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TMI Blog2017 (10) TMI 1564X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) without appreciating that the assessee had failed to deduct tax at source from commission paid to banks for providing credit cards services, in contravention of section 194H of the I.T.Act. 2. Whether on the facts and circumstances of the case and in the law the payment made to bank for providing credit card services constitute commission in terms of section 194H of the Act or constitute bank charges." 3. At the time of hearing an adjournment was sought by the Manager Taxation of the assessee company, however as the issue in appeal i.e whether the commission paid to credit card companies on credit card transaction would attract provisions of section 194H of the Act was already decided by the Hon'ble Delhi High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same u/s. 40(a)(ia) on the commission paid to HDFC Bank Limited. 5. Ld.CIT(A) taking note of the decisions of the Hyderabad Bench in the case of DCIT v. Vah Magna Retail (P) Ltd (supra) and the decision of the Mumbai bench in the case of ITO v. M/s. Jet Airways (India) Ltd (supra) and various other decisions of various benches of the Tribunal and also the decision of the Hon'ble Delhi High Court in the case of CIT v. JDS Apparels P. Ltd. [370 ITR 454] deleted the disallowance made by the Assessing Officer. Ld.CIT(A) also observed that similar view has been taken in assessee's own case for the Assessment Years 2009-10, 2010-11 and 2011-12 by the Ld.CIT(A) by orders dated 21.01.2013, 01.10.2013 and 19.05.2014 respectively. Against thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onale behind the provision. The bank in question is not concerned with buying or selling of goods or even with the reason and cause as to why the card was swiped. It is not bothered or concerned with the quality, price, nature, quantum, etc. of the goods bought/sold. The bank merely provides banking services in the form of payment and subsequently collects the payment. The amount punched in the swiping machine is credited to the account of the retailer by the acquiring bank, i.e. HDFC in this case, after retaining a small portion of the same as their charges. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been claimed as an expenditure by the assessee. The Commissioner (Appeals) held that the transaction was in the nature of bill discounting by HDFC, which had paid the bill amount after deducting the commission payable to the assessee. HDFC had taken up the entire risk relating to recovery of payment from the issuing bank. The Tribunal, however, held that the assessee had not violated section 194H. As a consequence, it held that the Assessing Officer was wrong in invoking section 40(a)(ia) and, accordingly, had erred in making the addition of Rs..44,65,654/- i.e. the charges deducted by HDFC on the payments made through credit cards. On appeal: Held, dismissing the appeal, (i) that HDFC was not acting as an agent of the assessee. Once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods. Therefore, section 194H would not be attracted. (ii) That another reason why section 40(a)(ia) should not have been invoked in the present assessee was the principle of doubtful penalization which required strict construction of penal provisions. The principle applies not only to criminal statutes but also to provisions which create a deterrence and result in punitive penalty. Section 40(a)(ia) is a deterrent and a penal provision. It has the effect of penalizing the assessee, who has failed to deduct tax at source and acts to the detriment of the assessee's property and other economic interests. It operates and inflicts hardship and deprivation, by disallowing expenditure actually incurred and treating it as disallowed. The Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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