TMI Blog2017 (9) TMI 1775X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner issued the directions vide order dated 20th March, 2015 directing the Assessing Officer to follow decision of the Hon’ble jurisdictional High Court in the case of JDS Apparels (P.) Ltd. (supra). It, therefore, stands concluded that assessee is not liable to make TDS on payments gateway charges. Therefore, provisions of section 194H of the Income Tax Act would not apply to the facts and circumstances of the case. We accordingly set aside the orders of the authorities below and delete the entire addition. - Decided in favour of assessee Disallowance on account of rate of depreciation on computer peripherals - Held that:- Assessee has not pointed out any error in the order of the learned CIT (Appeals) in declining part depreciation on the items which were not part of the computer software. The learned CIT (Appeals) did not allow higher depreciation on items like digital call logger board and software protection, Nortel equipment, head-sets and time attendance system, because they would not fall within the definition of computer or computer software. In the absence of any serious challenge to the findings of the learned CIT (Appeals), we do not find any justification to interf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er selects the product and clicks the payment option. The payment gateway website electronically transfers the customer data to the credit card issuer through VISA / Master Card, for the approval of the issuer and consequently the amount is debited by the issuer to the card-holder. Instantly the payment gateway website confirms approval to the merchant e-Commerce website and the transaction with respect to the customer gets concluded. The net price after deduction of facility charges by payment gateway have automatically credited to the bank account of the merchant. The amount retained by the payment gateway facility provider includes the charges for the facility of secured payment gateway and whatever are charges of VISA net / issuer. The secured payment gateway facilities are provided to all e-Commerce customers and are in the nature of standard facilities. 3.1 The Assessing Officer has disallowed the payment gateway charges paid to the banks HDFC, ICICI, American Express and Citi Banks aggregating to ₹ 12,52,49,946/- under section 40(a)(ia) of the Act, holding that TDS should have been deducted under section 194H of the Act treating as payment of commission or brok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,886/- paid to American Express Bank Ltd. And ₹ 7,84,06,562/- to the Citi Bank would not have been subject to TDS and there is no default in not deducting the TDS and, therefore, provisions of section 40(a)(ia) of the Income Tax Act are not applicable in this case. 3.2 The learned CIT (Appeals) considered this issue in detail in the light of the Notification of the Government of India and section 194H of the Income Tax Act, 1961 and noted that these payments are collected by the said banks for and on behalf of the assessee and after deducting its commission balance is transferred to the bank account of the assessee. Thus, the banks are providing service in the course of buying of the goods from the assessee. Hence, payment received by the banks for providing such services to the assessee are in the nature of commission or brokerage and, therefore, subject to TDS. The learned CIT (Appeals) also noted that the assessee has furnished certificates from Citi Bank and American Express Bank wherein it has been mentioned that gateway charges were received by Indian branches on their own account and these payments have been duly declared in their respective returns of income filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in the above cited decision. He also placed reliance on the following decisions and Notification of the CBDT :- (i) CIT Vs. JDS Apparels Pvt. Ltd. (Del.) (ITA. No. 608/2014) (Paras 16 17); (ii) DCIT Vs. Vah Magna Retail (Pvt.) Ltd. (ITA. No. 905/Hyd./2011); (iii) ITO Vs. Jet Airways India (Pvt.) Ltd. 36 Taxman.com 379; (iv) Tata Teleservices Ltd. Vs. DCIT 29 Taxman.com 261 (Bang.); (v) Copy of the assessment order passed under section 143(3) of the Act for assessment year 2011-12 in the respondent s case; (vi) CBDT Notification No. SO3069(E)56/2012 Dated 1.01.2013; (vii) Industrial Development Bank of India Vs. ITO [ JO SOT 397 ]; (viii) Pfizer Ltd. Vs. ITO (TDS), ( ITA. No. 1667/Mum./2010). 8. The ld. Sr. DR, on the other hand, placed reliance on the assessment order. 9. Having gone through the above cited decisions especially the decision of Hon ble jurisdictional High Court of Delhi in the case of CIT Vs. J.D.S. Apparels Pvt. Ltd. (supra), I find that an identical issue has already been decided in favour of the assessee. The Assessing Officer was of the view that the payments on account of gateway charges made by the assessee to the banks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot undertaken any act on behalf of the respondent-assessee. The relationship between HDFC and the respondent-assessee was not of an agency but that of two independent parties on principal to principal basis. HDFC was also acting and equally protecting the interest of the customer whose credit card was used in the swiping machines. It is noticeable that the bank in question or their employees were not present at the spot and were not associated with buying or selling of goods as such. Upon swiping the card, the bank made payment of the bill amount to the respondentassessee. Thus, the respondent assessee received the sale consideration. In turn, the bank in question had to collect the amount from the bankers of the credit card holder. The Bank had taken the risk and also remained out of pocket for sometime as there would be a time gap between the date of payment and recovery of the amount paid. 16. The amount retained by the bank is a fee charged by them for having rendered the banking services and cannot be treated as a commission or brokerage paid in course of use of any services by a person acting on behalf of another for buying or selling of goods. The intention of the legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of CIT Vs. JDS Apparels (P.) Ltd. (2015) 370 ITR 454 (Del.) in which it was held that commission to bank on payments received from customers who had made purchase through credit cards is not liable to TDS under section 194H of the I. T. Act. The issue is covered in favour of the assessee by order of ITAT, Delhi Bench in the case of same assessee vide order dated 30th January, 2017. Therefore, there is no justification for the authorities below to sustain addition on this issue. 7. Learned counsel for the assessee further submitted that assessee also moved before the Addl. Commissioner of Income Tax for direction under section 144A of the Income Tax Act for assessment year 2011-12 on the identical issue in which the learned Addl. Commissioner issued the directions vide order dated 20th March, 2015 directing the Assessing Officer to follow decision of the Hon ble jurisdictional High Court in the case of JDS Apparels (P.) Ltd. (supra). It, therefore, stands concluded that assessee is not liable to make TDS on payments gateway charges. Therefore, provisions of section 194H of the Income Tax Act would not apply to the facts and circumstances of the case. We acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to 4 below this Table] III. Machinery and Plant (5) Computers including computer software (See Note 7 below this Table) = 60% Notes: 1. Buildings include roads, bridges, culverts, wells and tubewells. 7. Computer software means any computer program recorded on any disc. tape, perforated media or other information storage device. .. .. .. .. .. .. 11.1 The learned counsel for the assessee has not pointed out any error in the order of the learned CIT (Appeals) in declining part depreciation on the items which were not part of the computer software. The learned CIT (Appeals) did not allow higher depreciation on items like digital call logger board and software protection, Nortel equipment, head-sets and time attendance system, because they would not fall within the definition of computer or computer software. In the absence of any serious challenge to the findings of the learned CIT (Appeals), we do not find any justification to interfere with the order of the learned CIT (Appeals). We confirm the findings of the learned C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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