2016 (2) TMI 1300 - AT - Income Tax

TDS u/s 194H - Disallowance u/s.40(a)(ia) - not deducting the TDS on Credit Card commission charged by bank on credit card transaction - HELD THAT - As decided in own case 2015 (8) TMI 1476 - ITAT MUMBAI payment of commission to banks with regard to the processing of credit card transactions was not liable to be considered as a commission within the meaning of section 194H. The bank does not act as an agent of the assessee while processing the credit card payments and a charge collected by the bank for such service does not amount to commission within the meaning of section 194H. In view of the aforesaid Judgment of Hon ble Delhi High Court in the case of JDS Apparels P. Ltd. 2014 (11) TMI 732 - DELHI HIGH COURT we hereby affirm the conclusion of the CIT(A) to the effect that the impugned disallowance made by the AO by invoking section 40(a)(ia) is unsustainable. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of TDS on Credit Card commission under section 40(a)(ia) of the Income Tax Act.

Analysis:
The case involved an assess-company operating five-star deluxe hotels, which filed its income tax return declaring a loss. The Assessing Officer completed the assessment, determining the income of the assessee. The main issue in the appeal was the disallowance of Rs. 2.19 crores under section 40(a)(ia) for not deducting TDS on Credit Card commission charged by the bank on credit card transactions.

During the proceedings, the Authorized Representative of the assessee highlighted that a similar issue was decided against the AO by the Tribunal in a previous assessment year. The Tribunal's previous order clarified that the commission paid to banks for credit card transactions did not fall under the purview of TDS deduction under section 194H. The Tribunal relied on the decision of the Hyderabad Bench and the Delhi High Court, emphasizing that such payments were not considered 'commission' within the meaning of the Act. The Tribunal affirmed the CIT(A)'s decision to disallow the impugned amount, stating that the bank did not act as an agent of the assessee in processing credit card payments.

Based on the precedent set by the earlier order and the decisions of the Delhi High Court and the Hyderabad Bench, the Tribunal upheld the CIT(A)'s order and dismissed the appeal filed by the AO. The Tribunal concluded that the disallowance made by the Assessing Officer was unsustainable under section 40(a)(ia). Consequently, the appeal filed by the AO was dismissed, following the Tribunal's decision in the previous assessment year.

In summary, the Tribunal's judgment in this case focused on the interpretation of section 40(a)(ia) regarding the disallowance of TDS on Credit Card commission. The decision was based on previous rulings and legal interpretations that clarified the nature of payments made to banks for credit card transactions, ultimately leading to the dismissal of the AO's appeal.