2018 (7) TMI 2159 - AT - Income Tax

Disallowance of write-off (Advances paid) - CIT(A) held that write off the aforesaid rental advance is permissible and allowed the assessee s claim - assessee s contention is that the said premises at Mohali was taken on lease to carry on the existing business of the assessee and therefore the payment of rental advance by it in this regard was in the normal course of and incidental to the conduct of its business activity - HELD THAT - The assessee is in the business of running stores and renting out premises in this regard is part of its normal business activity. Therefore in our considered view the impugned transaction is intrinsically linked and identical to the assessee s core business activity. In this view of the matter we are of the opinion that the ld CIT(A) has rightly held that the write off of rental advance paid is in the realm of revenue expenditure and allowable as deduction. We therefore uphold the decision of the ld CIT(A) on this issue and consequently dismiss ground No.2 raised by Revenue. TDS u/s 194H - Disallowance of Bank Charges for nondeduction of tax at source u/s 40(a)(ia) - HELD THAT - We find that the co-ordinate bench of this Tribunal in the case of Tata Teleservices Ltd. 2013 (1) TMI 480 - ITAT BANGALORE has examined this issue in all its facets and concluded that the payment to banks on account of utilization of credit card facilities would be in the nature of bank charges and not in the nature of commission within the meaning of sec. 194H - DR for revenue has not brought on record any details to controvert the facts of the case as laid out above OR any judicial decision contrary to that cited by the assessee. In this view of the matter we are of considered opinion that the ld CIT(A) was right in placing reliance on the cited case (Supra) and in holding that the collection charges by the bank for services rendered are in the nature of bank charges and not commission and hence was not liable for TDS thereon u/s 194H - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of Advances Written Off
2. Disallowance of Bank Charges for Non-Deduction of Tax at Source under Section 194H

Issue-wise Detailed Analysis:

1. Disallowance of Advances Written Off:

Facts of the Case:
- For the assessment year 2009-10, the assessee filed a return declaring a loss of ?31,13,18,618/-. The assessment was concluded with the loss determined at ?31,41,96,788/- after disallowing certain deductions.
- The disallowance included ?10,00,000/- towards advance payment made for renting a property intended for opening a store at Mohali. The advance was forfeited when the contract was canceled due to commercial reasons, and the amount was written off in the profit and loss account.

Assessment Officer's (AO) View:
- The AO treated the expenditure as capital in nature and disallowed it.

CIT(A)'s Decision:
- The CIT(A) allowed the deduction, stating that the amount paid as a rental deposit was allowable as a business loss since it was intricately connected to the assessee’s core business activity and incidental to its revenue/profit generation.

Tribunal's Analysis:
- The Tribunal upheld the CIT(A)'s decision, emphasizing that the rental advance was paid in the normal course of business and its forfeiture was a business loss, not a capital loss.
- The Tribunal referenced the decision in LG Soft India (P) Ltd. vs. DCIT, where a similar issue was decided in favor of the assessee, allowing the write-off of rental deposits as a business loss.

Conclusion:
- The Tribunal dismissed Revenue's appeal, affirming that the write-off of the rental advance was a revenue expenditure and allowable as a deduction.

2. Disallowance of Bank Charges for Non-Deduction of Tax at Source under Section 194H:

Facts of the Case:
- The assessee debited bank charges for collection services provided by banks on credit card payments made by customers. The AO disallowed these charges under Section 40(a)(ia) for non-deduction of tax at source under Section 194H, treating them as commission.

CIT(A)'s Decision:
- The CIT(A) deleted the disallowance, holding that the bank charges were not in the nature of commission and thus not liable for TDS under Section 194H.

Tribunal's Analysis:
- The Tribunal referenced the decision in Tata Tele Services Ltd. vs. DCIT, which concluded that payments to banks for credit card facilities were bank charges, not commission, and thus not subject to TDS under Section 194H.
- The Tribunal noted that the CIT(A) had thoroughly examined the factual matrix, legal position, and judicial precedents before deleting the disallowance.
- The Tribunal also clarified that the CIT(A) did not rely solely on the CBDT Circular No. 56/2012, which was effective from 1/4/2013, but considered the overall legal context and judicial decisions.

Conclusion:
- The Tribunal dismissed Revenue's appeal, affirming that the bank charges were not commission and thus not liable for TDS under Section 194H, and upheld the CIT(A)'s deletion of the disallowance under Section 40(a)(ia).

Final Judgment:
- The Tribunal dismissed Revenue’s appeals for the assessment years 2009-10 to 2012-13, upholding the decisions of the CIT(A) on both issues.