TRO TDS (OSD)1, MUMBAI V. JSM CORPORATION P. LTD, MUMBAI

ITA 5519/MUM/2013

• Counselvise Citation: 551919914 RSA 2013
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 20-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI . . , . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI R.C.SHARMA , ACCOUNTANT MEMBER ITA NO.5519/MUM/2013(A.Y. 2010-11) TRO(TDS)-1, ROOM NO.812, KG MITTAL HOSPITAL BLDG., CHARNI ROAD, MUMBAI 02. (APPELLANT ) VS. M/S. JSM CORPORATION PVT. LTD. AWING, 3 RD FLOOR, TODI ESTATE, SITARAM JADHAV MARG, LOWER PAREL, MUMBAI -13. PAN:AABCI 4903B (RESPONDENT) APPELLANT BY : SHRI AKHILENDRA YADA V RESPONDENT BY : NONE DATE OF HEARING : 02/03/2015 DATE OF PRONOUNCEMENT : 02 /03/2015 ORDER PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS D IRECTED AGAINST ORDER PASSED BY LD. CIT(A)-14, MUMBAI DATED 14/05/2013 FOR ASSE SSMENT YEAR 2010-11. GROUNDS OF APPEAL READ AS UNDER: 1. GROUNDS OF APPEAL: II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN NOT TREATING THE ASSESSEE IN DEFAUL T FOR NOT DEDUCTING TDS U/S. 194H OF THE IT. ACT ON THE CREDIT CARD COM MISSION PAID TO HDFC BANK, AS ASSESSED BY THE AO IN ORDER PASSED U/ S 201(1)/201(IA) OF THE INCOME TAX ACT, 1961. ITA NO.5519/MUM/2013(A.Y. 2010-11) 2 II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE ACQUIRING BANK RENDERS SERVICES FOR RECOVERY OF THE BILL AMOUNT TO THE MERCHANT AND HENCE ACTS AS AGENT OF THE RETAIL MERCHANT. THEREFO RE, THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE BANK IS OF PRINCIPAL TO AGENT, WHICH REQUIRES TDS U/S. 194H OF THE I. T. ACT, 1961. ) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE INTEREST U/S 201(I A) OF THE IT ACT, 1961 ON THE SHORT DEDUCTION OF TAX DETERMINED BY TH E AO AS THE TAX DETERMINED HAS ALREADY BEEN DELETED BY HIM AND INTE REST DELETION IS CONSEQUENTIAL TO THE QUANTUM DELETION FOR WHICH FUR THER APPEAL HAS BEEN RECOMMENDED VIDE GROUND NO. I&II 2. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS PAID CREDIT CARD COMMISSION OF RS.41,48,797/- TO HDFC BANK ON WHICH NO TAX WAS DEDUCTED AT SOURCE. THE AO BEING OF THE VIEW THAT SECTION 194H WAS APPLICABLE, RAISED A DEMAND OF RS.5,71,371/- UNDER SECTION 201 AND 201(I A) OF THE INCOME TAX ACT 1961 (THE ACT), AGAINST THE ASSESSEE AND THE SAID DEMAND HAS BEEN DELETED BY LD. CTT(A) FOLLOWING THE DECISION OF ITAT BANGALORE IN THE CASE OF TATA TELESERVICES LTD. VS. DCIT(TDS), 140 ITD 451 AND ALSO THE DECISI ON OF HYDERABAD ITAT IN THE CASE OF M/S. VAH MAGNA RETAIL PRIVATE LIMITED VS. DEPARTMENT OF INCOME TAX, IN ITA NO.905/HYD/2011, ORDER DATED 10/04/2011. THE DEPARTMENT IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 3. NOTICE OF HEARING WAS SENT TO THE ASSESSEE. HOW EVER, NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. AS THE ISSUE IS SMALL WE P ROCEED TO DECIDE THE PRESENT APPEAL ON MERITS, EX-PARTE QUA THE ASSESSEE. 4. LD. DR RELIED UPON THE ORDER PASSED BY AO. ITA NO.5519/MUM/2013(A.Y. 2010-11) 3 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 MA Y BE MENTIONED HERE THAT SUBSEQUENTLY ALSO, MUMBAI TRIBUNAL HAS FOLLOWED TH E AFOREMENTIONED DECISIONS IN THE CASE OF ACIT VS. JET AIRWAYS INDIA LTD., VID E DECISION DATED 23/10/2013 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 AFOREM ENTIONED CASE IT HAS BEEN HELD THAT NO TDS IS REQUIRED TO BE DEDUCTED ON THE FEES CHARGED BY THE BANK ON CREDIT CARD TRANSACTIONS. IT MAY FURTHER BE MENTIONED THA T RECENTLY, HONBLE DELHI HIGH 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 S UCH CONCLUSION AS PER FOLLOWING 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-ASSESS EE. ONCE THE PAYMENT WAS MADE BY HDFC, IT WAS RECEIVED AND CREDITED TO T HE ACCOUNT 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 THE SALE CON SIDERATION. IN TURN, THE ITA NO.5519/MUM/2013(A.Y. 2010-11) 4 BANK IN QUESTION HAD TO COLLECT THE AMOUNT FROM THE BANKERS OF THE CREDIT CARD HOLDER. THE BANK HAD TAKEN THE RISK AND ALSO R EMAINED OUT OF POCKET FOR SOMETIME AS THERE WOULD BE A TIME GAP BETWEEN T HE 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 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 ITA NO.5519/MUM/2013(A.Y. 2010-11) 5 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 STATU TES, 12TH EDITION (1969) IT HAS BEEN OBSERVED:- THE STRICT CONSTRUCTION OF PENAL STATUTES SEEMS TO MANIFEST ITSELF IN FOUR WAYS: IN THE REQUIREMENT OF EXPRESS LANGUAG E FOR THE CREATION OF AN OFFENCE; IN INTERPRETING STRICTLY WO RDS SETTING OUT THE ELEMENTS OF AN OFFENCE; IN REQUIRING THE FULFIL MENT TO THE LETTER OF STATUTORY CONDITIONS PRECEDENT TO THE INF LICTION OF PUNISHMENT; AND IN INSISTING ON THE STRICT OBSERVAN CE OF TECHNICAL PROVISIONS CONCERNING 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 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 THEREFORE, WE SEE NO INFIRMITY IN THE RELIEF GRAN TED BY LD. CIT(A). WE DECLINE TO INTERFERE AND THE DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/03/2015 ! ' 02/03/2015 # $ SD/- SD/- ( . . /R.C.SHARMA ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; %& DATED 02/03/2015 ITA NO.5519/MUM/2013(A.Y. 2010-11) 6 '() '() '() '() *)!( *)!( *)!( *)!( / COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. '-+, / THE RESPONDENT. 3. . ( ) / THE CIT(A)- 4. . / CIT 5. )/# '(& , , / DR, ITAT, MUMBAI 6. #0 1 / GUARD FILE. & & & & / BY ORDER, -)( '( //TRUE COPY// 2 22 2 / 3 3 3 3 4 4 4 4 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . & . ./ VM , SR. PS