DCIT (TDS) 1(3), MUMBAI V. LAQSHYA MEDIA P.LTD, MUMBAI

ITA 4390/MUM/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3494 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 17-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH SMC MUMBAI BEFORE SHRI A.D.JAIN , JUDICIAL MEMBER . . , ./ I.T.A. NO. 4390 / MUM/20 1 5 ( / ASSESSMENT YEAR : 20 10 - 11 ) DY.COMMISSIONER OF INCOME TAX OFFICER - 2 6 (1) 4 , SMT(TDS) - 1(3), ROOM NO.703, 7 TH FLOOR, K.G.MITTAL AYURVEDIK HOSPITAL BUILDING, CHARNI ROAD, MUMBAI - 400002 / VS. M/S LAQSHYA MEDIA PVT LTD., LAQSHYA HOUSE, NEXT TO RAMESHWAR TEM PLE, SARASWATI BAUG, SOCIETY ROAD, JOGESHSHWARI (E), MUMBAI - 400060 ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN/GIR NO. : AAACL5004C / APPELLANT BY SHRI A JAY / R E SPONDEN T BY NONE / DATE OF HEARING : 0 7 . 0 7 . 201 6 / DATE OF PRONOUNCEMENT : 0 7 .07.2016 / O R D E R PER A D JAIN ( J M) TH IS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2010 - 11 CHALLENGIN G THE ORDER OF LD.CIT(A) DATED 1 8.5.2015 . 2. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE. HOWEVER, FINDING THAT THE MATTER CAN BE PROCEEDED WITH IN THE ABSENCE OF THE ASSESSEE, I AM DOING SO. ITA NO. 4390 / MUM/20 1 5 2 3 . IN THIS APPEAL, THE DEPARTMENT HAS RAISED THE FOLLOWING ISSUES : A) DELETION OF PROCESSING FEES; B) DELETION OF DEDUCTION OF BANK GUARANTEE COMMISSION AND MISCELLANEOUS BANK CHARGES U/S 194H OF THE INCOME TAX ACT, 1961; AND C) DELETION OF INTERE ST U/S 201(1A) OF THE ACT. 4 . THE F ACTS OF THE CASE ARE THAT THE ASSESSEE FILED E - RETURN ON 14.10.2010. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING OUTDOOR MEDIA ADVERTISING SERVICES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO OBSERV ED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.40,18,998/ - TOWARDS PROCESSING FEES AND RS.8,92,665/ - TOWARDS BANK GUARANTEE COMMISSION AND DID NOT DEDUCT TDS THEREON. THE AO CALLED FOR AN EXPLANATION FROM THE ASSESSEE . T HE EXPLANATION TENDERED BY THE ASSESSEE DID NOT FIND FAVOUR BY THE AO AND BY INVOKING THE PROVISIONS OF SECTION 194 OF THE ACT , THE AO REJECTED THE CLAIM OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL B E FORE THE FIRST APPELLATE AUTHORITY (FAA, FOR SHORT ) 5 . IN THE APPELLATE PROCEEDINGS BEFORE THE FAA , THE ASSESSEE SUBMITTED THAT THE PROCESSING FEES PAID TO THE BANKS ARE GOVERNED BY THE BANKING REGULATION ACT, 1949. THE PROCESSING FEES ARE IN THE NATURE OF UPFRONT INTEREST. THE BANK S CHARGE PROCES SING FEES TO REDUCE INTEREST RATE AND TO SHOW INCOME IN THE YE A R OF SANCTION. IN SUPPORT OF THE SUBMISSIONS RAISED , THE ASSESSEE PLACED STRONG RELIANCE ON THE DECISION OF TRIBUNAL IN THE CASE OF ITA NO. 4390 / MUM/20 1 5 3 ABAN INVESTMENTS V/S DCIT (52 SOT 36) (CHENNAI (URO) AND T HE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF BILT POWER V/S ACIT ( 34 CCH 334 ) IN WHICH THE TRIBUNAL HELD SINCE PROCESSING FEES FALL WITHIN THE DEFINITION OF INTEREST PROVIDED IN SECTION 2(28A) OF THE INCOME TAX ACT, 1961, THESE FALL IN THE EXCLUSION PROVIDED IN SECTION 194A(3) OF THE ACT HENCE AND HENCE, TAX IS NOT LIABLE TO BE DEDUC T ED AT SOURCE IN THE CA S E OF PROCESSING FEES. THE ASSESSEE , BEFORE THE LD.CIT(A) , STRESSED THAT IN VIEW OF THE ABOVE MENTIONED PROVISIONS PROCESSING FEES PAID TO BANKS ARE NOT LIABLE TO BE SUBJECT ED TO TDS U/S 194J OF THE ACT , THAT O N THE CONTRARY, THE AO PLACED STRONG RELIANCE ON THE DECISION OF KOTAK SECURITIES TO HOLD THAT BANK GUARANTEE CHARGES FALL WITHIN AMBIT OF SECTION 194H ; AND T HIS DECISION HAS BEEN REVERSED BY THE TRIBUNAL REPORTED IN (2012) 50 SOT 148 (MUM). 6. THE LD. CIT (A) , AFTER CONSIDERING THE FACTS AND CASE LAWS RELIED ON BY BOTH THE PARTIES , DELETED THE ADDITION MADE BY THE AO ON THIS ISSUE BY OBSERVING AND HOLDING AS UNDER: A. PROCESSING FEES: THE PROCESSING FEE IS PAID TO SCHEDULED BANK. I AGREE WITH THE SUBMISSION OF THE APPELLANT THAT PROCESSING FEES ARE IN THE NATURE OF UPFRONT INTEREST. THIS VIEW IS AFFIRMED BY THE DECISION OF HON'BLE TRIBUNAL IN THE CASE OF M/S. ABAN INVES TMENTS VS. DCIT 52 SOT 36 (CHENNAI)(URO) AND BILT POWER VS. A(IT 34 (CH 334 - DELHI TRIBUNAL WHEREIN IT HAS BEEN HELD THAT PROCESSING FEES FALLS WITHIN THE DEFINITION OF INTEREST PROVIDED IN SECTION 2(28A) OF THE I T. ACT, 1961 WHICH FALLS IN THE EXCLUSION P ROVIDED IN SECTION 194A(3) OF THE ACT AND HENCE, TAX IS NOT LIABLE TO BE DEDUCTED AT SOURCE IN CASE OF PROCESSING FEES. IN VIEW OF THE AFORESAID DECISION, I AM OF THE CONSIDERED OPINION THAT NO INTEREST IS LIABLE TO BE DEDUCTED U/S.194J ON PROCESSING CHA RGES. ITA NO. 4390 / MUM/20 1 5 4 THE DEMAND RAISED U/S. 201 (1) 8: 201 (1A) OF RS.24,545 / - ACCORDINGLY, STAN D S DELETED. B. BANK GUARANTEE COMMISSION & MISC BANK CHARGES :.: ON THIS GROUND RELIANCE IS PLACED ON THE ORDER OF THE HON'BLE ITAT IN THE CASE OF M/S. KOTAK SECURITIES LTD . IN ITA NO.6657/MUM/11 DATED 03.02.2012 FOR A.Y. 2004 - 05 WHEREIN TILE H N 'BLE IT T HAS HELD INTER - ALIA AS UNDER : - '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 ASSESSEE. WHEN BANK ISSUES THE BANK GUARANTEE, ON BEHALF OF THE ASSESSEE, ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAY MENT OF A SPECIFIED AMOUNT TO, ON DEMAND, THE BENEFICIARY 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 THE NATURE OF 'COMMISSION' AS IT IS UNDERSTOOD IN COMMON BUSINESS PARLANCE AND IN THE CONTEXT OF THE SECTION 194H. THIS TRANSACTION, IN OUR CONSIDERED VIEW, IS NOT A TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCTION REQUIREMENTS U/S.194H. WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THE CIT(A) INDEED ERRED IN HOLDING THAT TH E ASSESSEE WAS INDEED UNDER OBLIGATION TO DEDUCT T AX AT SOURCE U/S.194H FROM PAYMENTS MADE BY THE ASSESSEE TO VARIOUS BANKS. A S WE HA VE HELD THAT THE ASSESSEE WAS NOT RE Q UIRED TO DEDUCT TAX AT SOURCE U/S.194H, THE Q UESTION OF LEVY OF I NTEREST U/S.201 ( 1 A) CANNOT ARISE. IN VIEW OF THE ABOVE DISCUSSION, WE QUASH THE IMPUGNED DEMANDS U/S 201 (1) AND 201(1A) R.W.S.194H. WE, THEREFORE, ALSO SEE NO NEED TO DEAL WITH OTHER PERIPHERAL LEGAL ISSUES RAISED BY THE ASSESSEE. 3.4 THE FACTS REMAINING THE SAME, RESPECT FULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, CITED SUPRA, IN MY CONSIDERED OPINION THE DEMAND RAISED BY A.O. U/S 201 (1) ON NON - DEDUCTION OF TAX AT SOURCE ON BANK GUARANTEE COMMISSION & MISCELLANEOUS BANK CHARGES OF RS. 1,00,058/ - U/S.194H STANDS DEL ETED. GROUND IS ALLOWED. ITA NO. 4390 / MUM/20 1 5 5 AGGRIEVED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS BENCH. 7 . THE LD.DR REITERATED THE FACTS OF THE CASE AND STRONGLY RELIED ON THE ORDER OF AO AND SUBMITTED THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE A ND THAT OF THE AO BE RESTORED. 8 . I HAVE CONSIDERED THE SUBMISSIONS OF THE LD.DR AND HAVE PERUSED THE MATERIAL BEFORE ME. THE LD. DR DID NOT BRING ANY MATERIAL ON RECORD TO REVERSE THE WELL REASONED FINDING S OF THE LD.CIT(A) ON THE ISSUE S INVOLVED. THE LD. CIT(A), FOR HIS DECISION, HAS RELIED ON ITAT ORDERS, WHICH HAVE NOT BEEN SHOWN TO BE UPSET . THEREFORE, I FIND THAT THE ORDER OF LD.CIT(A) IS JUSTIFIED AND NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, THE SAME IS CONFIRMED. THE GROUND S RAISED BY THE DEPARTMENT APROPOS PROCESSING FEES AND BANK GUARANTEE COMMISSION AND MISCELLANEOUS BANK CHARGES, ARE REJECTED. 9 . WITH REGARD TO THE GROUND REGARDING CHARGING OF LEVY OF INTEREST U /S 201(1A) OF THE ACT . THE LD. CIT(A) HELD THAT THE ASSESSEE WAS NOT REQ UIRED TO DEDUCT TDS U/S 194H THE QUESTION OF LEVY OF INTEREST U/S 201(1A) DOES NOT ARISE . BEFORE ME, THE LD.DR COULD NOT BRING ANY MATERIAL CONTRARY TO THE FIND OF THE LD.CIT(A), WHICH COMPEL ME TO REVERSE THE ORDER OF LD.CIT(A) ON THIS ISSUE. THEREFO RE, I AM ALSO CONSIDERED OPINION THAT THE VIEW TAKEN BY ITA NO. 4390 / MUM/20 1 5 6 THE LD.CIT(A) IS PERFECT AND JUSTIFIED. ACCORDINGLY , THE GROUND TAKEN BY T HE REVENUE STANDS DISMISSED . 10. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. PRONOUNCED ACCORDINGLY ON 7 TH JULY, 201 6 . 7 TH JULY, 2016 SD ( . . / A.D. JAIN ) / JUDICIAL MEMBER MUMBAI: 7 TH JULY, 2016 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWAR DED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI