2016 (7) TMI 18 - AT - Income Tax

TDS u/s 194H - TDS liability on charges paid by the assessee to the bank for using credit card facilities - Held that - No TDS liability in respect of payments made to banks for using credit card swiping machines. See The Commissioner of Income Tax-II Versus JDS Apparels Private Limited 2014 (11) TMI 732 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Whether the demand raised by the Assessing Officer under section 201(1) and the interest charged under section 201(1A) of the Income Tax Act on the charges paid by the assessee to the bank for using credit card facilities is valid.
2. Whether the decision of the learned CIT(A) to delete the addition is justified based on the interpretation of relevant legal provisions and judicial precedents.

Analysis:
Issue 1:
The appeal before the Appellate Tribunal ITAT Mumbai pertained to the demand raised by the Assessing Officer under section 201(1) and the interest charged under section 201(1A) of the Income Tax Act for the assessment year 2010-11. The Assessing Officer contended that the assessee failed to deduct tax at source from charges paid to the bank for using credit card facilities. However, the learned CIT(A) deleted the addition following a decision by the Coordinate Bench of the ITAT in the case of Jet Airways (India) Ltd. The Tribunal examined the arguments presented by both parties and noted that the CIT(A) had relied on judicial pronouncements to support the deletion of the demand.

Issue 2:
The Tribunal analyzed the legal position and various judicial precedents cited by the parties. The CIT(A) based the decision on the judgment in the case of Kotak Securities Ltd. and Vah Magna Retail Private Limited, where it was held that commission paid to credit card companies did not fall under the purview of section 194H for TDS deduction. Similar decisions by the Mumbai ITAT in the case of Jet Airways (India) Limited and by the Jaipur Bench were also considered, emphasizing that TDS provisions were not applicable to fees charged by banks on credit card transactions. Furthermore, the Tribunal referenced a decision by the CIT(A)-17, Mumbai, which ruled in favor of the appellant in a similar case for the assessment year 2009-10. The Tribunal also noted a decision by the CIT(A)-14, Mumbai, which held that no TDS was payable on credit card charges under section 194H. Based on these precedents, the Tribunal upheld the CIT(A)'s decision to delete the demand raised by the Assessing Officer, dismissing the appeal filed by the Revenue.

In conclusion, the Tribunal affirmed the decision of the CIT(A) to delete the demand raised under section 201(1) and the interest charged under section 201(1A) for the charges paid by the assessee to the bank for using credit card facilities. The Tribunal relied on various judicial pronouncements and precedents to support its decision, ultimately dismissing the Revenue's appeal.