TMI Blog2015 (11) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... commission or brokerage paid in the course of use of any services by a person acting on behalf of another for buying or selling of goods. The banking services cannot be covered and treated as services rendered by an agent for the principal during the course of buying or selling of goods as the banker does not render any service in the nature of agency. Accordingly, section 40(a)(ia) of the Act was held to be not applicable on payment of “commission” to the banks on payment received from customers through credit cards. The CIT(A) has succinctly analyzed the facts of the case and has arrived at the conclusion in accordance with law and therefore no interference is called for. Thus, the ground of appeal raised by the Revenue is dismissed. - Decided in favour of assessee. - ITA No.862/PN/2014 - - - Dated:- 30-9-2015 - SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM For The Appellant : Shri Dheeraj Kumar Jain For The Respondent : Shri Kishor Phadke ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal filed by the Revenue is against the order of CIT(A)-I, Pune dated 31.10.2013 relating to assessment year 2010-11 passed under section 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion amount paid to the banks/credit card agencies due to failure of the assessee to deduct the TDS while making commission payment. 5. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the CIT(A). 6. The assessee contended before the CIT(A) that for an expenditure/amount to fall under the definition of Commission or Brokerage , as provided in section 194H of the Act, there has to be a principal agent relationship between receiver and payer and in the assessee s case, the banks are not working as an agent, it is just providing infrastructure for facilitating the whole transaction and charging specific fee for providing this infrastructure. The fee paid in lieu thereafter is therefore nothing but are in the nature of bank charges/discounting charges, etc. and certainly not the commission or brokerage. The assessee contended that principal agent relationship between the assessee and banks/credit card agencies does not exist and therefore, section 194H of the Act is not applicable. The banks are merely making payment to the assessee on behalf of the customers who are holding credit cards. The bank is in no way helping the assessee to sell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank within the prescribed time limit, banks charge penal amount. But, Bank cannot refuse the payment to the Merchant Establishment, who sells their goods and services through credit card. Only in certain exceptional circumstances i.e. when the material purchased by him is damaged or defective etc., credit card holder can request the bank not to make the payment and in such cases only bank can withhold the payment. Even though the definition of the terms commission or brokerage used in section 194H is an inclusive definition, it is clear that the liability to make TDS under the said section arises only when a person acts on behalf of another person. In the case of commission retained by the credit card companies, it cannot be said that the banks acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sale made on the basis of a credit card is clearly a transaction of the Merchants Establishment only and the credit card company only facilitates the electronic payment, for a certain charge. Further, the material placed on record does not indicate that the banks concerned have advised the appellant to sell their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are authorized to receive the payment of interest and other sums from various clients/customers without deduction of tax. 4.4.2 For the reasons set out above, it is held that the impugned payments made to the banks are in the nature of bank charges and the provisions of sec. 194H are not attracted to such payments. Therefore, the Assessing Officer is not legally justified in making the disallowance of commission payments by invoking provisions of sec. 40(a)(ia) for non-deduction of tax at source. Accordingly, the addition of ₹ 98,03,623/- made by the Assessing Officer on this ground is deleted. Ground of appeal No.1 is allowed in favour of appellant. 8. Aggrieved by the order of the CIT(A), the Revenue is in appeal before us. 9. The Ld. Departmental Representative for the Revenue relied upon the order of the Assessing Officer and stated that in the absence of deduction of TDS for payment of commission to the banks for availing the services, the Assessing Officer has rightly triggered the provisions of section 40(a)(ia) of the Act and the CIT(A) ought to have interfered with the order of the Assessing Officer. He pleaded for reversal of the order of the CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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