NORTH EASTERN CARRYING CORPORATION LTD., NEW DELHI V. ACIT, CIRCLE- 18(2), NEW DELHI

ITA 5964/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5228 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 19-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non-deduction of tax; TDS
• Section: 143(3); 40(a)(ia); 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: E NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.5964/DEL/2017 ASSESSMENT YEAR: 2013-14 NORTH EASTERN CARRYING CORPORATION LTD., 9062/47, RAM BAGH ROAD, AZAD MARKET, NEW DELHI VS. ACIT, CIRCLE-18(2), NEW DELHI PAN :AABCN5129K (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST O RDER DATED 16/08/2017 PASSED BY THE LEARNED COMMISSIONER OF IN COME-TAX (APPEALS)-6, DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2013-14, RAISING FOLLOWING GROUNDS: 1. THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE P ETITIONER COMPANYS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)-6 NEW DELHI ERRED IN LAW IN UPHOLDING THE ORDER OF THE LE ARNED ASSESSING APPELLANT BY SH. DINESH GUPTA, CA RESPONDENT BY SH. GAURAV PUNDIR, SR.DR DATE OF HEARING 25.08.2021 DATE OF PRONOUNCEMENT 23.09.2021 2 ITA NO.5964/DEL./2017 OFFICER AND IN SUSTAINING THE DISALLOWANCE OF RS.4, 74,531 MADE IN TERMS OF THE PROVISIONS CONTAINED IN SECTION 40(A)( IA) OF THE INCOME TAX ACT, 1961 WITH RESPECT TO BANK GUARANTEE FEE / COMMISSION PAID BY THE ASSESSEE COMPANY. 2. THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE P ETITIONER COMPANYS CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)-6, NEW DELHI ERRED IN LAW IN UPHOLDING THE ORDER OF THE LE ARNED ASSESSING OFFICER AND IN SUSTAINING THE DISALLOWANCE OF RS. 4 ,74,531 MADE IN TERMS OF THE PROVISIONS CONTAINED IN SECTION 40( A)(IA) OF THE ACT WITHOUT SPECIFYING THE SECTION UNDER WHICH TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE UNDER CHAPTER XVII-B OF THE INCO ME TAX ACT, 1961. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE WAS ENGAGED IN TRANSPORT OF GOODS. FOR THE YEAR UNDER C ONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 19/09/2013, DECLARING TOTAL INCOME OF 9,82,18,720/-. THE RETURN OF INCOME FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND S TATUTORY NOTICES UNDER INCOME-TAX ACT, 1961 (IN SHORT THE A CT) WERE ISSUED AND COMPLIED WITH. DURING SCRUTINY PROCEEDIN GS, THE ASSESSING OFFICER OBSERVED PAYMENT OF 4,74,531/- BY THE ASSESSEE TO THE BANK AS BANK GUARANTEE FEE/COMMISSI ON. ACCORDING TO THE ASSESSING OFFICER, THIS PAYMENT WA S LIABLE FOR DEDUCTION OF TAX AT SOURCE AND ASSESSEE DID NOT DED UCT ANY TAX AT SOURCE AND, THEREFORE, EXPENSES ON BANK GUARANTEE FEE/COMMISSION DEBITED IN PROFIT AND LOSS ACCOUNT W ERE LIABLE FOR DISALLOWANCE IN TERMS OF SECTION 40(A)(IA) OF THE A CT. THE ASSESSEE REFERRED TO CBDT NOTIFICATION NO. 56/2012, DATED 31 /12/2012 AND SUBMITTED THAT ACCORDING TO THE NOTIFICATION TD S WAS NOT DEDUCTIBLE ON PAYMENT OF BANK GUARANTEE (BG)/COMMIS SION. THE LEARNED ASSESSING OFFICER REJECTED THE CONTENTION O F THE ASSESSEE AND HELD THAT SAID NOTIFICATION CAME INTO EFFECT FR OM 01/01/2013 3 ITA NO.5964/DEL./2017 WHEREAS THE PAYMENT HAS BEEN MADE PRIOR TO THIS DAT E AND, THEREFORE, ASSESSEE IS NOT COVERED BY THE ABOVE NOT IFICATION. THE ASSESSING OFFICER, ACCORDINGLY, MADE THE ADDITION O F 4,74,531/- IN THE IMPUGNED ORDER DATED 11/03/2016 PASSED IN TE RMS OF SECTION 143(3) OF THE ACT. ON FURTHER APPEAL, THE L D. CIT(A) UPHELD THE DISALLOWANCE. AGGRIEVED, THE ASSESSEE IS BEFORE THE TRIBUNAL BY WAY OF RAISING THE GROUNDS AS REPRODUCED ABOVE. 3. BEFORE US, BOTH THE PARTIES APPEARED THROUGH VIDEO CONFERENCING FACILITY AND FILED DOCUMENTS THROUGH E MAIL. 4. IN BOTH THE GROUNDS, THE SOLE ISSUE IS DISALLOWANC E OF BANK GUARANTEE FEE/COMMISSION IN TERMS OF SECTION 40(A)( IA) OF THE ACT. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE SUB MITTED THAT THE ASSESSING OFFICER HAS NOT SPECIFIED THE RE LEVANT SECTION UNDER WHICH BANK GUARANTEE FEE/COMMISSION WAS LIABL E FOR DEDUCTION OF TAX AT SOURCE. HE FURTHER SUBMITTED TH AT ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, THE CASE OF KOTAK SECURITIE S LTD. VS DCIT, (2012) 14 ITR (T) 495. 6. ON THE CONTRARY, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES AND SUBMITTED THAT PRIOR TO NOTIFICATIO N (SUPRA), BANK GUARANTEE FEE/COMMISSION WAS LIABLE FOR DEDUCTION O F TAX AT SOURCE FOR PAYMENTS MADE TO BOTH DOMESTIC AS WELL A S FOREIGN BANK, HOWEVER, BY WAY OF THE NOTIFICATION (SUPRA) W ITH EFFECT FROM 01/01/2013 BANK GUARANTEE COMMISSION PAID TO BANK L ISTED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA HA S BEEN EXEMPTED FROM DEDUCTION OF TAX AT SOURCE. ACCORDING TO HIM, PAYMENTS MADE TO FOREIGN BANK OR BANK GUARANTEE FEE/COMMISSION IS STILL LIABLE TO DEDUCTION OF TAX AT SOURCE. 4 ITA NO.5964/DEL./2017 THEREFORE, NO IMMUNITY CAN BE GRANTED TO THE ASSESS EE UNDER THE NOTIFICATION (SUPRA) FOR THE PERIOD PRIOR TO 01.01. 2013. 7. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOTED THAT BANK GUARANTEE FEE /COMMISSION ARE NOT COVERED WITHIN THE DEFINITION OF THE INTERE ST UNDER SECTION 2(28A) OF THE ACT AND, THEREFORE, EXEMPTION PROVIDE D UNDER SECTION 194A(3)(III) IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. THOUGH THE ASSESSING OFFICER HAS NOT SPECIFIED THE RELEVANT SECTION UNDER WHICH THE TAX WAS TO BE DEDUCTED, HE HELD THE PAYMENT FOR BANK GUARANTEE SERVICES IS NOT COVERED BY THE CBDT NOTIFICATION (SUPRA) AND MADE DISALLOWANCE UNDER SE CTION 40(A)(IA) FOR NON-DEDUCTION OF TAX AT SOURCE. THE LD. CIT(A) UPHELD THE DISALLOWANCE OBSERVING AS UNDER: 3.1.3. THE FACTS OF THE CASE AND THE SUBMISSIONS O F THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. THE AO DISALLOWED B ANK GUARANTEE COMMISSION/CHARGES AMOUNTING TO RS.4,74,531/- UNDER SECTION 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX FROM SUCH PAYMENT. FOR DISALLOWING THE SAME, THE AO RELIED UPON THE NOTIFI CATION NO. 56/2012 DATED 31.12.2012 ISSUED UNDER SECTION 197A (IF) OF THE ACT. SUB-SECTION (IF) WHICH WAS INSERTED IN SECTION 197A OF THE ACT VIDE FINANCE ACT, 2012 WITH EFFECT FROM 1ST JULY, 2 012 PROVIDES AS UNDER:- '(1F) NOTWITHSTANDING ANYTHING CONTAINED IN THIS CH APTER, NO DEDUCTION OF TAX SHALL BE MADE FROM SUCH SPECIFIED PAYMENT TO SUCH INSTITUTION, ASSOCIATION OR BODY OR CLASS OF I NSTITUTIONS, ASSOCIATIONS OR BODIES AS MAY BE NOTIFIED BY THE CE NTRAL GOVERNMENT IN THE OFFICIAL GAZETTE, IN THIS BEHALF. ' AFTER THE ENACTMENT OF FINANCE ACT, 2012, A SUPPLEM ENTARY MEMORANDUM EXPLAINING THE OFFICIAL AMENDMENTS TO TH E FINANCE BILL, 2012 WAS ISSUED VIDE CIRCULAR NO. 3/2012, DATED 12- 6-2012 :H INTER ALIA EXPLAINED THE INSERTION OF SUB-SECTION (IF) IN SECTION 197A OF THE ACT AS UNDER:- 5 ITA NO.5964/DEL./2017 'UNDER THE EXISTING PROVISIONS OF CHAPTER XVII-B OF THE ACT, TAX IS REQUIRED TO BE DEDUCTED (TDS) FROM CERTAIN PAYMENTS . THERE ARE SITUATIONS WHERE COLLECTION OF TAX BY WAY OF TDS MA Y CAUSE GENUINE HARDSHIP TO THE DEDUCTEE. IN ORDER TO REDUCE THE HA RDSHIP AND COMPLIANCE BURDEN IN THESE CASES, IT HAS BEEN PROVI DED THAT NO DEDUCTION OF TAX SHALL BE MADE FROM SUCH SPECIFIED PAYMENT TO SUCH INSTITUTION, ASSOCIATION OR BODY OR CLASS OF INSTIT UTIONS, ASSOCIATIONS OR BODIES AS MAY BE NOTIFIED BY THE CENTRAL GOVERNM ENT IN THE OFFICIAL GAZETTE. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST JULY, 2012 .' SUBSEQUENTLY, THE CENTRAL GOVERNMENT VIDE NOTIFICAT ION NO. 56/2012 DATED 31.12.2012 ISSUED UNDER SECTION 197A(1F) OF T HE ACT NOTIFIED THAT TAX SHALL NOT BE DEDUCTED UNDER CHAPTER XVII O F THE ACT FROM THE SPECIFIED PAYMENTS MADE TO A BANK (OTHER THAN A FOR EIGN BANK) LISTED IN THE SECOND SCHEDULE TO THE RESERVE BANK O F INDIA ACT, 1934. THE SAID NOTIFICATION NO. 56/2012 DATED 31.12 .2012 ISSUED FROM F. NO. 275/53/2012-IT(B) IS AS UNDER:- 'LN EXERCISE OF THE POWERS CONFERRED BY SUB-SECTION (IF) OF SECTION 197A OF THE INCOME-TAX ACT, 1961 (43 OF 196 1), THE CENTRAL GOVERNMENT HEREBY NOTIFIES THAT NO DEDUCTIO N OF TAX UNDER CHAPTER XVII OF THE SAID ACT SHALL BE MADE ON THE PAYMENTS OF THE NATURE SPECIFIED BELOW, IN CASE SUC H PAYMENT IS MADE BY A PERSON TO A BANK LISTED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT, 1934 (2 OF 1934), EXCLUDING A FOREIGN BANK, NAMELY:- (I) BANK GUARANTEE COMMISSION; (II) CASH MANAGEMENT SERVICE CHARGES; (III) DEPOSITORY CHARGES ON MAINTENANCE OF DEMAT A CCOUNTS; (IV) CHARGES FOR WAREHOUSING SERVICES FOR COMMODIT IES; (V) UNDERWRITING SERVICE CHARGES; (VI) CLEARING CHARGES (MICR CHARGES); (VII) CREDIT CARD OR DEBIT CARD COMMISSION FOR TRA NSACTION BETWEEN THE MERCHANT ESTABLISHMENT AND ACQUIRER BANK. 2. THIS NOTIFICATION SHALL COME INTO FORCE FROM THE 1ST DAY OF JANUARY, 2013.' 6 ITA NO.5964/DEL./2017 A PLAIN READING OF SECTION 197A(1F) OF THE ACT READ WITH MEMORANDUM EXPLAINING THE OFFICIAL AMENDMENTS TO TH E FINANCE BILL, 2012 INDICATES THAT THE CENTRAL GOVERNMENT UNDER SE CTION 197A(1F) OF THE ACT IS EMPOWERED TO PROVIDE EXEMPTION FROM D EDUCTION OF TAX TO THE PAYMENTS FROM WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVII OF THE ACT. THEREFORE, UNDER SECTION 197A (IF) OF THE ACT, THE CENTRAL GOVERNMENT CAN NOTIFY ONLY THOSE PAYMENTS FROM WHIC H THE TAX IS DEDUCTIBLE UNDER CHAPTER XVII OF THE ACT. HENCE, TH E SCHEME OF NOTIFICATION OF PAYMENTS UNDER SECTION 197A (IF) OF THE ACT PRESUPPOSES THAT A PAYMENT WHICH HAS BEEN NOTIFIED UNDER THIS SUB-SECTION WAS NOT EXEMPT FROM DEDUCTION OF TAX BE FORE THE DATE OF NOTIFICATION OF SUCH PAYMENT. AS THE TAX WAS DEDUCT IBLE FROM SUCH PAYMENT, THE CENTRAL GOVERNMENT NOTIFIED SUCH PAYME NTS FOR REDUCING THE HARDSHIP AND COMPLIANCE BURDEN IN THES E CASES. THEREFORE, THE POWER OF NOTIFICATION UNDER SECTION 197A (IF) IS NOT APPLICABLE FOR THOSE PAYMENTS FROM WHICH TAX IS NOT DEDUCTIBLE UNDER CHAPTER XVII OF THE ACT. THERE IS NO DISPUTE THAT THE CENTRAL GOVERNMENT UNDER SECTION 197A(1F) OF THE ACT HAS NO TIFIED CERTAIN PAYMENTS MADE TO A BANK (OTHER THAN A FOREIGN BANK) LISTED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT, 1 934 VIDE NOTIFICATION NO. 56/2012 DATED 31.12.2012. THIS NOT IFICATION INTER ALIA CONTAINS PAYMENTS IN THE NATURE OF BANK GUARAN TEE COMMISSION AND THE NOTIFICATION IS EFFECTIVE FROM 1ST JANUARY, THEREFORE, THE ISSUE OF NOTIFICATION UNDER SECTION 197A(1F) OF THE ACT INTER ALIA PROVIDING TAX UNDER CHAPTER XVII SHALL NOT BE DEDUC TED FROM PAYMENTS IN THE NATURE OF BANK GUARANTEE TO SPECIFI ED BANKS MAKES IT OBVIOUS THAT THE TAX IS REQUIRED TO BE DEDUCTED UNDER CHAPTER XVII OF THE ACT FROM THE PAYMENTS IN THE NATURE OF BANK GUARANTEE COMMISSION, HOWEVER, SUCH PAYMENTS MADE TO THE SPEC IFIED BANKS WITH EFFECT FROM 1ST JANUARY, 2013 SHALL NOT BE LIA BLE FOR TAX DEDUCTION IN VIEW OF THE NOTIFICATION ISSUED UNDER SECTION 197A(1F) OF THE ACT. FURTHER, THE NOTIFICATION ALSO MADE IT APPARENT THAT THE PAYMENTS SPECIFIED IN THE NOTIFICATION INCLUDING TH E PAYMENT IN THE NATURE OF BANK GUARANTEE COMMISSION PAID TO A DOMES TIC BANK OTHER THAN THE BANK LISTED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT, 1934 SHALL BE LIABLE FOR TAX DEDUCTION E VEN AFTER 1ST JANUARY, 2013 AS THE SAME IS NOT COVERED UNDER THE NOTIFICATION. THE APPELLANT'S CASE RELATES TO AY 2013-14 (PREVIOU S YEAR 2012- 13) I.E. PARTLY BEFORE THE DATE OF COMING INTO FORCE OF THE SAID NOTIFICATION, HENCE THE TAX WAS REQUIRED TO BE DEDUCTED FROM THE SAID PAYMENT AS THE PAYMENT FOR THE PERIOD UPTO 31.12.2012 WAS MADE BEFORE THE DATE OF COMING INTO FORCE OF THE NOTIFICATION. THE APPELLANT HAS RELIED UPON, AMONG OTHERS, THE JU DGMENT OF KOTAK SECURITIES LTD. VS DCIT 73DTR (MUMBAI)(TRIB). IT IS NOTICED THAT THE JUDGMENTS RELIED ON BY THE APPELLANT WERE EITHER PR ONOUNCED BEFORE THE ISSUE OF NOTIFICATION NO. 56/2012 DATED 31.12.2 012 OR ARE ON A 7 ITA NO.5964/DEL./2017 DIFFERENT FOOTING. AS DISCUSSED EARLIER, THE NOTIFI CATION NO. 56/2012 DATED 31.12.2012 MADE IT APPARENT THAT TAX IS REQUI RED TO BE DEDUCTED UNDER CHAPTER XVII OF THE ACT FROM THE PAY MENTS MENTIONED IN THE NOTIFICATION INCLUDING PAYMENT IN THE NATURE OF BANK GUARANTEE COMMISSION, HOWEVER, SUCH PAYMENTS M ADE TO THE SPECIFIED BANKS WITH EFFECT FROM 1ST JANUARY, 2013 SHALL NOT BE LIABLE FOR TAX DEDUCTION IN VIEW OF THE NOTIFICATIO N ISSUED UNDER SECTION 197A(1F) OF THE ACT. HENCE, THE JUDGMENTS R ELIED ON BY THE APPELLANT WOULD NOT BE OF ANY ASSISTANCE TO THE APP ELLANT IN THE CHANGED CIRCUMSTANCES. FURTHER, THE NOTIFICATION HA S NOT CLARIFIED THAT TAX IS NOT DEDUCTIBLE FROM THE PAYMENT IN THE NATURE OF BANK GUARANTEE COMMISSION, AS MENTIONED BY THE APPELLANT , RATHER AS DISCUSSED EARLIER, IT INTER ALIA PROVIDED THAT THE TAX IS DEDUCTIBLE FROM THE PAYMENTS IN THE NATURE OF BANK GUARANTEE, HOWEVER, IF SUCH PAYMENTS ARE MADE TO THE BANKS SPECIFIED IN THE NOT IFICATION ON OR AFTER 1ST JANUARY, 2013, THE TAX IS NOT BE DEDUCTED IN VIEW OF THE EXEMPTION GRANTED IN THE NOTIFICATION. BESIDES, THO UGH THE APPELLANT HAS SOUGHT RELIEF UNDER THE SECOND PROVISO TO SECTI ON 40(A)(IA), IT FAILED TO FURNISH ANY EVIDENCE OF THE RECIPIENT BAN K HAVING FILED THE RELEVANT IT RETURN. FROM THE DISCUSSION IN THE PRECEDING PARAGRAPHS, IT IS APPARENT THAT TAX WAS REQUIRED TO BE DEDUCTED FROM THE PAYMENT OF BANK GUARANTEE COMMISSION/CHARGES AMOUNTING TO RS.4,74,5 31/- DURING THE PREVIOUS YEAR 2011-12 AND AS THE TAX WAS NOT DE DUCTED, THE SAME IS NOT ALLOWABLE IN VIEW OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND HENCE THE DISALLOWANCE OF RS.4,74,531/- MADE BY THE AO IS HEREBY CONFIRMED. 7.1 HOWEVER, WE FIND THAT TRIBUNAL DELHI BENCH IN THE C ASE OF NAVNIRMAN HIGHWAY PROJECT PRIVATE LIMITED VS DCIT, IN ITA NO. 117/DEL/2017 HAS HELD THAT BANK GUARANTEE FEE/COMMISSION PAID BEFORE 01/01/2013 IS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE IN VIEW OF NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE BANK. THE RELEVANT FINDING OF THE TRIBUNAL (SUPRA) IS REPRODUCED AS UN DER: 5. LD. AR FOR THE ASSESSEE BY RELYING UPON THE ORD ER PASSED BY THE COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS KOTAK SECURITIES LTD. VS. DCIT, TDS CIRCLE 2 (1), MUMBAI (2012) 14 ITR (T) 495 (MUMBAI-TRIB.) CONTENDED THAT BANK GUARANTEE COMMISSION 8 ITA NO.5964/DEL./2017 PARTAKES CHARACTER OF INTEREST U/S 2(28A) OF THE AC T AND AS SUCH, ADDITION IS NOT LIABLE TO BE SUSTAINED. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ORDER PASSED BY THE LD. CIT (A) BUT HAS NOT CONTROVERTED THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL BY BRINGING ON RECORD ANY OTH ER DECISION CONTRARY TO IT. 6. COORDINATE BENCH OF THE TRIBUNAL DECIDED THE IDE NTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDI NGS :- 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS, AND WHEN WE LOOK AT THE CONNOTATIONS OF EXPRESSION COMMISSION OR BRO KERAGE IN ITS COGNATE SENSE, AS IN THE LIGHT OF THE PRINCIPL E OF NOSCITUR A SOCIIS AS WE ARE OBLIGED TO, IN OUR CONS IDERED VIEW, SCOPE OF EXPRESSION COMMISSION, FOR THIS PURPOSE, WIL L BE CONFINED TO AN ALLOWANCE, RECOMPENSE OR REWARD MADE TO AGENTS, FACTORS AND BROKERS AND OTHERS FOR EFFECTIN G SALES AND CARRYING OUT BUSINESS TRANSACTIONS AND SHALL NOT E XTEND TO THE PAYMENTS, SUCH AS BANK GUARANTEE COMMISSION, W HICH 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 STATUTO RILY DEFINED UNDER SECTION 2, IT STILL HAS TO MEET THE T EST OF CONTEXTUAL RELEVANCE AS SECTION 2 ITSELF STARTS WIT H THE WORDS IN THIS ACT ( I.E. INCOME TAX ACT), UNLESS CONTEXT OTHERWISE REQUIRES, AND, THEREFORE, CONTEXTUAL MEANING ASSU MES SIGNIFICANCE. EVERY DEFINITION IN THE INCOME TAX AC T MUST DEPEND ON THE CONTEXT IN WHICH THE EXPRESSION IN SET OUT, AND THE CONTEXT IN WHICH EXPRESSION COMMISSION APPEARS IN SECTION 194H, I.E. ALONGWITH THE EXPRESSION BROKERAGE, SIGNIFICANTLY RESTRICTS ITS CONNOTATIO NS. THE COMMON PARLANCE MEANING OF THE EXPRESSION COMMISSION THUS DOES NOT EXTEND TO A PAYMENT WHICH IS IN THE NA TURE OF FEES FOR A PRODUCT OR SERVICE; IT MUST REMAIN RESTRI CTED TO, AS HAS BEEN ELABORATED ABOVE, A PAYMENT IN THE NATURE O F REWARD FOR EFFECTING SALES OR BUSINESS TRANSACTIONS ETC. THE INCLUSIVE DEFINITION OF THE EXPRESSION COMMISSION O R BROKERAGE IN EXPLANATION TO SECTION 194 H IS QUITE IN HARMONY WITH THIS APPROACH AS IT ONLY PROVIDES THAT ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECT LY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICE S RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR AN Y SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN R ELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ART ICLE OR THING, NOT BEING SECURITIES IS INCLUDIBLE IN THE S COPE OF MEANING OF COMMISSION OR BROKERAGE. THEREFORE, WH AT THE 9 ITA NO.5964/DEL./2017 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 VS STATE OF GUJARAT [(1976) 4 SCC 601], HONBLE SUPREME COURT WERE IN SEISIN OF A SITUATION IN WHICH AN EXPRESSION, NAMELY PROCESSING, WAS GIVEN AN INCLUSI VE DEFINITION, BUT THEIR LORDSHIPS WERE OF THE VIEW TH AT THERE COULD BE NO OTHER MEANING OF PROCESSING BESIDES WH AT IS STATED AS INCLUDED IN THAT EXPRESSION AND THAT THO UGH 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 N OTED, DOES NOT NECESSARILY ALWAYS EXTEND THE MEANING OF AN EXPR ESSION. WHEN INCLUSIVE DEFINITION CONTAINS ORDINARY NORMAL CONNOTATIONS OF AN EXPRESSION, IN OUR CONSIDERED VIE W, EVEN AN INCLUSIVE DEFINITION HAS TO BE TREATED AS EXHAUS TIVE. THAT IS THE SITUATION IN THE CASE BEFORE US AS WELL. EVE N AS DEFINITION OF EXPRESSION COMMISSION OR BROKERAGE, IN EXPLANATION TO SECTION 194 H, IS STATED TO BE EXCLUS IVE, IT DOES NOT REALLY MEAN ANYTHING OTHER THAN WHAT HAS B EEN SPECIFICALLY STATED IN THE SAID DEFINITION. THEREFOR E, AS HELD BY THE COORDINATE BENCHES IN A NUMBER OF CASES INCL UDING SRL RANBAXY LTD VS ACIT (ITA NO. 434/DEL/11; ORDER DATE D 16.12.2011), FOSTERS INDIA LTD VS ITO (117 TTJ 346) , AND AJMER ZILA DUGDHUTPADAK SANGH LTD VS ITO (34 SOT 216 ), PRINCIPAL AGENT RELATIONSHIP IS A SINE QUA NON FOR INV OKING THE PROVISIONS OF SECTION 194 H. IN THE CASE BEFORE US, THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK ISS UING THE BANK GUARANTEE AND THE ASSESSEE. WHEN BANK ISSUES T HE BANK GUARANTEE, ON BEHALF OF THE ASSESSEE, ALL IT DOES I S TO ACCEPT THE COMMITMENT OF MAKING PAYMENT OF A SPECIFIED AMOUN T TO, ON DEMAND, THE BENEFICIARY, AND IT IS IN CONSIDERAT ION OF THIS COMMITMENT, THE BANK CHARGES A FEES WHICH IS CUSTOM ARILY TERMED AS BANK GUARANTEE 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. THI S TRANSACTION, IN OUR CONSIDERED VIEW, IS NOT A TRANS ACTION BETWEEN 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) I NDEED ERRED IN HOLDING THAT THE ASSESSEE WAS INDEED UNDER AN OB LIGATION TO DEDUCT TAX AT SOURCE UNDER SECTION 194 H FROM PAY MENTS 10 ITA NO.5964/DEL./2017 MADE BY THE ASSESSEE TO VARIOUS BANKS. AS WE HAVE H ELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOUR CE UNDER SECTION 194 H, THE QUESTION OF LEVY OF INTEREST UND ER SECTION 201(1A) CANNOT ARISE. 10. IN VIEW OF THE ABOVE DISCUSSIONS, WE QUASH THE IMPUGNED DEMANDS UNDER SECTION 201(1) AND 201(1A) R.W.S. 194 H . WE, THEREFORE, ALSO SEE NO NEED TO DEAL WITH OTHER PERIPHERAL LEGAL ISSUES RAISED BY THE ASSESSEE. 7. SO, FOLLOWING THE DECISION RENDERED BY THE COORD INATE BENCH OF THE TRIBUNAL, WHEN THE BANK HAS ISSUED BANK GUARANTEE O N BEHALF OF THE ASSESSEE THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK AND THE ASSESSEE WHICH IS A MANDATORY CONDITION FOR INVOKING THE PROVISIONS CONTAINED U/S 194H AND IN THESE CIRCUMST ANCES, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE U/S 194H FROM PAYMENT OF BANK GUARANTEE COMMISSION TO THE BANK. M OREOVER, BANK GUARANTEE COMMISSION ALSO PARTAKES THE CHARACTER OF INTEREST U/S 2(28A) OF THE ACT AND AS SUCH, EXEMPTION PROVIDED U /S 194A(3)(III) IS AVAILABLE TO THE ASSESSEE QUA SUCH PAYMENT. SO, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT (A) HAS ERRED IN N OT FOLLOWING THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TR IBUNAL IN KOTAK SECURITIES LTD. (SUPRA) ON THE GROUND THAT THE DECISION OF KOTAK SECURITIES LTD. (SUPRA) IS NOT APPLICABLE HAVING BEEN PRONOUNCED BEFORE THE ISSUE OF NOTIFICATION NO.56/20 12 DATED 3 1.12.2012 BECAUSE ORDINARILY ANY PROVISION OF THE STATUTE HA S TO BE READ HAVING PROSPECTIVE EFFECT AND NOT HAVING RETRO SPECTIVE EFFECT UNLESS IT IS SPECIFICALLY PROVIDED. SO, WHEN THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK AND THE ASSESSE E, DEDUCTION OF TAX AT SOURCE ON COMMISSION OR BROKERAGE IS NOT REQ UIRED FOR. CONSEQUENTLY, ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS ORDERED TO BE DELETED, THUS THE APPEAL F ILED BY THE ASSESSEE IS HEREBY ALLOWED. 7.2 RESPECTFULLY, FOLLOWING FINDING OF THE TRIBUNAL (S UPRA), WE HOLD THAT THE ASSESSEE WAS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE ON THE BANK GUARANTEE FEE/COMMISSION DURING THE RELEVANT PERIOD IN ABSENCE OF ANY PRINCIPAL AGENT R ELATIONSHIP BETWEEN THE ASSESSEE AND THE BANK. ACCORDINGLY, WE DIRECT THE 11 ITA NO.5964/DEL./2017 ASSESSING OFFICER TO DELETE THE ADDITION. THE GROUN DS OF APPEAL OF THE ASSESSEE ARE ACCORDINGLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2021 SD/- SD/- (AMARJIT SINGH) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 RD SEPTEMBER, 2021. RK/- (DTDC) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI