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TMI Blog2019 (11) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... ( 2016 (8) TMI 867 - ITAT MUMBAI ) - Decided in favour of assessee. - ITA No:- 2513/Del/2017 (Assessment Year: 2010-11) - - - Dated:- 3-10-2019 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER Assessee by: Shri Gaurav Jain, CA And Shri Deepesh Jain, CA Revenue by: Ms. Rakhi Vimal, Sr. DR ORDER Per Anadee Nath Misshra, AM (A) This appeal by Assessee is filed against impugned appellate order of Learned Commissioner of Income Tax (Appeals)-6, Delhi, [ Ld. CIT(A) , for short], dated 16.02.2017 for Assessment Year 2010-11. The grounds of appeal are as under: GROUND I: DISALLOWANCE OF BANK GUARANTEE CHARGES U/S 40(al(ial OF THE INCOME TAX ACT. 1961 ( the Act ) AGGREGATING TO ₹ 3.90.289/-. 1.1 On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income tax (Appeals) - 6, Delhi [ the CIT ] erred in upholding the disallowance of bank guarantee charges of ₹ 3,90,289/- paid to bank u/s. 40(a)(ia) of the Act on the alleged ground that the Appellant failed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in foregoing paragraph (B) of this order was also filed from the assessee s side during appellate proceedings. (B.1.1.) After hearing both sides, we find that both sides agree that the issue in dispute is covered in favour of the assessee by the aforesaid CBDT Notification dated 31-12-2012 and by the aforesaid precedents referred in foregoing paragraph (B) of this order. (B.1.1.1) In the case of CIT vs. JDS Apparels (P) Ltd. (supra), the Hon ble Delhi High Court has held as under: 16. The amount retained by the bank is a fee charged by them for having rendered the banking services and cannot be treated as a commission or brokerage paid in course of use of any services by a person acting on behalf of another for buying or selling of goods. The intention of the legislature is to include and treat commission or brokerage paid when a third person interacts between the seller and the buyer as an agent and thereby renders services in the course of buying and/or selling of goods. This happens when there is a middleman or an agent who interacts on behalf of one of the parties, helps the buyer/seller to meet, or participates in the neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction of penal statutes seems to manifest itself in four ways: in the requirement express language for the creation of an offence; in interpreting strictly words setting out the element of an offence; in requiring the fulfilment to the letter of statutory conditions precedent to infliction of punishment; and in insisting on the strict observance of technical provisions concert criminal procedure and jurisdiction. (B.1.1.2) In the case of Kotak Securities Ltd. vs. DCIT (Supra), Mumbai Bench of ITAT has held as under for Assessment Year 2004-05: 4. Let us first take a look at Section 194H, which is reproduced as follows: 194H. Commission or brokerage - Any person, not being an individual or a Hindu undivided family, who is responsible for paying, on or after the 1st day of June, 2001, to a resident, any income by way of commission (not being insurance commission referred to in section 194D) or brokerage, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct incometax thereon at the rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A plain reading of the above provision indicates that tax withholding requirements under section 194H apply in respect of 'commission or brokerage', which, in turn, is defined by Explanation to Section 194H. No doubt, this definition is inclusive but the fundamental question that we really need to consider in the first place is as to what are the connotations of expression 'commission or brokerage' in common parlance, and then proceed to deal with the inclusions thereto by the virtue of specific provision of law. 6. We find that the expression 'commission' and 'brokerage' have been used together in the statute. It is well settled, as noted by Maxwell in Interpretation of Statutes and while elaborating on the principle of noscitur a sociis, that when two or more words which are susceptible to analogous meaning are used together they are deemed to be used in their cognate sense. They take, as it were, their colours from each other, the meaning of more general being restricted to a sense analogous to that of less general. Explaining this principle in general terms, Hon'ble Shri M.K. Chaturvedi, the then Vice President (MZ) has, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sale of books, bonds or commodities, or property of any kind, or who attends to the doing of something for another . 9. In the light of the above discussions, and when we look at the connotations of expression 'commission or brokerage' in its cognate sense, as in the light of the principle of noscitur a sociis as we are obliged to, in our considered view, scope of expression 'commission', for this purpose, will be confined to 'an allowance, recompense or reward made to agents, factors and brokers and others for effecting sales and carrying out business transactions' and shall not extend to the payments, such as 'bank guarantee commission', which 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 not really mean anything other than what has been specifically stated in the said definition. Therefore, as held by the coordinate benches in a number of cases including SRL Ranbaxy Ltd v. Asstt. CIT [2011] 16 taxmann.com 343 (Delhi - Trib.), Foster's India (P.) Ltd. v. ITO [2009] 29 SOT 32 (Pune) (URO), and Ajmer Zila Dugdh Utpadak Sangh Ltd. v. ITO [2009] 34 SOT 216, principal agent relationship is a sine qua non for invoking the provisions of Section 194H. In the case before us, 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 payment 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 nature of 'commission' as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. Accordingly, we refuse to interfere on this issue and uphold the adjudication of the Ld. CIT (A). (B.1.1.4) Vide consolidated order dated 31/08/2017 in the case of ACIT vs. Jaypee Infratech Ltd. (supra) for Assessment Year 2011-12 to 2013-14 (in ITA Nos. 4284, 4285, 4286/Del/2015) also, similar view was taken by Co-ordiante Bench of ITAT, Delhi and it was held as under: 27. Ground No. 3 of the appeal of the Revenue is against TDS on bank guarantee charged. While Ground No. 3 of the appeal of the Revenue is covered by ground No. 3 of the appeal in case of Jaypee Sports International ltd. wherein we have held that bank guarantee charges are not subject to TDS u/s 194H of the Act. In view of this ground, No. 3 of the appeal of the Revenue is dismissed. (B.1.1.5) In DCIT vs Lakshya Media (P.) Ltd. (Supra), Mumbai Bench of ITAT held as under: 6. As regards guarantee fees paid which has been held to be liable for TDS under section 194H by the AO, we are unable to accept the contention of the AO, because the assessee has sought its banks like HDFC Bank, Dena Bank and Yes Bank to issue guarantee in its fav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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