JDS Apparels Ltd., New Delhi V. ACIT, New Delhi

ITA 5467/DEL/2012

• Counselvise Citation: 546720114 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-01-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Assessee Lawyers: V K GUREJA

Judgement Text

ITA NO.5467/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.5467/DEL/2012 ASSESSMENT YEAR : 2009-10 JDS APPARELS LTD., J-21A, CENTRAL MARKET, LAJPAT NAGAR, NEW DELHI. PAN : AABCJ3946J VS. ACIT, CIRCLE-4(1), NEW DELHI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI V.K. GUREJA, CA DEPARTMENT BY : S HRI S .N. BHATIA, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 AGAINST THE ORDER DATED 22.08.2012, PASSED BY THE LD. CIT(A)-VIII , NEW DELHI, CONTENDING THAT THE LD. CIT (A) HAS ERRED IN TREATING THE CRED IT CARD CHARGES RECOVERED BY HDFC BANK FROM THE ASSESSEE AS COMMISSION SUBJECT TO TDS PROVISIONS U/S 194H OF THE ACT, THEREBY WRONGLY SUSTAINING THE A DDITION OF ` 44,65,654/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA). 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF R EADYMADE GARMENTS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER DISALLOWED PAYMENT OF ` 44,65,654/- MADE BY THE ASSESSEE TO HDFC B ANK TOWARDS CREDIT CARD COMMISSION/DISCOUNT, ON WHICH, TDS, THOUGH DEDUCT IBLE AS PER SECTION ITA NO.5467/DEL/2012 2 194H OF THE ACT, WAS NOT DEDUCTED. THE DISALLOWANCE W AS MADE U/S 40(A)(IA) OF THE ACT. THE LD. CIT (A) CONFIRMED THIS DISALLOWA NCE. 3. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE L D. CIT (A) HAS WRONGLY HELD THE PAYMENT TO BE COMMISSION PAID FOR RE NDERING SERVICES FOR RECOVERY OF BILL AMOUNT, FAILING TO CONSIDER THAT T HE ACQUIRING BANK DOES NOT RENDER ANY SERVICE FOR RECOVERY OF BILL AMOUNT TO TH E RETAIL MERCHANT, I.E., THE ASSESSEE; THAT THE TRANSACTION IS IN THE NATURE OF BILL PURCHASE BY THE CREDIT CARD ACQUIRING BANK AFTER DEDUCTING A SPECIFIED PERC ENTAGE FROM THE BILL AMOUNT; HENCE, THE BUYERS ARE NEVER THE DEBTORS OF T HE RETAIL MERCHANT, AS THE ACQUIRING BANK, AFTER PURCHASING THE BILLS, RECOV ERS THE PAYMENT ON ITS OWN ACCOUNT; THAT THEREFORE, THE ENTIRE RISK PERTAIN ING TO THE PAYMENTS MADE THROUGH CREDIT CARDS RESTS WITH THE ACQUIRING BANK ON LY; AND THAT AS SUCH, THE TRANSACTION BETWEEN RETAIL MERCHANTS AND THE CREDIT C ARD ACQUIRING BANK IS ON A PRINCIPAL-TO-PRINCIPAL BASIS. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON INCOME-TAX OFFICER (TDS)-2(1) VS. JET A IRWAYS (INDIA) LTD., 36 TAXMANN.COM 379 (MUMBAI-TRIB); ORDER DATED 10.04.20 12 PASSED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN ITA NO.905/HYD/2 011, FOR ASSESSMENT YEAR 2007-08, IN THE CASE OF DY. COMMISSIONER OF INCO ME-TAX, HYDERABAD VS. M/S VAH MAGNA RETAIL (P) LTD., HYDERABAD (COPY IS PLACED ON RECORD); AND ORDER DATED 27.11.2012, PASSED BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE TATA TELESERVICES LTD. VS. DCIT (TDS) IN APP EAL NOS.308 TO 310 & 393 TO 396 (BANG.) OF 2011, 1014 TO 1021 & 1285 TO 1290 (BANG) OF 2012, FOR ASSESSMENT YEARS 2005-06 TO 2008-09 (COPY IS PLACED ON RE CORD). 4. THE LD. DR, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER, CONTENDING THAT HDFC BANK LTD., AS R IGHTLY OBSERVED BY THE LD. CIT (A), WHILE MAKING PAYMENT TO THE ASSESSEE, HAD DEDUCTED COMMISSION ON THE TRANSACTIONS; THAT THE SAID COMMISSION HAD BEEN PAID TO THE BANK FOR RENDERING SERVICES FOR THE RECOVERY OF T HE BILL AMOUNT TO THE ASSESSEE; THAT THIS SHOWS THAT THE BANK WAS ACTING AS AN A GENT OF THE ASSESSEE FOR THE PURPOSES OF RECOVERY OF PAYMENT, FOR WHI CH, IT WAS BEING ITA NO.5467/DEL/2012 3 PAID COMMISSION/DISCOUNT; THAT SINCE THE RELATIONSHIP BE TWEEN THE ASSESSEE AND THE BANK WAS THAT OF A PRINCIPAL AND AGENT, FOR WHICH, COMMISSION/DISCOUNT WAS DEDUCTED OBVIOUSLY, TDS WAS LIABL E TO BE DEDUCTED ON THE COMMISSION/DISCOUNT UNDER THE PROVISIONS OF SECTI ON 194H OF THE ACT, @ 10%; AND THAT THE ASSESSEE HAVING FAILED TO DO SO, THE ADDITION CORRECTLY MADE BY THE ASSESSING OFFICER U/S 40 (A)(IA) OF THE ACT , WAS RIGHTLY CONFIRMED BY THE LD. CIT (A). 5. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE REC ORD. THE FACTS ARE NOT DISPUTED. THE ISSUE IS AS TO WHETHER THE PAYMENT IN QUESTION CAN BE TERMED AS COMMISSION PAID FOR RENDERING SERVICES BY THE BANK TO THE ASSESSEE FOR THE RECOVERY OF THE BILL AMOUNT AND SO, WH ETHER TDS WAS DEDUCTIBLE THEREON U/S 194H AND WHETHER NON-COMPLIAN CE THEREOF HAS RIGHTLY RESULTED IN THE ADDITION OF THE AMOUNT U/S 40(A)(IA) OF THE ACT. 6. THE MATTER STANDS SQUARELY COVERED BY JET AIRWAYS (INDIA) LTD. (SUPRA), WHEREIN IT HAS BEEN HELD, UNDER SIMILAR CIRCU MSTANCES THAT PAYMENTS TO BANKS FOR UTILIZATION OF CREDIT CARD FAC ILITIES ARE IN THE NATURE OF BANK CHARGES AND NOT COMMISSION AND, THEREFORE, NO TAX IS DEDUCTIBLE AT SOURCE U/S 194H. NO DECISION TO THE CONTRARY HAS BEEN B ROUGHT TO OUR NOTICE BY THE DEPARTMENT. NOW, ONCE NO TAX IS DEDUCTIBLE A T SOURCE U/S 194H OF THE ACT ON THE PAYMENT MADE TO BANK FOR UTILIZATION OF CREDIT CARD FACILITY AND SUCH PAYMENT IS IN THE NATURE OF BANK CHARGES, OBVIOUSL Y, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT DO NOT GET ATTRACTED. THAT BEING SO, THE ADDITION, BEING UNSUSTAINABLE IN LAW, IS HEREBY DELETED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 07.02.201 4. SD/- SD/- [ G.D. AGRAWAL ] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 07 TH FEBRUARY, 2014. ITA NO.5467/DEL/2012 4 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.