DCIT, New Delhi V. M/s. RRB Energy Ltd., New Delhi

ITA 5155/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3782 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA TRIPATHY

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5155/DEL/2016 (ASSESSMENT YEAR: 2011 - 12 ) DCIT, CIRCLE - 20(2), ROOM NO. 219, 2 ND FLOOR, CR BUILDING, IP ESTATE, NEW DELHI VS. RRB ENERGY LTD, GA - 1/B1, EXTENSION MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI PAN:AAACV0109N (APPELLANT) (RESPONDENT) REVENUE BY : SMT PARAMITA TRIPATHY, CIT DR ASSESSEE BY: NONE DATE OF HEARING 30/10/ 2017 DATE OF PRONOUNCEMENT 3 1 / 10 / 2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS APPEAL IS FILED BY REVENUE AGAINST THE ORDER OF THE LD. CIT (A) 7, NEW DELHI DATED 25/07/2016 FOR ASSESSMENT YEAR 2011 - 12, WHEREIN THE DISALLOWANCE OF RS. 3198246 MADE BY THE LD. ASSESSING OFFICER FOR NON - DEDUCTION OF TAX AT SOURCE ON BANK GUARANTEE COMMISSION WAS DELETED. 2. THE REVENUE HAS RAISED THE SOLITARY GROUND OF APPEAL AS UNDER: - ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS AND IN LAW IN DELETING THE ADDITION OF RS. 3 198246/ MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT ACCORDING TO CBDT NOTIFICATION NO. 56/2012 DATED 31 ST . DECEMBER 2012 THE ASSESSEE COMPANY AS TO DEDUCT TDS FROM BANK GUARANTEE COMMISSION PAID ON OR BEFORE 31 ST . DECEMBER 2012. 3. THE ASSESSEE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND INSTALLING OF WIND ELECTRIC GENERATORS FOR HARNESSING POWER FROM WIND AT DIFFE RENT LOCATION IN INDIA. IT FILED ITS RETURN OF INCOME ON 30/09/2011 DECLARING NIL INCOME. THE ASSESSMENT UNDER SECTION 143 (3) OF THE ACT WAS PASSED ON 21/03/2014 DETERMINING THE TOTAL LOSS OF THE ASSESSEE OF RS. 9708812/ . AGAINST THE ORDER OF THE LD. ASS ESSING OFFICER ASSESSEE PREFERRED APPEAL BEFORE DCIT VS. RRB ENERGY LTD, ITA NO. 5155/DEL/2016 (ASSESSMENT YEAR: 2011 - 12) THE LD. CIT(A), WHICH WAS DECIDED ON 25/07/2016 IN FAVOUR OF THE ASSESSEE . THEREFORE, THE REVENUE IS IN APPEAL AGAINST THE ORDER OF LD. CIT (A). 4. THE ONLY DISPUTE IN THE APPEAL IS THAT ASSESSEE HAS PAID BANK G UARANTEE COMMISSION OF RS. 3198246/ - ON WHICH THE TAX IS NOT BEEN DEDUCTED WHILE CREDITING THIS PAYMENTS. ON QUERY BY THE LD. ASSESSING OFFICER THAT WHY IT SHOULD NOT BE DISALLOWED AS FOR NON - DEDUCTION OF TDS AS PRESCRIBED . THE CONTENTION OF THE AO IS THAT BY NOTIFICATION NO. 56/2012 DATED 31 ST . DECEMBER 2012 THE CBDT HAS NOTIFIED THAT NO TAX IS DEDUCTIBLE ON BANK GUARANTEE COMMISSION. THE AO WAS OF THE VIEW THAT AFTER THE DATE OF NOTIFICATION IF THE TAX IS NOT DEDUCTED ON BANK GUARANTEE COMMISSION IT IS N OT DISALLOWABLE. HOWEVER, AS THE NOTIFICATION IS DATED 31.12.2012 THEREFORE, PRIOR TO THE DATE OF ISSUE OF NOTIFICATION TAX WAS DEDUCTIBLE ON BANK GUARANTEE COMMISSION. THE ASSESSEE STATED THAT NOTIFICATION HAS COME INTO FORCE FROM 1 ST DAY OF JANUARY 2013 , HOWEVER, THE PRINCIPLE REMAINS THE SAME AND THOUGH THE ASSESSMENT YEAR INVOLVED IS 2011 - 12 THEREFORE THE SAME APPL IES TO THE FACTS OF THE CASE FOR THIS YEAR ALSO . HOWEVER, THE LD. ASSESSING OFFICER REJECTING THE CONTENTION OF THE ASSESSEE DISALLOWED THE ABOVE SUM. THE LD. CIT (A) ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA NO. 5 OF HIS ORDER FOR THE REASON THAT THAT THE ABOVE NOTIFICATION ISSUED BY THE CBDT IS CLARIFICATORY NOTIFICATION. HE RELIED UPON THE DECISION OF THE COORDINATE BENCH IN CASE OF KOTAK SECURITIES LTD VS. DCIT AND ALSO ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VERSUS JDS APPAREL ( P.) LTD. WHEREIN IT HAS BEEN HELD THAT SUCH COMMISSION IS OUTSIDE THE PURVIEW OF THE SECTION 194H OF THE INCOME TAX ACT. THEREFORE, HE HELD THAT THE DISALLOWANCE OF RS. 31982 46/ - MADE BY THE LD. ASSESSING OFFICER IS NOT SUSTAINABLE. 5. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTESTED THAT THE CBDT HAS ISSUED A NOTIFICATION WHEREIN IT IS BEEN STATED THAT THE TAX IS NOT REQUIRED TO BE DEDU CTED ON BANK GUARANTEE COMMISSION PAID TO THE BANKS OTHER THAN FOREIGN BANK S FROM 01.01.2013. PRIOR TO THE ISSUE OF THE NOTIFICATION SHE SUBMITTED THAT THE TAX IS REQUIRED TO BE DEDUCTED. THEREFORE ACCORDING TO HER THE TAX SHOULD HAVE BEEN DEDUCTED BY THE ASSESSEE PRIOR TO THE ISSUE OF THE NOTIFICATION . 6. DESPITE NOTICE NONE APPEARED BEFORE US ON BEHALF OF THE ASSESSEE AND THEREFORE THE ISSUE IS DECIDED ON MERIT BASED ON THE INFORMATION AVAILABLE ON RECORD. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ISSUE INVOLVED HEREIN IS THAT THE NOTIFICATION ISSUED BY THE CBDT PRESCRIBED THAT NO TAX IS REQUIRED TO BE DEDUCTED IN CASE OF PAYMENTS OF BANK GUA RANTEE COMMISSION TO THE BANKS. THE CBDT HAS ALSO STATED THAT THE IMPUGNED NOTIFICATION SHALL COME INTO FORCE FROM 01.01.2013. THEREFORE, THE ISSUE IN APPEAL IS WHETHER THAT NOTIFICATION APPLIES TO ASSESSMENT YEAR 2011 - 12 OR NOT. THE LD CIT(A) HAS HELD THA T SAME IS CLARIFICATORY IN NATURE. DCIT VS. RRB ENERGY LTD, ITA NO. 5155/DEL/2016 (ASSESSMENT YEAR: 2011 - 12) 8. HON DELHI HIGH COURT IN JDS APPAREL (P0 LTD ( 370 ITR 454 ) HAS HELD THAT BANK IS NOT ACTING AS AN AGENT OF THE ASSESSEE. FURTHER ON IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCHES IN DCIT VS. LAQSHYA M EDIA PVT. LTD 72 TAXMANN.COM 119 WHEREIN, FOR AY 2010 - 11 IN PARA NO. 6 THE COORDINATE BENCH HAS HELD THAT ABOVE CIRCULAR IS RETROSPECTIVE IN NATURE AS IT H ELD FOR ASSESSMENT YEAR 2010 - 11 AS UNDER : - 6. AS REGARDS 'GUARANTEE FEES' PAID WHICH HAS BEEN HEL D TO BE LIABLE FOR TDS UNDER SECTION 194H BY THE AO, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE AO, BECAUSE THE ASSESSEE HAS SOUGHT ITS BANKS LIKE HDFC BANK, DENA BANK AND YES BANK TO ISSUE GUARANTEE IN ITS FAVOUR FOR WHICH BANK HAS CHARGED CERTAIN AMOU NT AS 'GUARANTEE FEE'. TO FALL WITHIN THE AMBIT AND SCOPE OF SECTION 194H, THE PAYMENT HAS TO BE IN THE NATURE OF 'COMMISSION OR BROKERAGE'. THE EXPLANATION TO SECTION 194H DEFINES THE PHRASE 'COMMISSION AND BROKERAGE' IN THE FOLLOWING MANNER: ''COMMISSI ON OR BROKERAGE' INCLUDES 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 BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES'. THUS, IT IS SINE QUA NON THAT THERE HAS TO BE A PRINCIPAL - AGENT RELATIONSHIP FOR A PAYMENT TO BE TREATED AS COMMISSION OR BROKERAGE. THE RECIPIENT OF THE INCOME MUST ACT ON BEHALF OF THE PRINCIPAL. HERE THE BANKER DOES NOT ACT ON BEHALF OF THE ASSESSEE FOR RENDERING ANY KIND OF SERVICE. THE CONTRACT OF GUARANTEE DOES NOT GIVE ANY RISE TO PRINCIPAL - AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE BANK AND, THEREFORE, THE CONSIDERATION RECEIVED BY THE BANK ON ACCOUNT OF GUARANTEE COMMISSION CANNOT BE RECKONED AS COMMISSION AS CONTEMPLATED UNDER SECTION 194H AND ACCORDINGLY, THERE WAS NO REQUIREMENT TO DEDUCT TDS ON THIS PAYMENT. THUS, ON THIS SCORE ALSO, THE ORDER OF THE LD. CIT(A) IS AFFIRMED. BEFORE US, THE LD. COUNSEL HAD ALSO BROUGHT TO OUR NOTICE A CBDT CIRCULAR NO.56 OF 2012 (SIC) WHEREIN IT HAS BEEN CLARIFIED THAT 'GUARANTEE FEE' PAID TO A NATIONALIZED BANK WILL NOT BE SUBJECT TO WITHHOLDING TAX. T HUS IN VIEW OF THE CDBT CIRCULAR ALSO THE GROUND RAISED BY THE REVENUE CANNOT BE SUSTAINED AND ACCORDINGLY, THE SAME IS DISMISSED. 9. FURTHER IN KOTAK SECURITIES 18 TAXXMANN. COM 48 IT HAS BEEN HELD AS UNDER: - 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS, AND WHEN WE LOOK AT THE CONNOTATIONS OF EXPRESSION 'COMMISSION OR 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 EXPRESSION 'COMMISSION', FOR THIS PURPOSE, WILL BE CONFINED TO 'AN ALLOWANCE, RECOMPENSE OR REWARD MADE TO AGENTS, FACTORS AND BROKERS AND OTHERS FOR EFFECTING SALES AND CARRYING OUT BUSINESS TRANSACTIONS' AND SHALL NOT EXTEND TO THE PAYMENTS, SUCH AS 'BANK GUARANTEE COMMISSION', WHICH ARE IN THE NATURE OF FEES FOR SERVICES RENDERED OR PRODUCT OFFERED BY THE RECIPIENT OF SUCH PAYMENTS ON PRINCIPAL TO PRINCIPAL BASIS. EVEN WHEN AN EXPRESSION IS STATUTORILY DEFINED UNDER SECTION 2, IT STILL HAS TO MEET THE TEST OF CONTEXTUAL RELEVANCE AS SECTION 2 ITSELF STAR TS WITH THE WORDS 'IN THIS ACT (I.E. INCOME TAX ACT), UNLESS CONTEXT OTHERWISE REQUIRES...', AND, THEREFORE, CONTEXTUAL MEANING ASSUMES SIGNIFICANCE. EVERY DEFINITION IN THE INCOME TAX ACT MUST DEPEND ON THE CONTEXT IN WHICH THE EXPRESSION IN SET OUT, AND THE DCIT VS. RRB ENERGY LTD, ITA NO. 5155/DEL/2016 (ASSESSMENT YEAR: 2011 - 12) CONTEXT IN WHICH EXPRESSION 'COMMISSION' APPEARS IN SECTION 194H, I.E. ALONGWITH THE EXPRESSION 'BROKERAGE', SIGNIFICANTLY RESTRICTS ITS CONNOTATIONS. THE COMMON PARLANCE MEANING OF THE EXPRESSION 'COMMISSION' THUS 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 SALES OR BUSINESS TRANSACTIONS ETC. THE INCLUSIVE DEFINITION OF THE EXPRESSION 'COMMISSION OR BROKE RAGE' 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 S ERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, NOT BEING SECURITIES ' IS INCLUDIBLE IN THE SCOPE OF MEANING OF 'COMMISSION OR BROKERAGE'. THEREFORE , WHAT THE INCLUSIVE DEFINITION REALLY CONTAINS IS NOTHING BUT NORMAL MEANING OF THE EXPRESSION 'COMMISSION OR BROKERAGE'. IN THE CASE OF SOUTH GUJARAT ROOFING TILES MANUFACTURERS ASSOCIATION V. STATE OF GUJARAT [1976] 4 SCC 601, HON'BLE SUPREME COURT WERE IN SEISIN OF A SITUATION IN WHICH AN EXPRESSION, NAMELY 'PROCESSING', WAS GIVEN AN INCLUSIVE 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 INTERPRETATION CLAUSE AS A WORD OF ENLARGEMENT, IN SOME CASES CONTEXT MIGHT SUGGEST A DIFFERENT INTENTION'. THEIR LORDSHIPS THEN CONCLUDED THAT THOUGH THE EXPRESSION USED IN THE DEFINITION CLAUSE IS 'INCLUDES', ' IT SEEMS TO US THAT THE WORD 'INCLUDES' HAS BEEN USED HERE IN THE SAME SENSE OF 'MEANS'; THIS IS THE ONLY CONSTRUCTION THAT THE WORD CAN BEAR IN THIS CONTEXT'. IN OTHER WORDS, AN INCLUSIVE DEFINITION, AS THEIR LORDSHIPS NOTED, DOES NOT NECESSARILY ALWAYS E XTEND THE MEANING OF AN EXPRESSION. WHEN INCLUSIVE DEFINITION CONTAINS ORDINARY NORMAL CONNOTATIONS OF AN EXPRESSION, IN OUR CONSIDERED VIEW, EVEN AN INCLUSIVE DEFINITION HAS TO BE TREATED AS EXHAUSTIVE. THAT IS THE SITUATION IN THE CASE BEFORE US AS WELL. EVEN AS DEFINITION 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. THEREFORE, AS HELD BY THE COORDINA TE BENCHES IN A NUMBER OF CASES INCLUDING SRL 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 UTPADAK SANGH LTD . V. ITO [2009] 34 SOT 2 16 , PRINCIPAL AGENT RELATIONSHIP IS A SINE QUA NON FOR INVOKING THE PROVISIONS 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 GUARANTE E, ON BEHALF OF THE ASSESSEE, ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAYMENT 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 GUARAN TEE COMMISSION'. WHILE IT IS TERMED AS 'GUARANTEE COMMISSION', IT IS NOT IN 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 BE TWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCTION REQUIREMENTS UNDER SECTION 194H. WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THE CIT(A) INDEED ERRED IN HOLDING THAT THE ASSESSEE WAS INDEED UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER S ECTION 194H FROM PAYMENTS MADE BY THE ASSESSEE TO VARIOUS BANKS. AS WE HAVE HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION 194H, THE QUESTION OF LEVY OF INTEREST UNDER SECTION 201(1A) CANNOT ARISE. DCIT VS. RRB ENERGY LTD, ITA NO. 5155/DEL/2016 (ASSESSMENT YEAR: 2011 - 12) 10. IN VIEW OF THIS RESPECT FULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH WE HOLD THAT NO TAX IS REQUIRED TO BE DEDUCTED ON BANK GUARANTEE COMMISSION PAID TO A NATIONALISED BANK AND THEREFORE, DISALLOWANCE OF RS. 3198246/ - HAS BEEN CORRECTLY DELETED BY THE LD CIT(A). IN THE RE SULT SOLITARY GROUND OF APPEAL IS DISMISSED. . 11. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 / 10 / 2017 . - SD/ - - SD/ - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 / 10 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI