TMI Blog2017 (11) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of levy of penalty it is necessary to establish that there was contumacious conduct on the part of the assessee. The coordinate bench also followed several decisions of the Hon'ble Delhi High Court for deleting the penalty u/s 271C of the Act. There was no such contumacious conduct shown by the revenue in the present appeals. Thus deleting the penalty levied u/s 271C confirmed - Decided in favour of assessee. - ITA No. 5454, 5455 to 5456/Del/2015, ITA No. 5452 to 5453/Del/2015, ITA No. 5451/Del/2015 - - - Dated:- 31-10-2017 - Shri Sudhanshu Srivastava, Judicial Member And Shri Prashant Maharishi, Accountant Member Revenue by : Shr. RC Pandey, Sr. DR Assessee by : Shri Sudhir Kumar Bhardwaj, CA ORDER Per Prashant Maharishi, A. M. ITA No. 5454, 5455 to 5456/Del/2015 (Assessment Year: 2011-12, 2012-13 and 2013-14) 1. These are the appeals filed by the Assessing Officer against the order of the ld CIT(A)-I, Noida dated 14.05.2015 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 provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97A 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 guarantee commission; (ii) cash management service charges; (iii) depository charges 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 establishment and acquirer bank. 2. This notification shall come into force from the Ist day of January, 2013. 6. The above circular has been considered in the following two decisions of the Coordinate Bench which has stated that above circular is clarificatory in nature and therefore, though issued w.e.f. 01.01.2013 applies retrospectively and hence no deduction of tax is required on payment of bank guarantee commission to the banks. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it is understood in common business parlance and in the context of the section 194H. This transaction, in our considered view, is not a transaction between principal and agent so as to attract the tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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