ITO(TDS) 3(4), MUMBAI V. THE INDIAN HOTELS COMPANY LTD, MUMBAI

ITA 5419/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4010 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 27-08-2014
• Court: TRIBUNAL
• Department Lawyers: K RAVIKIRAN
• Assessee Lawyers: BHADRESH JOSHI
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER I.T.A. NO. 5419/M/2014 (ASSESSMENT YEAR: 2011 - 201 2 ) ITO - (TDS) (OSD) - 3(4), 9 TH FLOOR, R.NO.909, SMT. K.G. MITTAL AAYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI 400 002. / VS. THE INDIAN HOTELS COMPANY LTD., (TAJ MAHAL CREDIT TAJ MAHAL TOWER), MANDLIK HOUSE, MANDLIK ROAD, MUMBAI - 01. ./ PAN : AAACT3957G ( / APPELLANT) .. ( / RESPONDENT ) I.T.A. NO. 5420/M/2014 (ASSESSMENT YEAR: 2011 - 201 2 ) ITO - (TDS) (OSD) - 3(4), 9 TH FLOOR, R.NO.909, SMT. K.G. MITTAL AAYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI 400 002. / VS. THE INDIAN HOTELS COMPANY LTD., (TAJ LANDS END), MANDLIK HOUSE, MANDLIK ROAD, MUMBAI - 01. ./ PAN : AAACT3957G ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI BHADRESH JOSHI / REVENUE BY : SHRI K. RAVI KIRAN, DR / DATE OF HEARING : 04 .04.2016 / DATE OF PRONOUNCEMENT : 13 .04.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE FILED BY THE REVENUE FOR THE AY 2011 - 2012. SINCE, THE REVENUE RAISED THE IDENTICAL GROUNDS IN THESE TWO APPEALS, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OFF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. 2. THE GROUNDS RAISED BY THE REVENUE IN APPEAL ITA NO.5420/M/2014 ARE AS FOLLOWS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION MADE U/S 201(1)/201(1A) OF THE ACT HOLDING THAT NO TDS WAS DEDUCTIBLE U/S 194H BY THE ASSESSEE COMPANY ON THE AMOUNT HELD 2 BY THE BANKS / CREDIT CARD AGENCIES AS COLLECTION CHARGES IN RESPECT OF CREDIT SERVICES PROV IDED IGNORING THE FACT THAT THE ENTIRE PROCESS OF FACILITATION OF CREDIT CARD, THE BANK IS NOTHING BUT A CONSTRUCTIVE AGENT FOR THE ASSESSEE - COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN FAILING TO APPRECIATE THE REAL AND TRUE NATURE OF THE RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND BANK / CREDIT CARD AGENCIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A ) ERRED IN FAILING TO APPRECIATE THAT IN SUBSTANCE AND IN FACT RELATIONSHIP BETWEEN THE ASSESSEE COMPANY AND BANK / CREDIT CARD AGENCIES WAS IN THE NATURE OF PRINCIPAL AND AGENTS RELATIONSHIP AND THEREFORE, THE LD CIT (A) ERRED IN NOT UPHOLDING THE AOS CO NCLUSION OF BRINGING THE CHARGES CHARGED TO THE ASSESSEE COMPANY BY BANK / CREDIT CARD AGENCIES WITHIN THE PURVIEW OF SECTION 194H OF THE IT ACT, 1961. 3 . AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BRIEFLY NARRATED THE FACTS OF THE CASE AND SUBMITTED THA T IN THE SCRUTINY ASSESSMENT, AO INVOKED THE PROVISIONS OF SECTION 194H READ WITH SECTION 201(1) / 201(1A) OF THE ACT AND THRUST ON THE ASSESSEE THE TDS IN RESPECT OF THE BANK CHANGES COLLECTED BY THE BANK FOR CREDIT CARD SERVICES BEFORE REMITTING THE NET AMOUNT TO THE ASSESSEE. IN THIS REGARD, IT IS THE ARGUMENT OF THE LD COUNSEL FOR THE ASSESSEE THAT THE RELATIONSHIP BETWEEN THE BANK AND THE ASSESSEE IS NOT PRINCIPAL TO AGENT BUT PRINCIPAL TO PRINCIPAL. THEREFORE, THE PROVISIONS OF SECTION 194H OF T HE ACT ARE NOT APPLICABLE. FOR THIS PROPOSITION ON THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. INFINITI RETAIL LIMITED FOR THE AY 2009 - 2010 IN ITA NO.4461/M/2013, DATED 1.5.2015 AND PARA 2.1 OF THE SAID TRIBUNALS ORDER IS RELEVANT IN THIS REGARD. FURT HER, LD COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. JDS APPARELS (P) LTD [2015] 53 TAXMANN.COM 139 (DELHI) IN SUPPORT OF HIS ARGUMENT. 4 . ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 5 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED DECISION OF THE TRIBUNAL AND ALSO THE RELEVANT MATERIAL PLACED BEFORE US. ON PERUSAL OF THE SAID DECISION OF THE TRIBUNAL (SUPRA) DA TED 1.5.2015, WE FIND, ON IDENTICAL ISSUE, THE TRIBUNAL DISMISSED THE REVENUES APPEAL AND UPHELD THE DECISION OF THE CIT (A) VIDE PARA 2.1 OF ITS ORDER. CONSIDERING THE SIGNIFICANCE OF THE SAID PARA 2.1 OF THE TRIBUNALS ORDER (SUPRA) FOR THE SAKE OF COM PLETENESS OF THIS ORDER, THE SAME IS EXTRACTED AS UNDER: 2.1. WE HAVE CONSIDERED THE SUBMISSIONS OF LD DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF ARE THAT THE ASSESSEE IS IN THE BUSINESS OF RETAILS IN ELECTRONIC GOODS, KITCHEN A PPLIANCES, COMPUTERS, LAPTOPS AND RELATED ACCESSORIES THROUGH DEDICATED OUTLETS CALLED CROMA. THE ASSESSEE DECLARED LOSS OF RS. 85,33,61,594/ - IN ITS RETURN FILED ON 29.9.2009. THE LD AO DURING THE ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO SHOW CAUS E AS TO WHY THE PAYMENTS OF CHARGES TO 3 BANKS IN RESPECT OF SALES EFFECTED THROUGH CARD MECHANISM SHOULD NOT BE SUBJECTED TO TDS U/S 194H OF THE ACT. THE ASSESSEE VIDE COMMUNICATION DATED 15.12.2011 EXPLAINED THAT THE PROVISIONS OF SECTION 194H OF THE ACT WILL BE ATTRACTED ONLY WHEN ONE PERSON ACTS ON BEHALF OF ANOTHER, THEREBY, CREATING A PRINCIPLE AND AGENT RELATIONSHIP AND FURTHER IN THE INSTANT CASE, THE SALE IS CONDUCTED BY THE ASSESSEE ON ITS OWN AND NOT THROUGH THE BANK AND FURTHER THE TRANSACTION MA Y TERMED AS CREDIT CARD MSF CHARGES BUT IN CHARGES, CHEQUE BOOK REQUEST CHARGES, ETC. THE LD AO COMPLETED THE ASSESSMENT DISALLOWING THE EXPENDITURE OF RS. 5,02,36,000/ - INCURRED ON ACCOUNT OF PAYMENT OF PROCESSING CHARGES TO HDFC BANK ON TOTAL AMOUNT SWI PED THROUGH CUSTOMER CREDIT CARD AND EXPENDITURE OF RS. 49,02,000/ - ON ACCOUNT OF VARIOUS OTHER BANK CHARGES (CASH MANAGEMENT SERVICES) U/S 40(A)(IA) OF THE ACT. ACCORDING TO THE LD AO, TAX SHOULD HAVE BEEN DEDUCTED AT SOURCE U/S 194 OF THE ACT. ON APPEA L, LD CIT (A) EXAMINED THE FACTS AND FOLLOWING THE DECISION IN THE CASE OF AHMEDABAD STAMP VENDORS ASSOCIATION VS. UOI (257 ITR 202) AND TATA TELE SERVICES LTD VS. DCIT (TDS) A DECISION FROM BANGALORE BENCH (ITA NOS.308 TO 310 AND 393 TO 396) ORDER DATED 2 7/11/2012, WHEREIN, IT WAS HELD THAT THERE IS NO REQUIREMENT OF MAKING TDS ON THE COMMISSION RETAINED BY CARD COMPANIES, OPINED THAT THE PROVISIONS OF SECTION 40(A)(IA) R.W.S 194H OF THE ACT ARE NOT APPLICABLE, DELETED THE ADDITION. WE FIND NO INFIRMITY I N THE CONCLUSION OF THE LD CIT (A) UNDER THE FACTS AVAILABLE ON RECORD. HIS STAND IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. 6 . WE HAVE ALSO PERUSED THE CITED JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF JDS APPARELS (P) LTD (SUPRA) AND FIND THE SAME IS RELEVANT FOR THE PROPOSITION THAT COMMISSION TO BANK ON PAYMENTS RECEIVED FROM CUSTOMERS WHO HAD MADE PURCHASES THROUG H CREDIT CARDS IS NOT LIABLE TO TDS UNDER SECTION 194H OF THE ACT. CONSIDERING THE ABOVE S ETTLED NATURE OF THE ISSUE AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT (SUPRA) AND THE DECISION OF THE TRIBUNAL (SUPRA) FOR THE AY 2009 - 2011, WE ARE OF THE OPINION, THE DECISION TAKEN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7 . SINCE, THE ISSUES RAISED IN OTHER APPEAL ITA NO.5420/M/2014 (AY 2 011 - 2012) ARE IDENTICAL, THEREFORE, OUR DECISION GIVEN IN APPEAL ITA NO.5419/M/2014, IN THE ABOVE PARAGRAPHS OF THIS ORDER, SQUARELY APPLIES TO THE PRESENT APPEAL TOO. CONSIDERING THE SAME, WE UPHELD THE DECISION OF THE CIT (A) AND THE GROUNDS RAISED BY T HE REVENUE ARE DISMISSED. 8 . IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNC ED IN THE OPEN COURT ON 1 3 T H APRIL, 2016. S D / - S D / - ( RAM LAL NEGI ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 3 .4.2016 . . ./ OKK , SR. PS 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI