TMI Blog2019 (12) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... DICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER For the Appellant : Shri K.V.S.R. Krishna, CA For the Respondent : Ms. Rakhi Vimal, Sr. DR ORDER Per Anadee Nath Misshra, AM (A) This appeal by Assessee is filed against the order of Learned Commissioner of Income Tax (Appeals)-37, New Delhi, [ Ld. CIT(A) , for short], dated 25.05.2017 for Assessment Year 2013-14. Ground taken in this appeal of Assessee is as under: 1. The CIT(A) has erred on facts and in law in upholding the order of the AO for disallowing bank guarantee charges of ₹ 10,58,963/- by invoking the provision of Section 40(a)(ia) of Income Tax Act. The appellant contends that the payment of bank guarantee charges to scheduled bank is not covered under any TDS provisions. Hence, the addition should be deleted. (B) The limited issue in this appeal is whether the disallowance of Bank Guarantee Charges by the Assessing Officer ( AO , for short) under Section 40a(ia) of Income Tax Act, 1961 ( I.T. Act , for short) is correct. Vide Assessment Order dated 22.03.2016 under Section 143(3) of I.T. Act, AO had disallowed the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with condition that assessee would provide bank, guarantee of requisite value. During financial year 2010-11, assessee had paid guarantee fee of ₹ 18,69,61/- to Canara Bank for giving such guarantee. It has been submitted by Ld. AR that assessee claimed these expenses as allowable expenditure. It has also been submitted that such expenses have been allowed as expenditure every year in the income tax assessments even though TDS was not deducted, as the provision were not attracted on payment of guarantee fee to scheduled bank. Was in the nature of expenditure in the hands of assessee. Ld. AR submitted that as there were some ambiguity,' CBDT came with notification No.' 56/2012 clarifying specific payments from deduction of TDS, He submitted that said notification is clarificatory issued by CBDT, in terms of provisions of section 197A(1F) which has come into statute by Finance Act 2012, w.e.f. 07.01.2012. He submitted that payment made was not. in the nature of any income or interest in any manner. But it was charges paid to bank for obtaining bank guarantee, which cannot be made exigible to TDS provisions. Ld. AR submitted that expenses incurred by assessee by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 1st day of January, 2013. Sec. 40(a)(ia) of the Income Tax Act, 1961 emphasis on that expenditure covered under mentioned TDS sections paid to resident and debited Profit Loss Account will not be allowed as deduction while computing the income under the head Profit and Gains of Business or Profession , if:- Tax has not been deducted, at source, b) Tax deducted at source-and the same is not remitted, or c) If expenditure is debited and tax. deducted at source during the previous year, tax is not remitted within the time-limits mentioned in section 200 such expenditure will be allowed as deduction in the year of remittance of the tax. The followinq payments are covered under Section 40(a)(ia): a) In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rospective operation is generally intended. An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect, 12. Further this view is supported by the following decisions of coordinate benches of Mumbai Tribunal. The relevant extracts have been reproduced herein below: Hon ble Mumbai Tribunal in; case of Neo Sports Broadcast Pvt. Ltd Vs.CIT.TDS reported in 181 TTJ 417 has held as under: Section 194A(1) is' applicable only to income by way of interest . However, the impugned transaction is that of reimbursement of bank guarantee commission and does not involve payment of interest. There is no borrowing whatsoever. Interest as per sec. 2(28A) means interest payable ... in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation)) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred ... In the case of CIT v. Cargill Global Trading (I.) Co.. (P.) Ltd. [2011] 335 ITR 94/199 Taxman 320 (Delhi), Hon'ble Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e then Vice President (MZ) has, interpretation of Taxing Statutes (AIFTP Journal : Vol. 4, No. 7, July, 2002, at p. 7), in his inimitable words' observed: Law is not a brooding .omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism. Similarly, the rules relating to interpretation are also based on common-sense .approach. Suppose a man tells his wife to go out and buy bread, milk or anything else she needs, he will not normally be understood to include in the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of fees for a product or service; it must remain restricted to, as has-been elaborated above, a payment in the nature of reward for effecting soles or business transactions etc. The inclusive definition of the expression ' commission or brokerage' in Explanation to Section 194H is quite in harmony with this approach as it only provides 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 expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness 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 deduction requirement under section 194H. We are, therefore, of the considered view that the CIT (A) indeed erred in holding that the assessee 'was indeed under an obligation to deduct tax at source under section 194H from payments made by the assessee to various banks. (B.2) The Ld. Authorized Representative of the assessee further submitted that as far as applicability of Section 194J of I.T. Act is concerned, the issue stands covered in favour of the assessee by order of Hon ble Supreme Court in the case of CIT vs. Kotak Securities Ltd. [2016] 383 ITR 1 (SC). Placing reliance on the aforesaid precedents, vide order dated 31.05.2017 of Co-ordinate Bench of ITAT, Delhi in assessee s own case; and order in the case of CIT vs. Kotak Securities Ltd. (supra); the Ld. AR of the assessee submitted that the aforesaid disallowance of ₹ 10,58,963/- under Section 40a(ia) of I.T. Act should be deleted. The Ld. Departmental Representative ( Ld. DR , for short) however, drew our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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