ASST CIT CIR 6(1), MUMBAI V. JSM CORPORATION P. LTD, MUMBAI

ITA 5525/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88530 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2009-2010
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Tax effect

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.5525/MUM/2013(A.Y. 2009-10) THE ACIT-6(1), ROOM NO.506, 5 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT ) VS. M/S. JSM CORPORATION PRIVATE LIMITED, A-WING, 3D FLOOR, TODI ESTATE, SITARA JADHAV MARG. LOWER PAREL, MUMBAI 400 013. PAN:AABCJ 4903B (RESPONDENT) APPELLANT BY : SHRI AKHILENDRA YADA V RESPONDENT BY : NONE DATE OF HEARING : 04/03/2015 DATE OF PRONOUNCEMENT : 04 /03/2015 ORDER PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-14,MUMBAI DATED 13/05/2013 FO R ASSESSMENT YEAR 2009-10. GROUNDS OF APPEAL READ AS UNDER: 1.WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS.10 ,78,049/- UNDER SECTION 40(A)(IA) BEING THE COMMISSION PAID BY THE ASSESSEE TO THE BANKS/CREDIT CARD COMPANIES ON THE AMOUNT RECEIVED FROM ITS CUSTOMERS THROUGH CREDIT CARD/DEBIT CARD BY HOLDING THAT TDS WAS NOT PAYABL E ON SUCH PAYMENT SO SEC.40(A)(IA0 WAS NOT APPLICABLE. ITA NO.5525/MUM/2013(A.Y. 2009-10) 2 2. IT WAS OBSERVED THAT APPEAL FILED BY THE REVENU E INVOLVES LOW TAX EFFECT, THEREFORE, THE SAME IS LIABLE TO BE DISMISSED IN VIEW OF INSTRUCTION ISSUED BY CBDT VIDE INSTRUCTION NO.5/2014 (F.NO.279/MISC.1 42/2007-ITJ(PT)] DATED 10/07/2014 3. ON MERIT ALSO THE ISSUE IS COVERED AGAINST THE R EVENUE AND RECENTLY SIMILAR ISSUE WAS DECIDED AGAINST THE REVENUE BY BOTH OF US IN ANOTHER DEPARTMENTAL APPEAL VIDE ORDER DATED 02/03/2015 IN ITA NO.5519/ MUM/2013(A.Y. 2010-11) AND THE RELEVANT OBSERVATIONS ARE AS UNDER: 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., VIDE 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 AFOREMENTIONED CASE IT HAS BEEN HELD THAT NO TDS IS REQUIRED TO BE DEDUCTED ON THE FEES CHARGED BY THE BANK ON CREDIT CARD TRAN SACTIONS. IT MAY FURTHER BE MENTIONED THAT RECENTLY, HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. JDS APPARELS (P) LTD. VIDE THEIR DECISION DATED 18 /11/2014, 53 TAXAMANN.COM 139(DEL) HAVE UPHELD SUCH 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 NOT BE ATTRACTED. HDFC WAS NOT ACTING AS AN AGENT OF THE R ESPONDENT- ASSESSEE. ONCE THE PAYMENT WAS MADE BY HDFC, IT WAS RECEIVED AND CREDITED TO THE ACCOUNT OF THE RESPONDENT-ASSESSEE. IN THE PROCESS, A SMALL FEE WAS DEDUCTED BY THE ACQUIRING BANK, I.E. THE BANK WHOSE SWIPING MACHINE WAS USED. ON SWIPING THE CREDIT CAR D ON THE SWIPING MACHINE, THE CUSTOMER WHOSE CREDIT CARD WAS USED, G OT ACCESS TO THE INTERNET GATEWAY OF THE ACQUIRING BANK RESULTING IN THE REALISATION OF PAYMENT. SUBSEQUENTLY, THE ACQUIRING BANK REALIZED AND RECOVERED THE ITA NO.5525/MUM/2013(A.Y. 2009-10) 3 PAYMENT FROM THE BANK WHICH HAD ISSUED THE CREDIT C ARD. HDFC HAD NOT UNDERTAKEN ANY ACT ON BEHALF OF THE RESPONDEN T-ASSESSEE. THE RELATIONSHIP BETWEEN HDFC AND THE RESPONDENT-ASSESS EE WAS NOT OF AN AGENCY BUT THAT OF TWO INDEPENDENT PARTIES ON PR INCIPAL TO PRINCIPAL BASIS. HDFC WAS ALSO ACTING AND EQUALLY P ROTECTING THE INTEREST OF THE CUSTOMER WHOSE CREDIT CARD WAS USED IN THE SWIPING MACHINES. IT IS NOTICEABLE THAT THE BANK IN QUESTIO N OR THEIR EMPLOYEES WERE NOT PRESENT AT THE SPOT AND WERE NOT ASSOCIATE D WITH BUYING OR SELLING OF GOODS AS SUCH. UPON SWIPING THE CARD, TH E BANK MADE PAYMENT OF THE BILL AMOUNT TO THE RESPONDENT-ASSESS EE. THUS, THE RESPONDENT ASSESSEE RECEIVED THE SALE CONSIDERATION . IN TURN, THE BANK IN QUESTION HAD TO COLLECT THE AMOUNT FROM THE BANK ERS 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 BE TWEEN THE 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 AN Y SERVICES BY A PERSON ACTING ON BEHALF OF ANOTHER FOR BUYING OR SE LLING OF GOODS. THE INTENTION OF THE LEGISLATURE IS TO INCLUDE AND TREA T COMMISSION OR BROKERAGE PAID WHEN A THIRD PERSON INTERACTS BETWEE N THE SELLER AND THE BUYER AS AN AGENT AND THEREBY RENDERS SERVICES IN THE COURSE OF BUYING AND/OR SELLING OF GOODS. THIS HAPPENS WHEN T HERE IS A MIDDLEMAN OR AN AGENT WHO INTERACTS ON BEHALF OF ON E OF THE PARTIES, HELPS THE BUYER/SELLER TO MEET, OR PARTICIPATES IN THE NEGOTIATIONS OR TRANSACTIONS RESULTING IN THE CONTRACT FOR BUYING A ND SELLING OF GOODS. THUS, THE REQUIREMENT OF AN AGENT AND PRINCIPAL REL ATIONSHIP. THIS IS THE EXACT PURPORT AND THE RATIONALE BEHIND THE PROV ISION. THE BANK IN QUESTION IS NOT CONCERNED WITH BUYING OR SELLING OF GOODS OR EVEN WITH THE REASON AND CAUSE AS TO WHY THE CARD WAS SWIPED. IT IS NOT BOTHERED OR CONCERNED WITH THE QUALITY, PRICE, NATURE, QUANT UM ETC. OF THE GOODS BOUGHT/SOLD. THE BANK MERELY PROVIDES BANKING SERVI CES IN THE FORM OF PAYMENT AND SUBSEQUENTLY COLLECTS THE PAYMENT. THE AMOUNT PUNCHED IN THE SWIPING MACHINE IS CREDITED TO THE ACCOUNT O F THE RETAILER BY THE ACQUIRING BANK, I.E. HDFC IN THIS CASE, AFTER RETAI NING A SMALL PORTION OF THE SAME AS THEIR CHARGES. THE BANKING SERVICES CANNOT BE COVERED AND TREATED AS SERVICES RENDERED BY AN AGENT FOR TH E PRINCIPAL DURING THE COURSE OF BUYING OR SELLING OF GOODS AS THE BAN KER DOES NOT RENDER ANY SERVICE IN THE NATURE OF AGENCY. ITA NO.5525/MUM/2013(A.Y. 2009-10) 4 17. ANOTHER REASON WHY WE FEEL SECTION 40(A)(IA) OF THE ACT SHOULD NOT HAVE BEEN INVOKED IN THE PRESENT CASE IS THE PRINCI PLE OF DOUBTFUL PENALIZATION WHICH REQUIRES STRICT CONSTRUCTION OF PENAL PROVISIONS. THE SAID PRINCIPLE APPLIES NOT ONLY TO CRIMINAL STA TUTES BUT ALSO TO PROVISIONS WHICH CREATE A DETERRENCE AND RESULTS IN PUNITIVE PENALTY. SECTION 40(A)(IA) IS A DETERRENT AND A PENAL PROVIS ION. IT HAS THE EFFECT OF PENALISING THE ASSESSEE, WHO HAS FAILED TO DEDUC T TAX AT SOURCE AND ACTS TO THE DETRIMENT OF THE ASSESSEES PROPERTY AND OTHER ECONOMIC INTERESTS. IT OPERATES AND INFLICTS HARDSHIP AND DE PRIVATION, BY DISALLOWING EXPENDITURE ACTUALLY INCURRED AND TREAT ING IT AS DISALLOWED. THE EXPLANATION, THEREFORE, REQUIRES A STRICT CONSTRUCTION AND THE PRINCIPLE AGAINST DOUBTFUL PENALIZATION WOU LD COME INTO PLAY. THE DETRIMENT IN THE PRESENT CASE, AS IS NOTICEABLE , WOULD INCLUDE INITIATION OF PROCEEDINGS FOR IMPOSITION OF PENALTY FOR CONCEALMENT, AS WAS DIRECTED BY THE ASSESSING OFFICER IN THE PRESEN T CASE. THE AFORESAID PRINCIPLE REQUIRES THAT A PERSON SHOULD N OT BE SUBJECTED TO ANY SORT OF DETRIMENT UNLESS THE OBLIGATION IS CLEA RLY IMPOSED. WHEN THE WORDS ARE EQUALLY CAPABLE OF MORE THAN ONE CONS TRUCTION, THE ONE NOT INFLICTING THE PENALTY OR DETERRENT MAY BE PREF ERRED. IN MAXWELLS THE INTERPRETATION OF STATUTES, 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 LANGUAGE FOR THE CREATION OF AN OFFENCE; IN INTERPR ETING STRICTLY WORDS SETTING OUT THE ELEMENTS OF AN OFFEN CE; IN REQUIRING THE FULFILMENT TO THE LETTER OF STATUTORY CONDITIONS PRECEDENT TO THE INFLICTION OF PUNISHMEN T; AND IN INSISTING ON THE STRICT OBSERVANCE 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 S AID PRINCIPLE 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 P AID TAXES ON THEIR INCOME. IT IS NOT A CASE OF LOSS OF REVENUE AS SUCH OR A CASE WHERE THE RECIPIENT DID NOT PAY THEIR TAXES. ITA NO.5525/MUM/2013(A.Y. 2009-10) 5 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. IN THIS VIEW OF THE SITUATION, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2015 ! ' 04/03/2015 # $ SD/- SD/- ( . . /R.C.SHARMA ) ( . . / I.P. BANSAL ) /ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; %& DATED 04/03/2015 '() '() '() '() *)!( *)!( *)!( *)!( / 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