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TMI Blog2017 (11) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... .05.2015 for the Assessment Year 2011-12, 2012-13 and 2013-14 cancelling the penalty u/s 271C of the Act levied for non deduction of tax/ short deduction of tax on account of bank guarantee commission to various banks as per provisions of section 194H of the Act. 2. The Revenue has raised the following grounds of appeal in Assessment Year 2011-12, 2012-13 and 2013-14:- "Ld CIT(A)-I, Noida has erred in law and all facts in deleting the demand on account of payment of Bank guarantee commission ignoring the fact that Notification No. 56/ 2012/ ( F No. 275/53/2012-IT(B) dated 31.12.2012 which provides that no TDS shall be done on payment like Bank Guarantee commission is effect from 01.01.2013 while in the case of the assessee the payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UCTION OF TAX AT SOURCE - NO DEDUCTION IN CERTAIN CASES - SPECIFIED PAYMENT UNDER SECTION 197A (1F) NOTIFICATION NO. SO 3069(E) [NO.56/2012 (F. NO. 275/53/2012-IT(B)], DATED 31-12-2012 [SUPERSEDED BY NOTIFICATION NO. SO 2143(E) (NO.47/2016 (F.NO.275/53/2012-IT(B), DATED 17-6-2016] In exercise of the powers conferred by sub-section (1F) of section 197A 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 specified below, in case such 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 guarante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phrase 'commission and brokerage' in the following manner:- "'Commission or brokerage' includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities". Thus, it is sine qua non that there has to be a principal - agent relationship for a payment to be treated as commission or brokerage. The recipient of the income must act on behalf of the principal. Here the banker does not act on behalf of the assessee for rendering any kind of service. The cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pient of such payments on principal to principal basis. Even when an expression is statutorily defined under section 2, it still has to meet the test of contextual relevance as section 2 itself starts with the words "In this Act (i.e. Income Tax Act), unless context otherwise requires...", and, therefore, contextual meaning assumes significance. Every definition in the Income Tax Act 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 connotations. The common parlance meaning of the expression 'commission' thus does not extend to a payment which is in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 noted, does not necessarily always extend the meaning of an expression. When inclusive definition contains ordinary normal connotations of an expression, in our considered view, even an inclusive definition has to be treated as exhaustive. That is the situation in the case before us as well. Even as definition of expression 'commission or brokerage', in Explanation to Section 194H, is stated to be exclusive, it does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee was not required to deduct tax at source under section 194H, the question of levy of interest under section 201(1A) cannot arise." 9. Hon Delhi High court in JDS apparel (P) ltd ( 370 ITR 454) has also held that bank is not acting as an agent of the assessee. 10. The provision of section 273B of the Act provides that penalty u/s 271C of the Act cannot be levied if the assessee shows reasonable cause for the failure referred to in that provision. In the present case non-deduction tax at source on bank guarantee commission is supported by many decisions of the coordinate benches as well as the notification issued by the CBDT. Therefore, even if assuming that there is a default of non-deduction of tax at source it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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