DCIT, New Delhi v. M/s. Asian Hotels (North) Ltd., New Delhi

ITA 1221/DEL/2013 | 2009-2010
Pronouncement Date: 21-11-2014 | Result: Dismissed

Appeal Details

RSA Number 122120114 RSA 2013
Assessee PAN AAACA0125H
Bench Delhi
Appeal Number ITA 1221/DEL/2013
Duration Of Justice 1 year(s) 8 month(s) 18 day(s)
Appellant DCIT, New Delhi
Respondent M/s. Asian Hotels (North) Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-11-2014
Date Of Final Hearing 05-11-2014
Next Hearing Date 05-11-2014
Assessment Year 2009-2010
Appeal Filed On 04-03-2013
Judgment Text
DELHI BENCH A : NEW DELHI BEFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI A. T. VARKEY JUDICIAL MEMBER ITA NO. 1221 /DEL/ 2013 (ASSESSMENT YEAR: 2009 - 10 ) AND ITA NO. 4456 /DEL/ 2013 (ASSESSMENT YEAR: 2010 - 11 ) DCIT CIRCLE - 2(1) ROOM NO.398D C. R. BUILDING NEW DELHI VS. ASIAN HOTELS (NORTH) LTD. 1A HOTEL HYATT REGENCY BHIKAJI CAMA PLACE M.G. MARG RING ROAD NEW DELHI PAN AAACA0125H (APPELLANT) (RESPONDENT) O R D E R PER A. T. VARKEY JUDICIAL MEMBER THESE DEPARTMENTAL APPEALS INVOLVE CONSIDERATION OF COMMON ISSUES AND THEREFORE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. 2. THE SOLITARY GROUNDS RAISED IN BOTH THE APPEALS RELATES TO DISALLOWANCE MADE U/S 40(A)(IA) OF THE INCOME TAX ACT 1961 (HEREIN AFTER THE ACT) ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TDS U/S 194H OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE OPERATES A HOTEL WHEREI N IT ALLOWS ITS GUEST TO MAKE PAYMENT THROUGH CREDIT - CARD. ON EXAMINATION OF THE BOOKS THE AO OBSERVED THAT THE ASSESSEE HA D PAID CHARGES OF RS.14 53 717/ - HDFC BANK FOR ASSESSMENT YEAR 2009 - 10. HE HELD THAT THESE CHARGES ARE FOR RENDERING SERVICES FOR RE COVERY OF THE BILL OF CREDIT - CARD PAYMENT MADE BY CUSTOMERS. ACCORDINGLY HE CONCLUDED SUCH PAYMENTS ARE IN THE NATURE OF COMMISSION / DISCOUNT U/S 1 9 4H OF THE ACT. AND AS ASSESSEE FAILED TO DEDUCT TDS THEREFORE DISALLOWANCE IS WARRANTED U/S 40(A)(IA ) OF THE ACT. APPELLANT BY : Y. KAKKAR SR. DR RESPONDENT BY : M.P.RASTOGI ADV PAGE 2 OF 5 4. THE LD CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE ORDER OF THE ITAT HYDERABAD BENCH IN THE CASE OF DCIT VS. M/S . VAH MAGNA RETAIL (P) LTD. IN ITA NO.905/HYD/2011. 5. HAVING CONSIDERED THE RIVAL SUBMISSION S WE FIND THAT THE LD CIT(A ) HAS DELETED THE DISALLOWANCE BY CON CLUDING THAT PAYMENTS TO CREDIT - CARD COMPANY BY A HOTEL IN CONNECTION WITH THE OPERATION OF THE HOTEL IS NOT COMMISSION/ DISCOUNT U/S 194H OF THE ACT. WE HAVE NOTED THAT BEFORE THE AO THE ASSESSEE HAD EXPLAINED THE NA TURE OF THE TRANSACTION AS UNDER: - 6.1 THE SUBMISSION FILED BY THE AR OF THE ASSESSEE COMPANY VIDE LETTER DATED 26.12.2011 IS BEING REPRODUCED FOR THE SAKE OF CONVENIENCE: 'ASIAN HOTELS LTD AY 2009 - 10 SUBMISSIONS REGARDING ALLOWANCE OF CHARGES TO HDFC B ANK ON BILLS OF CUSTOMERS AVAILING CREDIT CARD FACILITY 1. THE COMPANY OPERATES A 5 STAR DELUXE HOTEL. IT ALLOWS ITS GUESTS TO MAKE PAYMENT THROUGH CREDIT CARD. ON PRODUCING CREDIT CARD ISSUED TO A PERSON BY A BANK AND ALSO SIGNING A CREDIT CARD CHARGE SL IP - WHICH IS A TYPE OF 'BILL OF EXCHANGE' / USANCE PROMISSORY NOTE UNDERTAKING TO PAY THE AMOUNT ON PRESENTATION AFTER A SPECIFIED PERIOD - WHICH NORMALLY IS ABOUT ONE MONTH 2. THE CREDIT CARD OPERATIONS ARE BRIEFLY EXPLAINED HEREUNDER SO THAT YOUR GOOD S ELF CAN APPRECIATE THE TRANSACTION IN A PROPER PERSPECTIVE. A) A BANK AFTER EXAMINING THE CREDENTIALS OF A PERSON AND HIS CREDITWORTHINESS ISSUES HIM A SERIALLY NUMBERED CARD [POPULARLY REFERRED TO AS CREDIT CARD] B) THEN THE BANK ENTERS INTO ARRANGEMENTS WITH VARIOUS MERCHANT AND COMMERCIAL ESTABLISHMENTS WHEREBY IT AGREES TO PURCHASE THE BILLS RAISED BY SUCH ESTABLISHMENTS FOR THE SALE OF GOODS OR SERVICES MADE BY IT TO SUCH CARD HOLDERS ON THE CONDITION THAT IT WILL PURCHASE IT AT A PRE DET ERMINED DISCOUNT RATE AND WILL MAKE PAYMENT TO IT ON PRESENTING THE BILL [WITH CERTAIN CONDITIONS /PROCEDURES BEING FULFILLED] ON SAME DAY OR WITHIN 24 HOURS OF PRESENTATION. C. THE BANK THEN INSTALLS AN ELECTRONIC DATA CAPTURE [EDC FOR SHORT] DEVICE AT AL L THE ESTABLISHMENTS WITH WHICH IT HAS ENTERED INTO AN ARRANGEMENT IN THIS REGARD TO ENABLE IT TO INTIMATE AND PASS ON THE DATA TO IT. D. ONCE THE ESTABLISHMENT MAKES A SALE /SERVICE TO SUCH CARD HOLDER IT IS REQUIRED TO INTIMATED/TRANSFER SUCH DATA TO IT THROUGH THE EDC AND THE BANK REMITS THE BILL AMOUNT LESS THE AGREED DISCOUNT TO THE BANK ACCOUNT OF THE COMPANY WITHIN 24 HOURS. PAGE 3 OF 5 E) THE E STABLISHMENT FORWARDS TO THE BANK THE BILL AND CREDIT CARD SLIP COPY WHICH ENABLES IT TO COLLECT IT FROM THE CONCERNED PERSON AT ITS OWN COST AND RISK. 3 THE ACCOUNTING ENTRIES MADE FOR IT ARE TO THE FOLLOWING EFFECT: A) ON RAISING OF THE BILL AND THE CUSTOMER SIGNING THE CREDIT CARD SLIP CREDIT CARD CUSTOMER ALE OR 100.00% TO SALES REVENUE 100.00% / B) ON RECEIPT OF THE BILL AMOUNT BANK OR 98. 75%~ CREDIT CARD CHARGES OR 1.25~ TO CREDIT CARD CUSTOMER ALC 100.00% THE DETAILS OF THE CHARG ES TO HDFC BANK ON BILLS OF CUSTOMERS AVAILING CREDIT CARD FACILITY AS DESIRED BY YOUR KIND SELF IS RS.14 53 717.00. YOUR KIND SELF HAS ALSO ASKED US EXPLAIN AS TO WHY THE CHARGES ON CREDIT CARDS TO HDFC BANK SHOULD NOT BE TREATED AS A PAYMENT OF IN THE NA TURE OF COMMISSION /DISCOUNT TO IT AND DISALLOW IT U/S 40(A)(IA) AS NO TAX AT SOURCE (TDS) FOR SHORT] ON IT HAS BEEN DEDUCTED ON IT WHILE MAKING PAYMENT TO IT 6. FROM THE AFORESAID WE CONCLUDE THAT THE CREDIT - CARD COMPANY DOES NOT RENDER SERVICES TO THE HOTEL. ON THE CONTRARY THE SERVICES ARE PROVIDED BY THE CREDIT - CARD COMPANY TO THE CUSTOMER OF THE HOTEL. THERE IS NO PAYMENT MADE BY THE HOTEL TO THE CREDIT - CARD COMPANY. ALL WHAT HAPPENS IS THAT THE CREDIT - CARD COMPANY DEDUCTS CHARGES BEFORE REMITTING T HE AMOUNT TO THE HOTEL WHICH IS NOT IN CONSIDERATION FOR ANY SERVICES RENDERED IN THE COURSE OF OPERATION OF THE HOTEL. THIS ISSUE HAS BEEN EXAMINED BY THE HYDERABAD BENCH IN THE CASE OF DCIT VS. M/S VAH MAGNA RETAIL PVT. LTD. IN ITA NO.905/HYD/2011(SUPRA) AS UNDER: - '4. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DIRECT RETAIL TRADING IN CONSUMER GOODS. ASSESSEE CLAIMED DEDUCTION OF RS.16 34 000/ - ON ACCOUNT OF COMMISSION PAID TO THE CREDIT CARD COMPANIES WHICH HAS BEEN DISALLOWED BY THE AO IN TERMS OF S .40(A)(IA) ON ACCOUNT OF THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE IN TERMS OF S.194H OF THE ACT WHILE MAKING THE SAID COMMISSION PAYMENTS. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE ASSES SEE ONLY RECEIVES THE PAYMENT FROM THE BANK/CREDIT CARD COMPANIES CONCERNED AFTER DEDUCTION OF PAGE 4 OF 5 COMMISSION THEREON AND THUS THIS IS ONLY IN THE NATURE OF A POST FA CTO ACCOUNTING AND DOES NOT INVOLVE ANY PAYMENT OR CREDITING OF THE ACCOUNT OF THE BANKS OR ANY OTHER ACCOUNT BEFORE SUCH PAYMENT BY THE ASSESSEE. CONSIDERING THESE SUBMISSION OF THE ASSESSEE THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AMOUNT OF RS.16 34 000/ - ON THE FOLLOWING REASONING. '9.8 ON GOING THROUGH THE NATURE OF TRANSACTIONS I FIND CONSIDERABLE MERIT IN THE CONTENTION OF THE APPELLANT THAT COMMISSION PAID TO THE CREDIT CARD COMPANIES CANNOT BE CONSIDERED AS FALLING WITHI N THE PURVIEW OF S.19H. EVEN THOUGH THE DEFINITION OF THE TERM 'COMMISSION OR BROKERAGE' USED IN THE SAID SECTION IS AN INCLUSIVE DEFINITION IT IS CLEAR THAT THE LIABILITY TO MAKE TDS UNDER THE SAID SECTION ARISES ONLY WHEN A PERSON ACTS ON BEHALF OF ANOT HER PERSON. IN THE CASE OF COMMISSION RETAINED BY THE CREDIT CARD COMPANIES HOWEVER IT CANNOT BE SAID THAT THE BANK ACTS ON BEHALF OF THE MERCHANT ESTABLISHMENT OR THAT EVEN THE MERCHANT ESTABLISHMENT CONDUCTS THE TRANSACTION FOR THE BANK. THE SALE MADE O N THE BASIS OF A CREDIT CARD IS CLEARLY A TRANSACTION OF THE MERCHANTS ESTABLISHMENT ONLY AND THE CREDIT CARD COMPANY ONLY FACILITATES THE ELECTRONIC PAYMENT FOR A CERTAIN CHARGE. THE COMMISSION RETAINED BY THE CREDIT CARD COMPANY IS THEREOF IN THE NATURE OF NORMAL BANK CHARGES AND NOT IN THE NATURE OF COMMISSION/BROKERAGE FOR ACTING ON BEHALF OF THE MERCHANT ESTABLISHMENT. ACCORDINGLY CONCLUDING THAT THERE WAS NO REQUIREMENT FOR MAKING TDS ON THE COMMISSION RETAINED BY THE CREDIT CARD COMPANIES THE DIS ALLOWANCE OF RS. 1 6 34 000/ - IS DELETED....... WE FIND NO INFIRMITY IN THE ABOVE REASONING GIVEN BY THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUNDS OF THE REVENUE WHICH ARE DEVOID OF MERIT. 7. WE THEREFORE UPHOLD THE ORDER OF THE LD CIT(A) WHO HAS CORRECTLY HELD THAT PAYMENT RECEIVED BY AN ASSESSEE/ MERCHANDISER FROM CREDIT - CAR D ISSUING COMPANY OF THE BUYER/ CUSTOMER THERE IS NO PRINCIPAL - AGENT RELATIONSHIP BETWEEN THE ASSESSEE AND THE CREDIT - CA RD COMPANY. 8 . FOR THE AFORESAID REASON WE HOLD THAT CHARGES DEDUCTED BY THE CREDIT - CARD COMPANY ON REMITTANCE TO THE ASSESSEE DO NOT CONSTITUTE COMMISSION U/S 194H. AND AS SUCH SECTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE. IN THE RESULT THE APPEALS F ILED BY THE REVENUES LACKS MERIT AND SO DISMISSED. PAGE 5 OF 5 9 . IN THE RESULT BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 1 . 11 .2014. - S D / - - S D / - ( S.V. MEHROTRA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 1 / 11 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI