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TMI Blog2021 (5) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax Act, 1961. 3. Briefly the facts are, the assessee is a resident company. As stated by the assessing officer, assessee is in the business of running five star deluxe hotels. For the assessment year under dispute, assessee filed its return of income on 27-11-2013 declaring loss of Rs. 3,42,86,88,928/-. In course of assessment proceedings, the assessing officer, on verifying the materials on record found that during the year under consideration the assessee, allegedly, has paid commission on credit cards to various banks without deducting tax at source in terms of section 194H of the Act. After calling for explanation from the assessee as to why disallowance of the commission paid should not be made under section 40(a)(ia) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was reiterated by the Tribunal while deciding revenue's appeal in assessee's case for Assessment Year 2012-13 vide ITA No.5825/Mum/2016 dated 25-10-2017. The relevant observations of the Tribunal in this regard in Assessment Year 2012-13 is reproduced hereunder for better clarity:- "7. We have perused the orders of the authorities below and the decisions relied on by the Ld.CIT(A) and find that the issue in appeal is squarely covered by the decision of the various Benches of the Tribunal referred to by the Ld.CIT(A) and the decision of the Hon'ble Delhi High Court in the case of CIT v. JDS Apparels P. Ltd (supra). The Hon'ble Delhi High Court considered on similar situation where the assessee made commission to the banks on the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etaining a small portion of the same as their charges. The banking services cannot be covered and treated as services rendered by an agent for the principal during the course of buying or selling of goods as the banker does not render any service in the nature of agency." 8. The head note of the decision reads as under: - "The expressions 'Commission" and brokerage" are words of general and common parlance used both commercially and by the common man on the street. Clause (i) of the Explanation to section 194H of the Income-tax Act, 1961, expressly seeks to define the expression "Commission" or "brokerage" but states that it will include payments received or receivable, directly or indirectly by a person acting on behalf of another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer was wrong in invoking section 40(a)(ia) and, accordingly, had erred in making the addition of Rs..44,65,654/- i.e. the charges deducted by HDFC on the payments made through credit cards. On appeal: Held, dismissing the appeal, (i) that HDFC was not acting as an agent of the assessee. Once the payment was made by HDFC, it was received and credited to the account of the assessee. In the process, a small fee was deducted by HDFC. On swiping the credit card on the swiping machine, the customer whose credit card was used, got access to the internet gateway of the acquiring bank resulting in the realization of payment. Subsequently, HDFC realized and recovered the payment from the bank which had issued the credit card. HDFC had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unitive penalty. Section 40(a)(ia) is a deterrent and a penal provision. It has the effect of penalizing the assessee, who has failed to deduct tax at source and acts to the detriment of the assessee's property and other economic interests. It operates and inflicts hardship and deprivation, by disallowing expenditure actually incurred and treating it as disallowed. The Explanation, therefore, requires a strict construction and the principle against doubtful penalization would come into play. The detriment in the present assessee would include initiation of proceedings for imposition of penalty for concealment, as was directed by the Assessing Officer. The principle requires that a person should not be subjected to any sort of detriment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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