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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SMT. BEENA PILLAI & SHRI. LAXMI PRASAD SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH : BANGALORE BEFORE SMT. BEENA PILLAI, JUDICIAL MEMBER AND SHRI. LAXMI PRASAD SAHU, ACCOUNTANT MEMBER
ITA Nos. 702 & 703/Bang/2022 Assessment Years : 2013-14 & 2014-15
Shri Srinivas Rudrappa, #845, 5th Main, 11th Cross, The Income Tax Capital School, RBI Officer, Layout, TDS, Ward 3(1), JP Nagar, 7th Phase, Bengaluru. Vs. Bengaluru. PAN : ASLPR 7967 E APPELLANT RESPONDENT
Assessee by : Shri Rajiv C Nulvi, C.A : Smt. Priyadarshini Revenue by Baseganni, Addl.CIT (DR)
Date of Hearing : 18-10-2022 Date of Pronouncement : 02-12-2022
ORDER PER BENCH These two appeals have been filed by the assessee against the separate order passed by the Ld.CIT(A) vide order dated 25/07/2022. The issues involved in both these appeals are identical and arises out of identical facts and circumstances. We therefore deem it convenient to pass common order and the decision in ITA No.702/Bang/2022 shall apply mutatis mutandis in ITA No.703/Bang/2022 for the assessment year 2014-15.
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Page 2 2. The grounds raised in both these appeals are common except for the figures. Grounds raised by the assessee in ITA No.702/Bang/2022 is reproduced as under:- “1. The order of the Assessing Officer is against the fact of the case and is made by assuming the facts perversely. 2. The Assessing Officer erred in generalizing the terms and conditions of MOU entered by M/s Bigtree with different persons, for different activities undertaken by it, in a different situation and a different circumstance. The Assessing Officer has no authority to dictate the terms and conditions of MOU entered by the Appellant, which is none of her business. And also amounts to stepping into the shoes of the Appellant. 3. On the facts and circumstances of the case, the Assessing Officer in assuming the constructive payment of commission by the Appellant to M/s Bigtree as against the fact that the Appellant has not paid any commission to M/s Bigtree, whereas, M/s Bigtree has shared its income to the Appellant for granting permission to upload the seat layout of the appellant cinema theatre in M/s Bigtree website. 4. On the facts and circumstances of the case and under the provisions of the law, the Assessing Officer erred in passing the order u/s 201(1) and 201(1A) of the Income Tax Act, 1961 though section 194H of the Income Tax Act, 1961 is not applicable to the Appellant as the Appellant has not paid any commission on actual payment mode or constructive payment ñiode. 5. On the facts and circumstances of the case, the Assessing Officer erred in passing the order u/s 201(1) and 201(1A) of the Income Tax Act, 1961 without bringing on record, the convenience charges collected by the M/s Bigtree belongs to the Appellant and the convenience charges retained by M/s Bigtree on behalf of the Appellant. But in fact, the convenience charges collected from the customers by M/s Bigtree and the Appellant is unaware of the value of convenience charges collected by M/s Bigtree. 6. On the facts and circumstances of the case and under the provisions of the law, the order passed by the Assessing Officer u/s 201(l) and 201(1A) of the Income Tax Act, 1961 for the financial year 2012-13 relevant to the assessment year 2013-14 on 30-03- 2021 is barred by limitation hence deserved to be annulled. 7. On the facts and circumstances of the case and under the provisions of the law, the Assessing Officer erred in miscarrying the facts perversely to suit her requirement to paste the liability on the Appellant u/s 201(1) and 201(1A) of the Income Tax Act, 1961. 8. On the facts and circumstances of the case and under the provisions of the law, The Commissioner of Income Tax (Appeals)
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Page 3 erred in dismissing the appeal of the Appellant without appreciating the contention of the Appellant on question of law and merits. 9. On the facts and circumstances of the case and under the provisions of the law, The Commissioner of Income Tax (Appeals) erred in dismissing the appeal without rebutting the judgements relied by the Appellant in support of his contention. 10. For these other reasons which may be adduced at the time of the hearing, the Appellant prays Your Honour to delete the amount levied u/s 201(1) of the Income Tax Act, 1961 Rs. Rs. 18,438/- and interest levied u/s 201(1A) of the Income Tax Act, 1961 Rs. 19,913/- for the substantial cause of justice 11. The Appellant craves permission to add, to alter, to amend and to delete any of the grounds at the time of the hearing.” 3. The sole and substantive issue involved in this case is for non deduction of TDS on the commission paid towards services rendered by the M/s Bigtree Entertainment Pvt. Ltd. Mumbai (hereafter referred as M/s Bigtree]. 3.1 Brief facts of the case are as under: The assessee is a proprietor of M/s Eshwari Cinema and Kamakya Cinema theatres engaged in the business of exhibition of films. A survey u/s. 133A was conducted in the business premises of M/s Bigtree. M/s Bigtree provides services through their online platform Book.My.Show, facilitating booking for cinema tickets to the public by providing online ticketing platform for end customers and sale of tickets of cinemas, food and beverages coupons, and events through its website www.bookmyshow.com. The copies of agreements were examined by the authorities below. In the case of cinema owners, when the end customers books cinema tickets through bookmyshow portal and makes the payment to M/s Bigtree, the payment is raised towards ticket cost along with convenience fees that is charged over and above the ticket charges. The ticket cost is remitted by M/s. Bigtree to the cinema owners after deducting TDS while it retains convenience fee which is revenue in the hands of
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Page 4 M/s. Bigtree. The Ld.AO was of the opinion that the convenience fee retained by M/s. Bigtree was in lieu of commission service charges payable by the cinema owners (assessee) and amounts to constructive payment made by the cinema owners(assessee) to M/s. Bigtree. He therefore, was of the opinion that tax should be deducted at source under sec. 194H of the Act. The Ld.AO computed the TDS payable by the assessee on such convenience fee as under:
The Ld.AO issued show cause notice u/s 201(1) and 201(1A) of the Act dated 16/03/2021 for the financial year 2013-14 on the cinema owner, to show cause, as to why, the assessee should not be treated to as an ‘assessee is in default’ as per provisions of sec. 201(1) and 201(1A) of the Act. In response, the assessee filed letter dated 24/03/2021 stating that the assessee is not availing services of M/s. Bigtree for sale of online cinema tickets, but has permitted M/s. Bigtree to list assessee’s cinema tickets on M/s. Bigtree platform. The assessee also submitted that, the relationship between the assessee and M/s. Bigtree is of principal-to-principal, and, therefore, the conditions laid down in section 194H does not stand satisfied. The Ld.AO however not convinced with the submissions of the assessee held as under:
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The Ld.AO thus held assessee to be an “assessee in default” as per sec. 201(1) of the Act and levied interest u/s. 201(1A) for non- deduction of TDS u/s. 194H. 6. Aggrieved by the order of Ld.AO, the assessee filed appeal before the Ld.CIT(A), who confirmed the order of Ld.AO by observing as under: “5.3 In course of the appellate proceedings, the appellant submitted that the assessing officer erred in generalizing the terms and conditions of MOU entered by BEPL with different persons, for different activities undertaken by it, in a different situations and different circumstances and this amounts to stepping into the shoes of the appellant. It was contended by the appellant that the assessing officer erroneously concluded that there is constructive payment of the commission by the Appellant to BEPL whereas, actually BEPL has shared it's income with the appellant for granting permission to upload the seat layout of the appellant cinema theatre in Bigtree website platform. 5.4 The contentions of the appellant have been duly considered. From the factual position which emerges, it is clear that the said convenience fees are nothing but charges for use of the ticket booking platform of BEPL which has been used by the appellant. BEPL is being paid
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Page 8 this amount of convenience charges on the basis of the tickets sold through it's platform. The nature of these convenience charges is clearly of the nature of commission/service charges. The said amount of convenience retained by BEPL out of the total amount received by the end users amounts to constructive payment of commission. The contention of the appellant that BERL has shared it's income for allowing it to upload the seat layout of the appellant cinema theatre in Bigtree website platform, is not acceptable since if that was the case, BEPL would have made TDS on the payments made to the appellant for allowing it to upload the seat layout of the appellant cinema theatre.” Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal. 6. During the course of hearing the ld.AR has raised legal issue in Ground No.6 in the appeal filed for assessment year 2013-14, stating that, the order passed by the Ld.AO is barred by limitation, and therefore, it is nonest :- 6.1. The Ld.AR in the statement of facts has submitted as under: “6. For the financial year 2012-13 the order passed by the Assessing Officer on 30-03-2021 u/s 201(1) & 201(1A) of the Income Tax Act, 1961 is barred by limitation. Up to the assessment year 2009-10 relevant to the financial year 2008- 09 there was no limitation period u/s 201(1) of the Income Tax Act, 1961 for initiating proceedings for failure to deduct the tax at source. It means until then as per Hon'ble Supreme Court in the case of State of Punjab Vs Bhatinda Co-op Milk Producers Union Ltd (2007) 11 SCC 363 held that "action must be initiated by the competent authority under the Act that there is specified limitation period is prescribed then it should be initiated within four years period from the end of the financial year and not later than that." The Finance Act, 2009 subsection (3) of 201(l) was inserted It was only by the Finance Act, 2009 that sub-section (3) was inserted, initially providing for a period of limitation of two years from the end of the financial year in which the statement is filed; and four years from the end of the financial year in which the statement is filed; and four years from the end of the financial year in which the payment is made or credit is given. The provisions of section 201(3) amended by Finance Act, 2012 with retrospective effect from 0104.2010 is applicable which reads as follows:
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Page 9 (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of (I) two years from the end of the financial year in which the statement is flied in a case where the statement referred to in section 200 has been filed. (ii) six years from the end of the financial year in which payment is made or credit is given, in any other case Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011." It means that from 01-04-2010 to 01-10-2014 the limitation period for passing the order u/s 201(1) and 201(1A) is six years from the end of the financial year. In the Appellant's case for the financial year, 2012- 13 six years expired on 31-03-2019. Hence the order passed by the Assessing Officer for the financial year 2012-13 relevant to the assessment year 2013-14 is barred by limitation. The department before Hon'ble I.T.A.T, Bangalore Bench in ITA No.2931/Bang/2018 for the financial year 2010-11 relevant to the assessment year 2011-12 in the case of DCIT Bangalore Vs M/s Coffeeday Enterprises Ltd taken the stand that the limitation period u/s 201(3) of Income Tax Act for the financial year 2010-11 would apply only to a pay-out made to resident Indian, not to the non-resident Indian. It means the limitation period u/s 201(3) for the financial year 2012-13 is applicable as existed during the financial year 2012-13 prior to the amendment by the Finance Act 2014. 7. The Commissioner of Income Tax (Appeals), National faceless Appeal Centre, Delhi passed an order u/s 250 of the Income Tax Act, 1961 by dismissing the appeal of the Appellant without appreciating the contention of the Appellant on question of law and merits. The Commissioner of Income Tax (Appeals) has not even rebutted the judgements relied by the Appellant in support of his contention. In view of the above submission, the Appellant did not pay any commission to M/s Bigtree so as to attract provision of 194H of the Income Tax Act, 1961. When the Appellant is not liable to pay commission to the M/s Bigtree whether on actual payment or constructive payment the question of making TDS u/s 194H of the Income Tax Act, 1961 does not arise. The order passed by Commissioner of Income Tax (Appeals), National faceless Appeal Centre, Delhi u/s 250 of the Income Tax Act, 1961 and the Assessing Officer u/s 201(1) and 201(1A) of the Income Tax Act, 1961 is against the fact and law. Hence, this Honourable Bench is requested to delete the amount levied u/s 201(1) of the Income Tax Act, 1961 for default u/s 201(1) of the Income Tax Act, 1961 Rs. Rs. 18,438/- and interest levied u/s 201(1A) of the Income Tax Act, 1961 Rs. 19,913/-, for default u/s 201(1) of the Income Tax Act, 1961 for the substantial cause of justice.”
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Page 10 6.2. On going through the submission made by the ld.AR we noted that the show cause notice was issued on 16/03/2021 and the order was passed on 30/03/2021 for the financial year 2012-13 which is not as per sec. 201(3) of the IT Act, accordingly the order has not been passed by the AO within the within the prescribed time period of seven from the end of relevant financial year in which the payment was made. Our this view is supported by the decision of coordinate bench of the Tribunal in the case of M/s Coffee Day Enterprises Ltd., cited supra. The relevant paragraphs are as under:- “10.3 We have heard the rival submissions and perused the record. With regard to limitation for initiating action u/s 201 of the I.T. Act, upto assessment year 2009- 10, there was no limitation provided u/s. 201(1) of the Act for initiating proceedings for failure to deduct tax at source. In the present case, the assessment year involved is 2011-12. It was only by the Finance Act, 2009 that sub-section (3) was inserted, initially providing for a period of limitation of two years from the end of the financial year in which the statement is filed; and four years from the end of the financial year in which the statement is filed; and four years from the end of the financial year in which the payment is made or credit is given. The provisions of section 201(3) amended by Finance Act, 2012 with retrospective effect from 01.04.2010 is applicable which reads as follows: (3) No order shall be made under sub-section (1) deeming a person to be an assessee in default for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of (i) two years from the end of the financial year in which the statement is filed in a case where the statement referred to in section 200 has been filed. (ii) six years from the end of the financial year in which payment is made or credit is given, in any other case Provided that such order for a financial year commencing on or before the 1st day of April, 2007 may be passed at any time on or before the 31st day of March, 2011. 10.4 The question whether the order passed u/s. 201(1) and 201(1A) of the Act for the assessment year 2011-12, was barred by limitation was decided against the assessee by the CIT(A), on the reason that it is observed from the provisions of section 201(3) that the time limit period of six years is applicable for the failure to deduct whole or any part of the tax from the person resident in India and in the appellant’s case the deductee is not an Indian resident company and therefore the time limit period of six years prescribed u/s. 201(3) will not apply to the present
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Page 11 case. In view of the above, it is held that the order passed by the Assessing Officer is legally valid. 10.5 The learned DR submitted that the order passed u/s 201(1) and 201(1A) was not barred by limitation u/s 201(3) of the I.T. Act for the reason that the payee in the instant case is a non-resident, whereas, the limitation prescribed u/s 201(3) of the I.T.Act would apply only to payments made to Indian resident company. Section 201(3) and (4) was inserted by the Finance (No.2) Act, 2009 with effect from 01.04.2010 and it was later substituted by the Finance (No.2) Act, 2014 with effect from 01.10.2014. Prior to the time limit being prescribed by virtue of insertion of section 201(3), the Courts have held that when the statute does not prescribe the time limit for passing an order u/s 201(1) / 201(1A) of the I.T.Act, then reasonable time limit ought to be read into the provisions. The Special Bench of the Tribunal in the case of Mahindra & Mahindra Ltd. v. DCIT reported in [(2010) 122 ITD 216 (Mum.)] had held that order passed u/s 201(1) is akin to an order of assessment and the reasonable time limit for passing an order u/s 201(1) / 201(1A) would be same as the time limit prescribed for initiating and completion of reassessment u/s 147 of the I.T.Act. The Special Bench of the Tribunal was confirmed by the Hon’ble Bombay High Court in the case of Director of Incometax (International Taxation) v. Mahindra & Mahindra Ltd. reported in [(2014) 48 taxmann.com 150 (Bombay)]. The Special Bench order was considering payments made to non-residents. In our case also the payees are non-resident and that was the reason for the CIT(A) to hold that the time limit mentioned u/s 201(3) of the I.T.Act does not have application to this case. 10.6 When no time limit is prescribed under the statute for initiating and completion of a proceedings, the Hon’ble Kerala High Court in the case of Iswara Bhat v. Commissioner of Agricultural Income-tax [(1993) 200 ITR 238 (Ker.)] had held that the powers should be exercised within the reasonable time. The Hon’ble High Court was considering the powers of the Commissioner to exercise the revisionary jurisdiction. The Kerala Agricultural Income-tax Act, 1950 did not prescribe a time limit for initiating a suo moto revisional proceedings. However, the Hon’ble Kerala High Court held that the Commissioner has to pass an order within a reasonable time and what is a reasonable time limit depends on the facts of that particular case. 10.7 The Hon’ble Delhi High Court in the case of CIT v. NHK Japan Broadcasting Corporation reported in [(2008) 305 ITR 137 (Delhi)] had held that the order passed u/s 201 of the I.T.Act beyond four years was not reasonable and had quashed the same as barred by limitation. Similar view was taken by the Hon’ble Himachal Pradesh High Court in the case of CIT v. Satluj Jal Vidyut Nigam Ltd. reported in [(2012) 345 ITR 552 (HP)]. As mentioned earlier, the learned DR submitted that the time limit prescribed in sub-section (3) of section 201 does not have application since the payee is a non-resident. The Hon’ble Bombay High Court in the case of Director of Income-tax (International Taxation) v. Mahindra & Mahindra Ltd. (supra) had held even if there is no time limit
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Page 12 41 ITA No.2931/Bang/2018 & C.O. No. 42/Bang/2019 prescribed under the statute for passing an order u/s 201(1) / 201(1A) of the I.T. Act, a reasonable time limit should be read into the provision. The Hon’ble Bombay High Court had confirmed the Special Bench order of the Tribunal, wherein the time limit prescribed for initiating and completion of reassessment u/s 147 of the I.T. Act was upheld to be correct. The Hon’ble High Court was considering the following substantial question of law:- “(1) Whether the Tribunal was justified in prescribing the time limit for initiation and completion of proceedings under sub-sections (1) and (1A) of Section 201 of the Income-tax Act, 1961 in the absence of any time-limit provided under the said Act? (2) Whether the Tribunal was justified in prescribing the time limit statutorily provided for initiation and completion of reassessment proceedings under Section 147 of the Income-tax Act, 1961 for the purposes of sub-sections (1) and (1A) of Section 201 of the said Act?” In deciding the above question, the Hon’ble High Court confirmed the Special Bench order of the Tribunal by following the judgment of the Hon’ble Delhi High Court in the case of CIT v. NHK Japan Broadcasting Corporation (supra). 10.8 In the instant case, the financial year concerned is 2010-11 and notice for initiating proceedings u/s 201(1) / 201(1A) was issued on 19.03.2018. The orders u/s 201(1) / 201(1A) of the I.T. Act was finally passed on 31.03.2018, which is seven years from the end of the financial year. Therefore, it cannot be stated in facts of this case, the order u/s 201(1) / 201(1A) was passed within a reasonable time, going by the dictum laid down by the judicial pronouncement mentioned supra and the prescription of limitation mentioned u/s 201(3) and (4) of the I.T.Act. Similar view was taken by the Co-ordinate Bench, Cochin, vide order dated 10.04.2018 in ITA No.122/Coch/2017 for assessment year 2007-2008 in the case of M/s.U.S. Technology Resources (P) Ltd., wherein the present Accountant Member was the co-author of the said order. In view of the aforesaid reasoning, we hold that the order passed u/s 201(1)/ 201(1A) of the I.T. Act was barred by limitation in the facts and circumstances of the case. It is ordered accordingly. “ 6.3. Respectfully following the above decision, we allow Ground no.6 of the assessee. As we have decided the legal issue in favour of the assessee we hold that the order passed by the Ld.AO is beyond the statutory period as per section 201(3) of the Act. As a consequence, the order passed by the Ld.AO is held to be bad in law and stands quashed.
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Page 13 Accordingly, we allow the appeal of the assessee for assessment year 2013-14 on the legal issue raised in Ground no.6. 7. Now coming to the merits of the case for assessment year 2014-15, the ld.AR reiterated the submission made before the lower authorities and he also submitted that there was no relationship between the principal and agent between these two parties, therefore, the provision of sec.195H is not applicable. The M/s. Bigtree directly receives service charges from the end customers and does not receive from the assessee. The M/s Bigtree company receives ticket charges and service charges separately after deducting the fee as per the agreement, remits the balance amount to the assessee. He submitted that the assessee company has got share from M/s. Bigtree and in support of which he submitted Form No.26AS. During the course of hearing the ld.AR has also raised legal issue regarding not passing order within the stipulated time limit, in this regard he reiterated the pages in appeal set , which is placed at page Nos.11 and 12. In this regard he relied on the judgment on the coordinate bench of Tribunal in the case of DCIT Vs. M/s Coffee Day Enterprises Ltd., in ITA No.2931/Bang/2018 for the assessment year 2011-12. 7.1. The ld.DR relied on the orders of the authorities below. Further she submitted that the Ld.CIT(A) rightly dismissed the appeal of the assessee, as was indirect payment to M/s. Bigtree that was allowed retained by M/s. Bigtree as per the agreement
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Page 14 clause. She submitted that there was an implied agency relationship between the assessee and M/s. Bigtree. 7.2. He thus submitted that M/s. Bigtree provided indirect services to the assessee. She also submitted that the case is squarely in favour of the Revenue as per the decision of Hon’ble Supreme Court in the case of M/s. JB Boda & Company Pvt. Ltd. vs. CBDT reported in 223 ITR 271. She thus submitted that the assessee was liable to deduct tax at source on the transaction / service fee retained by M/s. Bigtree. 7.3. We have perused the submissions advanced by both sides in the light of records placed before us. The assessee is running cinema theatre and has allowed M/s. Bigtree for booking tickets by the end customer. M/s. Bigtree charges a convenience/transaction fee from the end customer for using the online platform of M/s. Bigtree in respect of the same. The agreement between the assessee and M/s. Bigtree is scanned and reproduced herein below:
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7.2. From the above, the clause relating to pricing clearly reveals that the transaction fee ranging from Rs. 5/- to Rs. 25/- per ticket is borne by the end customer. M/s. Bigtree deducts its service fee and balance amount is remitted to the assessee. There is no dispute with the revenue that the amount paid by M/s. Bigtree to the assessee is after deducting TDS.
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Page 16 7.3. From the above it is clear that M/s. Bigtree is facilitating the end customer for booking cinema tickets for which a transaction / convenience fee is charged from the end customer. Further it is pertinent to note that M/s. Bigtree was making payment to the assessee after deducting the transaction / convenience fee and there was no occasion for the assessee to deduct tax at source and further M/s. Bigtree was acting on behalf of the end customer and not the assessee. In the present facts even provision of sec. 40(a)(i) also cannot be invoked. Reliance is placed on the decision of Hon’ble Delhi High Court in case of CIT vs. JDS Apparels Pvt. Ltd. reported in (2015) 53 taxmann.com 139 in support of this view. 7.4. We have perused the decision relied by the Ld.AO in case of Right Tunneling Company Ltd. vs. ADIT reported in (2014) 45 taxmann.com 196 passed by Hon’ble Delhi Tribunal. The facts in the above case are distinguishable with that of the present assessee before us. The main issue that was considered by Hon’ble Delhi Tribunal was in respect of allowability of expenses incurred by the head office of Right Tunneling Company Ltd. which was located in Thailand for an Indian project. It is clear that from the mere perusal of the facts therein that the assessee therein had claimed certain expenditure incurred by it towards an Indian project which was disallowed by the Ld.AO on the ground that they are initial start-up expenses and has to be held as capital in nature. Another issue that was considered by Hon’ble Delhi Tribunal was in respect of disallowance u/s. 40(a)(i)(a) for non-compliance of section 195 on an expenditure
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Page 17 claimed on account of machinery hire charges. The facts in respect of this issue was that the assessee therein had hired certain machinery and paid hire charges to Italian Thailand Development Co. Ltd. on which TDS was not deducted. 7.5. The Ld.CIT(A) relied on the decision of Hon’ble Supreme Court in case of M/s. JB Boda & Company Pvt. Ltd. vs. CBDT (supra), we have perused this decision carefully and in our view the facts of the present case are not similar to that of the present assessee before us. In the case of M/s. JB Boda & Company Pvt. Ltd. vs. CBDT (supra), Hon’ble Supreme Court was dealing with the issue of an amount whether eligible to be claimed u/s. 80O. Hon’ble Supreme Court observed that the assessee therein was engaged in the brokerage business as reinsurance brokers and in respect of reinsurance risk covered by Indian and foreign insurance companies it arranged for reinsurance of the portion of the risk with various reinsurance companies either directly or through foreign brokers. In return of such services, the assessee therein received a percentage of the premium received by the foreign or Indian companies as its share of brokerage. As per the agreement with the foreign company, the assessee was permitted to retain service fee from the gross premia collected and remit the net amount of foreign company instead of sending the gross amount and then receiving its fee in foreign currency. Hon’ble Supreme Court noted that assessee worked out entire premia payable in dollar retained its commission in dollar and remitted only the balance of the foreign company with the permission of RBI. The assessee claimed that the brokerage determined in
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Page 18 foreign exchange that was retained in India as per the agreement would amount to an income u/s. 80O that was sought for an approval from CBDT which was refused. 7.6. On such facts, Hon’ble Supreme Court held that the income was received in India in convertible foreign exchange in a lawful and permissible manner through premier institution concern with the subject matter being the RBI and Hon’ble Supreme Court allowed the amount to be claimed u/s. 80O by the assessee. In our view, this decision is of no help to assessee as it do not involve the issue that arises out of the facts of the present assessee before us. 7.7. Both these issues considered in the case of Right Tunneling Company Ltd. vs. ADIT (supra), nowhere is similar to the facts in the present of the assessee before us. Admittedly, in the present facts of the assessee, no expenditure is claimed by the assessee in respect of any payments alleged to be in the nature of commission / service fee by the Ld.AO. 7.8. On analyzing the above scanned agreement between the assessee and M/s. Bigtree, we note that there is no non-compete clause wherein a complete /partial control of M/s. Bigtree by the assessee is not established. M/s. Bigtree on its online platform sells tickets of other / many theatre owners apart from the assessee before us. For example if the theatre has a total 200 seats, if in the event no tickets are sold by the Bigtree, there is no penalty that is levied on Bigtree. It is totally the discretion of the customers to use Bigtree for booking the tickets. The agreement of the assessee with M/s.Bigtree is a non exclusive agreement for
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Page 19 selling cinema tickets of the assessee through its platform. The only income earned by the Bigtree is the convenience fee that it collects from the customers / movie viewers. Even there is no discounts given by the assessee to the Bigtree on account of tickets purchased by the customer from their platform. 7.9. The applicability of section 194H in the case of amount received by the M/s.Bigtree from its end customer depends on whether there is any payments that retained by the Bigtree as payable by the assessee. Even though the definition of the term “commission or brokerage” used in section 194H is in a inclusive definition, it is clear that the liability to make TDS arises only when a person acts on behalf of another person. This issue also depends on whether sale of tickets to the end customer is a service or as a commodity. In the present facts of the case, the transaction charges or service charges, or convenience fee by whatever name it may be called, retained by M/s. Bigtree from the end customer cannot lead to the inference that M/s. Bigtree acts on behalf of the theatre owner (“the assessee”). 7.10. In our view, the transaction / service fee collected by M/s. Bigtree from the end customers are actually margin charged from the end customers for provision of such services to the end customers. It is also to be noted that the end customer, pays service tax on such additional transaction / convenience fee charged by M/s. Bigtree. It is also very much pertinent to note that such service tax is not levied on the ticket charges. This fact establishes that the assessee do not cast any obligation on M/s.Bigtree to sell tickets from their platform.
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Page 20 7.11. However one more aspect that needs to be considered is the situation where the tickets are liable to be refunded. For example, the theater owner is unable to start or play the movie, then who will be liable to refund the ticket price. Is it the Bigtree or the Theater owner. This issue needs to be ascertained. The risk needs to be analysed. We therefore direct the Ld.AO to carry out necessary verification. We direct the Ld.AO to consider the claim of assessee in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee Accordingly, the grounds raised by assessee for Assessment Year 2014-15 stands allowed for statistical purposes. In the result, both the appeals filed by the assessee stands allowed. Order pronounced in the open court on 2nd December, 2022.
Sd/- Sd/- (LAXMI PRASAD SAHU) (BEENA PILLAI) Accountant Member Judicial Member
Bangalore, Dated, the 2nd December, 2022. /MS /
Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file
By order
Assistant Registrar, ITAT, Bangalore