TaxTMI 
TaxTMI 
2018 (10) TMI 68
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....ted by Banks are not covered under TDS u/s.194H and hence disallowance u/s.40(a)(ia) is not applicable. Whereas the notification number 56/2012 dated 31.12.2012 issued by the CBDT comes into force from 01.01.2013 the instant case relates to prior period. 3. Whether on the facts and in the circumstances of the case the CIT(A) is erred in placing reliance on the decision of the Hon'ble ITAT Bangalore Bench in ITA No.308 to 310 and 393 to 396(Bang) of 2011 and in deleting the disallowance made by the AO u/s.40(a)(ia) since the above decision has not become final and the department has filed further appeal. 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 5. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above." 3. The assessee is a company engaged in the business of development and maintenance of industrial park and providing infrastructural facilities to various industries, besides running hotel business. In the course of assessment....
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....ion of commission thereon, and thus, this is only in the nature of a post facto 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 within the purview of S.194H. 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 behalf of another 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 on the basis of a credit card is clearly a transaction of the merchants establishment only and t....
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....S. The revenue has argued before us that before the said notification such charges were subject to TDS. We are of the view that the notification is only recognition of the position as it always prevailed and as interpreted by several decisions rendered by the different benches of ITAT. The notification therefore cannot be the basis on which it can be said that the amount retained by the bank was in the nature of commission within the meaning of Sec.194-H of the Act. For the reasons given above, we confirm the order of the CIT(Appeals) on this issue and dismiss the appeals of the Revenue. 5.7 The reliance of the AO on the CBDT Notification No.56/2012 dated 31.12.2012 is wrongly placed. This notification has been suppressed by notification no. SO 2143(E), No.47/2016 dated 17.06.2016 with certain addition but having no relevance to the instant case. This notification was passed u/s. 197A(1F) of the Act through which exemption from TDS was granted to certain categories of payments. One of such category is "(vii) Credit card or Debit Card Commission for transaction between merchant establishment and acquirer bank" and the same was effective from 01.01.2013. The assumption of AO....
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....paid on delayed remittances of service tax of Rs. 58,11,696, and (ii) interest paid u/s. 201(1A) of the Act on delayed remittances of TDS amounting to Rs. 41,136. 10. As far as interest paid on delayed remittances of service tax is concerned, the AO was of the view that the expenditure was in the nature of penalty and was hit by Explanation to section 37(1) of the Act, which lays down that any expenditure by an assessee for any purpose, which is an offence or which is prohibited by law, shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. 11. On appeal by the assessee, the CIT(Appeals) confirmed the order of the AO by placing reliance on the decision of the Hon'ble Supreme Court in the case of Star India (P) Ltd. v. Commissioner of Central Excise, Mumbai & Goa, 280 ITR 321 (SC). 12. Aggrieved, the assessee has raised ground No.2 before the Tribunal. 13. We have heard the submissions of the ld. counsel for the assessee, who placed reliance on the decision of the Kolkata Bench of the Tribunal in DCIT v. Narayani Ispat Pvt. Ltd., ITA No.2127/K/2014, AY 2010-11, order ....
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.... Court in the case of Bharat Commerce Industries Ltd. Vs. CIT (1998) reported in 230 ITR 733 cannot be applied to the case on hand. The Tribunal distinguished the decision in the case of Bharat Commerce Industries Ltd. (supra) as not applicable to the facts of the case. The tribunal also derived support from the decision of the Hon'ble Supreme Court in the case of Lachmandas Mathura (Supra) wherein deduction on account of interest on late deposit of sales tax u/s 37(1) of the Act was allowed. 15. Further reliance was placed by the ld. counsel for the assessee on the decision of the Hon'ble Gujarat High Court in the case of CIT v. Kaypee Mechanical India (P) Ltd. [2014] 45 taxmann.com 363 (Gujarat) wherein the Hon'ble Gujarat High Court in the context of liability of service tax and interest on delayed payment of service tax took the following view:- "6. We have no hesitation in upholding the view of the CIT (A), as confirmed by the Tribunal. The amount was expended by the assessee during the course of business, wholly and exclusively for the purpose of business. If the assessee had taken proper steps and charged service tax to the service recipients and deposited wi....
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....t. Such liability although created retrospectively, could not entail the punishment of payment of interest with retrospective effect. 18. As far as the liability of interest payable on delayed remittance of TDS u/s. 201(1A) of the Act is concerned, the ld. DR placed reliance on the decision of the Hon'ble Madras High Court in the case of CIT v. Chennai Properties and Investment Ltd., 239 ITR 439 (Mad) wherein the Hon'ble High Court took the view that interest paid u/s. 201(1A) of the Act partakes the colour of tax and was therefore in the nature of income tax payable under the Act and cannot be allowed as a deduction. 19. We have given a careful consideration to the rival submissions. As far as payment of interest on delayed payment of service tax is concerned, it is clear from the decision of the Hon'ble Gujarat High Court in the case of Kaypee Mechanical India (P) Ltd. (supra) that service tax and interest paid on delayed deposit of service tax had to be allowed as a deduction. The Hon'ble Gujarat High Court took the view that payment of interest was only compensatory in nature and would not be in the nature of penalty which would be hit by Explanation to se....
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....ectively legislate, such, retrospectivity is normally not permissible to create an offence retrospectively. There were clearly judgments, decrees or orders of courts and Tribunals or other authorities, which required to be neutralised by the validation clause. We can only assume that the judgments, decree or orders, etc., had, in fact, held that persons situate like the appellants were not liable as service providers. This is also clear from the Explanation to the valuation section which says that no act or acts on the part of any person shall be punishable as an offence which would not have been so punishable if the section had not come into force. 8. The liability to pay interest would only arise on default and is really in the nature of a quasi-punishment. Such liability although created retrospectively could not entail the punishment of payment of interest with retrospective effect." 20. The observations of the Hon'ble Supreme Court in para 8 is only in the context of a question, whether there can be criminal liability imposed by retrospective law. The above observations cannot be read to mean that interest paid on delayed deposit of service tax is penal in natu....