ACIT TDS 1(2), MUMBAI V. INFRSTRUCTURE LEASING & FINANCE SERVICES LTD, MUMBAI

ITA 4028/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0965 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANGULKAR
• Assessee Lawyers: DILIP V LAKHANI
• Section: 133A; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 4028/MUM/2015 (ASSESSMENT YEAR: 2012-13) ACIT, TDS 1(2) VS. M/S. INFRASTRUCTURE LEASING & ROOM NO. 803, K.G. MITTAL HOSPITAL BLDG., CHARNI ROAD (W), MUMBAI 400002 FINANCE SERVICES LTD. PLOT NO. C-22, G-BLOCK THE IL&FS FINANCIAL CENTRE BKC (E), MUMBAI 4000051 PAN AAACL5004C APPELLANT RESPONDENT APPELLANT BY: SHRI ANGULKAR RESPONDENT BY: SHRI DILIP V. LAKHANI DATE OF HEARING: 02.05.2017 DATE OF PRONOUNCEMENT: 03.05.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF THE CIT(A)-59, MUMBAI DATED 13.04.2015 FOR A.Y. 2012-13. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE, THE HOLDING COMPANY OF ALL COMPAN IES OF THE IL&FS GROUP, IS PRINCIPALLY ENGAGED IN THE BUSINESS OF IN VESTMENT IN GROUP COMPANIES, GRANTING OF LOANS AND ADVANCES TO GROUP COMPANIES AND MANAGING ITS OWN BUSINESS CENTRE. PURSUANT TO SURVE Y ACTION UNDER SECTION 133A OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') ON 16.03.2012 THE ASSESSING OFFICER (AO) REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY TAX WAS NOT DEDUCTED AT SOURCE ON EXPENSES/PAYMENTS INC URRED ON ACCOUNT OF BANK GUARANTEE COMMISSION. THE AO, AFTER CONSIDERIN G THE ASSESSEES EXPLANATION THAT TDS IS NOT REQUIRED TO BE MADE ON SUCH PAYMENTS, WAS OF THE OPINION THAT BANK GUARANTEE CHARGES ARE IN THE NATURE OF COMMISSION PAYMENTS AND THEREFORE TAX OUGHT TO BE DEDUCTED THE REON IN ACCORDANCE ITA NO. 4028/MUM/2015 INFRASTRUCTURE LEASING & FINANCE SERVICES LTD. 2 WITH THE PROVISIONS OF SECTION 194H OF THE ACT. IN VIEW OF THE FAILURE ON THE PART OF THE ASSESSEE TO DO SO, THE AO TREATED THE A SSESSEE AS AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) OF THE ACT AND CHA RGED INTEREST UNDER SECTION 201(1A) OF THE ACT RAISING THE TOTAL DEMAND OF ` 56,42,590/- (I.E. DEFAULT UNDER SECTION 201(1) ` 41,48,963/- AND INTEREST UNDER SECTION 201(1A) ` 14,93,627/-) IN THE ORDER UNDER SECTION 201(1)/201( 1A) OF THE ACT DATED 05.03.2014. 2.2 AGGRIEVED BY THE ORDER UNDER SECTION 201(1)/201 (1A) OF THE ACT DATED 05.03.2014 FOR A.Y. 2012-13 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-59, MUMBAI. THE LEARNED CIT(A) DISPOSED OFF THE APPEAL VIDE THE IMPUGNED ORDER DATED 13.04.2015. IN DOING SO, FOLLO WING THE DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF KO TAK SECURITIES LTD. VS. DCIT IN ITA NO. 6657/MUM/2011 DATED 03.02.2012 THE LEARNED CIT(A) HELD THAT THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTION 194H OF THE ACT ON BANK GUARANTEE COMMISSION. 3.1 REVENUE, BEING AGGRIEVED BY THE ORDER OF THE CI T(A)-59, MUMBAI DATED 13.04.2015 FOR A.Y. 2012-13, HAS PREFERRED TH IS APPEAL RAISING THE FOLLOWING GROUNDS: - 1. GROUNDS OF APPEAL: - I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE SHORT DEDUCTION U/ S 201(1) AND INTEREST U/S 201(IA) OF THE I.T. ACT, IN RESPEC T OF BANK GUARANTEE COMMISSION ON THE BASIS OF REASONING THAT BANK GUARANTEE COMMISSION IS NOT IN THE NATURE OF 'COMMI SSION' AND NO TDS WAS REQUIRED TO BE DEDUCTED ON SUCH CHAR GES PAID TO BANK U/S 194H OF THE I.T. ACT, 1961.' II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT NO TDS WAS REQ UIRED TO BE DEDUCTED ON BANK GUARANTEE COMMISSION PAID TO BANKS U/S 194H OF THE I.T. ACT, 1961, FAILING TO APPRECIATE T HAT IN SUBSTANCE AND IN FACT THE RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND BANKS WAS IN THE NATURE OF PRINCIPAL AN D AGENTS RELATIONSHIP AND THE PAYMENT MADE TO BANKS FOR SERV ICES RENDERED FALLS WITHIN THE MEANING OF SECTION 194H O F THE ACT.' 2. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY AT THE TIME OF TH E HEARING OF THE CASE OR THEREAFTER. ITA NO. 4028/MUM/2015 INFRASTRUCTURE LEASING & FINANCE SERVICES LTD. 3 3. THE ORDER OF THE CIT(A) BEING ERRONEOUS BE SET ASID E AND LD. A.O'S ORDER BE RESTORED. 3.2.1 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE LEARNED D.R. FOR REVENUE IN SUPPORT OF THE GROUNDS RAISED (SUPRA) AN D OF THE LEARNED A.R. OF THE ASSESSEE AND PERUSED AND CAREFULLY CONSIDERED T HE MATERIAL ON RECORD. AT THE OUTSET OF THE HEARING, THE LEARNED A.R. OF T HE ASSESSEE SUBMITTED THAT THE ISSUE BEFORE US, I.E. OF WHETHER THE ASSES SEE IN THE CASE ON HAND IS REQUIRED TO DEDUCT TAX AT SOURCE IN RESPECT OF PAYM ENTS OF BANK GUARANTEE COMMISSION TO BANKS AS PER THE PROVISIONS OF SECTIO N 194H OF THE ACT, HAS BEEN CONSIDERED AND DECIDED BY A COORDINATE BENCH O F ITAT, MUMBAI IN THE ASSESSEES OWN CASE FOR A.Y. 2011-12 IN ITS ORD ER IN ITA NO. 5241/MUM/2014 DATED 20.07.2016, A COPY OF WHICH WAS PLACED BEFORE THE BANK. 3.2.2 ON A PERUSAL OF THE ORDER OF THE AFORESAID CO ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR A.Y. 2011-12 (SUPRA) WE FIN D THAT THIS ISSUE HAS BEEN DISCUSSED, CONSIDERED AND ADJUDICATED IN FAVOU R OF THE ASSESSEE; HOLDING THAT THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMENTS OF THE BANK GUARANTEE COMMISSION CHARGES U NDER SECTION 194H OF THE ACT. IN COMING TO THIS FINDING THE COORDINAT E BENCH FOLLOWED THE DECISIONS OF OTHER COORDINATE BENCHES IN THE CASE O F KOTAK SECURITIES LTD. (ITA NO. 5241/MUM/2011 DATED 03.02.2012) AND IN THE ASSESSEES OWN CASE FOR A.Y. 2010-11 IN ITA NO. 3920/MUM/2014. IN ITS ORDER IN ASSESSEES OWN CASE FOR A.Y. 2011-12 IN ITA NO. 524 1/MUM/2014 DATED 20.07.2016, THE COORDINATE BENCH CONSIDERED THE ISS UE AND HELD ASS UNDER AT PARAS 2 TO 4 THEREOF: - 2. THE BRIEF FACTS OF THE CASE ARE THAT THE SURVEY OPERATION U/S.133A OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) WA S CONDUCTED ON 16.03.2012 AT THE PREMISES OF ASSESSEE COMPANY M/S. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD. THE ASSESSEE COMP ANY IS A HOLDING COMPANY OF ALL COMPANIES OF IL & FS GROUP. THE PRIN CIPLE BUSINESS COMPRISES OF INVESTMENTS IN GROUP COMPANIES GRANTIN G OF LOANS AND ADVANCES ONLY TO GROUP COMPANIES AND MANAGING ITS O WN BUSINESS CENTRE. DURING THE COURSE OF SURVEY, STATEMENT OF M R. S. SRINIVAS, VICE PRESIDENT (TAXATION) WAS RECORDED U/S.131 OF THE AC T AND IT WAS POINTED OUT TO MR. S. SRINIVAS, THAT THE EXPENSES I NCURRED ON ACCOUNT OF BANK GUARANTEE COMMISSION WERE NOT SUBJECTED T O TDS. MR. S. ITA NO. 4028/MUM/2015 INFRASTRUCTURE LEASING & FINANCE SERVICES LTD. 4 SRINIVAS WAS OF THE OPINION THAT BANK GUARANTEE CO MMISSION WAS NOT COVERED ANY OF THE TDS PROVISIONS AND ACCORDING LY NOT LIABLE TO TDS. THEREAFTER, THE NOTICE U/S.201(1) /201(1A) OF THE ACT WAS ISSUED ON 12.03.2013 TO THE ASSESSEE. REPLY FILED. THE ASS ESSEE WAS FIND IN DEFAULT OF NON-DEDUCTING OF TDS ON BANK GUARANTEE C OMMISSION TO THE TUNE OF RS.94,19,985/- UPON WHICH TDS TO THE TUNE O F RS.9,41,999/- WAS REQUIRED TO BE DEDUCTED. THEREAFTER THE INTERES T U/S.201(1A) OF THE ACT TO THE TUNE OF RS.3,39,120/- WAS ALSO ASSES SED AGAINST THE ASSESSEE. THE TOTAL AMOUNT WAS REQUIRED TO BE PAYAB LE TO THE TUNE OF RS.12,81,119/-, THEREAFTER, THE ASSESSEE CHALLENGED THE SAID ORDER AND THE LEARNED CIT(A) ALLOWED THE APPEAL ON THE AS SESSEE IN THE CASE OF M/S. KOTAK SECURITIES LTD. IN ITA NO.6657/M UM/2011 DATED 03.02.2012 FOR THE ITA NO.5241/M/14 A.Y. 2011-12 3 A.Y.2004-05. IN THE SAID JUDGMENT IT WAS HELD THAT NO TDS WAS PA YABLE ON THE BANK GUARANTEE COMMISSION CHARGES U/S.194H OF THE A CT. FEELING AGGRIEVED THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEA RNED REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSING OFFICER IS OF THE VIEW THA T TDS IS REQUIRED TO BE DEDUCTED UPON THE INTEREST/COMMISSION PAYABLE ON BANK GUARANTEE AND ACCORDINGLY THE INTEREST IS ALSO REQU IRED TO BE PAYABLE U/S.201(1A) OF THE ACT. IN APPEAL THE LEARNED CIT(A ) HAS DELETED THE ADDITION IN VIEW OF THE CASE OF M/S. KOTAK SECURITI ES LTD. (SUPRA). IT IS SPECIFICALLY HELD THAT NO TDS IS PAYABLE ON BANK GU ARANTEE CHARGES U/S. 194H OF THE ACT. THEREFORE, THE SAME IS NOT LI ABLE TO BE DEDUCTED. ACCORDINGLY, THE LEARNED CIT(A) DELETED THE SAID AD DITION. THIS ISSUE HAS FURTHER CAME INTO EXISTENCE IN THE ASSESSEES O WN CASE FOR THE A.Y.2010-11. THE HONBLE INCOME TAX APPELLATE TRIBU NAL, WHILE DECIDING THE MATTER IN THE ASSESSEES OWN CASE IN I TA NO.3920/MUM/2014 HAS ALSO DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE ON RELYING THE CASE DECIDED BY THE HONBLE TRIBUNAL M/S. KOTAK SECURITIES LTD. (SUPRA). THIS ISSUE HAS BEEN SQUARELY COVERED BY THE ABOVE SAID JUDGEMENT, THEREFORE HONORING THE JUDGEMENT OF THE HONBLE TRIBUNAL MENTIONED ABOVE AND FINDING NOTHIN G CONTRARY MATERIAL AGAINST THE FINDING OF THE SAID JUDGEMENT, WE ARE OF THE VIEW THAT LEARNED CIT(A) HAS DECIDED THE MATTER JUDICIOU SLY AND CORRECTLY WHICH DOES NOT REQUIRED TO INTERFERE WITH AT THIS A PPELLATE STAGE. 4. ACCORDINGLY, APPEAL OF THE REVENUE IS HEREBY DIS MISSED. FOLLOWING THE AFORESAID ORDER OF THE COORDINATE BE NCH IN THE ASSESSEES OWN CASE FOR A.Y. 2011-12 IN ITA NO. 524 1/MUM/2014 DATED 20.07.2016, WE HOLD THAT THE ASSESSEE IN THE CASE O N HAND IS NOT REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194H OF THE A CT IN RESPECT OF BANK GUARANTEE COMMISSION/CHARGES PAID TO BANKS. IN THIS VIEW OF THE MATTER, AND FINDING NO MERIT IN THE GROUNDS NO. 1 TO 3 RAIS ED BY REVENUE (SUPRA), ITA NO. 4028/MUM/2015 INFRASTRUCTURE LEASING & FINANCE SERVICES LTD. 5 WE DISMISS THE SAME AND CONSEQUENTLY UPHOLD THE IMP UGNED ORDER OF THE LEARNED CIT(A) AS NO INTERFERENCE IS CALLED FOR THE REIN. 4. IN THE RESULT, THE REVENUES APPEAL FOR A.Y. 2012-1 3 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD MAY, 2017. SD/ - SD/ - (RAM LAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 3 RD MAY, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -59, MUMBAI 4. THE CIT (TDS)- 1, MUMBAI 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.