TMI Blog2012 (2) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ee appellant has called into question correctness of order dated 26th August 2011, passed by the learned Commissioner (Appeals), in the matter of tax withholding demand under section 201(1) r.w.s. 194 H of the Income Tax Act, 1961, on the following grounds: Ground No. I 1. The Commissioner of Income Tax (Appeals) -14, Mumbai [hereinafter referred to as "CIT(A)"] erred in confirming the order of the Assessing Officer treating the assessee in default under section 201 of the Income Tax Act and thereby charging tax amounting to Rs 5,57,929 for not deducting TDS on bank guarantee commission of Rs 83,25,990 under section 194 H. 2. He failed to appreciate that he ought to have held that : (a) The Bank Guarantee Commission is not liable to TDS under any of the provisions of the Income Tax Act, 1961, including Section 194H; (b) The Bank Guarantee is provided by Bank on principal to principal basis and there is no agency relationship between the bank and the appellant in bank guarantee transaction. 3. The appellant prays that it be held that bank guarantee commission fees are not liable to TDS under section 194H and AO be directed to delete the tax demand of Rs 4,57,929 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'commission or brokerage" covers any payment, received or receivable - directly or indirectly, for any services in relation to any transaction relating to any asset, valuable or thing. He rejected the assessee's submission regarding principal agent relationship being sine qua non for invoking the tax deduction at source requirements as "totally incorrect and devoid of any merits" and observed that "the Explanation to Section 194 H is very wide and covers any payments in the nature of any commission or brokerage for any services in relation to any transaction relating to any asset". He further noted that the assessee has taken bank guarantees from various banks and these bank guarantees protect the stock exchanges from any default by the assessee and acts as security for due performance and fulfillment of obligations by the assessee. The bank guarantee commission paid by the assessee for these bank guarantees, according to the Assessing Officer, was liable for deduction at source under section 194 H. The assessee's failure to deduct the tax source was, accordingly, visited with demands raised under section 201(1) r.w.s. 194H, to make good the shortfall in tax deduction at source, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payee, does not exceed five thousand rupees : Provided further that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such commission or brokerage is credited or paid, shall be liable to deduct income-tax under this section: Provided also that no deduction shall be made under this section on any commission or brokerage payable by Bharat Sanchar Nigam Limited or Mahanagar Telephone Nigam Limited to their public call office franchisees. Explanation. For the purposes of this section, (i) "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; (ii) the expression "professional services" means services rendered by a per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he terms 'anything else she needs' a new car or an item of jewellery. The dictum of ejusdem generis refers to similar situation. It means of the same kind, class or nature. The rule is that when general words follow particular and specific words of the same nature, the general words must be confined to the things of same kind as specified. Noscitur a sociis is a broader version of the maxim ejusdem generis. A man may be known by the company he keeps and a word may be interpreted with reference to be accompanying words. Words derive colour from the surrounding words. 7. Broom's Legal Maxims (10th Edn.) observes that "It is a rule laid down by Lord Bacon, that copulatio verborum indicat acceptationem in eodem sensu the coupling of words together shows that they are to be understood in the same sense." 8. Let us now deal with legal connotations of these two expressions, namely 'commission' and 'brokerage'. The Law Lexicon (Edited by Justice Y.V. Chandrachud; 1997 Edn.) observes that "in commercial law, commission is a compensation to a factor or other agent for services to be rendered in making a sale or otherwise; a sum allowed as compensation to a servant, factor or agent who ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that "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" is includible in the scope of meaning of 'commission or brokerage'. Therefore, what the inclusive definition really contains is nothing but normal meaning of the expression 'commission or brokerage'. In the case of South Gujarat Roofing Tiles Manufacturers Association v. State of Gujarat [(1976) 4 SCC 601], Hon'ble Supreme Court were in seisin of a situation in which an expression, namely 'processing', was given an inclusive definition, but Their Lordships were of the view that "there could be no other meaning of 'processing' besides what is stated as included in that expression" and that "Though 'include' is generally used in interpretation clause as a word of enlargement, in some cases context might suggest a different intention'. Their Lordships then concluded that though the expression used in the definition clause is 'includes', "it seems to u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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