THE DCIT, CIRCLE - 2(1), Vijayawada V. M/s Efftronic Systems Pvt., Ltd., Vijayawada

ITA 205/VIZ/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76464 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KOMALI KRISHNA
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J.SUDHAKAR REDDY, AM AND SHRI SAKTIJIT DEY, JM ITA NO.205/VIZAG/2013 : ASST.YEAR 2009-2010 THE DY.COMMISSIONER OF INCOME - TAX CIRCLE 2(1) VIJAYAWADA. VS. M/S.EFFTRONIC SYSTEMS PRIVATE LIMITED 40-15-9, BRINDAVAN COLONY LABBIPET, VIJAYAWADA. PAN : AAACE4879Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT.KOMALI KRISHNA, ADDL.CIT RESPONDENT BY : SRI C.SUBRAHMANYAM DATE OF HEARING : 0 6 .03 .2014 DATE OF PRONOUNCEMENT : 06 .0 3 .2014 O R D E R PER J.SUDHAKAR REDDY (AM) : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), VIJAYAWADA, D ATED 22.01.2013, ON THE FOLLOWING GROUNDS:- A. THE LD.CIT(A) ERRED BOTH IN LAW AND IN FACTS OF THE CASE. B. THE LD.CIT(A) ERRED IN DELETING THE ADDITION MA DE U/S 40(A)(IA)OF RS.10,79,949/- SINCE THE GUARANTEE COMM ISSION PAID TO BANK IS LIABLE FOR DEDUCTION OF TAX AT SOURCE AS HELD BY THE A.O. IN THE ASSESSMENT ORDER. C. THE LD. CIT(A) FAILED TO CONSIDER THAT THE SERV ICES RENDERED BY THE BANKING AUTHORITY IN THE SAID GUARA NTEE EXECUTED WITH THE ASSESSEE ARE COVERED UNDER THE PROVISIONS OF SECTION 194H OF THE ACT. D. THE LD. CIT(A) ERRED IN DELETING THE ADDITION S TATING THAT THERE IS NO PRINCIPAL AGENT RELATIONSHIP SINCE THE PROVISIONS OF SECTION 194H OF THE INCOME TAX ACT DOES NOT SPEAK W ITH SUCH RELATIONSHIP. 2. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT TH E FIRST APPELLATE AUTHORITY HAS FOLLOWED THE DECISION OF THE MUMBAI BENCH OF THE TR IBUNAL IN THE CASE OF KOTAK ITA NO.205/VIZAG/2013. M/S.EFFTRONIC SYSTEMS PVT.LTD. 2 SECURITIES LIMITED V. DCIT REPORTED IN (2012) 50 SO T 158 (MUMBAI) AND DELETED THE DISALLOWANCE IN QUESTION. 3. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LIMITED (SUPRA) HELD AS FOLLOWS:- THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN T HE BANK ISSUING THE BANK GUARANTEE AND THE ASSESSEE. WHEN BANK ISSUES THE BA NK GUARANTEE, ON BEHALF OF THE ASSESSEE, ALL IT DOES IS TO ACCEPT TH E COMMITMENT OF MAKING PAYMENT OF A SPECIFIED AMOUNT TO, ON DEMAND, THE BE NEFICIARY, AND IT IS IN CONSIDERATION OF THIS COMMITMENT, THE BANK CHARGES 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 THE S.194H. THIS TRANSACTION, IS NOT A TRANSACTION BETWEEN PRIN CIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCTION REQUIREMENTS UNDER S.194H . CIT(A) INDEED ERRED IN HOLDING THAT THE ASSESSEE WAS INDEED UNDER AN OBLIG ATION TO DEDUCT TAX AT SOURCE UNDER S. 194H FROM PAYMENTS MADE BY THE ASSE SSEE TO VARIOUS BANKS. ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT S OURCE U/S 194H, THE QUESTION OF LEVY OF INTEREST U/S 201(1A) CANNOT ARI SE. CONCLUSION : WHEN THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETW EEN BANK ISSUING BANK GUARANTEE AND ASSESSEE, TRANSACTION BETWEEN THEM IS NOT TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT TAX DE DUCTION UNDER S.194H. 4. RESPECTFULLY FOLLOWING THE ORDER IN THE CASE OF KOTAK SECURITIES LIMITED (SUPRA), WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF MARCH, 2014. SD/- SD/- ( SAKTIJIT DEY ) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM; DATED : 6 TH MARCH, 2014. DEVDAS* ITA NO.205/VIZAG/2013. M/S.EFFTRONIC SYSTEMS PVT.LTD. 3 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT, VIJAYAWADA . 4. CIT(A) VIJAYAWADA . 5. DR, ITAT, VISAKHAPATNAM. 6. GUARD FILE. BY ORDER, //TRUE COPY// (SENIOR PRIVATE SECRETARY) ITAT, VISAKHAPATNAM