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The Deputy Commissioner of Income Tax Versus M/s. Mysore Saree Udyog Private Ltd.

2015 (6) TMI 62 - ITAT BANGALORE

Liability of deduct TDS - payments to banks on account of utilization of credit card facilities would be in the nature of bank charge and not in the nature of commission within the meaning of sec.194H - Held that:- The notification u/s.197A of the Act vide notification NO.56/2012 dated 31.12.2012 as relied by AO therefore cannot be the basis on which it can be said that the amount retained by the bank was in the nature of commission within the meaning of Sec.194-H of the Act. For the reasons giv .....

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ssion payments are routine in the line of business of assessee is not disputed by the AO. The genuineness of the payment has also not been doubted by the AO. There is no material on record to show that the amounts paid to individual taxi & auto drivers were above the threshold limit for deduction of tax at source. It is not the case of the AO that individual vouchers evidencing payments in cash, were in excess of the specified limit for deduction of tax at source. In our view, the addition has b .....

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rises for consideration in this appeal is as to whether the CIT(Appeals) was justified in holding that there was no obligation on the part of assessee to deduct tax at source on a sum of ₹ 27,65,565. The aforesaid sum was shown in the books of account of assessee as credit card commission. 3. The assessee is in the business of manufacture and wholesale dealing of pure silk sarees. When the customer purchases sarees using credit card, the bank after retaining their charges, remit the remain .....

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n falling with the ambit of section 194H of the Act. The assessee relied on the decision of the following decisions:- (1) DCIT v. Vah Magna Retail Pvt. Ltd., 4T(II) ITCL 537 (Hyd). (2) Gems Paradise, ITA No.746 & 841/Jp/2011 dated 2.2.12. 5. The assessee also submitted that services rendered by the bank are on a principal to principal basis and for characterizing the payment of commission, there should be a relationship of principal and agent between the payer and the recipient. 6. The AO di .....

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by the order of the CIT(Appeals), the Revenue has preferred appeal before the Tribunal. The learned DR relied on the order of the AO. The learned counsel for the Assessee relied on the order of the CIT(A). 9. We have given a careful consideration to the rival submissions. The provisions of Sec.194-H of the Act, in so far as it relevant for the present appeal, read as follows: Section 194H: COMMISSION, BROKERAGE, ETC. (1) Any person, not being an individual or a Hindu undivided family, who is res .....

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sub-section (1) shall not apply - (a) To such persons or class or classes of persons as the Central Government may, having regard to the extent of inconvenience caused or likely to be caused to them and being satisfied that it will not be prejudicial to the interests of the revenue, by notification in the Official Gazette , specify in this behalf; (b) Where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or .....

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ion to any transaction relating to any asset, valuable article or thing; (ii) "Professional services" means services rendered by a person in the course 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; 10. The question whether the payments on account of credit card charges should be treated as comm .....

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he credit card companies, which has been disallowed by the assessing officer in terms of S.40(a)(ia) on account of the failure of the assessee to deduct tax at source in terms of S.194H of the Act, while making the said commission payments. It was the contention of the assessee before the lower authorities that the assessee only receives the payment form the bank/credit card companies concerned, after deduction of commission thereon, and thus, this is only in the nature of a post facto accountin .....

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n the purview of S.194H. Even though the definition of the term commission or brokerage used in the said section is an inclusive definition, it is clear that the liability to make TDS under the said section arises only when a person acts behalf of another person. In the case of commission retained by the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sal .....

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rd companies, the disallowance of ₹ 16,34,000 is deleted….. We find no infirmity in the above reasoning given by the CIT(A). We accordingly uphold the order of the CIT(A) and reject the grounds of the Revenue which are devoid of merit. 11. Similar view has been expressed by several Bench of ITAT in the following cases: 1. M/S.TATA Teleservices Ltd. Vs. DCIT ITA No.393-396/Bang/11 order dated 27.11.2012 2. ITO (TDS) Vs. M/S.Jet Airways ITA No.7439-41/Mum/2010 order dated 17.7.2013, 3 .....

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otification u/s.197A of the Act vide notification NO.56/2012 dated 31.12.2012 specified that credit/debit card commission for transaction between the merchant establishment and acquirer bank need not be subject to TDS. The revenue has argued before us that before the said notification such charges were subject to TDS. We are of the view that the notification is only recognition of the position as it always prevailed and as interpreted by several decisions rendered by the different benches of ITA .....

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tion of the CIT(Appeals) in deleting the addition of ₹ 6,96,923 out of commission payments claimed as deduction by the assessee. 15. The assessee has made a total commission payment of ₹ 2,44,18,648, out of which ₹ 6,96,923 was commission paid to auto and taxi drivers. As already seen the Assessee is in the business of selling silk saree. The assessee s explanation was that auto & taxi drivers who bring potential customers/clients are paid commission in cash. The AO wanted .....

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