DCIT Vs Jaypee Sports International Ltd. (ITAT Delhi)
Conclusion: TDS u/s 194H was not applicable to bank guarantee commission as the same did not fall into clause (i) of Explanation to section 194H and exemption was provided under section 194A(2)(iiia) in respect of any payment made to any banking company to which any Banking Regulation applies.
Held: Bank guarantee commission could not be subjected to TDS under section 194H as the same did not fall into clause (i) of Explanation to section 194H and also assessee in present case was not acting as an agent but on principal-to-principal basis. Also exemption is provided under section 194A(2)(iiia) in respect of any payment made to any banking company to which any Banking Regulation applies.
FULL TEXT OF THE ITAT JUDGEMENT
Present appeal has been filed by revenue against order dated 27/03/15 passed by Ld. CIT (A)-2, Noida for assessment year 2011-12 on following grounds of appeal:
“1) Whether on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding that the provisions of section 40 (a)(ia) are not applicable where the expenditure in question is capitalized and no deduction of such expenditure has been claimed while computing business income.
a) The Ld. CIT (A) has erred in not appreciating the fact that :
i) The section 40 (a)(ia) begins with a non-obstante clause and it has an overriding effect on the provisions of section 30 to 38.
ii) The word “expenditure’’ has not been defined in the Act. It is word of wide amplitude and takes within its ambit any amount which has the effect on the debit side of the P&L account. Even capitalized amounts have such effect on the P&L account, albeit in the year when allocation out of such capital expenditure is made against the profits.
iii) Deduction of an expenditure may or may not be claimed by direct debit in the P&L account. Where an expenditure is capitalized in an year, it does not mean that it is not being claimed as a deduction, only the time of deduction is deferred. It will be claimed as a deduction in the year when the corresponding income is recognized.
iv) There is nothing in the provision which suggests that the provision is applicable only where the expenditure in question has been charged to the P&L account of a particular year. The expenditure which is capitalized in any year under “work-in- progress” etc. is ultimately charged to the P&L account when the corresponding income is recognized in a subsequent year. Therefore, such outgo/expenditure, if not out rightly disallowed or added to the P&L account, is liable to be reduced from “work-in-progress” or the capital account, which would be a mode of giving effect to the provisions of section 40(a)(ia).
v) All outgoings, regardless of whether capital or revenue in nature, are meant to be covered by the word “expenditure” for the purpose of this section, only the mode of giving effect to the provision of section 40 (a)(ia) shall be different.
2) Whether on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding that the amount of Rs. 2,51,17,344/- received by the assessee from M/s Formula One Management Limited was not liable to be treated as business income in the hands of the assessee for the year under assessment.
3) The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal.”
2. Brief facts of the case are as under:
Assessee filed its return of income on 20/09/11, declaring ‘nil’ income. The same was processed under section 143(1) of the Act, and case was selected for scrutiny. Accordingly, notice under section 143(2) of the Act was issued. Thereafter, notice under section 142(1) along with questionnaire was issued to assessee.
In response to statutory notices, representative of assessee appeared before Ld. AO and filed necessary details which were placed on record.
2.1 Ld.AO observed that assessee is engaged in business to develop facilities of international standard for sports and recreation activities. Ld.AO called upon assessee to furnish information regarding the activities carried on by assessee. During course of TDS survey, it was found that assessee made payment of interest, lease rent and commission to various parties on which assessee should have to deduct TDS. After verifying details filed by assessee Ld.AO held that, no deduction could be allowed to assessee and was liable to be disallowed under provisions of section 40(a)(ia) of the Act. Ld. AO accordingly made following addition under section 40(a)(ia) of the Act:
