MADE BY THE AO. (VIII) (A) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELET ING ADDITION OF RS. 38,500/- MADE FOR DEPOSITING THE EMPLOYEES CON TRIBUTION TO PF & ESI BEYOND THE PRESCRIBED TIME LIMIT PROVIDED IN THE RESPECTIVE ACTS. (B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN HOLDI NG THAT EMPLOYEES CONTRIBUTION TO PF & ESI ARE GOVERNED BY THE PROVISION OF SECTION 43B AND NOT BY SECTION 36(1)(V A) R.W.S. 2(24)(X) OF I.T. ACT. (IX) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE U/S 194A OF RS. 4,74,201/- MADE BY THE AO. (X) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE U/S 194H OF RS. 14,12,035/- MADE BY TH E AO. (XI) THE APPLICANT CRAVES ITS RIGHTS TO ADD, AMEND OR AL TER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. GROUND NOS. 1 TO 4 ARE REGARDING DISALLOWANCES OF M ATERIAL EXPENSES, LABOUR EXPENSES, VEHICLE EXPENSES AND TEL EPHONE EXPENSES. 2. THE ASSESSEE IS A GOVERNMENT CIVIL CONTRACTOR AN D FILED ITS RETURN OF INCOME ON 14 TH OCTOBER, 2010 DECLARING TOTALING INCOME OF RS. 1,0 7,46,270/-. SUBSEQUENTLY THE RETURN WAS REVISED ON 21 ST APRIL, 2011 WHEREIN THE ASSESSEE DECLARED TOTAL INCOME OF RS. 80,20,200/-. THE REASON OF REVISED R ETURN WAS EXPLAINED BY THE ASSESSEE AS A TECHNICAL ERROR IN COMPUTING THE TOTA L INCOME IN THE ORIGINAL RETURN OF 3 INCOME. DURING THE ASSESSMENT PROCEEDINGS, THE AO P OINTED OUT SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS REGARDING NON MAINTENANCE OF STOCK REGISTER, VALUATION OF OPENING STOCK AND CLOSING STOCK GIVEN ON ESTIMATE B ASIS, CONSUMPTION OF RAW MATERIAL NOT VERIFIABLE ETC. ACCORDINGLY, THE AO R EJECTED THE BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE IT ACT. THE AO, THEREA FTER, DISALLOWED 10% OUT OF MATERIAL EXPENSES, LABOUR & WAGES AND TELEPHONE EXP ENSES AND 20% OUT OF CONVEYANCE EXPENSES, TRAVELLING EXPENSES, DIESEL EX PENSES, REPAIR & MAINTENANCES EXPENSES AND DEPRECIATION. ON APPEAL, THE LD. CIT (A) CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT WH ICH HAS NOT BEEN CHALLENGED BY THE ASSESSEE. HOWEVER, THE CIT (A) DELETED THE ADDI TION MADE BY THE AO. HENCE THE REVENUE HAS FILED THE PRESENT APPEAL. 3. BEFORE US THE LD. D/R HAS SUBMITTED THAT THE LD. CIT (A) DID NOT CONSIDER AND APPRECIATE THE DEFECTS POINTED OUT BY THE AO IN RES PECT OF EACH HEAD OF EXPENSES. THE LD. CIT (A) HAS DELETED THE ENTIRE ADDITION MAD E BY THE AO ON ACCOUNT OF VEHICLE MAINTENANCE AND TELEPHONE EXPENSES WITHOUT CONSIDER ING THE PERSONAL USE OF VEHICLE AND TELEPHONE. HE HAS RELIED UPON THE ORDE R DATED 28 TH SEPTEMBER, 2016 OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. CHOUDHARY & BROTHERS VS. ACIT IN ITA NO. 54/JP/2013 AND SUBMITTED THAT THE T RIBUNAL HAS CONFIRMED THE ESTIMATION OF INCOME BY APPLYING THE NET PROFIT RAT E AT 17%. 3.1. ON THE OTHER HAND, THE LD. A/R HAS SUBMITTED T HAT THE NET PROFIT RATE DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS 13.73% BEFORE DEPRECIATION, INTEREST AND SALARY TO THE PARTNERS WHICH IS HIGHER THAN THE PAST NET PROFIT DECLARED BY THE ASSESEE. THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007- 08 HAS CONSIDERED AND DECIDED AN IDENTICAL ISSUE AN D HELD THAT IN CASE THE NET PROFIT 4 DECLARED BY THE ASSESSEE IS MORE THAN THE PAST YEAR , THEN NO ADDITION IS REQUIRED. HE HAS RELIED UPON THE DECISION OF THE HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GOTAN LIME KHANIZ UDYOG, 256 ITR 243 (RA J.) AND SUBMITTED THAT THE HONBLE HIGH COURT HAS HELD THAT MERE REJECTION OF BOOKS OF ACCOUNTS NEED NOT NECESSARILY LEAD TO ADDITION TO THE RETURNED INCOME . THE LD. A/R HAS FURTHER SUBMITTED THAT THE DECISION IN CASE OF CHOUDHARY & BROTHERS IS NOT APPLICABLE IN THE FACTS OF THE CASE IN HAND BECAUSE IN THE SAID CASE THE ASSESSEES PAST HISTORY WAS CONSIDERED FOR THE PURPOSE OF ESTIMATION OF INCOME BY APPLYING NET PROFIT RATE DECLARED BY THE ASSESSEE IN THE EARLIER YEAR AND, T HEREFORE, A NET PROFIT DECLARED BY ANOTHER ASSESSEE CANNOT BE CONSIDERED AS A STANDARD BENCH MARK FOR ANOTHER ASSESSEE RATHER THE ASSESEES OWN PAST NET PROFIT C AN BE THE BASIS OF ESTIMATION OF INCOME. HE HAS SUPPORTED THE ORDER OF LD. CIT (A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO AFTER REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) MADE DISALLOWANCE OF VARIOUS EXPENSES AND TESTED THE INC OME OF THE ASSESSEE WITH NET PROFIT RATE. IT IS PERTINENT TO STATE THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED BY THE AO, THE ONLY RECOURSE IS LEFT WITH THE AO IS TO ESTIMATE THE INCOME/PROFIT OF THE ASSESSEE BY APPLYING PROPER AND REASONABLE BASIS. I T IS SETTLED POSITION AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT THAT THE PAST HISTORY OF GP/NP DECLARED BY THE ASSESSEE IS A PROPER GUIDANCE FOR ESTIMATION OF INC OME. IN THE CASE IN HAND, THE AO POINTED OUT CERTAIN DEFECTS IN THE BOOKS OF ACCOUNT S AND REJECTED THE BOOK RESULT UNDER SECTION 145(3) OF THE ACT. THE LD. CIT (A) CO NFIRMED THE REJECTION OF BOOKS OF ACCOUNTS AND THE ASSESSEE DID NOT CHALLENGE THE SAI D DECISION OF THE AUTHORITIES BELOW. THUS ONCE THE BOOKS OF ACCOUNTS ARE REJECTED , THE AO CANNOT MAKE A 5 DISALLOWANCE OF EXPENDITURE PERTAINING TO THE TRADI NG ACCOUNT IF THE ESTIMATION OF INCOME OF ASSESSEE IS BASED ON GP RATE. EVEN IN CA SE OF NET PROFIT IS TAKEN AS THE BASIS OF ESTIMATION, THE SCOPE OF DISALLOWANCE OF O THER EXPENDITURE IS ALSO VERY LIMITED. THEREFORE, THE EXPENSES WHICH ARE PART OF TRADING ACCOUNT WOULD BE COVERED UNDER THE ESTIMATION OF INCOME BY APPLYING GP RATE. HOWEVER, THE EXPENSES BEYOND THE TRADING ACCOUNT ARE SUBJECT TO VERIFICATION AND ALLOWABILITY BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT IS PERTINENT TO NOTE THAT IN CASE THE INCOME OF THE ASSESEE IS COMPUTED ON THE BASIS OF ESTIMATION OF NET PROFIT AND FURTHER CLAIM OF DEDUCTION IS ALLOWED WH ICH IS AGAIN SUBJECTED TO THE VERIFICATION AND CONFIRMITY OF THE PROVISIONS OF TH E ACT THEN THE VERY PURPOSE OF INVOKING THE PROVISIONS OF SECTION 145(3) WOULD BE DEFEATED. THEREFORE, IN THESE FACTS AND CIRCUMSTANCES WHEN THE BOOK RESULTS ARE R EJECTED, THE INCOME OF THE ASSESSEE IS REQUIRED TO BE ESTIMATED EITHER ON THE BASIS OF GP OR NP RATE WITHOUT ALLOWING FURTHER EXPENDITURE. THE PROVISIONS OF SE CTION 44AD ARE RELEVANT ON THIS POINT WHICH PROVIDES THE ESTIMATION OF PROFITS FROM THE BUSINESS OF CIVIL CONTRACT AS OF THE ASSESSEE BEFORE US. THUS THE PROVISIONS OF SECTION 44AD CAN BE TAKEN AS A GUIDANCE FOR ESTIMATION OF THE INCOME OF THE ASSESS EE FROM THE BUSINESS OF CIVIL CONTRACT. THE HONBLE KERALA HIGH COURT OF SAMURAI TECHNO TRADING CO. PVT. LTD. VS. CIT, 197 TAXMAN 144 (KER.) HAS HELD IN PARA 6 AS UN DER :- 6. IN THE APPEALS FILED FOR THE YEARS 1994-95 AND 199 5-96, WE FIND THAT THE COMMON ISSUE PERTAINS TO ESTIMATION OF INC OME FROM CIVIL WORK AT 8 PER CENT OF THE TOTAL CONTRACT RECEIPTS. EVEN THOUGH THE ASSESSING OFFICER MADE ESTIMATION ONLY BECAUSE THE ASSESSEE'S BOOKS OF ACCOUNT WERE FOUND TO BE UNRELIABLE AND UNCREDITWORTHY, SIN CE, COUNSEL APPEARING FOR THE APPELLANTS CANVASSED FOR ACCEPTAN CE OF BOOKS OF ACCOUNT, WE HAVE TO NECESSARILY REFER TO THE REASON FOR REJECTION OF 6 BOOKS OF ACCOUNT AT LEAST FOR ONE YEAR. IT IS SEEN THAT ON EXAMINING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER NOTICED THA T THE ASSESSEE HAS SHOWN CASH PAYMENT OF RS. 80.16 LAKHS ON A SINGLE D AY, I.E., ON THE LAST DATE OF THE PREVIOUS YEAR RELEVANT FOR THE ASS ESSMENT YEAR 1994- 95 I.E., ON 31-3-1994. IN ORDER TO VERIFY THE GENUINENESS O F THE TRANSACTION, THE ASSESSING OFFICER ISSUED NOTICE TO THE PERSONS IN WHOSE NAMES VOUCHERS WERE PREPARED BY THE ASSESSEE FOR HAVING MADE THE PAYMENTS. THE NOTICES SENT TO SOME OF THE PARTIES WERE RETURNED STATING THAT NO SUCH PARTY EXISTS AND SOME OF THE PERSONS WHO APPEARED BEFORE THE ASSESSING OFFICER GAVE SWOR N STATEMENT STATING THAT THEY HAVE NOT RECEIVED THE AMOUNT FROM THE ASSESSEE. WE HAVE NO DOUBT IN OUR MIND THAT THE ASSESSEE'S ACCOU NT IS ABSOLUTELY UNBELIEVABLE BECAUSE ON A SINGLE DAY, I.E. ON 31-3-1994, THE ASSESSEE IS STATED TO HAVE GIVEN RS. 19.2 LAKHS TOWARDS TRAC TOR HIRING CHARGES, RS. 3.71 LAKHS TOWARDS WATER CHARGES AND RS. 57.25 LAKHS TOWARDS THE LABOUR CHARGES FOR EARTHMOVING. WE DO NOT KNOW HOW LABOUR CHARGES GOT ACCUMULATED FOR THE WHOLE ACCOUNTING YEAR TO JU STIFY PAYMENT OF CASH OF RS. 57.25 LAKHS ON THE LAST DATE OF THE PRE VIOUS YEAR. IN OUR VIEW, WHEN THE CASH PAYMENT OF RS. 80.16 LAKHS ON A SINGLE DAY ITSELF GAVE RISE TO DOUBT IN THE MIND OF THE ASSESSING OFF ICER, HE RIGHTLY CROSS CHECKED THE GENUINENESS OF THE PAYMENTS BY ISSUING SUMMONS TO THE PERSONS WHOSE NAMES WERE SHOWN IN THE VOUCHERS PREP ARED BY THE ASSESSEE. THE RESULT WAS THAT PARTLY, VOUCHERS WERE FOUND TO BE BOGUS, AND PARTLY STAND DISPROVED. WE DO NOT KNOW ON WHAT GROUND THE APPELLANTS CAN SEEK FOR ACCEPTANCE OF BOOKS OF ACCO UNT WHICH WAS FOUND TO BE UNWORTHY OF CREDIT BY THREE LOWER AUTHO RITIES. IN THE ABSENCE OF CREDIBLE BOOKS OF ACCOUNT, OPTION OF THE AO UNDER S. 145(3) OF THE IT ACT IS TO MAKE ASSESSMENT ON ESTIMATION B ASIS IN TERMS OF S. 144 OF THE IT ACT. IN THIS CASE, WE FIND THE ORDER OF THE TRIBUNAL IS QUITE FAVOURABLE TO THE ASSESSEE BECAUSE AS AGAINST THE ESTIMATION OF 10 PER CENT MADE BY THE ASSESSING OFFICER, THE TRIB UNAL HAS REDUCED THE ESTIMATION TO 8 PER CENT OF THE TOTAL WORKS TUR NOVER. THERE IS LOGIC AND REASON IN ESTIMATION OF INCOME FROM CIVIL CONST RUCTION WORK AT 8 PER CENT BECAUSE UNDER THE PRESUMPTIVE SCHEME, SECT ION 44AD PROVIDES FOR ASSESSMENT OF INCOME ON CIVIL CONSTRUC TION WORK AT 8 PER CENT WHERE THE CONTRACTOR'S TURNOVER IS BELOW RS. 4 0 LAKHS. EVEN THOUGH COUNSEL FOR THE APPELLANT CONTENDED THAT SEC TION 44AD HAS NO APPLICATION AS THE CONTRACT AMOUNT IS ABOVE RS. 40 LAKHS, WE DO NOT THINK, THERE IS JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE TRIBUNAL BECAUSE IN THE FIRST PLACE, THE TRIBUNAL HAS GRANTE D PART RELIEF TO THE ASSESSEE BY REDUCING THE ESTIMATED INCOME FROM 10 P ER CENT TO 8 PER CENT. SECONDLY, WHAT THE TRIBUNAL HAS DONE, IS ONLY TO FOLLOW SECTION 7 44AD AS A GUIDELINE FOR ESTIMATION OF INCOME FROM C IVIL WORK. WE, THEREFORE, FIND NO JUSTIFICATION TO INTERFERE WITH THIS PART OF THE ORDER OF THE TRIBUNAL. IT IS WORTHWHILE TO NOTE THAT WHILE C ONFIRMING THE ESTIMATION OF INCOME AT REDUCED PERCENTAGE, THE TRI BUNAL CANCELLED SEPARATE ADDITION MADE BY THE ASSESSING OFFICER UND ER THE HEAD 'OTHER INCOME' WHICH IS A HUGE AMOUNT OF RS. 15,44,353. WE ARE OF THE VIEW THAT AFTER GETTING DELETION OF ADDITION OF RS. 15,4 4,353, THE ASSESSEE CANNOT CANVASS FOR MODIFICATION OF OTHER PART OF TH E ORDER OF THE TRIBUNAL CONFIRMING ESTIMATION OF INCOME AT THE RED UCED PERCENTAGE OF 8 PER CENT WHICH IS A REASON FOR DELETING THE SEPAR ATE ADDITION WITHOUT CONSIDERING IT INDEPENDENTLY ON MERIT. ACCORDINGLY THE INCOME OF THE ASSESSEE SHALL BE COM PUTED BY TAKING THE NP @ 8% AND NO FURTHER DEDUCTION SHALL BE ALLOWED. THE AO I S DIRECTED TO COMPUTE THE INCOME OF THE ASSESSEE BY APPLYING NP @ 8% ON THE TURNOVER WITHOUT FURTHER DEDUCTION. 5. IN THE RESULT, THE GROUND NOS. 1 TO 4 OF THE REV ENUES APPEAL ARE PARTLY ALLOWED. GROUND NO. 5 IS REGARDING ADDITION ON ACCOUNT OF IN TEREST ON FDRS. 6. THE AO NOTED THAT THE ASSESSEE HAS ACCRUED INTER EST ON FDRS AT RS. 25,34,962/- BUT THE SAME HAS NOT BEEN DECLARED AS P ART OF TOTAL INCOME. HE HAS NOTED THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING AND, THEREFORE, INTEREST ACCRUED ON FDR SHOULD HAVE BEEN DECLARED A S PART OF THE TOTAL INCOME. ACCORDINGLY, THE AO ADDED INTEREST ON FDRS OF RS. 2 5,34,962/- TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT (A) DELETED THE ADDITION MADE BY THE AO BY NOTING THE FACT THAT THE ASSESSEE HAS INCLUDED IN T HE TOTAL INCOME THE AMOUNT OF INTEREST ACCRUED ON FDRS DURING THE YEAR UNDER CONS IDERATION. 8 7. WE HAVE HEARD LD. D/R AS WELL AS LD. A/R AND CON SIDERED THE RELEVANT MATERIAL ON RECORD. THE AO MADE THE ADDITION OF CLOSING BAL ANCE OF THE INTEREST ACCRUED ON FDRS SHOWN IN THE BALANCE SHEET WITHOUT CONSIDERING THE OPENING BALANCE AND INTEREST ACCRUED DURING THE YEAR ALREADY CREDITED T O THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE. THE LD. CIT (A) HAS CONSIDERED AND DECID ED THIS ISSUE IN PARA 3.3 AS UNDER :- 3.3. I HAVE PERUSED THE FACTS OF THE CASE, THE AS SESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. I HAVE PERUSED TH E ACCRUED INTEREST ACCOUNT OF THE ASSESSEE. THE ASSESSING OFFICER HAS ADDED THE CLOSING BALANCE OF THE ACCRUED INTEREST ACCOUNT AMOUNTING T O RS. 25,34,962/-, TAKEN TO THE BALANCE SHEET, TO THE TOTAL INCOME WIT HOUT CONSIDERING THAT THERE IS AN OPENING BALANCE OF RS. 20,16,009/- . THE ACCRUED INTEREST DURING THE YEAR AMOUNTS TO RS. 10,00,335/- FROM BANK OF INDIA AND RS. 2,59,252/- FROM SYNDICATE BANK WHICH HAS BE EN CREDITED TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE. ALSO, I HAVE PERUSED FORM NO. 26AS OF THE APPELLANT AND FIND THAT THE INTERES T INCOME IN FORM NO. 26AS IS LESS THAN THE AMOUNT CREDITED BY THE AS SESSEE TO THE PROFIT AND LOSS ACCOUNT. THE APPELLANT HAS ALSO EXPLAINED THE ACCOUNTING ENTRIES FOR ACCRUED INTEREST. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THE ASSESSEE HAS CORRECTLY SHOWN THE INTEREST INCOME IN THE PROFIT AND LOSS ACCOUNT AND THERE IS NO UNDER REPORTING OF INTEREST INCOME. THIS ACCRUED INTEREST ON FDRS IS TO BE TREATED AS I NCOME FROM OTHER SOURCES. THEREFORE, THE ADDITION MADE BY THE ASSESS ING OFFICER OF ACCRUED INTEREST OF RS. 25,34,962/- IS DIRECTED TO BE DELETED AND THE INTEREST SHOWN BY THE APPELLANT IN THE PROFIT AND L OSS ACCOUNT IS DIRECTED TO BE TREATED AS INCOME FROM OTHER SOURCES . 9 THUS IT IS CLEAR THAT THE LD. CIT (A) HAS CONSIDERE D THE FACT THAT THE ACTUAL INTEREST ACCRUED DURING THE YEAR ON FDRS HAS ALREADY BEEN IN CLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THIS FACTUAL FINDING OF THE LD. CIT (A) HAS NOT BEEN CONTROVERTED BEFORE US BY THE DEPARTMENT. HENCE WE DO NOT FIND A NY ERROR OR ILLEGALITY IN THE ORDER OF LD. CIT (A) QUA THIS ISSUE. GROUND NO. 6 IS REGARDING ADDITION MADE UNDER SECTI ON 41(1) OF THE IT ACT. 8. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ABN AMRO BANK AND INDIA BULLS HAD SETTLED THEIR LOANS AT RS. 8,36 ,400/- AS AGAINST OUTSTANDING LIABILITIES OF RS. 12,36,250/-. THUS THE AO WAS OF THE VIEW THAT THERE WAS A REDUCTION OF RS. 12,72,728/- IN THE OUTSTANDING LIABILITY TOW ARDS BANK AND NBFC. THE AO FURTHER NOTED THAT THE ASSESSEE HAS CREDITED ONLY R S. 8,28,083/- AS AGAINST THE TOTAL REDUCTION GIVEN TO THE ASSESSEE OF RS. 12,72,728/-. THUS THE AO ADDED THE BALANCE AMOUNT OF RS. 4,44,645/- TO THE INCOME OF THE ASSES SEE UNDER SECTION 41(1) OF THE ACT. ON APPEAL, THE LD. CIT (A) HAS DELETED THE A DDITION MADE BY THE AO BY CONSIDERING THE FACT THAT THE ASSESSEE HAS CORRECTL Y CREDITED THE AMOUNT ON ACCOUNT OF REDUCTION/WAIVER GRANTED TO THE ASSESSEE UNDER T HE SETTLEMENT OF LOANS. 9. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO CONSIDERED THE AMOUNT WA IVED OFF BY THE BANK AND NBFC AS PER THE SETTLEMENT LETTERS ISSUED BY THE BANK AN D NBFC. THE AO ACCORDINGLY ADDED DIFFERENCE AMOUNT OF THE OUTSTANDING LIABILIT IES TO THE INCOME OF THE ASSESSEE. THE LD. CIT (A) DELETED THE ADDITION BY CONSIDERING THE FACTS AS RECORDED IN THE BOOKS OF ACCOUNT IN PARA 4.4 AS UNDER :- 10 4.4. DURING THIS YEAR, BANKS AND FINANCIAL INSTIT UTIONS HAVE SETTLED APART OF THE ASSESSEES OUTSTANDING LIABILITIES. TH E ASSESSEE HAS CREDITED AN AMOUNT OF RS. 8,28,083/- IN THE FINANCE EXPENDITURE ACCOUNT FOR THE ABOVE CESSATION OF LIABILITIES. THE ASSESSING OFFICER HAS COMPUTED THE ABOVE FIGURES RELATING TO CESSATION OF LIABILITIES PERTAINING TO THREE ACCOUNTS, DURING THE EYAR AND HAS COME TO THE CONCLUSION THAT A FURTHER AMOUNT OF RS. 4,44,645/- SHOULD BE ADDED TO THE TOTAL INCOME ON ACCOUNT OF SECTION 41(1). THE APPELLANT HAS ALS O GIVEN A CHART PERTAINING TO CESSATION OF LIABILITIES PERTAINING T O TWO ACCOUNTS OF ABN AMRO BANK AND TWO ACCOUNT OF INDIA BULLS. I HAVE CH ECKED THIS CHART WITH THE INDIVIDUAL LEDGER ACCOUNTS SHOWING THE OPE NING BALANCE AND THE AMOUNT PAID BEFORE THE SETTLEMENT OF LIABILITIE S AND THE SETTLEMENT LETTERS ISSUED BY THE ABOVE BANK/FINANCIAL INSTITUT ION WITH RESPECT TO EACH OF THE FOUR ACCOUNTS AND FIND THAT THE FIGURES GIVEN BY THE APPELLANT ARE CORRECT. IN THE CHART GIVEN BY THE A SSESSING OFFICER, I FIND THAT THE FIGURE OF OUTSTANDING LIABILITY DOES NOT MATCH WITH THE AMOUNTS REFLECTED IN THE BOOKS OF ACCOUNTS. IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSING OFFICER IS DIRECTED TO DE LETE THE ABOVE ADDITION OF RS. 4,44,645/- MADE U/S 41 OF THE I.T. ACT, 1961. THUS IT IS NOT DISPUTED THAT IN THE BOOKS OF ACCOUN T THE ASSESSEE HAS SHOWN THE OUTSTANDING AMOUNT WHICH IS LESS THAN AMOUNT SHOWN IN THE SETTLEMENT LETTERS. ACCORDINGLY THE REMISSION OF LIABILITY UNDER SECTIO N 41(1) HAS TO BE CONSIDERED AS PER THE BOOKS OF ACCOUNT AND NOT AS PER THE CLAIM OF TH E CREDITOR. HENCE WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF LD. CIT (A) QUA THIS ISSUE, WHEN THE OUTSTANDING LIABILITY SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSE SSEE IS NOT IN DISPUTE. 11 GROUND NO. 7 IS REGARDING DISALLOWANCE OF HOUSE REN T ALLOWANCE. 10. THE AO NOTED THAT DURING THE YEAR UNDER CONSIDE RATION THE ASSESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF HOUSE RENT OF RS. 98 ,400/- IN THE PROFIT & LOSS ACCOUNT. HOWEVER, THE SAME HAS NOT BEEN DISALLOWED IN THE COMPUTATION OF INCOME BEING NOT PART OF BUSINESS INCOME. THE ASSESSEE EXP LAINED THAT THE SAME HAS BEEN INCURRED ON THE EMPLOYEES OF THE COMPANY. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION AND EXPLANATION OF THE ASSESSEE AND DISA LLOWED THE SAID AMOUNT OF RS.98,400/-. ON APPEAL, THE LD. CIT (A) DELETED T HE DISALLOWANCE MADE BY THE AO BY HOLDING THAT THE HOUSE RENT ALLOWANCE IS AN ALLO WABLE BUSINESS EXPENDITURE. 11. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS NOT DISPUTED THAT T HE HOUSE RENT OF RS. 98,400/- WAS PAID BY THE ASSESSEE TO ITS EMPLOYEES BEING HOU SE RENT ALLOWANCE. THE ASSESSEE PRODUCED THE SUPPORTING RECORD BEING LEDGE R ACCOUNT OF HRA. THE LD. CIT (A) HAS DECIDED THIS ISSUE IN PARA 4.5 AS UNDER :- 4.5. AS REGARDS, THE DISALLOWANCE OF HOUSE RENT A LLOWANCE OF RS. 98,400/- THE APPELLANT HAS EXPLAINED THAT THIS EXPE NDITURE HAS BEEN INCURRED ON EMPLOYEES AND IS THEREFORE, AN ALLOWABL E BUSINESS EXPENDITURE. I AGREE WITH THE CONTENTION OF THE APP ELLANT AND THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO DEL ETE THE ABOVE DISALLOWANCE. WHEN THE NATURE OF EXPENDITURE BEING HOUSE RENT ALL OWANCE PAID TO THE EMPLOYEES HAS NOT BEEN DISPUTED, THEN THE SAME IS AN ALLOWABL E BUSINESS EXPENDITURE AND, THEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGALITY I N THE ORDER OF LD. CIT (A) QUA THIS ISSUE. THE SAME IS UPHELD. 12 GROUND NO. 8 IS REGARDING DISALLOWANCE OF PF AND ES I. 12. THE AO MADE THE DISALLOWANCE OF RS. 38,590/- ON ACCOUNT OF DELAYED PAYMENT MADE IN RESPECT OF EMPLOYEES CONTRIBUTION T O PF AND ESI. ON APPEAL, THE LD. CIT (A) HAS DELETED THE DISALLOWANCE MADE BY TH E AO BY CONSIDERING THE FACT THAT THE PAYMENT WAS MADE BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF RETURN UNDER SECTION 139 OF THE ACT I.E. 31 ST OCTOBER, 2010. THE RELEVANT FINDING OF LD. CIT (A ) ON THIS ISSUE IS IN PARA 4.6 AS UNDER :- 4.6. ADMITTEDLY, EMPLOYEES CONTRIBUTION TO PF HAS BEEN PAID BY THE APPELLANT, IN ALL INSTANCES, BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME U/S 139(1). THIS FACT IS THEREFORE, NOT IN D ISPUTE. IN VIEW OF THE JUDGEMENTS OF THE RAJASTHAN HIGH COURT IN THE CASE JAIPUR VIDHYUT VITHRAN NIGAM LTD., 265 CTR 62 (RAJ.), CIT VS. STAT E BANK OF BIKANER & JAIPUR (2014) 99 DTR 131 (RAJ.), AND OTHER CASE LAW S ON THIS ISSUE, THE CLAIM OF THE APPELLANT IS ALLOWABLE. ACCORDINGLY, THIS DISALLOWANCE MADE BY THE ASSESSING OFFICER IS, DIRECTED TO BE DE LETED. THUS THE ISSUE IS NOW COVERED BY THE DECISION OF TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. STATE BANK OF BIKANER & JAIPUR, 363 ITR 70 (RAJ.) AS WELL AS THE DECISION IN THE CASE OF CIT VS. JAIPUR VIDHY UT VITHRAN NIGAM LTD., 363 ITR 307 (RAJ.). IN VIEW OF THE BINDING PRECEDENTS OF HONBL E JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF TH E LD. CIT (A) QUA THIS ISSUE. 13 GROUND NO. 9 IS REGARDING DISALLOWANCE UNDER SECTIO N 40(A)(IA). 13. THE AO NOTED THAT THE ASSESSEE HAS FAILED TO DE DUCT TDS ON INTEREST TO ABN AMRO BANK AND TWO OTHER FINANCIAL INSTITUTIONS, NAM ELY INDIA BULL SERVICES LTD. AND M/S. RELIANCE CAPITAL TOTAL AMOUNTING TO RS. 11,59, 266/-. THE AO ACCORDINGLY DISALLOWED RS. 4,74,201/- UNDER SECTION 40(A)(IA) H OLDING THAT THESE NBFCS ARE NOT EXEMPT FROM TDS UNDER SECTION 194A(3)(IIIA) OF THE ACT. ON APPEAL, THE LD. CIT (A) HAS DELETED THE DISALLOWANCE MADE BY THE AO IN RESP ECT OF INTEREST PAYMENT TO THE ABN AMRO BANK AS THE BANK IS COVERED BY THE BANKING REGULATIONS ACT, 1949 AND SUCH PAYMENT OF INTEREST IS COVERED BY THE PROVISIO NS OF SECTION 194A(3)(III). HOWEVER, THE LD. CIT (A) HAS CONFIRMED THE DISALLOW ANCE MADE BY THE AO IN RESPECT OF THE INTEREST PAYMENT TO NBFCS. 14. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AS FAR AS THE INTEREST TO ABN AMRO BANK IS CONCERNED, THERE IS NO DISPUTE THAT THE INTEREST PAID IS COVERED UNDER SECTION 194A(3)(III) OF THE ACT AND, THEREFORE, THE ASSESSEE IS NOT UNDER OBLIGATION TO DEDUCT TDS AGAINST THE INTEREST TO THE BANK. HENCE, WE DO NOT FIND ANY ERROR OR ILLEGA LITY IN THE ORDER OF LD. CIT (A) QUA THIS ISSUE. GROUND NO. 10 IS REGARDING DISALLOWANCE UNDER SECTI ON 40(A)(IA) IN RESPECT OF BANK GUARANTEE COMMISSION. 15. THE AO NOTED THAT THE ASSESSEE HAS CLAIMED TO H AVE PAID BANK GUARANTEE COMMISSION AMOUNTING TO RS. 14,12,035/-. THE AO WA S OF THE VIEW THAT AS PER PROVISIONS OF SECTION 194H, THE ASSESSEE WAS REQUIR ED TO DEDUCT TDS @ 10%. ACCORDINGLY THE AO MADE THE DISALLOWANCE OF SAID AM OUNT BY INVOKING THE PROVISIONS 14 OF SECTION 40(A)(IA). ON APPEAL, THE LD. CIT (A) HAS DELETED THE ADDITION BY HOLDING THAT THE BANK GUARANTEE COMMISSION IS NOT IN THE NA TURE OF BROKERAGE AS ENVISAGED IN SECTION 194H AS THE RELATIONSHIP BETWEEN THE ASS ESSEE AND THE BANK IS NOT OF PRINCIPAL AGENT. 16. WE HAVE HEARD THE LD. D/R AS WELL AS THE LD. A/ R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD.CIT (A) HAS CONSIDERED THIS ISSUE IN PARA 4.9 AS UNDER :- 4.9. THE ASSESSING OFFICER HAS MADE A DISALLOWAN CE U/S 40(A)(IA) ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO D EDUCT TDS U/S 194H ON PAYMENT OF GUARANTEE COMMISSION AMOUNTING TO RS. 14,12,035/-. I HAVE PERUSED THE JUDGMENT OF THE ITAT, MUMBAI IN TH E ABOVE CASE OF KOTAK SECURITIES (2012) 18 TAXMANN.COM 48 (MUM.). T HIS CASE EXAMINES WHETHER THE COMMISSION ON BANK GUARANTEE I S COVERED BY THE PROVISIONS OF SECTION 194H I.E. WHETHER COMMISS ION ON BANK GUARANTEE IS COMMISSION OR BROKERAGE IS ENVISAGED IN SECTION 194H. THE RELEVANT EXTRACT OF THIS ORDER IS REPRODUCED BE LOW A PLAIN READING OF SECTION 194H INDICATES THAT TAX WITHHOLDING REQUIREMENTS UNDER SECTION 194H APPLY IN RESPECT OF 'COMMISSION OR BROKERAGE', WHICH, IN TURN, IS DEFINED BY EXPLANATION TO SECTION 194H. [PARA 5] THE EXPRESSION 'COMMISSION' AND 'BROKERAGE' HAVE BE EN USED TOGETHER IN THE STATUTE. IT IS WELL SETTLED, AS NOTED BY MAXWELL IN INTERPRETATION OF STATUTES AND WHILE ELABORATING ON THE PRINCIPLE OF NOSCITUR A SOCIIS , THAT WHEN TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE TO ANALOGOUS MEANING AR E USED TOGETHER, THEY ARE DEEMED TO BE USED IN THEIR COGNATE SENSE. THEY TAKE , AS IT WERE, THEIR COLOURS FROM EACH OTHER, THE MEANING OF MORE GENERAL BEING RESTRICTED TO A SENSE ANALOGOUS TO THAT OF LESS GENERAL. [PARA 6] WHEN ONE LOOK AT THE CONNOTATIONS OF EXPRESSION 'CO MMISSION OR BROKERAGE' IN ITS COGNATE SENSE, AS IN THE LIGHT OF THE PRINCIPLE OF NOSCITUR A SOCIIS , 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 BUSINESS TRANSACTI ONS' AND SHALL NOT EXTEND TO THE PAYMENTS, SUCH AS 'BANK GUARANTEE COMMISSION', WHICH ARE IN THE NATURE OF FEES FOR SERVICES RENDERED OR PRODUCT OFFERED BY TH E RECIPIENT OF SUCH PAYMENTS ON PRINCIPAL-TO-PRINCIPAL BASIS. EVEN WHEN AN EXPRE SSION IS STATUTORILY 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 15 OTHERWISE REQUIRES', AND, THEREFORE, CONTEXTUAL MEANING ASSUMES SIGNIFICANCE. EVERY DEFINITION IN THE INCOME-TAX AC T MUST DEPEND ON THE CONTEXT IN WHICH THE EXPRESSION IS SET OUT, AND THE CONTEXT, IN WHICH EXPRESSION 'COMMISSION' APPEARS IN SECTION 194H, I.E. , ALONG WITH THE EXPRESSION 'BROKERAGE', SIGNIFICANTLY RESTRICTS ITS CONNOTATIO NS. THE COMMON PARLANCE MEANING OF THE EXPRESSION 'COMMISSION', THUS, DOES NOT EXTEND TO A PAYMENT WHICH IS IN THE NATURE OF FEES FOR A PRODUCT OR SER VICE; IT MUST REMAIN RESTRICTED TO A PAYMENT IN THE NATURE OF REWARD FOR EFFECTING SALES OR BUSINESS TRANSACTIONS, ETC. THE INCLUSIVE DEFINITION OF THE EXPRESSION 'COMMISSION OR BROKERAGE' IN EXPLANATION TO SECTION 194H IS QUITE IN HARMONY WITH THIS APPROACH AS IT ONLY PROVIDES THAT 'ANY PAYMENT RECE IVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHAL F OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING 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 ME ANING OF THE EXPRESSION 'COMMISSION OR BROKERAGE'. WHEN INCLUSIVE DEFINITIO N CONTAINS ORDINARY NORMAL CONNOTATIONS OF AN EXPRESSION, EVEN AN INCLU SIVE DEFINITION HAS TO BE TREATED AS EXHAUSTIVE. THAT IS THE SITUATION IN THE INSTANT CASE AS WELL. EVEN AS DEFINITION OF EXPRESSION 'COMMISSION OR BROKERAGE', IN EXPLANATION TO SECTION 194H, IS STATED TO BE EXCLUSIVE, IT DOES NOT REALLY MEAN ANYTHING OTHER THAN WHAT HAS BEEN SPECIFICALLY STATED IN THE SAID DEFIN ITION. THEREFORE, PRINCIPAL- AGENT RELATIONSHIP IS A SINE QUA NON FOR INVOKING THE PROVISIONS OF SECTION 194H. IN THE INSTANT CASE, THERE IS NO PRINCIPAL-AG ENT RELATIONSHIP BETWEEN THE BANK ISSUING THE BANK GUARANTEE AND THE ASSESSEE. W HEN BANK ISSUES THE BANK 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 COMMITMENT, THE BANK CHARG ES A FEES WHICH IS CUSTOMARILY TERMED AS 'BANK GUARANTEE COMMISSION' . WHILE IT IS TERMED AS 'GUARANTEE COMMISSION', IT IS NOT IN THE NATURE OF 'COMMISSION' AS IT IS UNDERSTOOD IN COMMON BUSINESS PARLANCE AND IN THE C ONTEXT OF SECTION 194H. THIS TRANSACTION IS NOT A TRANSACTION BETWEEN PRINC IPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCTION REQUIREMENTS UNDER SECTIO N 194H. THEREFORE, THE COMMISSIONER (APPEALS) INDEED ERRED IN HOLDING THAT THE ASSESSEE WAS INDEED UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER S ECTION 194H FROM PAYMENTS MADE BY THE ASSESSEE TO VARIOUS BANKS. AS THE ASSES SEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194H, THE QUESTI ON OF LEVY OF INTEREST UNDER SECTION 201(1A) CANNOT ARISE. [PARA 9] IN VIEW OF THE ABOVE DISCUSSIONS, THE IMPUGNED DEMA NDS UNDER SECTION 201(1) AND 201(1A) READ WITH SECTION 194H ARE TO BE QUASHE D. [PARA 10]. THE ABOVE JUDGMENT IS APPLICABLE TO THE FACTS OF TH IS ISSUE. THE COMMISSION ON BANK GUARANTEE IS NOT COVERED BY THE EXPRESSION COMMISSION OR BROKERAGE AS ENVISAGED IN SECTION 1 94H SINCE THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE BANK IS N OT OF PRINCIPAL- AGENT. ALSO, COMMISSION ON BANK GUARANTEE IS NOT CO VERED BY THE 16 EXPLANATION (I) WHICH GIVES AN INCLUSIVE DEFINITION OF THE TERM COMMISSION OR BROKERAGE. FOLLOWING THE ABOVE ORDE R OF THE ITAT, MUMBAI, IT IS HELD THAT THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE ON COMMISSION ON BANK GUARANTEE AS PER THE P ROVISIONS OF SECTION 194H AND THEREFORE, THE PROVISIONS OF SECTI ON 40(A)(IA) ARE NOT APPLICABLE ON THIS EXPENDITURE. THE ASSESSING OFFIC ER IS THEREFORE, DIRECTED TO DELETE THIS DISALLOWANCE MADE U/S 40(A) (IA). IT IS CLEAR THAT THE LD. CIT (A) HAS DECIDED THIS I SSUE BY FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KOTAK S ECURITIES (SUPRA). THEREFORE, IN THE ABSENCE OF ANY CONTRARY VIEW, WE DO NOT FIND AN Y REASON TO INTERFERE WITH THE ORDER OF LD. CIT (A) QUA THIS ISSUE. 17. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 07/03/2 018. SD/- SD/- ( HKKXPUN ) ( FOT; IKY JKWO ( BHAGCHAND ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 07/03/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE-5, JAIPUR. 2. THE RESPONDENT M/S. LATALA CONSTRUCTION COMPAN Y, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 194/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 17