Commissioner Of Income Tax-I, New Central Revenue Building,Statue Circle, Jaipur (Raj v. M/S Gems Paradise, Gulab Niwas, M.i. Road, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No.228/2012. Commissioner of Income Tax-I, New Central Revenue Building,Statue Circle, Jaipur (Raj.). ----Appellant Versus M/s Gems Paradise, Gulab Niwas, M.I. Road, Jaipur. ----Respondent Connected With D.B.INCOME TAX APPEAL No.411/2008. Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.). ----Appellant Versus M/s Gems Paradise, Gulab Niwas, M.I. Road, Jaipur. ----Respondent D.B.INCOME TAX APPEAL No.418/2008. Commissioner of Income Tax-I, New Central Revenue Building, Statue Circle, Jaipur (Raj.). ----Appellant Versus M/s Gems Paradise, Gulab Niwas, M.I. Road, Jaipur. ----Respondent _____________________________________________________ For Appellant(s) : Mr. Aditya Vijay on behalf of Mr. Anuroop Singhi For Respondent(s) : Mr. Sanjay Jhanwar _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHUR Judgment Per Hon’ble Jhaveri, J. 14/02/2017 1.By way of these appeals, the department haschallenged the judgment and order of the Tribunal in appealNo.228/2012 whereby the Tribunal has allowed the appealpreferred by the assessee and modifying the order of the CIT (A)which has partly modified the order of the Assessing Officer. Inother appeal Nos.411/2008 and 418/2008 , the tribunal hasdismissed the appeals preferred by the department and confirmedthe order of CIT (A) which has reversed the order of AssessingOfficer. 2.This Court while admitting appeal No.228/2012 on01.08.2012 has framed following substantial questions of law: “(i) Whether on the facts andcircumstances of the case, the Tribunal wasright and justified in on one hand holdingthe purchase made by the assessee ofRs.3,54,96,161/- as unverifiable andconsequently upholding the rejection ofbooks of accounts under section 145(3) ofthe Act and simultaneously on the otherhand reducing the trading addition madeby the Assessing Officer of Rs.89,49,544/-to merely Rs.4,00,000/- without anyreasoning whatsoever? (ii) Whether the Tribunal was justified inholding that the provisions of section 194Hare not applicable on payment ofcommission made by assessee to banks ontransactions made through credit cards andthereby deleting the addition of Rs.15,15,572/- made under Section 40(a)(ia)of the Act?” 2.1.This Court while admitting appeal No.411/2008 on 07.11.2008 has framed the following substantial questions of law: “(i) Whether on the facts and circumstancesof the case, the Tribunal was justified inallowing the deduction of Rs. 25,47,625/-u/s 80 HHC to the assessee on countersales made to foreign tourist in India,inspite of the specific provisions ofExplanation (aa) to Section 80 HHC of theAct? (ii) Whether on the facts and circumstancesof the case, the Tribunal as well as the CIT(A) was justified in allowing the deductionU/S 80HHC of the Act, when there is nofinding to the effect that the goods werecleared at any of the custom station?” 2.2.This Court while admitting appeal No.418/2008 on 10.11.2008 has framed the following substantial question of law: “(i) Whether on the facts and circumstancesof the case, the Tribunal was justified in allowing the deduction of Rs. 21,37,017/- U/s 80HHC to the assessee on counter salesmade to foreign tourists in India, inspite of the specific provisions of Explanation (aa) to Section 80HHC of the Act?” Tax Appeal No.228/2012 3.Counsel for the appellant has contended that the firstissue is squarely covered by the decision of this Court in the case of Commissioner of Income Tax Vs. M/s Gems Paradise- in D.B. Income Tax Appeal No.201/2010 decided on02.11.2016, wherein this Court in para 3 and 4 has held asunder: 2.2.This Court while admitting appeal No.418/2008 on 10.11.2008 has framed the following substantial question of law: “(i) Whether on the facts and circumstancesof the case, the Tribunal was justified in allowing the deduction of Rs. 21,37,017/- U/s 80HHC to the assessee on counter salesmade to foreign tourists in India, inspite of the specific provisions of Explanation (aa) to Section 80HHC of the Act?” Tax Appeal No.228/2012 3.Counsel for the appellant has contended that the firstissue is squarely covered by the decision of this Court in the case of Commissioner of Income Tax Vs. M/s Gems Paradise- in D.B. Income Tax Appeal No.201/2010 decided on02.11.2016, wherein this Court in para 3 and 4 has held asunder: 3.Considering the law declared by theSupreme Court in the case of Vijay ProteinsLtd. Vs. Commissioner of Income Tax,Special Leave to Appeal (C) No.8956/2015decided on 06.04.2015 whereby theSupreme Court has dismissed the SLP andconfirmed the order dated 09.12.2014passed by the Gujarat High Court and otherSupreme Court in the case of Vijay ProteinsLtd. Vs. Commissioner of Income Tax,Special Leave to Appeal (C) No.8956/2015decided on 06.04.2015 whereby theSupreme Court has dismissed the SLP andconfirmed the order dated 09.12.2014passed by the Gujarat High Court and other decisions of the High Court of Gujarat in thecase of Sanjay Oilcake Industries Vs.Commissioner of Income Tax (2009) 316ITR 274 (Guj) and N.K. Industries Ltd. Vs.Dy. C.I.T., Tax Appeal No.240/2003 decidedon 20.06.2016, the parties are bound bythe principle of law pronounced in theaforesaid three judgments. 4.We remit back the case to the AssessingOfficer for deciding afresh on the factualmatrix. The authority will accept the law but thetransaction whether it is genuine or not will beverified by the Assessing Officer on the basisof the aforesaid three judgments. The issuesare answered accordingly. The appeal isaccordingly disposed of.” 4.However, counsel for the respondent has contended that the second issue is now squarely covered by the decision ofDelhi High Court in the case of Commissioner of Income TaxVs. JDS Apparels Private Limited- (2015) 370 ITR 0454 (Delhi), wherein the Delhi High Court has held as under: “12. The expressions "commission" or"brokerage" are words of general andcommon parlance used both commerciallyand by the common man on the street.Clause (i) expressly seeks to define theexpression "commission" or "brokerage" butstates that it will include payments receivedor receivable, directly or indirectly by aperson acting on behalf of another if theyfall in the three categories. A definition maybe exhaustive or restrictive of its commonmeaning or may be an extensive one.Indeed, there are decisions which observethat use of the word "includes" in the clausecan show legislative intent to enlarge themeaning of the words or phrases occurringso as to not only mean and comprehendsuch things as they signify according totheir nature and import, but also thingswhich the interpretation clause declaresthat they shall include. (see CIT versus TajMahal Hotel, (1971) 3 SCC 550). But, thismay not always be the case and in certain cases, the expression "includes" has beenconstrued as "equivalent to" and, therefore,given a narrower meaning (see SouthGujarat Roofing Tiles ManufacturersAssociation versus State of Gujarat andOthers AIR 1977 SC 90). Thus, the word"includes" can be used in the sense of theword "means". The definition clause in suchcases is treated as an exhaustive one (seeReserve Bank of India versus PeerlessGeneral Finance and Investment CompanyLtd. (1987) 1 SCC 424). Thus, ina particular context the word "includes"when used, may only mean "comprise of"or "consist of". cases, the expression "includes" has beenconstrued as "equivalent to" and, therefore,given a narrower meaning (see SouthGujarat Roofing Tiles ManufacturersAssociation versus State of Gujarat andOthers AIR 1977 SC 90). Thus, the word"includes" can be used in the sense of theword "means". The definition clause in suchcases is treated as an exhaustive one (seeReserve Bank of India versus PeerlessGeneral Finance and Investment CompanyLtd. (1987) 1 SCC 424). Thus, ina particular context the word "includes"when used, may only mean "comprise of"or "consist of". 15. Applying the above cited case law to thefactual matrix of the present case, we feelthat Section 194H of the Act would not beattracted. HDFC was not acting as an agentof the respondent-assessee. Once thepayment was made by HDFC, it wasreceived and credited to the account of therespondent-assessee. In the process, asmall fee was deducted by the acquiringbank, i.e. the bank whose swiping machinewas used. On swiping the credit card on theswiping machine, the customer whosecredit card was used, got access to theinternet gateway of the acquiring bankresulting in the realisation of payment.Subsequently, the acquiring bank realisedand recovered the payment from the bankwhich had issued the credit card. HDFC hadnot undertaken any act on "behalf" of therespondent-assessee. The relationshipbetween HDFC and the respondent-assessee was not of an agency but that oftwo independent parties on principal toprincipal basis. HDFC was also acting andequally protecting the interest of thecustomer whose credit card was used in theswiping machines. It is noticeable that thebank in question or their employees werenot present at the spot and were notassociated with buying or selling of goodsas such. Upon swiping the card, the bankmade payment of the bill amount to therespondent-assessee.Thus,therespondent assessee received the saleconsideration. In turn, the bank in questionhad to collect the amount from the bankersof the credit card holder. The Bank had taken the risk and also remained out ofpocket for sometime as there would be atime gap between the date of payment andrecovery of the amount paid. 16. The amount retained by the bank is afee charged by them for having renderedthe banking services and cannot be treatedas a commission or brokerage paid incourse of use of any services by a personacting on behalf of another for buying orselling of goods. The intention ofthelegislature is to include and treatcommission or brokerage paid when a thirdperson interacts between the seller and thebuyer as an agent and thereby rendersservices in the course of buying and/orselling of goods. This happens when there isa middleman or an agent who interacts onbehalf of one of the parties, helps thebuyer/seller to meet, or participates in thenegotiations or transactions resulting in thecontract for buying and selling of goods.Thus, the requirement of an agent andprincipal relationship. This is the exactpurport and the rationale behind theprovision. The bank in question is notconcerned with buying or selling of goods oreven with the reason and cause as to whythe card was swiped. It is not bothered orconcerned with the quality, price, nature,quantum etc. of the goods bought/sold. Thebank merely provides banking services inthe form of payment and subsequentlycollects the payment. The amount punchedin the swiping machine is credited to theaccount of the retailer by the acquiringbank, i.e. HDFC in this case, after retaininga small portion of the same as theircharges. The banking services cannot becovered and treated as services renderedby an agent for the principal during thecourse of buying or selling of goods as thebanker does not render any service in thenature of agency.” Income Tax Appeal Nos.411/2008 & 418/2008. Income Tax Appeal Nos.411/2008 & 418/2008. 5.In these two appeals, the issue is now squarely coveredby the decision of this Court in the case of S. Kasliwal & Co. Vs. The Assistant Commissioner of Income Tax- 2015(3) RLW 2522 (Raj.), wherein speaking for the Bench, the Division Benchof this Court in para 7 and 8 has observed as under: “7. In the present case, the assessee hadproduced the 'Sale to Foreign TouristsVoucher', which not only recorded the nameand address of the customers (tourist), butalso his/her passport number and thedeclaration given by him that the goods willnot be gifted or sold in India. The goodswere sold at the counter at theshop/emporium to be taken out of thecountry, which necessarily involvedclearance of baggage, by the customsauthorities. No further proof, nor anydocument in proof of clearance of the goodsat the Customs Station by the assessee isrequired. The declaration in the form ofSale to Foreign Tourist Voucher, for salemade against the convertible foreignexchange with the undertaking that thegoods will not be gifted or sold in India, wassufficient proof for export out of India.Unless anything contrary was alleged andproved or any material was found by thedepartment, it was not necessary for theassessee to have produced the documentsof clearance of goods sold by him to theforeign tourists at any Customs Station, norit was feasible. The Explanation (aa) is nota rule of evidence, nor raises anypresumption of such sale, which is not forexport of goods out of India. It also doesnot require submission of any proof ofclearance at any Customs Station. Theexplanation is couched in double negativeterms. It is a rule of exclusion whichexcludes only those transactions, which donot involve clearance at any CustomsStation. It cannot be read in a manner, assuggested by learned counsel appearing forthe department that a proof of customsclearance of baggage must be provided toestablish the export of goods out of Indiafor the purpose of deduction of profits onsuch sales under Section80HHC of theIncome Tax Act. 8. The question of law is even otherwisecovered by judgment of the Supreme Courtin Commissioner of Income Tax v. Silver &Arts Palace (supra), which has beenfollowed by the Rajasthan High Courtconsistently. The facts and circumstances ofthe case are not distinguishable to take adifferent view in the matter. The questionis, thus, decided in favour of the assesseeand against the department. The IncomeTax Appeal is allowed. The Income TaxDepartment will proceed in accordance withthe decision on the question decided infavour of the assessee.” 6.The other decision of the Supreme Court in the case of Commissioner of Income Tax Vs. Silver & Arts Palace- (2003) 259 ITR 0684, wherein the Supreme Court has observedas under: “4. There is no dispute between the partiesthat the transactions of counter saleseffected by the respondent involved customsclearance within the meaning of Expln.(aa)to s.80HHC(4A) of the Act and further thatthe sales were in convertible foreignexchange.” 7.Another decision of this Court in the case of M/s Jewells Emporium & anr. Vs. Union of India & ors.- D.B. Civil Writ Petition No.6162/1991 decided on 21.03.2003,wherein this Court has observed as under: “As learned counsel for the petitioners hasnot pressed the ground challenging thevalidity of clause (aa) of Explanation-2 tosub-section (4B) of Section 80HHC of theAct, the same prayer is rejected. There is no dispute between the parties thatthe transactions of counter sales effected bythe petitioners involved customs clearancewithin the meaning of Explanation (aa) to Sec.80(4B) of the Act and further that thesales were in convertible foreign exchange.” 8.We have heard learned counsel for the parties. 7.Another decision of this Court in the case of M/s Jewells Emporium & anr. Vs. Union of India & ors.- D.B. Civil Writ Petition No.6162/1991 decided on 21.03.2003,wherein this Court has observed as under: “As learned counsel for the petitioners hasnot pressed the ground challenging thevalidity of clause (aa) of Explanation-2 tosub-section (4B) of Section 80HHC of theAct, the same prayer is rejected. There is no dispute between the parties thatthe transactions of counter sales effected bythe petitioners involved customs clearancewithin the meaning of Explanation (aa) to Sec.80(4B) of the Act and further that thesales were in convertible foreign exchange.” 8.We have heard learned counsel for the parties. 9.Taking into consideration the law declared by thisCourt, the first issue in Tax Appeal No.228/2012 is answered infavour of the department by remitting the matter back to theassessing officer for deciding whether what is actual bogustransactions and subject to law declared by this Court andSupreme Court, the assessing officer will give benefit of thejudgment of this court. The second issue is answered in favour ofthe assessee. 10.In other two appeals, namely; appeal nos. 411/2008and 418/2008, the issue is answered in favour of the assessee. 11.All the three appeals stand disposed of. A copy of this judgment be placed in each of the file. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. bblm