Narain Dass R Israni & Co. Pvt. Ltd., Delhi V. DCIT, New Delhi

ITA 774/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4143 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 12-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: M K AGARWAL
• Keywords: Bonafide belief
• Section: 142(1); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G , NEW DELHI BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 7 74 /DEL/201 6 A.Y. 20 11 - 12 NARAIN DASS R ISRANI AND CO.P.LTD. 306, LAXMI TOWER C - 1/3, NAN IWALA BAGH AZADPUR DELHI 110 033 PAN: AABCN5578Q VS . DCIT CIRCLE 13(1 ) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. MK AGARWAL, C.A. RESPONDENT BY SHRI KAUSHLENDRA TIWARI, SR.D.R. DATE OF HEARING 02.01.2 018 DATE OF PRONOUNCEMENT 12.01.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 10/ 12 /1 5 PASSED BY LD.CIT(A) - 6 , DELHI FOR ASSESSMENT YEAR 20 11 - 12 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THE DISAL LOWANCE OF BANK CHARGES AND BANK GUARANTEE COMMISSION IS WRONG AND UNTENABLE IN VIEW OF SECTION 2(28A) OF THE INCOME TAX ACT, 1961 AS THE SAME ARE COVERED UNDER THE DEFINITION OF INTEREST. ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 2 OF 9 2 . THE NOTIFICATION NO. 56/2012 [F. NO. 275/53/2012 - IT(B)], ISSUED BY THE CBDT GIVING RELIEF TO THE ASSESSEE IS BINDING UPON THE AO AS THE ASSESSMENT IS DONE ON 21.03.2014 WHICH IS THE DATE OF ORDER U/S143(3) OF THE IT ACT,1961 AS THE NOTIFICATION IS APPLIED PROSPECTIVELY. THE CIT (APPEALS) HAS GONE WRONG IN APPRECIATING THE FACTS OF THE CASE WHILE DEALING WITH THE NOTIFICATION. 3. THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE CHARGES PAID TO THE BANK ARE COVERED U/S 2(28A) OF THE ACT AND ARE THERE IS NO REQUIREMENT TO DEDUCT TDS ON THE SAID AND HENCE THE DISALLOWANCE MADE BY THE AO IS WRONG. 4. THE ASSESSEE RESERVES TO RAISE ANY ADDITIONAL GROUNDS OF APPEAL AT THE TIME OF HEARING. IT IS THEREFORE PRAYED THAT THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED. 2. BRIEF F ACTS OF THE CASE ARE AS UNDER : A SSESSEE COMPANY IS WORKING AS A CIVIL CONTRACTOR EXECUTING GOVERNMENT PROJECTS. IN THIS CASE, ORIGINAL R ETURN DECLARING INCOME OF RS.72,55,640/ - WAS FILED ON 23.09.2011. THE CASE WAS SELECTED FOR SCRUTINY AND NOTI CE U/S 143(2) OF THE ACT WAS ISSUED AND SERVED UPON ASSE SSEE WITHIN PRESCRIBED TIME LIMIT. NOTICE U/S 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED TO ASSESSEE. IN RESPONSE TO STATUTORY NOTICES , A UTHORISED R EPRESENTATIVE OF ASSESSEE , ATTENDED ASSESSMEN T PROCEEDINGS AND FURNISHED REPLIES/DETAILS CALLED FOR THE REIN, FROM TIME TO TIME. THESE DETAILS WERE EXAMINED ON TEST CHECK BASIS AND PLACED ON RECORD. 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERUSAL OF PROFIT AND LOSS ACCOUNT (IN SCHEDULE NO.7 UNDER THE HEAD ADMINISTRATIVE OVERHEADS ) FILED BY ASSESSEE WITH THE RETURN OF INCOME, THE LD.AO NOTICED THAT ASSESSEE HAD CLAIMED RS.11,20,060/ - UNDER THE SUB HEAD BANK CHARGES AND INTEREST ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 3 OF 9 INCOME AS DEDUCTIBLE EXPENDITURE. THIS AMOUNT HAD BEEN PAID BY ASSESSEE TO BANK OF BARODA. FOR A.Y. UNDER CON SIDERATION, ASSESSEE WAS ASKED TO EXPLAIN WHY BANK CHARGES PAID MAY NOT BE DISALLOWED AS NO TDS HAS BEEN DEDUCTED ON THE SAME . THE LD. AO WAS OF THE OPINION THAT CBDT NOTIFICATION NO.56/2012 COVERS THE MATTER ONLY FROM 31.12.2012 ONWARDS. 2.2. IN ITS REP LY DATED 21.02. 2014 , ASSESSEE SUBMITTED THAT : AS PER SCHEDULE 7 OF THE BALANCE SHEET BANK CHARGES AND INTEREST AMOUNT S TO RS.11.20 LAKHS , THE BREAK - UP OF WHICH IS AS FOLLOWS. A) BANK CHARGES RS.74,430.20 B) BANK GUARANTEE COMMISSION RS.3,42,292.00 C) I NTEREST PAID ON ADVANCE RS.7,03,338.00 IN ITS REPLY DT. 21.3.2014, THE ASSESSEE FURTHER SUBMITTED THAT: THE AMOUNT OF BANK GUARANTEE COMMISSION HAS BEEN PAID TO SCHEDULED BANK I.E. BANK OF BARODA . NOW BECAUSE OF NOTIFICATION NO.56/2012 DT. 31.3.2012, NO DEDUCTION OF TAX AT SOURCE HAS BEEN DONE. THE ABOVE AMOUNT WAS TREATED AS PAYMENT MADE TOWARDS INTEREST CHARGES INCLUDING BANK COMMISSION. THE LD. AO AFTER CONSIDERING THE REPLY FILED WAS OF THE OPINION THAT CERTAIN ITEMS LISTED ALONG WITH BANK CHARGES BY ASSESSEE WERE IN THE NATURE OF ITEMS FALLING WITHIN THE AMBIT OF NOTIFICATION 56/2012 AND WAS LIABLE TO TD S DEDUCTIONS. LD. AO THUS DISALLOWED AN AMOUNT OF RS.4,16,722/ - UNDER SECTION 40 (A) (IA) OF THE ACT BEING: BANK CHARGES - RS. 74, 430/ - BANK GUARANTEE COMMISSION - RS. 3, 42, 292/ - ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 4 OF 9 2.3. A GGRIEVED BY THE ORDER OF LD.AO ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) WHO CONFIRMED THE ADDITION MADE BY LD.AO. 2.4 . AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE IS I N APPEAL BEFORE US NOW. 2.5. LD. AR PLACED RELIANCE UPON THE FOLLOWING DECISIONS OF THIS T RIBUNAL W HEREIN IT HAS BEEN SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE FOLLOWING DECISIONS OF THE ITAT. I. DCIT VS. M/S PRL PROJECTS & INFRASTRU C TURE LTD. ITA NO.5010/DEL/2015 ORDER DATED 16.11.2017 OF ITAT DELHI BENCH A , NEW DELHI II. ADDL.CIT(TDS) VS. JAYPEE AGRA VIKAS LIMITED, ITA NO.5454, 5455 TO 5456/DEL/2015 ORDER DATED 31.10.2017 OF ITAT DELHI BENCH A , NEW DELHI III. M/S EFFTRONICS SYSTE MS P.LTD. VS. ACIT, ITA NO.188/VIZAG/2015 ORDER DATED 21.10.2016 OF ITAT VISAKHAPATNAM. IV. DCIT VS. M/S LAQSHYA ME DIA P.LTD. ITA NO.4390/MUM/2015 ORDER DATED 07.07.2016 OF ITAT SMC BENCH, MUMBAI V. KOTAK SECURITIES LIMITED VS. DCIT, ITA NO.6657 /MUM/2011 ORDER DATED 03.02.2012 OF ITAT BENCH A MUMBAI. 2.6. LD. DR HAS BEEN SUPPORTING THE ORDER PASSED BY AUTHORITIES BELOW . 3. W E HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS PLACED ON RECORD. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER TD S IS TO BE DEDUCTED ON PAYMENTS MADE TO BANK TOWARDS BANK CHARGES AND BANK GUARANTEE COMMISSION. 3.1. ON PERUSAL OF THE DECISIONS OF THIS T RIBUNAL IT IS OBSERVED THAT IN ALL THE DECISIONS RELIANCE HAS BEEN PLACED ON N OTIFICATION NO. S03069 (E) NO. 56/2012 ( F.NO. 27 - SECTION 197A OF THE ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 5 OF 9 I NCOME T AX A CT D ATED 31/12/12 ) . FOR THE SAKE OF CONVENIENCE THE SAME IS REPRODUCED HEREUNDER: S03069 (E) NO. 56/2012 (F.NO. 27 - SECTION 190 7A OF THE INCOME TAX ACT SECTION 197A OF THE INCOME TAX ACT, 1961: DEDUCTION OF TAX A T SOURCE NO DEDUCTION IN CERTAIN CASES SPECIFIED PAYMENT U/S 197A(1F) NOTIFICATION NO. SO 3069(E) (NO.56/2012 (F.NO.275/53/2012 - IT(B), DT. 31.12.2012 (SUPERSEDED BY NOTIFICATION NO. SO 2143(E) (NO.47 /2016 F.NO.275/53/2012 IT(B), DT. 17.6.2016) IN EXER CISE OF THE POWERS CONFERRED BY SUB - SECTION (L F) OF SECTION 197 A OF THE INCOME - TAX ACT, 1961 (43 OF 1961), THE CENTRAL GOVERNMENT HEREBY NOTIFIES THAT NO DEDUCTION OF TAX UNDER CHAPTER XVII OF THE SAID ACT SHALL BE MADE ON THE PAYMENTS OF THE NATURE SPEC IFIED BELOW, IN CASE SUCH PAYMENT IS MADE BY A PERSON TO A BANK LISTED IN THE SECOND SCHEDULE TO THE RBI ACT, 1934 (2 OF 1934), EXCLUDING A FOREIGN BANK, NAMELY : (I) BANK GUARANTEE COMMISSION; (II) CASH MANAGEMENT SERVICE CHARGES; (III) DEPOSITORY CHA RGES ON MAINTENANCE OF DEMAT ACCOUNTS; (IV) CHARGES FOR WAREHOUSING SERVICES FOR COMMODITIES; (V) UNDERWRITING SERVICE CHARGES; (VI) CLEARING CHARGES (MICR CHARGES); (VII) CREDIT CARD OR DEBIT CARD COMMISSION FOR TRANSACTION BETWEEN THE MERCHANT ESTAB LISHMENT AND ACQUIRER BANK. 2. THIS NOTIFICATION SHALL COME INTO FORCE FROM THE 1ST DAY OF JANUARY, 2013.' 3.2. I T IS OBSERVED THAT THE ABOVE CIRCULAR HAS BEEN CONSIDERED IN THE DECISIONS OF C OORDINATE B ENCHES WHICH HAS HELD THE CIRCULAR TO BE CLARIFI CAT ORY IN NATURE AND THEREFORE THOUGH ISSUED W.E.F. 01/01/13, APPLIES RETROSPECTIVELY AND HENCE NO DEDUCTION OF TAX IS REQUIRED ON PAYMENT OF BANK GUARANTEE COMMISSION AND BANK CHARGES TO THE BANKS . ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 6 OF 9 W E FIND THAT THE DECISION OF KOTAK SECURITIES LTD VERSUS D CIT (SUPRA) SQUARELY COVERS THE ISSUE WHEREIN THIS T RIBUNAL OBSERVED AS UNDER: 23. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF BANK GUARANTEE CHARGES UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TDS U /S 194H OF THE ACT. THE L D. A.R. FOR THE ASSESSEE, AT THE TIME OF HEARING SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT, VISAKHAPATNAM IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2009 - 10 AND SUBMITTED THAT THE COORDINATE BENCH OF THIS TRI BUNAL, UNDER SIMILAR CIRCUMSTANCES DELETED THE ADDITIONS MADE BY THE A.O. WE FIND THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.205 /VIZAG/2013 FOR THE ASSESSMENT YEAR 2009 - 10 BY FOLLOWING THE D ECISION OF ITAT MUMBAI IN THE CASE OF KOTAK SECURITIES LTD. VS. DCIT (2012) 14 ITR (TRIB) 495 DELETED THE ADDITIONS MADE BY THE A.O. TOWARDS BANK GUARANTEE CHARGES. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER: 2. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE FIRST APPELLATE AUTHORITY HAS FOLL OWED THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LIMITED V. DCIT REPORTED IN (2012) 50 SOT 158 (MUMBAI) AND DELETED THE DISALLOWANCE IN QUESTION. 3. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KOTAK SECURITIES LIM ITED (SUPRA) HELD AS FOLLOWS: - 'THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN THE BANK ISSUING THE BANK GUARANTEE AND THE ASSESSEE. WHEN BANK ISSUES THE BANK GUARANTEE, ON BEHALF OF THE ASSESSEE , ALL IT DOES IS TO ACCEPT THE COMMITMENT OF MAKING PAYMEN T OF A SPECIFIED AMOUNT TO, ON DEMAND, THE BENEFICIARY, AND IT IS IN CONSIDERATION OF THIS COMMITMENT, THE BANK CHARGES A FEES WHICH IS CUSTOMARILY TERMED AS 'BANK GUARANTEE COMMISSION': WHILE IT IS TERMED AS 'GUARANTEE COMMISSION; IT IS NOT IN THE NATUR E OF 'COMMISSION' AS IT IS UNDERSTOOD IN COMMON BUSINESS PARLANCE AND IN THE CONTEXT OF THE S.194H. THIS TRANSACTION, IS NOT A TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT THE TAX DEDUCTION REQUIREMENTS UNDER ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 7 OF 9 S.194H. CIT(A) INDEED ERRED IN HOL DING THAT THE ASSESSEE WAS INDEED UNDER AN OBLIGATION TO DEDUCT TAX AT SOURCE UNDER S. 194H FROM PAYMENTS MADE BY THE ASSESSEE TO VARIOUS BANKS. ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 194H, THE QUESTION OF LEVY OF INTEREST U/S 201(1A) CAN NOT ARISE. CONCLUSION: WHEN THERE IS NO PRINCIPAL AGENT RELATIONSHIP BETWEEN BANK ISSUING BANK GUARANTEE AND ASSESSEE, TRANSACTION BETWEEN THEM IS NOT TRANSACTION BETWEEN PRINCIPAL AND AGENT SO AS TO ATTRACT TAX DEDUCTION UNDER S.194H. ' 4. RESPECTFULLY FOLLOWING THE ORDER IN THE CASE OF KOTAK SECURITIES LIMITED (SUPRA), WE UPHOLD THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE APPEAL OF THE REVENUE. 24. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RESPECTFULLY FOLLOWING THE ORDER OF T HE COORDINATE BENCH, WE DIRECT THE A.O. TO DELETE THE ADDITIONS MADE TOWARDS BANK GUARANTEE CHA RGES. 3.3 . I N VIEW OF THE ABOVE DISCUSSIONS WE DO NOT FIND ANY REASON TO DEVIATE FROM THE CONSISTENT VIEW TAKEN IN THIS CASE. ACCORDINGLY THE GROUNDS RAISED BY A SSESSEE STANDS ALLOWED. 4. IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH J ANUARY, 2018. SD/ - SD/ - (N.K.SAINI) (BEENA A PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH JANUARY, 2018 *MV ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 8 OF 9 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI ITA 774/DEL/2016 ASSESSMENT YEAR 2011 - 12 NARAIN DASS R ISRANI & CO.P.LTD. DELHI PAGE 9 OF 9 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & P LACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER