Income Tax Appellate Tribunal - Delhi
Income Tax Officer vs G.B. Morrision Travels (P) Ltd. on 16 February, 2005
Equivalent citations: (2006)99TTJ(DELHI)117
ORDER
Vimal Gandhi, President
1. This appeal by the Revenue for financial year 2001-02 is directed against order of the CIT(A) cancelling penalty of Rs. 1,79,342 imposed under Section 271C of the IT Act.
2. The assessee-company is carrying on business as a travel agent for different airlines. The company is member of IATA. During the period under reference, the assessee deducted tax at source on commission of Rs. 49,25,931 paid to sub-agents. However, the AO found that in the P&L a/c, commission and discount were shown under the head "Handling charges" at Rs. 7,14,37,140. The AO accordingly issued show-cause notice to the assessee for short deduction of tax at source. The AO also imposed interest/penalty under Section 201(1)/201(1A). The matter for imposition of penalty under Section 271C for shortfall in deduction of tax was referred to the Jt. CIT. After considering reply of the assessee, the Jt. CIT as per the impugned order, held that the assessee had failed to deduct tax at source from discount paid by the assessee without any reasonable cause and, therefore, was liable to pay penalty of Rs. 1,79,342 under Section 271C of the IT Act.
3. The assessee impugned above levy of penalty in appeal before the CIT(A). Before the CIT(A), the assessee contended that TDS on commission paid was duly deducted and deposited by the assessee. However, no TDS was deducted on rebate and discount or handling charges for which ultimate beneficiaries were passengers directly or through sub-agents. The discount/rebate was stated to be no commission in the ordinary sense as ultimately its destination was passengers who would get the airlines' ticket at the printed price less discount/rebate. It was accordingly contended that neither airlines nor the appellant had deducted tax on such amount under the bona fide belief that rebate and discount was not "commission". In this connection, the assessee referred to the practice being followed by the other travel agents and airlines. The assessee also pleaded that under Section 194H, tax at source was required to be deducted from commission and brokerage and that discount allowed did not fall within the ambit of the statutory provision. The word "discount" literally means, "to get down the price of the article". It was different from commission or brokerage.
4. The assessee further submitted that travel agents association, TAFI and TAAI as well as other associated persons had sought opinion whether persons like assessee were liable to deduct tax from discount and opinion by persons like Shri T.N. Pandey, ex-Chairman, CBDT and Shri R. Santhanam, senior advocate and other senior chartered accountant was that no tax at source was deductible from discount/rebate offered on ticket to the passengers as the same did not constitute commission or brokerage. Copies of opinion received in this regard from TAFI and other associations were filed before the CIT(A).
5. The learned CIT(A) also noted following submissions advanced on behalf of the assessee :
5. It is also submitted that the agents associations TAFI and TAAI as well as other persons associated with this trade have also sought the opinions of the eminent professionals in the field of taxation including the ex-chairman of CBDT on this issue. Almost all the income-tax experts such as Sh. T.N. Pandey, ex-chairman, CBDT, Sh. R. Santhanam, senior Supreme Court advocate and Sh. Pradeep Dinodia, a leading chartered accountant, are of the opinion that the rebate and discount offered on tickets by airlines to pass on to the passengers does not constitute commission/brokerage. Based on their opinions the associations and the airlines agreed to deduct TDS only on the commission, i.e., 7 per cent to 9 per cent on sale of international sectors and 5 per cent to 6 per cent on domestic sectors w.e.f. 1st June, 2001. The appellant being a member of these associations and as per their advice, have also deducted TDS on the commission paid. The opinion from tax experts in this regard has been obtained by the business associates and the agents have been advised that no liability to deduct tax on discount portion is attracted. The copies of opinion sought in this regard and letters from Travel Agents Federation of India (TAFI) and Travel Agents Association of India clarifying the tax liability on discount portion were filed before me. Thus, based on opinion from the different sources tax was not deducted on discount portion during the period in question. It is however, clarified that the company has deducted and deposited tax on commission element from the same agents. It is reiterated that the appellant was thus under the bona fide belief that it was not liable to deduct tax on discount portion. It is also pertinent to note that as soon as the matter was clarified by the CBDT and communicated to it, the appellant-company had started deducting tax on the discount amount paid thereafter suo motu and deposited the same. It is also pointed out that the same practice was followed by the industry as a whole, that is both by airlines and agents probably throughout India till the matter was clarified by CBDT. It is argued that theirs in not a case in isolation and the appellant-company has not committed any default within the meaning of Section 271C of the Act r/w Section 273B of the IT Act, as there was reasonable cause to believe that no tax was to be deducted on the discount portion.
6. On careful consideration of the matter, the learned CIT(A) held that the assessee was prevented by reasonable cause within meaning of Section 273B from complying with provisions relating to deduction of tax at source. In the light of Section 273B, no penalty could be imposed on the assessee as failure to comply with the statutory provision was on account of a reasonable cause. There were no taint of mala fide or element of recklessness or ruse on the part of the appellant in its conduct. The CIT(A) held that the view he has taken in the matter is supported by the decision of the jurisdictional High Court in the case of Woodward Governor India Ltd. v. CIT and that of the apex Court in the case of Hindustan Steel Ltd. v. State of Orissa . The learned CIT(A) further held that default in the present case could not be termed as one where the breach flows from a bona fide belief that the appellant is not liable to act in the manner prescribed in the statute. The learned CIT(A) also referred to various changes when provision of Section 194H was inserted, omitted and reintroduced. He noted that no tax at source was deductible right upto asst. yr. 2002-03 on discount/rebate.
The appellant had a bona fide belief that he was not liable to deduct tax at source, which was based on advice of opinion of experts including former chairman of CBDT. It was not possible to hold that the view taken by the assessee was not a possible view. The learned CIT(A) also referred to certain decisions of Tribunal in para 8 of his order where similar penalty imposed was cancelled. In the passing, the learned CIT(A) held that Jt. CIT did not advert to provision of Section 273B before imposing the penalty. On the facts and circumstances of the case, he held that in present case the levy of penalty was not warranted, the same was cancelled.
7. The Revenue is aggrieved and has brought the issue in appeal. The learned Departmental Representative strongly relied upon order of the Jt. CIT. He further pointed out that Jt. CIT had considered various pleas advanced by the assessee and held that default committed was without any reasonable cause. The finding to the contrary recorded in the impugned order was, therefore, erroneous. The assessee failed to deduct tax at source from commission paid by the assessee under the garb of discount and, therefore, was liable to pay penalty. He prayed that order of the Jt. CIT should be restored.
8. I have given careful thought to the submissions advanced before me and examined them in the light of material available on record. The jurisdictional High Court in the case of Woodward Governor India (P) Ltd. (supra) held that no penalty is leviable if failure to deduct tax at source was on account of a reasonable cause. In the present case, learned CIT(A) has held that the assessee bona fidely believed that no tax was deductible by the assessee on discount/rebate allowed to the passengers from printed price as the same was not commission to which statutory provision was applicable. The aforesaid belief was based upon opinion received by the assessee from experts. In these circumstances, it was held that failure on the part of the assessee to deduct tax was on account of a reasonable cause. Nothing has been placed on record to show experts like ex-chairman of CBDT, senior advocate and chartered accountant did not advice IATA or other associations of travel agents, of which the assessee was member, that no tax is deductible at source from discount and rebate offered by the assessee. It is further not shown that opinion given by above experts was not a possible opinion. There is no rebuttal to the material referred to by the learned CIT(A) in the impugned order. I am, therefore, unable to hold, on facts, that the CIT(A) committed any error in holding that default, if any, in this case was on account of a reasonable cause. Similar view has also been taken by the following Benches and the High Court :
(1) Shri Baidyanath Ayurved Bhawan Ltd. v. Jt. CIT (2004) 83 TTJ (Cal) 409 (2) Marubeni Corporation (Liaison Office) v. Jt. CIT (2003) 78 TTJ (Del) 297 : (2002) 83 ITD 577 (Del) (3) Wipro Finance Ltd. v. ITO (2003) 81 TTJ (Bang) 887 (4) CIT v. Misui & Co. Ltd. and Ors.;
(5) CIT v. Itochu Corporation.
In fact, Courts have drawn distinction between commission and discount and from discount, no tax at source was held to be deductible.
9. The learned Departmental Representative contended and in my view rightly, that the learned Jt. CIT had also recorded in the impugned order that default in the present case was not due to a reasonable cause. But he did not refer to the facts and circumstances of the case under which opinion was received by the assessee and acted upon. The action of the assessee was found to be bona fide. Accordingly, I hold that argument advanced by the learned Departmental Representative does not advance the case of the Revenue.
10. It is further seen from record that the assessee admittedly had paid commission of Rs. 49,25,931 and deducted tax at source from the commission paid and gave these details in the prescribed Form 26-1. The AO on the other hand, found that handling charges which included discount and rebate paid to the assessee amounted to Rs. 7,14,37,140. The assessee in reply to show-cause notice, did claim and similar plea was raised before the CIT(A), that ticket was sold to the customer at a price net of discount and that discount/rebate was only a book entry. The entry was made in the circumstances to avoid action against agents, sub-agents by airlines for selling tickets at a price less than the one listed. There can be no quarrel that tax is not deductible at source merely on book entries. It is deductible when amount is paid as commission or the same is credited to some account of the payee to be payable in future. Out of aggregate amount of Rs. 7,14,37,140 shown as handling charges, how much was the amount to which provisions of Section 194H were applicable, is not shown in the penalty order. Was difference more than Rs. 49,25,931 admittedly paid as commission to sub-agents and on which TDS was admittedly deducted ? If more, then what was that amount which was treated as commission and not merely book entry ? Nothing is clear from the order imposing penalty of Rs. 1,79,374. If it is for short deduction of tax at source, then what is the amount on which there was short deduction and how much ? The levy of penalty before answering above questions was not justified. This is another ground on which impugned order is sustainable.
11. In the light of above discussion, I hold that the Revenue authorities were not justified in imposing penalty on the assessee. The same has rightly been cancelled by the CIT(A). Accordingly, the impugned order is upheld.
12. In the result, the appeal is dismissed.