TMI Blog2019 (3) TMI 1359X X X X Extracts X X X X X X X X Extracts X X X X ..... of India Act. The assessee is right in contending that by virtue of the above notification no TDS is deductible from payments made towards “credit card or debit card commission for transaction between the merchant establishment and the acquirer bank”. This applies to the charges paid to the Banks for providing payment gateway in the case on hand. In that view of the matter, this Court finds that the ITAT has not committed any error in deleting the addition This Court finds that the ITAT has not committed any error in deleting the addition made by the Assessing officer under section 40(a)(ia) of the Act on account of non-deduction of TDS from the payment gateway charges paid to the Banks - Decided in favour of assessee. - ITA 136/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is debited by the issuer to the cardholder. Instantly the payment gateway website confirms approval to the merchant/e-Commerce website and the transaction gets concluded. The net price after deduction of facility charges by the payment gateway is 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 the charges of VISA/Mastercard. 4. The Assessing Officer (AO) disallowed the payment of ₹ 12,52,49,946/- made by the Assessee to the above Banks towards charges for providing the payment gateway facility for the AY in question under Section 40(a)(ia) of the Act since according to the AO the said payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the CIT (A) to the extent it partly allowed the appeal of the Assessee and did not file any cross-objection before the ITAT. 7. The ITAT has in the impugned order allowed the Assessee s appeal on this issue and held that the payment gateway charges were in nature of fees for banking services and not commission or brokerage and thus no TDS was deductible from the said charges under Section 194 H of the Act. In coming to the said conclusion, the ITAT relied on the judgment of this Court in Commissioner of Income Tax v JDS Apparels (P) Ltd. (2015) 370 ITR 454 (Del). 8. Ms. Vibhooti Malhotra, learned counsel for the Revenue, sought to distinguish the said judgment in Commissioner of Income Tax v JDS Apparels (P) Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r brokerage paid in course of use of any services by a person acting on behalf of another for buying or selling of goods. The ITAT has, in view of this Court rightly, held that the services provided by the payment gateway is such that the charges collected by it has to be necessarily treated as fees and not as a commission. The payment in fact is made by one principal to another and it is only being facilitated by the payment gateway by providing a service. The following observation of this Court in JDS Apparels (P) Ltd. (supra) equally applies to the case on hand: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y notification dated 31st December, 2012 has notified that no TDS shall be made on the following payments to the banks listed in the Second Schedule to the Reserve Bank of India Act: (i) bank guarantee commission; (ii) cash management service charges; (iii) depository charges on maintenance of DEMAT accounts; (iv) charges for warehousing services for commodities; (v) underwriting service charges; (vi) clearing charges (MiCR charges); (vii) credit card or debit card commission for transaction between the merchant establishment and acquirer bank. 11. The above notification was referred to in the order of the CIT (A) but not discussed. The assessee is right in contending that by virtue of the above notific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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