Was Declared. The. Revised Return Was Processed Under Section 143(1) Of The Act. O 15.06.2701) And A Refund Of v. Learned Counsel For The Revenue While Inviting The Attention Of This Court To Section 194H Of The Act Submitted That A Third Partly Viz., National Financial Swi

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 23 DAY OF NOVEMBER 2070PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASADILT.A. NO.427 OF Z2O1 BETWEEN: 1.|THE COMMISSIONER OF INCOME-TA® C.R.BUILDING, ATTAVARA| MANGALORE - 5/75 OO1. 2.|THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE - 2(1), C.R.BUILDING ATTAVARA, MANGALORE - 575 OO1. .., APPELLANTS~ (BY SRI K.V. ARAVIND., ADV.,) AND* M/S. CORPORATION BANK.FINANCIAL MANAGEMENT DIVISION.H.O.P.B. NO.88|MANGLADEVI TEMPLE ROADPANDESHWAR, MANGALORE,PAN: AAA CC /2Z45E. (BY SRI. T. SURYANARAYANA, ADV., FOR|SRI. BALRAM R. RAO, ADV.,) .., RESPONDENT THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,|1961 ARISING OUT OF ORDER DATED 11.03.2015 PASSED IN ITA.NO.1264/BANG/2013 FOR THE ASSESSMENT YEAR 2011-12,PRAYING TQ: (I) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED ABOVE. (II) ALLOW THE APPEAL AND SET ASIDE THE ORDER.PASSED BY THE ITAT, BANGALORE IN ITA NO.1264/BANG/2013.DATED 11-03-20L5 CONFIRMING THE ORDER OF THE APPELLATE.COMMISSIONER AND CONFIRM THE ORDER PASSED BY THE ASST..COMMISSIONER OF INCOME TAX, CIRCLE-2(1), MANGALORE. THIS ITA COMING ON FOR ADMISSION, THIS’ DAY, |ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matter|of the appeal pertains to the Assessment year 2011-12.The appeal is admitted on the following substantialquestions of law:| (1)Whether on the facts and in thecircumstances of the case, the tribunal wascorrect in holding tnat depreciation onvaluation of investment portfolio is allowableby treating the investments neid by theassessee bank as stock-in-trade once theRBI Master Circular read with CBDT CircularNo.665 came Into force?| (il)Whether on the facts and in thecircumstances of the case, the Tribunal erredin deleting the expenditure relating to.earning of exempted income ignoring the.provisions of Section 14A(1) of the Income|Tax Act read with Rule 8D? (111)Whether on the facts and in thecircumstances of the case, the Tribunal erredin holding that on the payment madetowards the service charges rendered byM/s. NESIS.nether.COmMmmIssioNOFbrokerage which does not attract TDS undersection 194H of the Income Tax Act? 2.|Facts leading to filing of this appeal brieflystated are that the assessee is a Nationalized Bank. Theassessee had filed the return of income on 28.09.2011.by which income of Rs.1412,98,.50,750/- was declared.Thereafter, a revised return was filed on 23.12.2011 bywhich income of Rs.1366,54,08,250/- was declared. The.revised return was processed under Section 143(1) oftheAct.O15.06.2701)and|arefundof Rs.133,39,33,9/70/- was granted. Subsequently, the|assessee filed a second revised return on 11.01.2013 Inwhich income of Rs.136/7,59,11,162/- was admitted.The Assessing Officer vide order dated 19.02.2013 made)an addition on account of depreciation on investmentportfolio, disallowance of expenses with reference toexempt income under Section 14A(1) of the Income TaxAct read with Rule 8D, disallowance under Section*+- .$disallowanceUnder|Section|40a(la)and|disallowance under Section 36(1)(vii) of the Act. — 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) wno-by an order dated 18.07.2013 partly allowed the appealpreferred by the assessee. The revenue thereupon filedan appeal before the Income Tax Appellate Tribunal(hereinafter referred to as ‘the tribunal for short). Thetribunal by an order dated 11.03.2015 dismissed theappeal preferred by the revenue. In the aforesaid factualbackground, this appeal Nas Deen filed. 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) wno-by an order dated 18.07.2013 partly allowed the appealpreferred by the assessee. The revenue thereupon filedan appeal before the Income Tax Appellate Tribunal(hereinafter referred to as ‘the tribunal for short). Thetribunal by an order dated 11.03.2015 dismissed theappeal preferred by the revenue. In the aforesaid factualbackground, this appeal Nas Deen filed. 4Learned counsel for the assessee submittedthat the first and second substantial questions of law.involved in this appeal have been answered in favour ofthe assessee by division bench decision of this court in."KARANTAKABANKLTD,VS,ASSISTANTCOMMISSIONER OF INCOME-TAX', CIRCLE-2(1),(2013) 34 TAXMANN.COM 150 (KAR), decision ofthe Supreme Court in"MAXOPP INVESTMENT LTD.VS. COMMISSIONER OF INCOME TAX, NEW DELHI, |(2018) 19 TAXMANN.COM 154 (SC)and judgment.dated17.01.7070|passedbythis|court.InI.T.A.No.97/2010 respectively. The aforesaid assertion.made by learned counsel! for the assessee could not bedisputed by learned counsel for the revenue. For thereasons assigned in the aforesaid judgments, the firstand second substantial questions of law are answeredagainst the revenue and in favour of the assessee. The)third substantialquestionoflawSUrVIVeSforconsideration. 5.|Learned counsel for the revenue whileinviting the attention of this court to Section 194H of theAct submitted that a third partly viz., National FinancialSwitch and Cash Tree has been acting as an agent andhas been collecting charges from the assessee and there|is no relationship between principal to principal basisand therefore, the provisions of Section 194H apply tothe case of the assessee and the third substantialquestion of law deserves to be answered In favour of therevenue. On the other hand, learned counsel for theaSS@CSSC2whileplacingrellance|ondecisionOf ‘COMMISSIONER OF COMMERCIAL TAX-II VS. JDSAPPARELS (P) LTD.', (2015) 53 TAXMANN.COM139submitted that in view of the aforesaid decision,the third substantial question of law also deserves to beanswered against the revenue. In rebuttal, learnedcounsel for the revenue submitted that the aforesaid.decision has no application to the obtaining factualmatrix of the case. 6.|We have considered the submissions made§ by learned counsel for the parties and have perused the record. Before proceeding further, it is apposite to take|note of Section 194H, which reads as under: 194H. 1 Commission, brokerage, etc. 2. (1) Any person, not being an individual ora Hindu undivided family, who is responsiblefor paying, on or after the 1st day of October,1991 , 3 but before the 1st day of June, 1992 |toadresident,ailyincomeDy Wdayofcommission (not being insurance commissionreferred to in section 194D) or brokerage,Shall, at the time of credit of such income tothe account of the payee or at the time of.payment of such income in casn or by tne.issue Of a cheque or draft or by any other.mode, whichever is earlier, deduct income- taxthereon at the rate of ten per cent. (2) The provisions of sub-section (1) shallnot apply-— (a) to such persons or class orclassesofDersonsaS|theCentralGovernment may, having regard to the| extent of inconvenience caused or Iikely|to be caused to them and being satisfiedthat it will not be prejudicial to the|interests of the revenue, by notification|in the Official Gazette 4, specify in this|behalf; (b) wheretheQAMOUNTofSUCh|income or, as the case may be, the|aggregate of the amounts of such)income credited or paid or likely to be|credited or paid during the financial year|by the person referred to in sub- section(1) to the account of, or to, the payee,does not exceed two thousand five!hundred rupees. — Explanation.- For the purposes ofthis section,-. (i) °COMMISSIONOrbrokerage’includesdhhypayment.receivedOrreceivable, directly or indirectly, by aperson acting on behalf of another person|for.Services rendered|(notbeingprofessional services) or for any services|in the course of buying or selling of goods| (b) wheretheQAMOUNTofSUCh|income or, as the case may be, the|aggregate of the amounts of such)income credited or paid or likely to be|credited or paid during the financial year|by the person referred to in sub- section(1) to the account of, or to, the payee,does not exceed two thousand five!hundred rupees. — Explanation.- For the purposes ofthis section,-. (i) °COMMISSIONOrbrokerage’includesdhhypayment.receivedOrreceivable, directly or indirectly, by aperson acting on behalf of another person|for.Services rendered|(notbeingprofessional services) or for any services|in the course of buying or selling of goods| or in relation to any transaction relating|to any asset, valuable article or thing; (ii) “ professional services" meansservices rendered by a person in thecourse of carrying on a legal, medical,|engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or such|other profession as Is notified by the)Board for the purposes of section 44AA; (iii) where any income ts credited toany account, whether called" Suspense|Account’ or by any other name, in the)books of account of the person liable to}pay such income, sucn crediting shall be|deemed to be credit of such Income ftothe account of the payee and theprovisions of this section. shall applyaccordingly. Thus, from perusal of Section 194H it is evidentthat the provision would apply if the payment wasreceived or is receivable directly or indirectly Dy a person. acting on behalf of another person for services renderednot being professional and for any services in the courseof Duying and selling of goods or in relation to any.transaction relating to an asset, valuable article or thing. 7Now we may advert to the facts of the casein hand. In case the credit card issued by the assesseewas used on the swiping machine of another bank, the)customer whose credit card was used got access to)internet|gateway|Of acquiring|bankresulting Inrealization of the payment. Subsequently, the acquiring»bank realize and recover the payment from the bank,which had issued the credit card. The relationshipbetween the assessee and any other bank is not of anagency but that of two independent basis on principal-—principal basis. Even assuming that the transaction was|being routed to National Financial Switch and Cash Tree,then also it is pertinent to mention here that the same isa consortium of banks and no commission or brokerageis paid to it. It does not act as an agent for collecting charges. Therefore, we concur with the view taken Dythe High court of Delhi in JOS APPARELS supra and holdthat provisions of Section 194H of the Act are notattracted to the fact situation of the case. In the result,the third substantial question of law is also answeredagainst the revenue and in favour of the assessee. In|the result, we do not find any merit in this appeal, thesame fails and is hereby dismissed. Sd/-—JUDGE. Sd/-—JUDGE.