ITO (TDS) 2(2), MUMBAI V. KESAR TRAVELS LTD, MUMBAI

ITA 636/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83495 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 30-07-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 21-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARI S RAHEJA
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI !' , # $% & & & & , , $% ' BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 636/MUM/2011 (ASSESSMENT YEAR: 2002-03) INCOME-TAX OFFICER (TDS)-2(2), ROOM NO. 707, SMT. K.G. MITTAL, AYURVEDIC HOSPITAL, CHARNI ROAD, MUMBAI VS M/S. KESAR TRAVELS LTD, ORIENTAL HOUSE, 4 TH FLOOR, 7, J. TATA ROAD, CHURCHGATE, MUMBAI -400 020 %( # .: PAN: AAACK 2228 H (+ (APPELLANT) ,-(+ (RESPONDENT) ITAS NO. : 8872 TO 8874/MUM/2011 (ASSESSMENT YEARS: 2003-04 TO 2005-06) INCOME-TAX OFFICER (TDS)-2(2), ROOM NO. 707, SMT. K.G. MITTAL, AYURVEDIC HOSPITAL, CHARNI ROAD, MUMBAI VS M/S. KESAR TRAVELS LTD, ORIENTAL HOUSE, 4 TH FLOOR, 7, J. TATA ROAD, CHURCHGATE, MUMBAI -400 020 %( # .: PAN: AAACK 2228 H (+ (APPELLANT) ,-(+ (RESPONDENT) APPELLANT BY : SHRI DURGA DUTT RESPONDENT BY : SHRI HARI S RAHEJA ./0# /DATE OF HEARING : 30-07-2014 123 ./0#/ DATE OF PRONOUNCEMENT : 06-08-2014 $ 5 $ 5 $ 5 $ 5 O R D E R , . . . . . .. . PER VIVEK VARMA, J.M. : THE INSTANT FOUR APPEALS, FILED BY THE DEPARTMENT A RE AGAINST THE FOUR ORDERS OF CIT(A)-14, MUMBAI, ALL DATED 28.10.2 010. ALL THE FOUR APPEALS HAVE COMMON GROUND, WHEREIN, THE CIT(A) HAS DELETED THE DEMAND, RAISED U/S 201(1)/201(1A) OF THE INCOME TAX ACT, 1961, BY THE AO. SINCE ALL THE FOUR APPEALS HAVE COMMON AND CONSOLIDATED GROUNDS ON IDENTICAL ISSUE, WE PROPOSE TO PASS A CO MMON AND M/S. KESAR TRAVELS LTD ITA NO. 636/MUM/2011 & 03 OTHER GROUP CASES 2 CONSOLIDATED ORDER IN ALL THE FOUR INSTANT APPEALS FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FOR THE SAKE OF CONVENIENCE, WE ARE TAKING UP IT A NO. 636/MUM/2011, PERTAINING TO ASSESSMENT YEAR 2002-03 , AS THE LEAD YEAR: ITA NO. : 636/MUM/2011 : REVENUES APPEAL : A. Y. 2002-2003 : 3. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE DEMAND OF RS. 8,64,102/- WITHOUT PROPERLY APPRECIATI NG THE FACTUAL AND LEGAL MATRIX OF THE CASE AS CLEARLY BRO UGHT OUT BY THE AO IN ORDER U/S 201(1)/201(1A) OF THE INCOME-TAX ACT , 1961. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE CORRECT NATURE OF THE EXPENSES INCURRED AND MER ELY GOING BY THE CLASSIFICATION OF EXPENSES AS HANDLING AND OTHE R SERVICE CHARGES WHEREAS SUCH EXPENSES, IN SUBSTANCE AND EFF ECT ARE IN NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF THE INCOME TAX ACT, 1961. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN IGNORING THE PITH AND SUBSTANCE RULE, WHICH IS AN ACCEPTED CANON OF INTERPRETATION IN JURISPRUDENCE, AND MERELY GONE BY THE FORM OF CLASSIFICATION OF SUCH EXPENSES AS HANDLING AND OTH ER SERVICE CHARGES THOUGH IN SUBSTANCE AND EFFECT SUCH EXPENSE S ARE IN NATURE OF COMMISSION EXPENSES. 4. THE FACTS ARE THAT THE ASSESSEE IS A REGISTERED IATA AIR TRAVEL AGENT, CARRYING ON THE BUSINESS OF AIR TICKETING ON DOMESTIC AND INTERNATIONAL SECTORS. HAVING INTENSE CUT THROAT CO MPETITION IN THE LINE OF BUSINESS, THE ASSESSEE, WHILE ISSUING TICKETS TO THE CUSTOMERS, OFFERS DISCOUNTS TO LURE CUSTOMERS AND INCREASE THE VOLUME OF BUSINESS. THE TRAVEL AGENT, NORMALLY CATEGORIZE THESE DISCOUNTS A S HANDLING CHARGES, WHICH VARY AIRLINES TO AIRLINES AND SECTOR TO SECTO R. 5. THE AO IN THE ORDER PASSED BY HIM, INCLUDED THER EIN, A PART OF THE STATEMENT RECORDED BY THE OFFICERS IN SURVEY OP ERATIONS CARRIED OUT ON THE BUSINESS PREMISES OF THE ASSESSEE, WHEREIN C HAIRPERSON OF THE ASSESSEE HAD DEPOSED THAT DISCOUNTS WERE MADE AVAILABLE TO THE M/S. KESAR TRAVELS LTD ITA NO. 636/MUM/2011 & 03 OTHER GROUP CASES 3 CUSTOMERS BY THE ASSESSEE. BUT, THE AO TREATED THE SAME AS COMMISSION GIVEN TO THE CUSTOMERS AND THEREFORE, HELD THAT TH E ASSESSEE WAS IN DEFAULT FOR NOT DEDUCTING TDS U/S 1 94H AND LEVIED THE PENALTY U/S 201(1)/201(1A). 6. THE ASSESSEE AGITATED THE ISSUE BEFORE THE CIT(A ), WHO ACCEPTED THE CLAIM OF THE ASSESSEE THAT THE DISCOUNTS GIVEN TO THE CUSTOMERS WERE NOT COMMISSION PASSED ON TO THE CUSTOMERS. THE CIT(A) HELD, I HAVE GONE THROUGH THE ABOVE SUBMISSIONS VERY CAR EFULLY AND FACTS OF THE CASE. IN THIS CASE, THE APPELLANT COMP ANY IS A REGISTERED AIR TRAVEL AGENT, CARRYING ON BUSINESS OF BOOKING AIR TICKETS FOR PASSENGERS. THE AIRLINES GIVE SOME DISC OUNT /COMMISSION TO THE AGENTS, THE AGENTS PASSED ON SOM E PERCENTAGE OF THIS AMOUNT TO THE CUSTOMERS. THE ASS ESSING OFFICER HAS TREATED THE PAYMENT PASSED ON TO THE CU STOMERS AS COMMISSION' WHICH IS NOT CORRECT. THIS IS MERELY DI SCOUNT WHICH IS PASSED ON TO THE CUSTOMERS BY THE AGENT. I AGREE WITH THE APPELLANT THAT THE AIRLINES DEDUCTS TDS U/S 194H FR OM THE COMMISSION PAID BY THEM TO THE AGENT AS THE AGENT I S RENDERING SERVICES TO THE AIRLINES BY GETTING A BOOKING OF PA SSENGERS BUT THE AMOUNT PASSED ON BY THE TRAVEL AGENT TO THE PAS SENGERS IS NOT A COMMISSION AS NO SERVICES ARE RENDERED BY THE CUSTOMER TO THE AGENT FOR GETTING A TICKET. IT IS MERELY A D ISCOUNT TO THE CUSTOMERS ON WHICH TDS PROVISIONS ARE NOT ATTRACTED . IN VIEW OF THE ABOVE FACTS, THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED TREATING THE APPELLANT AS ASSESSEE IN DEF AULT' FOR NOT DEDUCTING TAX U/S 194H FOR ALLOWING SOME DISCOUNT T O THE CUSTOMER ON BOOKING OF AIR TICKETS. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DEMAND RAISED U/S 201(1) /201(1A). THIS GROUND OF APPEAL IS DECIDED IN FAVOU R OF THE APPELLANT. 7. AGAINST THIS ORDER OF THE CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 8. BEFORE US, THE DR RELIED ON THE ORDER OF THE AO, WHEREAS THE AR RELIED ON THE ORDER OF THE CIT(A). 9. WE HAVE HEARD THE CONTESTING PARTIES. THE FACT T HAT NEEDS TO BE ADDRESSED IS WHETHER A DISCOUNT HAS THE SAME NOMENCLATURE AS THAT OF COMMISSION, BECAUSE, THE AO TREATED DISCOUNT AS COMMISSION . EVEN IN NORMAL PARLANCE, COMMISSION IS PASSED ON TO THE PER SON, WHO SOLICITS M/S. KESAR TRAVELS LTD ITA NO. 636/MUM/2011 & 03 OTHER GROUP CASES 4 THE BUSINESS, WHEREAS DISCOUNT IS A REDUCTION ON TH E SALE PRICE. HERE, THE ASSESSEE IS OFFERING DISCOUNT TO ITS CUSTOMERS, WHEREIN, THE CUSTOMER PAYS LESS THAN THE PRICE QUOTED TO HIM. TH E ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF CIT VS QATAR AIRWAYS, IN ITA NO. 99 OF 2009, WHE REIN THE HONBLE LORDSHIPS WERE SEIZED WITH IDENTICAL ISSUE AND HELD THAT PROVISIONS OF SECTION 194H ARE NOT ATTRACTED IN THE CASE OF DISCO UNT, BEING PASSED TO THE CUSTOMER. 10. IN OUR OPINION, THE VIEW TAKEN BY THE CIT(A) IS CORRECT, WHEN HE OBSERVES, IT IS MERELY A DISCOUNT TO THE CUSTOMERS ON WHICH TDS PROVISIONS ARE NOT ATTRACTED . WE, THEREFORE, SUSTAIN THE VIEW OF THE CIT(A) AND AS A CONSEQUENCE, BOTH THE GROUNDS RAISE D IN THE GOA ARE REJECTED. 11. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ITAS NO. : 8872 TO 8874/MUM/2011 : REVENUES APPEALS : A. YS. 2003-2004 TO 2005-06 : 12. AS GROUNDS AND ISSUES INVOLVED IN THESE THREE A PPEALS FILED BY THE REVENUE ARE IDENTICAL TO GROUNDS AND ISSUES DEC IDED BY US IN PARAS 3 TO 11 OF THIS ORDER IN FOR ASSESSMENT YEAR 2002-0 3. THE DECISION IN THE INSTANT THREE APPEALS IS AS PER THE DECISION, W E HAVE TAKEN IN ITA NO. 636/MUM/2011, WHICH WE FOLLOW AS SUCH, SPECIALL Y THE FINDINGS IN PARA 10, AS ABOVE, SINCE ALL THE FOUR APPEALS HAVE COMMON AND CONSOLIDATED GROUNDS ON IDENTICAL ISSUE, WE PROPOSE TO PASS A COMMON AND CONSOLIDATED ORDER IN ALL THE FOUR APPEALS FOR THE SAKE OF CONVENIENCE. SINCE WE HAVE DELIBERATED & DECIDED ITA NO. 636 OF 2011 AND DISMISS THE APPEAL FILED BY THE DEPARTMENT, FOL LOWING THE DECISION & APPLYING THE SAME RATIO TO THE IMPUGNED ITAS NO. 8872 TO M/S. KESAR TRAVELS LTD ITA NO. 636/MUM/2011 & 03 OTHER GROUP CASES 5 8874/MUM/2011 FOR ASSESSMENT YEARS 2003-04 TO 2005- 06, WE DISMISS ALL THE THREE APPEALS OF THE REVENUE. TO SUM-UP: ALL THE FOUR APPEALS FOR AYS 2002-03 TO 2005-06 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST, 2014. SD/- SD/- ( !' ) ( ) # $% $% (N.K. BILLAIYA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 6 TH AUGUST, 2014 ,// COPY TO:- 1) (+/ THE APPELLANT. 2) ,-(+/ THE RESPONDENT. 3) THE CIT (A)-14, MUMBAI. 4) 6 ( TDS )/ CONCERNED__ , MUMBAI / THE CIT-(TDS)/ CONCERNED__ , MUMBAI. 5) 89,/ , THE D.R. J BENCH, MUMBAI. 6) 9:; COPY TO GUARD FILE. $5 / BY ORDER / / TRUE COPY / / [