2020 (2) TMI 272 - HC - Income Tax

TDS u/s 194H - amount retained by a bank / credit card agency out of the sale consideration of tickets booked through credit card - Whether principal and agent relationship between the assessee and the bank / credit card agencies ? - HELD THAT - This Court in CIT Vs. Jet Airways (India) Ltd. 2019 (5) TMI 117 - BOMBAY HIGH COURT has answered the two questions in favour of the assessee and against the revenue. In the said decision this Court vide affirming the similar findings returned by the Tribunal held that amount retained by a bank / credit card agency out of the sale consideration of tickets booked through credit cards is not covered under the definition of commission or brokerage given in explanation (i) to Section 194H of the Act and in such circumstances assessee is not liable to deduct tax at source under Section 194H in respect of this amount. Appeal filed by the revenue is dismissed.

Summary

Issues:
1. Interpretation of Section 194H of the Income Tax Act, 1961 regarding the amount retained by a bank/credit card agency from the sale consideration through credit cards.
2. Determination of the existence of a principal and agent relationship between the assessee and the bank/credit card agencies.

Analysis:
1. The first issue before the court was whether the amount retained by a bank/credit card agency out of the sale consideration through credit cards falls under the definition of "commission or brokerage" as per Explanation (i) to Section 194H of the Income Tax Act, 1961. The appellant, represented by Mr. Suresh Kumar, argued that the Tribunal's decision upholding the order of the CIT(A) was incorrect. However, Mr. Kumar conceded that a previous judgment in CIT Vs. Jet Airways (India) Ltd. had ruled in favor of the assessee, stating that such amounts are not covered under the definition of commission or brokerage. The court, in line with the precedent, dismissed the appeal filed by the revenue, affirming that the assessee was not liable to deduct tax at source under Section 194H for the amount retained by the bank/credit card agency.

2. The second issue revolved around whether there existed a principal and agent relationship between the assessee and the bank/credit card agencies. The Tribunal, in line with the order of the CIT(A), had found a lack of such a relationship. The court did not delve deeply into this issue as the primary focus was on the interpretation of Section 194H. The judgment did not explicitly address this aspect further, as the decision was primarily based on the interpretation of the relevant tax provision. The court's ruling did not touch upon the determination of the principal and agent relationship, as the appeal was dismissed based on the first issue regarding the tax liability under Section 194H.

In conclusion, the High Court of Bombay, in this judgment, clarified the interpretation of Section 194H of the Income Tax Act, 1961 regarding the tax liability of the amount retained by a bank/credit card agency from the sale consideration through credit cards. The court relied on a previous judgment and ruled in favor of the assessee, dismissing the revenue's appeal. The judgment did not extensively address the issue of the principal and agent relationship, as the decision primarily focused on the tax liability aspect.