2015 (6) TMI 62 - AT - Income Tax

Liability of deduct TDS - payments to banks on account of utilization of credit card facilities would be in the nature of bank charge and not in the nature of commission within the meaning of sec.194H - Held that - The notification u/s.197A of the Act vide notification NO.56/2012 dated 31.12.2012 as relied by AO therefore cannot be the basis on which it can be said that the amount retained by the bank was in the nature of commission within the meaning of Sec.194-H of the Act. For the reasons given above, we confirm the order of the CIT(Appeals) on this issue and dismiss the appeals of the Revenue. Difference between the sale value of the sarees and the amount remitted by the bankers according to the Revenue, was nothing but commission and therefore the assessee ought to have deducted tax at source on the said sum u/s. 194H - CIT(A) deleted liability to tds - Held that - CIT(Appeals) had rightly held that disallowance made by the AO was not warranted. The fact that such commission payments are routine in the line of business of assessee is not disputed by the AO. The genuineness of the payment has also not been doubted by the AO. There is no material on record to show that the amounts paid to individual taxi & auto drivers were above the threshold limit for deduction of tax at source. It is not the case of the AO that individual vouchers evidencing payments in cash, were in excess of the specified limit for deduction of tax at source. In our view, the addition has been made by the AO only on the basis of surmises and was rightly deleted by the CIT(Appeals). - Decided in favour of assessee.

Summary

Issues:
1. Whether the assessee was obligated to deduct tax at source on a sum related to credit card commission.
2. Whether the addition of a specific amount out of commission payments claimed as a deduction by the assessee was justified.

Analysis:
1. The first issue revolved around the obligation of the assessee to deduct tax at source on a sum of Rs. 27,65,565 categorized as credit card commission. The Revenue contended that this sum represented commission, necessitating tax deduction under section 194H of the Income Tax Act. The Assessing Officer (AO) viewed the bank as an agent of the merchant, classifying the payment as commission. However, the CIT(Appeals) disagreed, citing that the payment was not commission but normal bank charges, aligning with the decision in Gems Paradise case. The Tribunal upheld this view, emphasizing that credit card charges are akin to bank charges and not commission, supported by various ITAT decisions and a CBDT notification. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the CIT(Appeals)'s order.

2. The second issue concerned the deletion of Rs. 6,96,923 from the total commission payments claimed as a deduction by the assessee. The AO disallowed this amount due to lack of details on payments made to auto and taxi drivers, questioning their genuineness and tax deduction at source. However, the CIT(Appeals) found the disallowance unwarranted, noting the routine nature of such payments in the assessee's business and the absence of evidence indicating non-compliance with tax deduction limits. The Tribunal concurred with the CIT(Appeals), emphasizing the absence of proof for payments exceeding tax deduction thresholds and dismissing the Revenue's appeal.