Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (3) TMI 315 - ITAT MUMBAI

2016 (3) TMI 315 - ITAT MUMBAI - TMI - TDS u/s.194-H - disallowance u/s 40(a)(ia) of Credit Card Charges - whether the said charges are in the nature of "Commission or brokerage" and payment/credit thereof is liable for TDS? - Held that:- Respectfully following the decision of the co-ordinate Bench of the Mumbai Tribunal in the case of Jet Airways India Ltd. (2014 (9) TMI 650 - ITAT MUMBAI) which is later on again followed by Mumbai Tribunal in the case of Jet Airways India Limited for succeedin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Decided in favour of assessee - I .T.A. No. 2612/Mum/2014 - Dated:- 29-1-2016 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri G.M. Doss For The Assessee : Shri Vipul Joshi ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the Revenue, being ITA No. 2612/Mum/2014, is directed against the order dated 29-01-2014 passed by the learned Commissioner of Income Tax (Appeals)- 16, Mumbai (Hereinafter called the CIT(A) ), for the assessmen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ces of the case and in law, the Ld. CIT(A) erred the disallowance u/s 40(a)(ia) of Credit Card Charges ₹ 5,30,13,348/- relying on the decision of Hon'ble ITAT, Mumbai, in the case of ITO(TDS) vs. Jet Airways (India) Ltd. (IT-Appeal Nos.7439, 7440 & 74 (Mum) of 2010 dated 17/07/2013) ignoring that the Department did not accept the decision of Hon'ble ITAT and has filed appeal against the same before the Hon'ble Bombay High Court u/s.260A of the IT Act." The appellant pr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

alled the Act ) that the assessee company has claimed credit card charges of ₹ 5,30,13,348/- under the head other expenses against which TDS as per provisions of section 194H of the Act were not deducted. The assessee company was show caused as to why the disallowance u/s 40(1)(ia) of the Act should not be made if TDS is not deducted as per provisions of Section 194H of the Act. In reply, the assessee company submitted that the Bank enters into a merchant establishment (ME) agreement with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ade by valid cards. The assessee company submitted that it is understood that the Bank is not acting as an agent of the Merchants under the Agreement. The assessee company submitted that as per our understanding the ME commission is not separately paid by the Merchant and is received by the Bank by way of processing charges or discounting charges. For e.g., if the bill amount paid through the card is ₹ 100/-, the Merchant would get, say ₹ 97/- from the Bank against the invoice. The B .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

professional skills and technology under an agreement, hence, the provisions of section 194-H of the Act is attracted. The A.O. held that this is a different mode of payment in which the assessee company is not making any payment but the service provider itself deduct the commission from the amount payable and this mode of payment between the assessee company and the banks is clearly covered by the provisions of section 194H of the Act. Provision of section 194H of the Act is clearly attracted .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, the A.O. vide assessment order dated 22.02.2013 passed u/s 143(3) of the Act disallowed the commission on credit card of ₹ 5,30,13,348/- u/s 40(a)(ia) of the Act on which no TDS was deducted u/s 194H of the Act. 4. Aggrieved by the assessment orders dated 22.02.2013 passed u/s 143(3) of the Act by the AO, the assessee company carried the matter in appeal before the CIT(A) and submitted that TDS u/s 194H will be attracted only in the case of payment of any income by way of commission or b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

this contention, the assessee company relied upon the decision of the ITAT, Mumbai Bench decision in the case of Kotak Securities Ltd. v. DCIT. 5. The CIT(A) accepted the contentions of the assessee company by relying upon the decision of Mumbai Bench of the Tribunal in the case of ITO v. Jet Airways India Ltd. (2013) 37 taxmann.com 379 (Mumbai - Tribunal) wherein the Tribunal held as under:- 1. Section 194H of the Income Tax Act, 1961 - Deduction of tax at source, Commission or brokerage (Credi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ether, where certificate under section 195(3) was issued to bank for receiving payments without deduction of tax at source for specific financial years mentioned therein, it could not be held that it was effective only from date of issuance - Held, yes [para 15] [in favour of assessee]. The CIT(A) also observed that similar issue has been considered by the Jaipur Bench of the Tribunal in the case of Gems Paradise in ITA No. 746/JP/2011 for the assessment year 2008-09 dated 2-2-2012 wherein the T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(A), in nutshell, held that payments made to the banks on account of utilization on credit card facilities would be in the nature of bank charges and not in the nature of commission within the meaning of section 194H of the Act and hence no TDS is required to be deducted u/s 194H of the Act. The CIT(A) also relied upon decision of Jaipur Bench of the Tribunal in the case of Bhandari Jewellers in ITA no. 745/JP/2011 dated 02-02-2012 for assessment year 2008-09 and decision of Hyderabad Tribunal i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ribunal. 7. The ld. D.R. fairly conceded that this issue is squarely covered in favour of the assessee company by the decision of the Mumbai Bench of the Tribunal in the case of Jet Airways India Ltd. (supra). The ld. D.R. submitted that the Revenue has not accepted the decision of the Tribunal in the case of Jet Airways India Ltd. (supra) and on appeal, the matter is still pending before the Hon ble Bombay High Court. The ld. D.R. also referred to the CBDT Notification No. 56/2012 [F. No. 275/5 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(i)…. (ii)… (vii) credit card or debit card commission for transaction between the merchant establishment and acquirer bank 2. This notification shall come into force from the 1st day of Januarty,2013. 8. We have heard the rival contentions and also perused the material available on record and the case laws relied upon. In the instant appeal, the assessee company has incurred credit card charges of ₹ 5,30,13,348/- which is claimed as an business expenses. No tax has been dedu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Act. The finding of the Tribunal in Jet Airways India Limited (supra) are reproduced hereunder: 9. We have carefully considered the submissions of the ld. Representatives of the parties and the orders of the authorities below. We have also carefully considered the provisions of section 194H of the Act. We observe that the similar issue has been considered by the Jaipur Bench of the Tribunal in the case of Gems Paradise (supra) and the Tribunal held vide paragraph 27 of the said order that th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l to the commission agent. This is not a case of commission agent as assessee sold its goods through credit card and on presentation of bill issued against credit card, the bank makes payment to the assessee after deducting agreed fees as per terms and conditions in case of credit card. This is not a commission payment but a fees deducted by the bank. If there is an agreement, that is agreement between the credit cardholder and the bank. Bank is a Principal and to spread over its business, a sch .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rd. Only in those cases where goods are found damaged and credit card holder inform the bank that the material purchased by them is damaged or defective and request the bank not to make the payment, in such cases only bank can withhold the payment, otherwise the bank has to make the payment to the shop keeper. Therefore, in our considered view, there is no such relation between the bank and the shop keeper which establishes the relationship of a Principal and Commission Agent. Technically it may .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

terial from the market through his credit card without making any payment and that shop keeper presents the bill to the bank against whose credit card the goods were sold and on presentation of bill as stated above the bank makes the payment. Therefore, in our considered view, provisions of section 194H are not attracted in this type of transaction. Therefore, we hold that addition made and confirmed by ld. CIT (A) was not justified. Accordingly, the addition made and confirmed by ld. CIT (A) is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssue again come up before the Hyderabad Bench of the Tribunal in the case of Vah Magna Retail (P.) Ltd. (supra) and the Tribunal vide paragraph 4 of the said order dismissed the appeal of the department by holding that the amount retained by the principal contractor from the payments made to the contracting persons and there was no requirement for making TDS on the amount. The said paragraph 4 of the order reads as under : '4. We heard the Learned Departmental Representative and perused the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 accounting and does not involve any payment or crediting of the account of the banks or any other account before such payment by the assessee. Considering these submission of the assessee, the CIT(A) accepted the claim of the assessee for deduction of the amount of ₹ 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f 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 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. The commission retained by the credit card company is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version