Asst.C.I.T., Bangalore V. M/s Adishwar India Limited, Bangalore

ITA 498/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8558 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 18-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K BIJU
• Assessee Lawyers: SUNDAR HEGDE
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 498/BANG/2016 ASSESSMENT YEAR : 2012-13 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1), BANGALORE. VS. M/S. ADISHWAR INDIA LIMITED, # 146, 11 TH C CROSS, 1 ST MAIN, 2 ND STAGE, WEST OF CHORD ROAD, RAJAJINAGAR, BANGALORE 560 086. PAN: AABCA 4663P APPELLANT RESPONDENT APPELLANT BY : SHRI M.K. BIJU, JCIT (DR) RESPONDENT BY : SHRI SUNDAR HEGDE, CA DATE OF HEARING : 24.11.2016 DATE OF PRONOUNCEMENT : 22.02.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST ORD ER OF THE CIT(A) INTER ALIA ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT(APPEALS), IN SO F AR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(APPEALS) ERRED IN ALLOWING RELI EF TO THE ASSESSEE BY HOLDING THAT THE CREDIT CARD SWIPING CH ARGES CANNOT BE CONSIDERED AS FALLING WITHIN THE PURVIEW OF SECT ION 194H OF THE I.T. ACT, BY PLACING RELIANCE ON THE DECISIONS OF HIS PREDECESSOR AND THE ORDER OF HONBLE ITAT, WITHOUT APPRECIATING ITA NO.498/BANG/2016 PAGE 2 OF 6 THE FACT THAT SUCH COMMISSION OR BROKERAGE RECEIVED OR RECEIVABLE DIRECTLY OR INDIRECTLY FOR ANY SERVICES IN THE COUR SE OF BUYING OR SELLING OF GOODS IS LIABLE TO TDS AS PER THE EXPLAN ATION (I) TO SECTION 194H. 3. THE LEARNED CIT (APPEALS) ERRED IN ALLOWING RE LIEF TO THE ASSESSEE BY HOLDING THAT THE CREDIT CARD SWIPING CH ARGES CANNOT BE CONSIDERED AS FALLING WITHIN THE PURVIEW OF SECT ION 194H OF THE I.T. ACT, BY PLACING RELIANCE ON THE DECISIONS OF HIS PREDECESSOR AND THE ORDER OF HONBLE ITAT, IN THE A SSESSEES OWN CASE, WITHOUT APPRECIATING THE FACT THAT THE MATTER HAS NOT REACHED FINALITY AS THE ORDER OF HONBLE HIGH COURT OF KARN ATAKA IN ITA NO. 96/2015 DATED 03.08.2015 IS NOT ACCEPTED BY THE REVENUE. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE U RGED AT THE TIME OF HEARING, IT IS HUMBLY PRAYED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFICER BE RE STORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, TO AMEND OR DELETE ANY OF THE GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 2. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESS HAS INVITED OUR ATTENTION WITH THE SUBMISSION THAT THE IMPUGNED ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN TH E ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12. COPI ES OF THE ORDERS OF TRIBUNAL ARE PLACED ON RECORD. THE REVENUE DID NOT DISPUTE THESE FACTS. 3. HAVING CAREFULLY EXAMINED THE GROUNDS OF APPEAL RAISED BEFORE US AND ORDERS OF TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE ASSESSMENT YEARS 2010-11 AND 2011-12, WE FIND THAT THE IMPUGNE D ISSUE IS SQUARELY COVERED BY THE AFORESAID ORDERS OF THE TRIBUNAL. F OR THE SAKE OF REFERENCE ITA NO.498/BANG/2016 PAGE 3 OF 6 WE EXTRACT THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THIS TR IBUNAL IN ASSESSEES OWN CASE IN THE ORDER CITED SUPRA BY THE LD. COUNSEL FOR THE ASSESSEE, DEALT WITH AN IDENTICAL ISSUE AND HELD AS FOLLOWS:- 3. IN ITS APPEAL BEFORE THE CIT(A) ARGUMENT OF TH E ASSESSEE WAS THAT FLOW OF CREDIT CARD PROCESS WAS AS UNDER; A) CUSTOMER MAKES A PURCHASE FROM US AND PROVIDES CREDIT CARD INFORMATION TO A POINT OF SALES TERMINA L. B) POINT OF SALES TERMINAL ENCRYPTS AND RELAYS THE INFORMATION TO THE PAYMENT PROCESSORS. THE PAYMENT PROCESSOR USES A PAYMENT GATEWAY TO RELAY THE CREDI T CARD DATA TO THE VISA/MASTER CARD ASSOCIATION. C) PAYMENT GATEWAY VERIFIES CREDIT CARD INFORMATI ON BY SEEKING APPROVAL FROM THE CREDIT CARD ASSOCIATION. D) UPON RECEIVING THE REQUEST FROM PAYMENT GATEWA Y, CREDIT CARD ASSOCIATION SENDS THE REQUEST TO CREDIT CARD ISSUING BANK FOR THEIR APPROVAL. E) CREDIT CARD ISSUING BANK ACCEPTS OR DECLINES T HIS AND RELAYS THIS MESSAGE BACK TO THE CREDIT CARD ASSOCIA TION. CREDIT CARD ASSOCIATION TRANSMITS THE MESSAGE TO TH E PAYMENT GATEWAY. IF THE SAME IS APPROVED, THE CUS TOMER IS NOTIFIED THAT THE TRANSACTION IS COMPLETE AND TH E MERCHANT ESTABLISHMENT CAN RELEASE THE GOODS TO THE CUSTOMER. F) THE CARD ISSUING BANK SENDS THE PAYMENTS TO TH E CREDIT CARD ASSOCIATION AFTER DEDUCTING A SMALL SER VICE FEE. THE CREDIT CARD ASSOCIATION TRANSFERS THE PAYMENT T O THE PAYMENT PROCESSOR. THE PAYMENT PROCESSOR MAKES TH E PAYMENT TO ACQUIRING BANK AND IN TURN ACQUIRING BAN K TRANSFER THE AMOUNT DIRECTLY INTO THE MERCHANTS BA NK ACCOUNT. 4. ACCORDING TO THE ASSESSEE MERCHANT ESTABLISHMEN TS LIKE ASSESSEE DID NOT EFFECT PAYMENT TO ANY OF THE PARTI ES IN THE CHAIN. THUS, AS PER ASSESSEE, IT WOULD NOT COME WITHIN THE MEANING OF ITA NO.498/BANG/2016 PAGE 4 OF 6 THE PHRASE PERSON RESPONSIBLE FOR PAYING, APPLYIN G SECTION 194H OF THE ACT. 5. LEARNED CIT(A) WAS APPRECIATIVE OF THE ABOVE CONTENTIONS. RELYING ON THE DECISION OF THE CO-ORD INATE BENCH IN THE CASE OF M/S TATA TELESERVICES LTD., HE HELD THA T ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE. 6. NOW BEFORE US, LEARNED DR SUBMITTED THAT ASSESS EE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE COMMISSION. H AVING NOT DONE SO, AO ACCORDING TO HIM WAS JUSTIFIED IN DISAL LOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE. 7. PER CONTRA, LEARNED AR SUPPORTED THE ORDER OF T HE CIT(A). 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. AT PARA-3.4 OF ITS ORDER, THIS TRIBUN AL IN THE CASE OF TATA TELESERVICES PVT.LTD.,(SUPRA) HAD HELD AS UNDE R; 4. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. ASSESSEE IS A COMPANY ENGAGED I N THE BUSINESS OF DIRECT RETAIL TRADING IN CONSUMER GOODS . ASSESSEE CLAIMED DEDUCTION OF RS.16,34,000 ON ACCOUN T OF COMMISSION PAID TO THE CREDIT CARD COMPANIES, WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER IN TERMS O F S.40(A)(IA) ON ACCOUNT OF THE FAILURE OF THE ASSESS EE TO DEDUCT TAX AT SOURCE IN TERMS OF S.194H OF THE ACT, WHILE MAKING THE SAID COMMISSION PAYMENTS. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE LOWER AUTHORI TIES THAT THE ASSESSEE ONLY RECEIVES THE PAYMENT FORM TH E BANK/CREDIT CARD COMPANIES CONCERNED, AFTER DEDUCTI ON OF COMMISSION THEREON, AND THUS, THIS IS ONLY IN THE N ATURE OF A POST FACTO ACCOUNTING AND DOES NOT INVOLVE ANY PA YMENT OR CREDITING OF THE ACCOUNT OF THE BANKS OR ANY OTH ER ACCOUNT BEFORE SUCH PAYMENT BY THE ASSESSEE. CONSID ERING THESE SUBMISSION OF THE ASSESSEE, THE CIT(A) ACCEPTE D THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AMOUNT O F RS.16,34,000 ON THE FOLLOWING REASONING- 9.8 ON GOING THROUGH THE NATURE OF TRANSACTIONS, I FIND CONSIDERABLE MERIT IN THE CONTENTION OF THE APPELLANT THAT COMMISSION PAID TO THE CREDIT CARD COMPANIES CANNOT BE CONSIDERED AS FALLING WITHIN TH E PURVIEW OF S.194H. EVEN THOUGH THE DEFINITION OF TH E ITA NO.498/BANG/2016 PAGE 5 OF 6 TERM 'COMMISSION OR BROKERAGE' USED IN THE SAID SECTION IS AN INCLUSIVE DEFINITION, IT IS CLEAR THA T THE LIABILITY TO MAKE TDS UNDER THE SAID SECTION ARISES ONLY WHEN A PERSON ACTS BEHALF OF ANOTHER PERSON. I N THE CASE OF COMMISSION RETAINED BY THE CREDIT CARD COMPANIES HOWEVER, IT CANNOT BE SAID THAT THE BANK ACTS ON BEHALF OF THE MERCHANT ESTABLISHMENT OR THA T EVEN THE MERCHANT ESTABLISHMENT CONDUCTS THE TRANSACTION FOR THE BANK. THE SALE MADE ON THE BASI S OF A CREDIT CARD IS CLEARLY A TRANSACTION OF THE MERCHANTS ESTABLISHMENT ONLY AND THE CREDIT CARD COMPANY ONLY FACILITATES THE ELECTRONIC PAYMENT, FO R A CERTAIN CHARGE. THE COMMISSION RETAINED BY THE CREDIT CARD COMPANY IS THEREFORE IN THE NATURE OF NORMAL BANK CHARGES AND NOT IN THE NATURE OF COMMISSION/BROKERAGE FOR ACTING ON BEHALF OF THE MERCHANT ESTABLISHMENT. ACCORDINGLY, CONCLUDING THAT THERE WAS NO REQUIREMENT FOR MAKING TDS ON THE COMMISSION RETAINED BY THE CREDIT CARD COMPANIES, THE DISALLOWANCE OF RS.16,34,000 IS DELETED.. WE FIND NO INFIRMITY IN THE ABOVE REASONING GIVEN B Y THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A ) AND REJECT THE GROUNDS OF THE REVENUE WHICH ARE DEV OID OF MERIT.' 8. WE FIND THAT THE FACT MATRIX HERE IS EXACTLY SI MILAR TO THAT IN M/S TATA TELESERVICES PVT. LTD. WE THEREFORE, F IND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 4. SINCE A CONSISTENT VIEW HAS BEEN TAKEN BY THE TR IBUNAL IN FAVOUR OF THE ASSESSEE, WE FIND NO JUSTIFICATION TO TAKE A CO NTRARY VIEW. MOREOVER, THE CIT(A) HAS ALSO DECIDED THE ISSUE FOLLOWING THE EARLIER ORDER OF CIT(A) WHICH WAS LATER ON CONFIRMED BY THE TRIBUNAL. ACCO RDINGLY, WE FIND NO MERIT IN THE REVENUES APPEAL AND WE DISMISS THE SAME. ITA NO.498/BANG/2016 PAGE 6 OF 6 5. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF FEBRUARY, 2017. SD/- SD/- ( A.K. GARODIA ) (SUNIL KUMAR YA DAV ) ACCOUNTANT MEMBER JUDIC IAL MEMBER BANGALORE, DATED, THE 22 ND FEBRUARY, 2017. / M S / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.