NATIONAL COOPERATIVE DEVELOPMENT CORPORATION, NEW DELHI V. DCIT, CIRCLE- 17(2), NEW DELHI

ITA 4309/DEL/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 3225 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 30-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment; TDS; Set aside
• Section: 143(3); 40(a)(ia); 194C; 37; 6

Judgement Text

ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 1 OF 14 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: E: NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 4309/DEL/2017 ( ASSESSMENT YEAR: 2013-14) NATIONAL COOPERATIVE DEVELOPMENT CORPORATION, NEW DELHI. VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-17(2), NEW DELHI. PAN NO: AAACN1964F APPELLANT RESPONDENT ASSESSEE BY : SHRI K.V.S.R. KRISHNA, CA REVENUE BY : MS. RAKHI VIMAL, SR. DR PER ANADEE NATH MISSHRA, AM (A) THIS APPEAL BY ASSESSEE IS FILED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-37, NEW DELHI, [LD. CIT(A), FOR SHORT], DATED 25.05.2017 FOR ASSESSMENT YEAR 2013-14. GROUND TAKEN IN THIS APPE AL OF ASSESSEE IS AS UNDER: 1. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN UPH OLDING THE ORDER OF THE AO FOR DISALLOWING BANK GUARANTEE CHARGES OF RS. 10,58 ,963/- BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF INCOME TAX ACT. THE APPELLANT CONTENDS THAT THE PAYMENT OF BANK GUARANTEE CHARGES TO SCHED ULED BANK IS NOT COVERED UNDER ANY TDS PROVISIONS. HENCE, THE ADDIT ION SHOULD BE DELETED. ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 2 OF 14 (B) THE LIMITED ISSUE IN THIS APPEAL IS WHETHER THE DIS ALLOWANCE OF BANK GUARANTEE CHARGES BY THE ASSESSING OFFICER (AO, FOR SHORT) UNDER SECTION 40A(IA) OF INCOME TAX ACT, 1961 (I.T. ACT, FOR SHORT) IS CORRECT. VIDE ASSESSMENT ORDER DATED 22.03.2016 UNDER SECTION 143(3) OF I.T. ACT, AO HAD DISALLOWED THE AMOUNT OF RS. 10,58,963/- UNDER SECTION 40A(IA) OF I.T. ACT HOLDING THAT THE ASSESSEE, ALTHOUGH REQUIRED TO DEDUCT TDS, HAD FAILED TO DEDUCT TAX AT SOURCE. AGGRIEVE D, THE ASSESSEE FILED AN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS)-37, NEW DELHI. VIDE ORDER DATED 25.05.2017, THE LD. CIT(A) UPHELD THIS ADDITI ON, HOLDING AS UNDER: ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 3 OF 14 ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 4 OF 14 (B.1) AGGRIEVED AGAIN, THE ASSESSEE HAS FILED THIS PRESEN T APPEAL IN INCOME TAX APPELLATE TRIBUNAL (ITAT, FOR SHORT). AT THE TIM E OF HEARING BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE (AR, FOR SHORT) OF THE ASSESSEE SUBMITTED THAT THE DISPUTE REGARDING APPLICABILITY OF SECTION 40A(IA) OF I.T. ACT IN RESPECT OF BANK GUARANTEE FEES CAME UP BEFORE ITAT, IN ASSESSEES OWN CASE, FOR AS SESSMENT YEAR 2011-12 IN ITA NO.- 4193/DEL/2014, AND VIDE ORDER DATED 31.05.2017 OF C O-ORDINATE BENCH OF ITAT, DELHI, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. T HE RELEVANT PORTION OF THE AFORESAID ORDER DATED 31.05.2017 OF CO-ORDINATE BENCH OF ITAT , DELHI IS REPRODUCED AS UNDER: 3. DURING THE ASSESSMENT PROCEEDINGS LD. AO OBSER VED THAT ASSESSEE HAD CLAIMED GUARANTEE .FEE ON BORROWINGS AS DEDUCTIBLE EXPENDITURE. IT WAS OBSERVED THAT THIS AMOUNT HAS BEEN PAID BY ASSESSEE TO CANAR A BANK DURING ASSESSMENT YEAR UNDER CONSIDERATION. LD. AO. ASKED ASSESSEE TO EXPL AIN AS TO WHY GUARANTEE FEE OF RS. 18,69,*613/- MAY NOT BE DISALLOWED, AS NO TDS H AS BEEN DEDUCTED ON THE SAME. LD. AO PLACED * RELIANCE ON CBDT NOTIFICATION NO: 56/2012, TO REACH TO THE CONCLUSION THAT CERTAIN SPECIFIED PAYMENTS SUCH AS PAYMENT TO INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTITUTION, ASSOCI ATIONS OR BODIES AS MAY BE NOTIFIED BY CENTRAL . GOVERNMENT IN THE OFFICIAL GAZETTE, W AS NOT REQUIRED TO DEDUCT TDS FROM 01.01.2013. LD. AO WAS OF OPINION THAT AS THIS PARTICULAR' PAYMENT IN THE PRESENT CASE OF ASSESSEE PERTAINED PRIOR TO 01.01.2 013, ASSESSEE WAS LIABLE TO DEDUCT TDS. LD. AO THEREFORE, ADDED BACK AMOUNT PAI D BY ASSESSEE UNDER SECTION 40(A) (IA) OF THE ACT. 4. AGGRIEVED BY ORDER OF LD. AO, ASSESSEE PREFERR ED AN APPEAL BEFORE LD. CIT (A) ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 5 OF 14 WHO CONFIRMED ADDITION MADE BY LD. AO. 5. AGGRIEVED BY ORDER OF LD. CIT (A), ASSESSEE IS IN APPEAL BEFORE US NOW. 6. LD. AR SUBMITTED THAT ASSESSEE HAD BORROWED T ERM LOAN FROM NATIONAL SCHEDULED TRIBES FINANCE AND DEVELOPMENT CORP WITH CONDITION THAT ASSESSEE WOULD PROVIDE BANK, GUARANTEE OF REQUISITE VALUE. D URING FINANCIAL YEAR 2010-11, ASSESSEE HAD PAID GUARANTEE FEE OF RS. 18,69,61/- T O CANARA BANK FOR GIVING SUCH GUARANTEE. IT HAS BEEN SUBMITTED BY LD. AR THAT ASS ESSEE CLAIMED THESE EXPENSES AS ALLOWABLE EXPENDITURE. IT HAS ALSO BEEN SUBMITTE D THAT SUCH EXPENSES HAVE BEEN ALLOWED AS EXPENDITURE EVERY YEAR IN THE INCOME TAX ASSESSMENTS EVEN THOUGH TDS WAS NOT DEDUCTED, AS THE PROVISION WERE NOT ATTRACT ED ON PAYMENT OF GUARANTEE FEE TO SCHEDULED BANK. WAS IN THE NATURE OF EXPENDITURE IN THE HANDS OF ASSESSEE. LD. AR SUBMITTED THAT AS THERE WERE SOME AMBIGUITY,' CB DT CAME WITH NOTIFICATION NO.' 56/2012 CLARIFYING SPECIFIC PAYMENTS FROM DEDUCTIO N OF TDS, HE SUBMITTED THAT SAID NOTIFICATION IS CLARIFICATORY ISSUED BY CBDT, IN TE RMS OF PROVISIONS OF SECTION 197A(1F) WHICH HAS COME INTO STATUTE BY FINANCE ACT 2012, W.E.F. 07.01.2012. HE SUBMITTED THAT PAYMENT MADE WAS NOT. IN THE NATURE OF ANY INCOME OR INTEREST IN ANY MANNER. BUT IT WAS CHARGES PAID TO BANK FOR OBT AINING BANK GUARANTEE, WHICH CANNOT BE MADE EXIGIBLE TO TDS PROVISIONS. LD. AR SUBMITTED THAT EXPENSES INCURRED BY ASSESSEE BY WAY OF GUARANTEE FEE IS AN ALLOWABLE EXPENDITURE UNDER SECTION 37 (1) OF THE ACT. 7. WE HAVE PERUSED TO RIVAL CONTENTIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF RECORDS PLACED BEFORE US. 8. THIS IS A CASE WHERE ASSESSEE HAD OBTAINED TERM LOAN FROM CANARA BANK ON. CONDITION THAT ASSESSEE WOULD PROVIDE BANK GUARANT EE OF EQUAL AMOUNT. LD. SR. DR CONTENDS THAT AS NOTIFICATION 56/2012 HAS BEEN INS ERTED W.E.F. 01.01.2013, ASSESSEE SHOULD HAVE DEDUCTED TDS ON GUARANTEE FEES PAID TO BANK. WHEREAS LD. AR JIAS, CONTENDED THAT THIS NOTIFICATION IS CLARIF ICATORY IN NATURE AS EVEN PRIOR TO RELEASE OF THIS NOTIFICATION GUARANTEE FEES PAID CO ULD NOT HAVE BEEN LIABLE TO TDS PROVISIONS AS IT DOESN'T FIT INTO ANY OF THE PROVIS IONS UNDER SECTION 194 AND-DO NOT FALL WITHIN DEFINITION OF INTEREST . UNDER SECTIO N 2(28A) OF THE ACT. IT HAS BEEN SUBMITTED THAT SUB CLAUSE (IF) WAS INSERTED TO SECT ION 197A BY FINANCE ACT, 2012 W.E.F. 07.01.2012 WHICH'' GRANTED POWER TO CENTRAL GOVERNMENT TO NOTIFY THAT TDS SHALL NOT BE DEDUCTED ON CERTAIN CLASSES OF PERSONS /INSTITUTIONS/BODIES ON SPECIFIED PAYMENTS MADE TO THEM. THE SECTION READS AS UNDER: 197A. .(1F) NOTWITHSTANDING ANYTHING CONTAINED I N THIS CHAPTER, NO DEDUCTION OF TAX SHALL BE MADE FROM SUCH SPECIFIED PAYMENT TO SUCH INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTIT UTIONS, ASSOCIATIONS OR BODIES AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE, IN THIS BEHALF. 9. THE NOTIFICATION THEREAFTER, SUBSEQUENTLY ISSUED UNDER SECTION BEING 56/2012, FOR THE SAKE OF CONVENIENCE HAS BEEN REPRODUCED HERE WI TH AS UNDER: ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 6 OF 14 SECTION 197A OF THE INCOME-TAX ACT, 1961- DEDUCTION OF TAX AT SOURCE - NO DEDUCTION IN CERTAIN CASES. UNDER SECTI ON 197A(1F) NOTIFICATION NO. 56/2012 [F. NO. 275/53/2012-IT(B)] } DATED 31-12- 2012. IN EXERCISE OF THE POWERS CONFERRED BY SUB-SECTION (IF) OF SECTION 197A OF THE INCOME-TAX ACT, 1961 (43 OF 1961), THE CENTRAL GOVERNMENT HEREBY NOTIFIES THAT NO DEDUCTION OF TAX UNDER CHAPTER XVI I OF THE SAID ACT SHALL BE MADE ON THE PAYMENTS OF THE NATURE SPECIFIED BEL OW, IN CASE SUCH PAYMENT IS MADE BY A PERSON TO A BANK LISTED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF . INDIA ACT, 1934 (2 OF 1934), EXCLUDING A FOREIGN BANK, NAMELY:- (I) BANK GUARANTEE COMMISSION; (II) CASH MANAGEMENT SERVICE CHARGES; (III) DEPOSITORY CHARGES ON MAINTENANCE OF DEMAT ACCOUNTS ; (IV) CHARGES FOR WAREHOUSING SERVICES FOR COMMODITIES; (V) UNDERWRITING SERVICE CHARGES; (VI) CLEARING CHARGES (MICR CHARGES); (VII) CREDIT CARD OR DEBIT CARD COMMISSION FOR TRAN SACTION BETWEEN THE 'MERCHANT ESTABLISHMENT AND ACQUIRER BANK. . 2. THIS NOTIFICATION SHALL COME INTO FORCE FROM THE 1ST DAY OF JANUARY, 2013. SEC. 40(A)(IA) OF THE INCOME TAX ACT, 1961 EMPHASIS ON THAT EXPENDITURE COVERED UNDER MENTIONED TDS SECTIONS PAID TO RESIDE NT AND DEBITED PROFIT & LOSS ACCOUNT WILL NOT BE ALLOWED AS DEDUCTION WHI LE COMPUTING THE INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION, IF:- TAX HAS NOT BEEN DEDUCTED, AT SOURCE, B) TAX DEDUCTED AT SOURCE-AND THE SAME IS NOT REMITT ED, OR C) IF EXPENDITURE IS DEBITED AND TAX. DEDUCTED AT SOU RCE DURING THE PREVIOUS YEAR, TAX IS NOT REMITTED WITHIN THE TIME-LIMITS ME NTIONED IN SECTION 200 SUCH EXPENDITURE WILL BE ALLOWED AS DEDUCTION IN TH E YEAR OF REMITTANCE OF THE TAX. THE FOLLOWINQ PAYMENTS ARE COVERED UNDER SECTION 40 (A)(IA): A) INTEREST U/S 194A B) COMMISSION OR BROKERAGE U/S 194H C) PROFESSIONAL OR TECHNICAL FEE U/S 194J AND D) CONTRACTORS & SUB CONTRACTORS U/S 194C THE PROVISIONS OF THE ABOVE MENTIONED TDS SECTIONS REQUIRE THAT TAX HAS TO BE DEDUCTED AT SOURCE WHEN AMOUNT IS PAID OR CREDITED TO THE ACCOUNT OF THE PAYEE, WHICHEVER IS EARLIER. WHEN TH E AMOUNT IS CREDITED- TO SUSPENSE ACCOUNT OR ANY ACCOUNT, BY WHATEVER NAM E CALLED, THEN IT IS TREATED AS AMOUNT CREDITED TO THE ACCOUNT OF THE PA YEE AND TAX HAS TO BE DEDUCTED AT SOURCE. HENCE, TAX HAS TO BE DEDUCTED A T SOURCE EVEN ON PROVISIONS MADE IN THE BOOKS OF ACCOUNT TO WHICH TD S PROVISIONS ARE APPLICABLE. ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 7 OF 14 10. TO OUR UNDERSTANDING GUARANTEE. FEES PAID WILL NOT FALL WITHIN AMBIT OF INTEREST,, UNDER SECTION 2(28 A) OF THE ACT. THER E ALSO DOES NOT ARISE ANY KIND OF PRINCIPAL-AGENT RELATIONSHIP BETWEEN ASSESSEE AND B ANK AND THEREFORE, GUARANTEE FEES RECEIVED BY BANK CANNOT EVEN BE RECKONED AS CO MMISSION OR BROKERAGE FOR THAT MATTER. THE BANK IS ALSO NOT ACTING ON BEHALF OF ASSESSEE FOR RENDERING ANY KIND OF SERVICE. WE AGREE WITH SUBMISSIONS ADVANCED BY LD. AR THAT GUARANTEE, FEE PAID BY ASSESSEE TO BANK DO NOT FIT INTO ANY OF TAXING PROVISIONS OR UNDER SECTION 2(28A) FOR TDS PROVISIONS TO BE APPLICABLE. 11. UNDER SUCH CIRCUMSTANCES WE DO NOT FIND ANY REA SON TO INTERPRET CIRCULAR IN THE MANNER AS IT HAS BEEN SUBMITTED BY LD. SR. DR. IT IS CARDINAL PRINCIPLE OF CONSTRUCTION THAT EVERY STATUTE IS PRIMA FACIE PROS PECTIVE UNLESS IT IS EXPRESSLY OR BY NECESSARY IMPLICATION MADE TO HAVE RETROSPECTIVE OPERATION. BUT THE RULE IN GENERAL I APPLICABLE WHERE OBJECT OF STATUTE IS OR TO IMPOSE NEW BURDENS OR TO IMPAIR EXISTING OBLIGATIONS. IF THERE ARE WORDS IN STATUTE SUFFICIENT TO SHOW INTENTION OF LEGISLATURE TO AFFECT EXISTING RIGHTS OF TAX PAY ER, IT IS DEEMED TO BE PROSPECTIVE IN NATURE. THE PRESUMPTION AGAINST RETROSPECTIVE OPERA TION IS NOT APPLICABLE TO DECLARATORY STATUTES. IN DETERMINING, THEREFORE, NA TURE OF THE ACT, REGARD MUST BE HAD TO SUBSTANCE RATHER THAN TO FORM. IF A. NEW ACT IS 'TO EXPLAIN' AN EARLIER ACT, IT WOULD BE CONSTRUED RETROSPECTIVELY. AN EXPLANATORY ACT IS GENERALLY PASSED TO SUPPLY AN OBVIOUS OMISSION OR TO CLEAR UP DOUBTS AS TO MEANING- OF THE PREVIOUS ACT. IT IS WELL SETTLED THAT IF A STATUTE IS CURATI VE OR MERELY DECLARATORY OF PREVIOUS LAW RETROSPECTIVE OPERATION IS GENERALLY INTENDED. AN AMENDING ACT MAY BE PURELY DECLARATORY TO CLEAR A MEANING OF A PROVISION OF TH E PRINCIPAL ACT WHICH WAS ALREADY IMPLICIT. A CLARIFICATORY AMENDMENT OF THIS NATURE WILL HAVE RETROSPECTIVE EFFECT, 12. FURTHER THIS VIEW IS SUPPORTED BY THE FOLLOWING DECISIONS OF COORDINATE BENCHES OF MUMBAI TRIBUNAL. THE RELEVANT EXTRACTS H AVE BEEN REPRODUCED HEREIN BELOW: HONBLE MUMBAI TRIBUNAL IN; CASE OF NEO SPORTS BROA DCAST PVT. LTD VS.CIT.TDS REPORTED IN 181 TTJ 417 HAS HELD AS UNDER: SECTION 194A(1) IS' APPLICABLE ONLY TO 'INCOME BY WAY OF INTEREST'. HOWEVER, THE IMPUGNED TRANSACTION IS THAT OF REIMBURSEMENT O F BANK GUARANTEE COMMISSION AND DOES NOT INVOLVE PAYMENT OF INTEREST . THERE IS NO BORROWING WHATSOEVER. 'INTEREST' AS PER SEC. 2(28A) MEANS 'IN TEREST PAYABLE ... IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED (IN CLUDING A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION)) AND INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF THE MONEYS BORROWED OR DEBT IN CURRED ... 'IN THE CASE OF CIT V. CARGILL GLOBAL TRADING (I.) CO.. (P.) LTD. [ 2011] 335 ITR 94/199 TAXMAN 320 (DELHI), HON'BLE DELHI HIGH COURT HELD A S UNDER:- 'IT IS CLEAR FROM THE PROVISIONS OF SECTION 2(28A) THAT BEFORE ANY AMOUNT PAID IS CONSTRUED AS INTEREST, IT HAS TO BE ESTABLISHED THAT THE SAME IS PAYABLE IN RESPECT OF ANY MONEY BORROWED OR DEBT INCURRED. IN THE INSTANT CASE, ON THE AFORESAID FACTS APPEARING ON RECORD, THE TRIBUNAL RIGHTLY HELD THAT THE DISCOUNTING CHARGES PAID WERE NOT IN ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 8 OF 14 RESPECT OF ANY DEBT INCURRED OR MONEY BORROWED, INS TEAD, THE ASSESSEE HAD MERELY DISCOUNTED THE SALE CONSIDERATION RESPEC TIVELY ON SALE OF GOODS.' IN THE INSTANT CASE, THERE IS NO MONEY BORROWED OR DEBT INCURRED. THEREFORE, PROVISIONS OF SEC. 2(28A) AND SEC. 194A DO NOT APPLY. PAYMENT MADE TO NCL IS NOT 'INCOME BY WAY OF INTERE ST'. THE IMPUGNED RECEIPT WOULD BE IN THE NATURE OF REIMBURS EMENT OF EXPENSES INCURRED BY IT IN VIEW OF THE ABOVE DISCUS SION, WE DO NOT FIND ANY MERIT IN THE ORDER PASSED U/ S.263 IN RESPECT O F ONE OF THE POSSIBLE VIEW TAKEN BY THE AO. EVEN ON MERIT, WE FOUND THAT BANK GUARANTEE COMMISSION DOES NOT COME UNDER THE PURVIEW OF INTER EST SO AS TO MAKE ASSESSEE LIABLE FOR TDS U/ S. 194A. LD. AR HAD PLACED RELIANCE UPON DECISION OF MUMBAI BENCH IN CASE OF KOTAK SECURITIES LTD VS. DCIT, REPORTED IN 147 TTJ 443 HA S HELD AS UNDER: 5. A PLAIN READING OF THE ABOVE PROVISION INDICATE S THAT TAX WITHHOLDING REQUIREMENTS, UNDER SECTION. 194H APPLY IN RESPECT OF 'COMMISSION OR BROKERAGE', WHICH, IN TURN, IS DEFIN ED BY EXPLANATION TO SECTION 194H. NO DOUBT, THIS DEFINITION IS INCLUSIV E BUT THE FUNDAMENTAL QUESTION THAT WE-REALLY NEED TO CONSIDER IN THE FIR ST PLACE IS AS TO WHAT ARE THE CONNOTATIONS OF EXPRESSION ' COMMISSION OR BROKERAGE 1 IN COMMON PARLANCE, AND THEN PROCEED TO DEAL WITH THE INCLUSIONS THERETO BY THE VIRTUE OF SPECIFIC PROVISION OF LAW. 6. WE FIND THAT THE EXPRESSION COMMISSION AND BR OKERAGE 1 HAVE BEEN USED TOGETHER IN THE STATUTE. IT IS WELL SETTLED, A S NOTED, BY MAXWELL IN INTERPRETATION OF ELABORATING ON THE PRINCIPLE OF N OSCITUR A SOCUS, THAT WHEN TWO OR MORE WORDS WHICH ARE SUSCEPTIBLE TO AN ALOGOUS MEANING ARE USED TOGETHER THEY ARE DEEMED TO BE USED IN THE IR COGNATE SENSE. THEY TAKE, AS IT WERE, THEIR COLOURS FROM EACH OTHE R, THE MEANING OF MORE GENERAL BEING RESTRICTED TO A SENSE ANALOGOUS TO THAT OF LESS GENERAL. EXPLAINING THIS PRINCIPLE IN GENERAL TERMS , HON'BLE SHRI M.K. CHATURVEDI, THE THEN VICE PRESIDENT (MZ) HAS, INTE RPRETATION OF TAXING STATUTES (AIFTP JOURNAL : VOL. 4, NO. 7, JULY, 2002 , AT P. 7), IN HIS INIMITABLE WORDS' OBSERVED: LAW IS NOT A BROODING .OMNIPOTENCE IN THE SKY. IT I S A PRAGMATIC TOOL OF THE SOCIAL ORDER. THE TENETS OF L AW BEING ENACTED ON THE BASIS OF PRAGMATISM. SIMILARLY, THE RULES RELATING TO INTERPRETATION ARE ALSO BASED ON COMMON -SENSE .APPROACH. SUPPOSE A MAN TELLS HIS WIFE TO GO OUT A ND BUY BREAD, MILK OR ANYTHING ELSE SHE NEEDS, HE WILL NOT NORMALLY BE UNDERSTOOD TO INCLUDE IN THE TERMS 'ANYTHING ELSE S HE NEEDS' A NEW CAR OR AN ITEM OF JEWELLERY. THE DICTUM OF EJUS DEM GENERIS REFERS TO SIMILAR SITUATION. IT MEANS OF THE SAME K IND, CLASS OR NATURE. THE RULE IS THAT WHEN GENERAL WORDS FOLLOW PARTICULAR ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 9 OF 14 AND SPECIFIC WORDS OF THE SAME NATURE, THE GENERAL WORDS MUST BE CONFINED TO THE THINGS OF SAME KIND AS SPECIFIE D. NOSCITUR A SOCIIS IS A BROADER VERSION OF THE MAXIM EJUSDEM GE NERIS. A MAN MAY BE KNOWN BY THE COMPANY HE KEEPS AND A WORD MAY BE INTERPRETED WITH REFERENCE TO BE ACCOMPANYING 'W ORDS. WORDS DERIVE COLOUR FROM THE SURROUNDING WORDS. 7. BROOM'S LEGAL MAXIMS (10TH EDN.) OBSERVES THAT ' IT IS A RULE LAID DOWN BY LORD BACON, THAT COPULATIO VERBORUM INDICAT ACCEPTATIONEM IN EODEM SENSU THE COUPLING OF WORDS TOGETHER SHOWS THAT THEY ARE TO BE UNDERSTOOD IN THESAME SENSE.' 8. LET US NOW DEAL WITH LEGAL CONNOTATIONS OF THESE TWO EXPRESSIONS, NAMELY ' COMMISSION ' ARID 'BROKERAGE'. THE LAW LE XICON (EDITED BY JUSTICE Y.V. CHANDRACHUD; 1997. EDN.) OBSERVES THAT 'IN COMMERCIAL LAW, COMMISSION IS A COMPENSATION TO A FACTOR. OR O THER AGENT FOR SERVICES TO BE RENDERED IN MAKING A SALE OR OTHERWI SE; A SUM ALLOWED AS COMPENSATION TO A SERVANT; FACTOR OR AGENT WHO M ANAGES THE AFFAIRS OF OTHERS, IN RECOMPENSE FOR HIS SERVICES.' ACCORDI NG TO -- THE GIVEN DEFINITION, 'IT IS AN ALLOWANCE, RECOMPENSE OR REWA RD MADE TO AGENTS, FACTORS AND BROKERS AND OTHERS FOR EFFECTING SALES AND CARRYING OUT BUSINESS TRANSACTIONS. IT IS GENERALLY CALCULATED A S A CERTAIN PERCENTAGE ON THE AMOUNT OF THE TRANSACTIONS ON THE PROFITS TO THE PRINCIPAL.' THE EXPRESSION 'BROKERAGE' IS DEFINED AS FEES OR COMMIS SION GIVEN TO OR CHARGED BY A BROKER'. IN TURN A BROKER IS DEFINED A S 'A MIDDLEMAN OR AGENT WHO, FOR A COMMISSION ON THE VALUE OF TRANSAC TION, NEGOTIATES FOR OTHERS THE PURCHASE OR SALE OF BOOKS, BONDS OR COMMODITIES, OR PROPERTY OF ANY KIND, OR, WHO ATTENDS TO THE - DOIN G OF SOMETHING FOR ANOTHER'. 9. IN THE LIGHT OF THE ABOVE DISCUSSION, AND WHEN W E LOOK AT THE CONNOTATIONS OF EXPRESSION EXPRESSION OF BROKERAGE IN ITS COGNATE SENSE, AS IN THE LIGHT OF THE PRINCIPLE OF NOSCITUR A SOCIIS AS WE ARE OBLIGED TO, IN OUR CONSIDERED VIEW, SCOPE OF EXPRES SION ' COMMISSION FOR THIS PURPOSE, WILL BE CONFINED TO 1 AN ALLOWANCE, RECOMPENSE OR REWARD MADE- TO AGENTS, FACTORS AND BROKERS AND OTH ERS FOR EFFECTING SALES AND CARRYING OUT BUSINESS TRANSACTIONS' AND S HALL NOT EXTEND TO THE PAYMENTS, SUCH AS 'BANK GUARANTEE COMMISSION, W HICH LORE IN THE NATURE OF FEES FOR SERVICES RENDERED OR PRODUCT OFF ERED BY THE RECIPIENT OF SUCH PAYMENTS ON PRINCIPAL TO PRINCIPAL BASIS. E VEN WHEN AN EXPRESSION IS STATUTORILY DEFINED UNDER SECTION 2, IT STILL HAS TO MEET THE TEST OF CONTEXTUAL RELEVANCE AS SECTION 2 ITSELF ST ARTS WITH THE WORDS 'IN THIS ACT (I.E. INCOME TAX ACT), UNLESS CONTEXT OTHERWISE REQUIRES...', AND, THEREFORE., CONTEXTUAL MEANING A SSUMES SIGNIFICANCE. EVERY DEFINITION IN THE INCOME. TAX ACT MUST DEPEND ON THE CONTEXT IN WHICH THE EXPRESSION IN SET OUT, AND THE CONTEXT IN WHICH EXPRESSION 'COMMISSION' APPEARS IN SECTION 194H, I.E. ALONGWIT H THE EXPRESSION 'BROKERAGE', SIGNIFICANTLY RESTRICTS ITS CONNOTATIO NS. THE COMMON ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 10 OF 14 PARLANCE MEANING OF THE EXPRESSION ' COMMISSION ' T HUS DOES NOT EXTEND TO A PAYMENT WHICH IS IN THE NATURE OF FEES FOR A PRODUCT OR SERVICE; IT MUST REMAIN RESTRICTED TO, AS HAS-BEEN ELABORATED ABOVE, A PAYMENT IN THE NATURE OF REWARD FOR EFFECTING SOLES OR BUSINESS TRANSACTIONS ETC. THE INCLUSIVE DEFINITION OF THE E XPRESSION ' COMMISSION OR BROKERAGE' IN EXPLANATION TO SECTION 194H IS QUITE IN HARMONY WITH THIS APPROACH AS IT ONLY PROVIDES THAT 'ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY 'A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES} OR FOR ANY SERVICES IN THE COURSE OF BUYI NG OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY A SSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES' IS INCLUDIBLE IN TH E SCOPE OF MEANING OF 'COMMISSION OR BROKERAGE'. THEREFORE, WHAT THE INCL USIVE DEFINITION REALLY CONTAINS IS NOTHING BUT NORMAL MEANING OF TH E EXPRESSION 1 COMMISSION OR BROKERAGE 1 . IN THE CASE OF SOUTH GUJARAT ROOFING TILES MANUFACTURERS ASSOCIATION V. STATE OF GUJARAT. [197 6] 4 SCC 601, HON'BLE SUPREME COURT WERE IN SEISIN OF A SITUATION IN WHICH AN EXPRESSION, NAMELY 'PROCESSING', WAS GIVEN AN INCLU SIVE DEFINITION, BUT THEIR LORDSHIPS WERE OF THE VIEW THAT 'THERE COULD BE NO OTHER MEANING OF 'PROCESSING BESIDES WHAT IS STATED AS INCLUDED IN THAT EXPRESSION AND THAT 'THOUGH INCLUDE' IS GENERALLY USED IN INTE RPRETATION CLAUSE AS A WORD OF ENLARGEMENT, IN SOME CASES CONTEXT MIGHT SUGGEST A DIFFERENT .INTENTION'. THEIR LORDSHIPS THEN CONCLUD ED THAT THOUGH, THE EXPRESSION USED IN THE DEFINITION CLAUSE IS INCLUDE S', 'IT SEEMS TO US THAT THE WORD INCLUDES' HAS BEEN USED HERE IN THE S AME SENSE OF 'MEANS'; THIS IS THE ONLY CONSTRUCTION THAT THE WO RD CAN, BEAR IN THIS CONTEXT. IN OTHER WORDS, AN INCLUSIVE DEFINITION, AS THEIR LORDSHIPS NOTED, DOES NOT NECESSARILY ALWAYS EXTEND THE MEANI NG OF AN EXPRESSION. WHEN INCLUSIVE DEFINITION CONTAINS ORDI NARY NORMAL CONNOTATIONS OF AN EXPRESSION, IN OUR CONSIDERED VI EW, EVEN AN INCLUSIVE DEFINITION HAS TO BE TREATED AS EXHAUSTIV E. THAT IS THE SITUATION IN THE CASE BEFORE US AS WELL EVEN AS DEF INITION 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 DEFINITION. TH EREFORE, AS HELD BY THE COORDINATE BENCHES IN A NUMBER OF CASES INCLUDING S RL RANBAXY LTD V. ASSTT. CIT [2011] 16 TAXMANN.COM 343 (DELHI - TRIB. ), FOSTER'S INDIA (P.) LTD. V. ITO [2009] 29 SOT 32 (PUNE) (URO), AND AJMER ZILA DUGDH UIPADAK SANGH.LTD. V. ITO 12009} 34 SOT 216, PRINCIPAL AGENT RELATIONSHIP IS A SINE QUA NON FOR INVOKING THE PRO VISIONS OF SECTION 194H. IN THE CASE BEFORE US, THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK ISSUING THE BANK GUARANTEE AND THE ASSESSEE. WHEN BANK ISSUES THE BANK GUARANTEE, ON BEHALF OF THE AS SESSEE, ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAYMENT OF A SPECIFIED AMOUNT TO, ON DEMAND, THE BENEFICIARY, AND IT IS IN CONSID ERATION OF THIS, COMMITMENT, THE BANK CHARGES A. FEES WHICH IS CUSTO MARILY TERMED AS 'HANK GUARANTEE COMMISSION. WHILE IT IS TERMED AS G UARANTEE COMMISSION, IT IS NOT IN THE NATURE OF' COMMISSION ' AS IT IS UNDERSTOOD IN COMMON BUSINESS PARLANCE AND IN THE CONTEXT OF T HE SECTION -194H. ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 11 OF 14 THIS TRANSACTION, IN OUR CONSIDERED, VIEW, IS NOT A TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCT ION REQUIREMENT UNDER SECTION 194H. WE ARE, THEREFORE, OF THE CONSI DERED VIEW THAT THE CIT (A) INDEED ERRED IN HOLDING THAT THE ASSESSEE ' WAS INDEED UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194H FROM PAYMENTS MADE BY THE ASSESSEE TO VARIOUS BANKS. (B.2) THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE F URTHER SUBMITTED THAT AS FAR AS APPLICABILITY OF SECTION 194J OF I.T. ACT IS CON CERNED, THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. [2016] 383 ITR 1 (SC). PLACING REL IANCE ON THE AFORESAID PRECEDENTS, VIDE ORDER DATED 31.05.2017 OF CO-ORDINATE BENCH OF ITAT, DELHI IN ASSESSEES OWN CASE; AND ORDER IN THE CASE OF CIT VS. KOTAK SECURI TIES LTD. (SUPRA); THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE AFORESAID DISALLOWANCE OF RS. 10,58,963/- UNDER SECTION 40A(IA) OF I.T. ACT SHOULD BE DELETED. THE LD. DEP ARTMENTAL REPRESENTATIVE (LD. DR, FOR SHORT) HOWEVER, DREW OUR ATTENTION TO PARAGRAPH S 5.1 AND 5.2 OF THE AFORESAID IMPUGNED APPELLATE ORDER DATED 25.05.2017 OF THE LD . CIT(A) AND SUPPORTED THE ORDER OF THE LD. CIT(A). IN REJOINDER, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE CONTENTS OF THE PARAGRAPHS 5.1 AND 5.2 OF THE IMPUGNED APPEL LATE ORDER DATED 25.05.2017 OF THE LD. CIT(A) HAVE NO BASIS. HE FURTHER SUBMITTED THA T THE FACTS STATED IN THESE PARAGRAPHS OF THE ORDER OF THE LD. CIT(A) HAVE NO R ELEVANCE OR APPLICATION IN THE CASE OF THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ASS ESSEE HAD NEVER SOUGHT ANY TECHNICAL SERVICES FROM THE BANK AND FURTHER THAT T HE BANK HAD NEVER PROVIDED ANY TECHNICAL SERVICES TO THE ASSESSEE BY WAY OF ANY RE CORD ETC. HE ALSO SUBMITTED THAT APPLICABILITY OF SECTION 194J OF I.T. ACT WAS NOT E VEN ALLEGED BY THE AO AND THE LD. ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 12 OF 14 CIT(A) HAS INVOKED SECTION 194J OF I.T. ACT WITHOUT ANY CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF ASSESSEES CASE. (C) WE HAVE HEARD BOTH SIDES. WE HAVE ALSO PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE FIND THAT NOWHERE, IT IS THE CASE OF TH E AO THAT SECTION 194J OF I.T. ACT IS APPLICABLE IN THE CASE OF THE ASSESSEE. WE ALSO FI ND THAT THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE ACTUALLY SOUGHT ANY TECHNICA L SERVICES FROM BANK OR THAT THE BANK ACTUALLY PROVIDED ANY TECHNICAL SERVICES TO TH E ASSESSEE OR THAT THE AFORESAID PAYMENT OF RS. 10,58,963/- WAS MADE BY THE ASSESSEE TO THE BANK AS FEES FOR TECHNICAL SERVICES. THUS, WE ARE OF THE VIEW THAT THE FINDIN G OF THE LD. CIT(A) THAT THE PAYMENT OF RS. 10,58,963/- WAS MADE BY THE ASSESSEE TO THE BANK ON ACCOUNT OF TECHNICAL SERVICES; IS WITHOUT ANY BASIS AND WITHOUT ANY SUPP ORTING MATERIALS. THEREFORE, THE CONCLUSION OF LD. CIT(A), ARRIVED AT WITHOUT ANY BA SIS AND WITHOUT ANY SUPPORTING MATERIALS, CANNOT BE UPHELD. IN VIEW OF THE FOREGO ING, AND RESPECTFULLY FOLLOWING THE PRECEDENTS, VIDE ORDER DATED 31.05.2017 OF CO-ORDIN ATE BENCH OF ITAT IN ASSESSEES OWN CASE IN ITA NO. 4193/DEL/2014 FOR ASSESSMENT YE AR 2011-12, DELHI AND ORDER OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KOTAK SECURITIES LTD. (SUPRA); AND MOREOVER, AS NEITHER SIDE HAS BROUGHT ANY FACTS AND CIRCUMSTANCES FOR OUR CONSIDERATION TO DISTINGUISH THE PRESENT APPEAL BEF ORE US FROM FACTS AND CIRCUMSTANCES RELEVANT FOR AFORESAID ORDERS, I.E. ORDER DATED 31. 05.2017 OF ITAT IN ASSESSEES OWN CASE AND IN THE CASE OF CIT VS. KOTAK SECURITIES LT D. (SUPRA); WE DECIDE THE DISPUTED ISSUE IN THE PRESENT APPEAL BEFORE US IN FAVOUR OF THE ASSESSEE, AND SET ASIDE THE ORDER ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 13 OF 14 OF THE LD. CIT(A). THE AO IS ACCORDINGLY DIRECTED TO DELETE THE AFORESAID ADDITION OF RS. 10,58,963/-. (D) IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4/12/2019. SD/- SD/- (H.S. SIDHU) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED: 4/12/2019. POOJA/- COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.-4309/DEL/2017. NATIONAL COOPERATIVE DEVELOPMENT CORPORATION. PAGE 14 OF 14 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER