DCIT, Bangalore V. M/s Vodafone Essar South Ltd., Bangalore

ITA 218/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57544 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-03-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 02-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Keywords: Retrospective amendment; Tax effect
• Section: 201(1)

Judgement Text

PAGE 1 OF 6 ITA NOS.215 TO 218/B ANG/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES B BEFORE SHRI N K SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NOS.215 TO 218/BANG/2011 (ASST. YEARS 2005-06 TO 2008-09) THE DEPUTY COMMISSIONER OF INCOME TAX (TDS), CIRCLE-18(2), BANGALORE . VS VODAFONE ESSAR SOUTH LTD., MARUTHI INFOTECH CENTRE, #11/1 & 12/1, KORAMANGALA INTERMEDIATE RING ROAD, AMAR JYOTI LAYOUT, BENGALURU-71. PA NO.AABCB5847L (APPELLANT) (RESPONDENT) DATE OF HEARING : 15.03.2012 DATE OF PRONOUNCEMENT : 27.03.2012 APPELLANT BY : SMT. SUSAN THOMAS JOSE, JCIT RESPONDENT BY : SHRI SALIL KAPOOR, ADVOCATE O R D E R PER BENCH : THESE APPEALS ARE INSTITUTED BY THE DEPARTMENT AGA INST THE CONSOLIDATED ORDER OF THE CIT(A)-V, BANGALORE DATED 31.12.2010. THE RELEVANT ASSESSMENT YEARS ARE 2005-06 TO 2008-09. T HE ORDER OF CIT(A) ARISE OUT OF THE ASSESSING OFFICERS ORDER PASSED U NDER SECTION 201(1) AND 201(1A) OF THE ACT. 2. THE REVENUE HAS RAISED IDENTICAL TEN GROUNDS IN THESE APPEALS. HOWEVER, THEY RELATE TO THE SOLITARY ISSUE, NAMELY, W HETHER THE CIT(A) IS PAGE 2 OF 6 ITA NOS.215 TO 218/B ANG/2011 2 JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 194H OF THE ACT ARE NOT APPLICABLE IN RESPECT OF CHARGES COLLECTED THROUGH CREDIT CARDS. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE APPELLANT IS A COMPANY. IT IS ENGAGED IN THE BUSINESS OF TELECOM OPERATIONS, UNDER THE NAME AND STYLE VODAFO NE. A SURVEY WAS CONDUCTED IN THE APPELLANTS PREMISES ON 27.2.2008, TO VERIFY THE COMPLIANCE UNDER THE TDS PROVISIONS. IN THE COURSE OF THE SUR VEY, THE ASSESSING OFFICER NOTED THAT THE APPELLANT COMPANY WAS COLLEC TING ITS PAYMENTS FROM CUSTOMERS THROUGH CREDIT CARD COMPANIES AND IN THE PROCESS, THESE CREDIT CARD COMPANIES EARNED COMMISSION FROM THE APPELLANT COMPANY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE APPELLAN T COMPANY IS LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194H OF THE ACT IN RESPECT OF THE PAYMENTS MADE TO THE CREDIT CARD COMPANIES. ACCORDI NGLY, THE APPELLANT COMPANY WAS TREATED AS AN ASSESSEE IN DEFAULT UNDE R SECTION 201(1) OF THE ACT AND INTEREST WAS LEVIED UNDER SECTION 201(1A) O F THE ACT. 4. AGGRIEVED, THE APPELLANT COMPANY FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE FIRST APPELLATE AUTHORITY ALLOWED THE CLAIM OF THE ASSESSEE. THE ARGUMENTS RAISED BY THE APPELLANT BEFORE THE FIR ST APPELLATE AUTHORITY AND THE FINDING OF THE LEARNED CIT(A) READS AS FOLL OWS:- 7. THE ARGUMENTS OF THE APPELLANT ARE AS UNDER:- THE APPELLANT HAD ARRANGEMENTS WITH BANKS LIKE HDFC BANK, ICICI BANK AND CITI BANK, WHEREIN THE APPELLA NT USED TO GET THE PAYMENTS MADE BY ITS SUBSCRIBERS PAGE 3 OF 6 ITA NOS.215 TO 218/B ANG/2011 3 THROUGH CREDIT CARDS DISCOUNTED. THE PROCEDURE IS AS UNDER:- I) THE APPELLANT TAKES EDC MACHINES (CARD SWIPE MACHINES) FROM DESIGNATED BANKS. EACH MACHINE IS HAVING A MERCHANT ESTABLISHMENT (ME) NUMBER. II) A SPECIFIC PERCENTAGE RATE CALLED MERCHANT DISCOUNTING RATE (MDR) WILL BE NEGOTIATED. III) THESE MACHINES ARE INSTALLED AT VARIOUS COLLECTION LOCATIONS. IV) THE SUBSCRIBER WALKS IN AND SWIPES HIS CARD. THROUGH ONLINE AUTHORIZATION PROCESS, THE PAYMENT CAN BE APPROVED/REJECTED. V) FOR APPROVED PAYMENTS, DESIGNATED BANK GIVES CREDIT TO APPELLANTS BANK ACCOUNT IN THE AGREED TIME. THE CREDIT WILL BE NET AMOUNT (GROSS AMOUNT PAID BY CUSTOMER MDR). VI) AFTER THE COLLECTIONS ARE CREDITED TO APPELLANTS ACCOUNT, THE DESIGNATED BANK, IN TURN COLLECTS THE AMOUNT FROM VARIOUS BANK BASED ON THE CARD ISSUER BANK. THIS SETTLEMENT WILL TAKE SOME TIME LAG. AS A RESULT THE DESIGNATED BANK COLLECTS THE DISCOUNT CHARGES FROM THE APPELLANTS PAYMENTS. THE APPELLANT FURTHER ARGUED THAT THERE IS NO PRINC IPLE TO AGENT RELATIONSHIP BETWEEN THE APPELLANT AND THE BA NKS AND HENCE PROVISIONS OF SECTION 194H OF THE I T ACT , 1961 ARE NOT APPLICABLE. THE MDR CHARGES ARE NOTHI NG BUT BILL DISCOUNTING CHARGES AND WOULD FALL WITHIN THE DEFINITION OF THE TERM INTEREST AS ENVISAGED UNDER SECTION 2(28A) OF THE IT ACT, 1961. THUS, ORDINARI LY, IF AL ALL ANY TDS PROVISIONS APPLY, IT COULD BE ONLY 194A . HOWEVER, CLAUSE (III) TO SUB SECTION (3) TO SECTION 194A SPECIFICALLY PROVIDES THAT THE PROVISIONS OF SUB SEC TION (1) SHALL NOT APPLY TO SUCH INCOME CREDITED OR PAID TO A NY BANKING COMPANY. PAGE 4 OF 6 ITA NOS.215 TO 218/B ANG/2011 4 8. I HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE ASSESSING OFFICER AND THE APPELLANT. I FOUND T HAT THE STAND TAKEN BY THE APPELLANT IS IN ORDER AND ACCORDINGLY, THE DEMANDS RAISED BY THE ASSESSING OFFICER UNDER SECTION 201(1) AND 201(1A) AS MENTION ED BELOW ARE CANCELLED: AY : 2005-06 DEMAND RAISED U/S 201(1) RS. 35,304 INTEREST U/S 201(1A) RS. 16,511 TOTAL RS. 51,815 AY : 2006-07 DEMAND RAISED U/S 201(1) RS.46,782 INTEREST U/S 201(1A) RS. 16,454 TOTAL RS. 63,236 AY : 2007-08 DEMAND RAISED U/S 201(1) RS.62,689 INTEREST U/S 201(1A) RS. 14,418 TOTAL RS. 77,108 AY : 2008-09 DEMAND RAISED U/S 201(1) RS.1,14,103 INTEREST U/S 201(1A) RS. 10,857 TOTAL RS.1,24,960 6. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. 7. AT THE OUTSET, IT WAS POINTED OUT BY THE LEARNED AR THAT THE MONETARY LIMIT IN RESPECT OF THESE DEPARTMENTS APPEA LS IS BELOW THE PRESCRIBED LIMIT MENTIONED IN THE BOARDS INSTRUCTI ON NO. 200/34/2009- ITA.1 DATED 6-10-2009 AND ACCORDINGLY, THE REVENUE O UGHT NOT TO HAVE FILED THE APPEALS IN THIS CASE. 8. THE LEARNED DR WAS UNABLE TO CONTROVERT THE ASS ERTION MADE BY THE LEARNED AR. PAGE 5 OF 6 ITA NOS.215 TO 218/B ANG/2011 5 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. AFTER CONSIDERING THE SUBMISSIONS OF TH E LD. DR AND THE MATERIAL ON RECORD, IT IS NOTICED THAT SECTION 268A HAS BEEN INSERTED BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1.4.99. T HE PROVISIONS CONTAINED IN SECTION 268A READ AS UNDER: 268A. (1) THE BOARD MAY, FROM TIME TO TIME, ISSUE ORDERS, INSTRUCTIONS OR DIRECTIONS TO OTHER INCOME- TAX AUTHORITIES, FIXING SUCH MONETARY LIMITS AS IT MAY D EEM FIT, FOR THE PURPOSE OF REGULATING FILING OF APPEAL OR APPLICATION FOR REFERENCE BY ANY INCOME-TAX AUTHORITY UNDER THE PROVISIONS OF THIS CHAPTER. (2) WHERE, IN PURSUANCE OF THE ORDERS, INSTRUCTION S OR DIRECTIONS ISSUED UNDER SUB-SECTION (1), AN INCOME- TAX AUTHORITY HAS NOT FILED ANY APPEAL OR APPLICATION FOR REFERENCE ON ANY ISSUE IN THE CASE OF AN ASSESSEE FOR ANY ASSESSMENT YEAR, IT SHALL NOT PRECLUDE SUCH AUTHORITY FROM FILING AN APPEAL OR APPLICATION FOR REFERENCE ON THE SAME ISSUE IN THE CASE OF - (A) THE SAME ASSESSEE FOR ANY OTHER ASSESSMENT YEAR, OR (B) ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR. (3) NOTWITHSTANDING THAT NO APPEAL OR APPLICATION FOR REFERENCE HAS BEEN FILED BY AN INCOME-TAX AUTHORITY PURSUANT TO THE ORDERS OR INSTRUCTIONS OR DIRECTIONS ISSUED UNDER SUB-SECTION (1), IT SHALL N OT LAWFUL FOR AN ASSESSEE, BEING A PARTY IN ANY APPEAL OR REFERENCE, TO CONTEND THAT THE INCOME-TAX AUTHORITY HAS ACQUIESCED IN THE DECISION ON THE DISPUTED ISSUE BY NOT FILING AN APPEAL OR APPLICATIO N FOR REFERENCE IN ANY CASE. PAGE 6 OF 6 ITA NOS.215 TO 218/B ANG/2011 6 (4) THE APPELLATE TRIBUNAL OR COURT, HEARING SUCH APPEAL OR REFERENCE, SHALL HAVE REGARD TO THE ORDERS, INSTRUCTIONS OR DIRECTIONS ISSUED UNDER SUB-SECTION (1) AND THE CIRCUMSTANCES UNDER WHICH SUCH APPEAL OR APPLICATION FOR REFERENCE WAS FILED NOT FILED IN RESPECT OF ANY CASE. (5) EVERY ORDER, INSTRUCTION OR DIRECTION WHICH HAS BEEN ISSUED BY THE BOARD FIXING MONETARY LIMITS FOR FILING AN APPEAL OR APPLICATION FOR REFERENCE SHALL BE DEEMED TO HAVE BEEN ISSUED UNDER SUB- SECTION (1) AND THE PROVISIONS OF SUB-SECTIONS (2), (3) AND (4) SHALL APPLY ACCORDINGLY. 9.1 IT IS NOT IN DISPUTE THAT THE BOARDS INSTRUC TIONS OR DIRECTIONS ISSUED TO OTHER INCOME-TAX AUTHORITIES ARE BINDING ON THOSE AUTHORITIES, THEREFORE, THE DEPARTMENT OUGHT NOT TO HAVE FILED T HE APPEAL IN VIEW OF THE ABOVE MENTIONED PROVISIONS OF SECTION 268A SINCE TH E TAX EFFECT IN EACH OF THE INSTANT CASES IS LESS THAN RS.3.00 LAKHS I.E., THE AMOUNT PRESCRIBED BY THE CBDT FOR NOT FILING THE APPEAL, SO THESE APPEAL S ARE DISMISSED. 10. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF MARCH, 2012 SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO:- 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONC ERNED 4. THE CIT(A) CONCERNED 5. THE DR 6. GF MSP/- BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.