The Commissioner Of Incometax(Tds), Kolkata v. M/S. Itd Cementation India Ltd

OD-24 ITAT/77/2018 IA No.GA/2/2018 Old No.GA/721/2018)IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE THE COMMISSIONER OF INCOMETAX(TDS), KOLKATA -Versus- M/S. ITD CEMENTATION INDIA LTD. BEFORE: The Hon’ble JUSTICE T.S. SIVAGNANAM The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Appearance: Mr. P. K. Bhowmick, Adv....for the appellant.Mr. Soham Sen, Adv....for the respondent. The Court : This appeal filed by the revenue underSection 260A of the Income Tax Act, 1961 (the ‘Act’ in brevity) isdirected against the order dated 5[th] May, 2017 passed by the IncomeTax Appellate Tribunal, “A” Bench, Kolkata (the ‘Tribunal’ inshort) in ITA No.812/Kol/2014 for the assessment year 2011-12. The revenue has raised the following substantialquestions of law for consideration: (i)Whether on the facts and circumstances of the casethe Learned Income Tax Appellate Tribunal has erred in law that there is no principal agent relationship betweena bank issuing the Bank Guarantee and the Assessee andconsequently the payment though termed as commission isnot covered by section 194H of the of the Income Tax Act,1961? (ii)Whether on the facts and circumstances of the casethe Learned Income Tax Appellate Tribunal has erred inlaw in holding that no tax was deductible at source undersection 194H of the Income Tax Act, 1961 of the AssesseeCompany on payment of Bank Guarantee charges therebyignoring the fact that for this service the bank is aconstructive agent for the assessee company ? (iii)Whether on the facts and circumstances of the casethe Learned Income Tax Appellate Tribunal has erred inlaw in holding that there was lack of principal and agentrelationship between the assessee and the bank/credit andregulation? We have heard Mr. P. K. Bhowmick, learned standingcounsel appearing for the appellant/revenue and Mr. Soham Sen,learned standing counsel appearing for the respondent/assessee. The short question which is involved in this appeal iswhether the bank guarantee commission is not in the nature ofcommission paid to an agent but it is in the nature of bankcharges for providing one of the banking services and, if it so,whether the requirement for deduction at source under Section 194Hwould stand attracted. This issue is no longer res integra and hasbeen decided in the case of Commissioner of Income Tax-II Vs. JDS Apparels (P.) Ltd. reported in (2015) 53 taxmann.com 139(Delhi).The Court after taking into consideration various decisions on thepoint held that the amount retained by the bank is a fee chargedby them for having rendered the banking services and cannot betreated as a commission or brokerage paid in course of use of anyservices by a person acting on behalf of another for buying orselling of goods. Similar view has been taken in the case ofCommissioner of Income tax (TDS)-1 Vs. Larsen & Toubro Ltd.reported in (2019) 101 taxmann.com 83(Bombay). We are in respectful agreement with the aforementioneddecisions and, consequently, held that the Tribunal rightlydismissed the appeal. Accordingly, the appeal (ITAT/77/2018) is dismissed andthe substantial questions of law are answered against the revenue. The connected application for stay (IA No.GA/2/2018) alsostands dismissed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)