DCIT CIR 6(1), MUMBAI V. JSM CORPORATION P.LTD, MUMBAI

ITA 4477/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2993 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 07-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 27-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH PATNADE
• Assessee Lawyers: SHAILESH B DAVE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NOS.4477 & 5858/M/2014 ASSESSMENT YEARS: 2011-12 & 2012-13 DCIT, CIR. 6(1), R.NO.506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. JSM CORPORATION PVT. LTD., A-WING, 3 RD FL., TODI ESTATE, S.J. MARG, LOWER PAREL (W), MUMBAI 400 013 PAN: AABCJ 4903B (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SHAILESH B. DAVE, A.R. REVENUE BY : SHRI PRAKASH PATNADE, D.R. DATE OF HEARING : 21.06.2016 DATE OF PRONOUNCEMENT : 29.06.2016 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THESE APPEALS BY THE REVENUE HAVE BEEN DIRECTED AG AINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFT ER REFERRED TO AS THE CIT(A)] DATED 22.04.2014 AND 17.07.2014 RELEVANT TO A.Y. 2011- 12 AND A.Y. 2012-13 RESPECTIVELY. 2. THE COMMON ISSUE RAISED BY THE REVENUE IN BOTH T HE APPEALS IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THA T NO TDS WAS DEDUCTIBLE/PAYABLE ON THE COMMISSION PAID BY THE AS SESSEE TO THE BANKS/CREDIT CARD COMPANIES ON THE AMOUNT RECEIVED FROM ITS CUST OMERS THROUGH CREDIT CARD/DEBIT CARD U/S 194H OF THE INCOME TAX AND THER EFORE NO DISALLOWANCE WAS ATTRACTED U/S SEC.40(A)(IA) OF THE ACT AND THUS, U NDER THE CIRCUMSTANCES, ASSESSEE CAN NOT BE HELD TO BE AS ASSESSEE IN DEFA ULT UNDER SECTION 201 OF THE ACT. ITA NO.4477/M/2014 M/S. JSM CORPORATION PVT. LTD. 2 3. AT THE OUTSET, THE LD. AR OF THE ASSESSEE HAS S TATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN THE OWN CASE OF THE ASS ESSEE IN RELATION TO APPEALS FOR EARLIER ASSESSMENT YEARS AY 2009-10 AND AY 2010 -11. THE TRIBUNAL VIDE ORDER DATED 02/03/2015 IN ITA NO.5519/MUM/2013(A.Y. 2010-11) HAS DISMISSED THE APPEAL OF THE REVENUE OBSERVING AS UN DER: 5. WE HAVE CAREFULLY GONE THROUGH THE ORDER PASSED BY AO AS WELL AS LD. CIT(A). WE FIND THAT RELIEF HAS BEEN GRANTED BY LD. CIT(A) ON THE BASIS OF AFOREMENTIONED TWO DECISION OF THE TRIBUNAL. IT MAY BE MENTIONED H ERE THAT SUBSEQUENTLY ALSO, MUMBAI TRIBUNAL HAS FOLLOWED THE AFOREMENTIONED DEC ISIONS IN THE CASE OF ACIT VS. JET AIRWAYS INDIA LTD., VIDE DECISION DATED 23/10/2 013 REPORTED AS 146 ITD 682(MUM) (MUM) AND ALSO IN THE CASE OF ITO VS. JET AIRWAYS INDIA LTD. REPORTED IN 147 ITD 133. IN THE AFOREMENTIONED CASE IT HAS BEEN HELD THAT NO TDS IS REQUIRED TO BE DEDUCTED ON THE FEES CHARGED BY THE BANK ON CRED IT CARD TRANSACTIONS. IT MAY FURTHER BE MENTIONED THAT RECENTLY, HONBLE DELHI H IGH COURT IN THE CASE OF CIT VS. JDS APPARELS (P) LTD. VIDE THEIR DECISION DATED 18/ 11/2014, 53 TAXAMANN.COM 139(DEL) HAVE UPHELD SUCH CONCLUSION AS PER FOLLOWI NG OBSERVATIONS: 15. APPLYING THE ABOVE CITED CASE LAW TO THE FACTU AL MATRIX OF THE PRESENT CASE, WE FEEL THAT SECTION 194H OF THE ACT WOULD NO T BE ATTRACTED. HDFC WAS NOT ACTING AS AN AGENT OF THE RESPONDENT- ASSESSEE. ONCE THE PAYMENT WAS MADE BY HDFC, IT WAS RECEIVED AND CREDITED TO THE A CCOUNT OF THE RESPONDENT-ASSESSEE. IN THE PROCESS, A SMALL FEE WA S DEDUCTED BY THE ACQUIRING BANK, I.E. THE BANK WHOSE SWIPING MACHINE WAS USED. ON SWIPING THE CREDIT CARD ON THE SWIPING MACHINE, THE CUSTOME R WHOSE CREDIT CARD WAS USED, GOT ACCESS TO THE INTERNET GATEWAY OF THE ACQ UIRING BANK RESULTING IN THE REALISATION OF PAYMENT. SUBSEQUENTLY, THE ACQUI RING BANK REALIZED AND RECOVERED THE PAYMENT FROM THE BANK WHICH HAD ISSUE D THE CREDIT CARD. HDFC HAD NOT UNDERTAKEN ANY ACT ON BEHALF OF THE RESPONDENT-ASSESSEE. THE RELATIONSHIP BETWEEN HDFC AND THE RESPONDENT-AS SESSEE WAS NOT OF AN AGENCY BUT THAT OF TWO INDEPENDENT PARTIES ON PRINC IPAL TO PRINCIPAL BASIS. HDFC WAS ALSO ACTING AND EQUALLY PROTECTING THE INT EREST OF THE CUSTOMER WHOSE CREDIT CARD WAS USED IN THE SWIPING MACHINES. IT IS NOTICEABLE THAT THE BANK IN QUESTION OR THEIR EMPLOYEES WERE NOT PRESEN T AT THE SPOT AND WERE NOT ASSOCIATED WITH BUYING OR SELLING OF GOODS AS S UCH. UPON SWIPING THE CARD, THE BANK MADE PAYMENT OF THE BILL AMOUNT TO T HE RESPONDENT- ASSESSEE. THUS, THE RESPONDENT ASSESSEE RECEIVED TH E SALE CONSIDERATION. IN TURN, THE BANK IN QUESTION HAD TO COLLECT THE AMOUN T FROM THE BANKERS OF THE CREDIT CARD HOLDER. THE BANK HAD TAKEN THE RISK AND ALSO REMAINED OUT OF POCKET FOR SOMETIME AS THERE WOULD BE A TIME GAP BE TWEEN THE DATE OF PAYMENT AND RECOVERY OF THE AMOUNT PAID. 16. THE AMOUNT RETAINED BY THE BANK IS A FEE CHARGE D BY THEM FOR HAVING RENDERED THE BANKING SERVICES AND CANNOT BE TREATED AS A COMMISSION OR BROKERAGE PAID IN COURSE OF USE OF ANY SERVICES BY A PERSON ACTING ON BEHALF OF ANOTHER FOR BUYING OR SELLING OF GOODS. THE INTE NTION OF THE LEGISLATURE IS ITA NO.4477/M/2014 M/S. JSM CORPORATION PVT. LTD. 3 TO INCLUDE AND TREAT COMMISSION OR BROKERAGE PAID W HEN A THIRD PERSON INTERACTS BETWEEN THE SELLER AND THE BUYER AS AN AG ENT AND THEREBY RENDERS SERVICES IN THE COURSE OF BUYING AND/OR SELLING OF GOODS. THIS HAPPENS WHEN THERE IS A MIDDLEMAN OR AN AGENT WHO INTERACTS ON B EHALF OF ONE OF THE PARTIES, HELPS THE BUYER/SELLER TO MEET, OR PARTICI PATES IN THE NEGOTIATIONS OR TRANSACTIONS RESULTING IN THE CONTRACT FOR BUYING A ND SELLING OF GOODS. THUS, THE REQUIREMENT OF AN AGENT AND PRINCIPAL RELATIONS HIP. THIS IS THE EXACT PURPORT AND THE RATIONALE BEHIND THE PROVISION. THE BANK IN QUESTION IS NOT CONCERNED WITH BUYING OR SELLING OF GOODS OR EVEN W ITH THE REASON AND CAUSE AS TO WHY THE CARD WAS SWIPED. IT IS NOT BOTHERED O R CONCERNED WITH THE QUALITY, PRICE, NATURE, QUANTUM ETC. OF THE GOODS B OUGHT/SOLD. THE BANK MERELY PROVIDES BANKING SERVICES IN THE FORM OF PAY MENT AND SUBSEQUENTLY COLLECTS THE PAYMENT. THE AMOUNT PUNCHED IN THE SWI PING MACHINE IS CREDITED TO THE ACCOUNT OF THE RETAILER BY THE ACQU IRING BANK, I.E. HDFC IN THIS CASE, AFTER RETAINING A SMALL PORTION OF THE S AME AS THEIR CHARGES. THE BANKING SERVICES CANNOT BE COVERED AND TREATED AS S ERVICES RENDERED BY AN AGENT FOR THE PRINCIPAL DURING THE COURSE OF BUYING OR SELLING OF GOODS AS THE BANKER DOES NOT RENDER ANY SERVICE IN THE NATURE OF AGENCY. 17. ANOTHER REASON WHY WE FEEL SECTION 40(A)(IA) OF THE ACT SHOULD NOT HAVE BEEN INVOKED IN THE PRESENT CASE IS THE PRINCIPLE O F DOUBTFUL PENALIZATION WHICH REQUIRES STRICT CONSTRUCTION OF PENAL PROVISI ONS. THE SAID PRINCIPLE APPLIES NOT ONLY TO CRIMINAL STATUTES BUT ALSO TO P ROVISIONS WHICH CREATE A DETERRENCE AND RESULTS IN PUNITIVE PENALTY. SECTION 40(A)(IA) IS A DETERRENT AND A PENAL PROVISION. IT HAS THE EFFECT OF PENALIS ING THE ASSESSEE, WHO HAS FAILED TO DEDUCT TAX AT SOURCE AND ACTS TO THE DETR IMENT OF THE ASSESSEES PROPERTY AND OTHER ECONOMIC INTERESTS. IT OPERATES AND INFLICTS HARDSHIP AND DEPRIVATION, BY DISALLOWING EXPENDITURE ACTUALLY IN CURRED AND TREATING IT AS DISALLOWED. THE EXPLANATION, THEREFORE, REQUIRES A STRICT CONSTRUCTION AND THE PRINCIPLE AGAINST DOUBTFUL PENALIZATION WOULD C OME INTO PLAY. THE DETRIMENT IN THE PRESENT CASE, AS IS NOTICEABLE, WO ULD INCLUDE INITIATION OF PROCEEDINGS FOR IMPOSITION OF PENALTY FOR CONCEALME NT, AS WAS DIRECTED BY THE ASSESSING OFFICER IN THE PRESENT CASE. THE AFOR ESAID PRINCIPLE REQUIRES THAT A PERSON SHOULD NOT BE SUBJECTED TO ANY SORT O F DETRIMENT UNLESS THE OBLIGATION IS CLEARLY IMPOSED. WHEN THE WORDS ARE E QUALLY CAPABLE OF MORE THAN ONE CONSTRUCTION, THE ONE NOT INFLICTING THE P ENALTY OR DETERRENT MAY BE PREFERRED. IN MAXWELLS THE INTERPRETATION OF ST ATUTES, 12TH EDITION (1969) IT HAS BEEN OBSERVED:- THE STRICT CONSTRUCTI ON OF PENAL STATUTES SEEMS TO MANIFEST ITSELF IN FOUR WAYS: IN THE REQUIREMENT OF EXPRESS LANGUAGE FOR THE CREATION OF AN OFFENCE; IN INTERPRETING STRICTL Y WORDS SETTING OUT THE ELEMENTS OF AN OFFENCE; IN REQUIRING THE FULFILMENT TO THE LETTER OF STATUTORY CONDITIONS PRECEDENT TO THE INFLICTION OF PUNISHMEN T; AND IN INSISTING ON THE STRICT OBSERVANCE OF TECHNICAL PROVISIONS CONCERNIN G CRIMINAL PROCEDURE AND JURISDICTION. 18. THE AFORESAID PRINCIPLES AND INTERPRETATIONS CA N APPLY TO TAXING STATUTES. IN THE PRESENT CASE WE FURTHER FEEL THE SAID PRINCI PLE SHOULD BE APPLIED AS HDFC WOULD NECESSARILY HAVE ACTED AS PER LAW AND IT IS NOT THE CASE OF THE ITA NO.4477/M/2014 M/S. JSM CORPORATION PVT. LTD. 4 REVENUE THAT THE BANK HAD NOT PAID TAXES ON THEIR I NCOME. IT IS NOT A CASE OF LOSS OF REVENUE AS SUCH OR A CASE WHERE THE RECIPIE NT DID NOT PAY THEIR TAXES. 19.IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN THE PRESENT APPEAL AND THE SAME IS DISMISSED 4. THE TRIBUNAL HAS FOLLOWED THE ABOVE ORDER IN IT A NO.5525/MUM/2013 FOR A.Y. 2009-10 ALSO AND ACCORDINGLY HAS DISMISSED THE APPEAL OF THE REVENUE ON THE IDENTICAL GROUND VIDE ORDER DATED 4. 3.2015. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL ON THE IDENT ICAL ISSUE IN THE OWN CASE OF THE ASSESSEE FOR EARLIER YEARS, WE SEE NO INFIRMITY IN THE RELIEF GRANTED BY LD. CIT(A). THE ABOVE CAPTIONED APPEALS FILED BY THE R EVENUE ARE THEREFORE, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.06.2016. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 29.06.2016. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.