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2018 (10) TMI 68 - AT - Income TaxTDS u/s 194H - credit card commission expenses - Held that - The issue has already been decided by the Tribunal in assessee s own case in AY 2011-12 by following the decision of the Tribunal Bangalore Bench in the case of TATA TELESERVICES LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX (TDS) CIRCLE 18(1). BANGALORE 2013 (1) TMI 480 - ITAT BANGALORE facts and circumstances remain the same in the present assessment year there is no merit in the appeal filed by the revenue The sale made on the basis of a credit card is clearly a transaction of the merchants establishment only and the credit card company only facilitates the electronic payment for a certain charge. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/ brokerage for acting on behalf of the merchant establishment - 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. l94H. The fact that the revenue has preferred an appeal against the order of Tribunal in Tata Tele Services (supra) cannot be the basis not to follow the order of the coordinate Bench of the Tribunal so long as the said decision has not been reversed by any higher judicial forum. We therefore dismiss the appeal of the revenue. Disallowance of interest paid on delayed remittances of service tax - Held that - There remains no doubt that the interest expense on the delayed payment of service tax is allowable deduction. The above principles can be applied to the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which are subject to the TDS provisions. The assessee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and consequently the principles laid down in the case of Bharat Commerce Industries Ltd. Vs. CIT (1998 (3) TMI 2 - SUPREME COURT) reported in cannot be applied to the case on hand. Interest paid u/s. 201(1A) on delayed remittances of TDS - Held that - Though the decision of the Tribunal is later in point of time judicial discipline demands that the decision of the Hon ble Madras High Court is to be followed. It is also worthwhile to mention that the Kolkata Bench of Tribunal in the case of Narayani Ispat Pvt. Ltd. 2017 (10) TMI 67 - ITAT KOLKATA which was cited for the assessee did not consider or did not have an occasion to consider the decision of the Hon ble Madras High Court in the case of Chennai Properties and Investment Ltd. (supra). In these circumstances we follow the decision of the Hon ble Madras High Court and uphold the order of the CIT(A) insofar as it relates to disallowance of interest on delayed remittance of tax deducted at source u/s. 201(1A) of the Act.
Issues Involved:
1. Applicability of TDS under Section 194H on credit card commission expenses. 2. Deductibility of interest paid on delayed remittances of service tax. 3. Deductibility of interest paid under Section 201(1A) on delayed remittances of TDS. Issue-wise Detailed Analysis: 1. Applicability of TDS under Section 194H on Credit Card Commission Expenses: The primary issue was whether the credit card commission expenses incurred by the assessee are subject to TDS under Section 194H of the Income-Tax Act, 1961. The Assessing Officer (AO) disallowed these expenses under Section 40(a)(ia) due to non-deduction of TDS. The CIT(Appeals) allowed the expenses, relying on the Tribunal's earlier decisions, including Tata Tele Services Ltd. v. DCIT and other similar cases, which held that such payments are in the nature of bank charges and not commission under Section 194H. The Tribunal upheld the CIT(A)'s decision, noting that the issue had been consistently decided in favor of the assessee in previous years and similar cases. The Tribunal dismissed the revenue's appeal, emphasizing that the CBDT notification dated 31.12.2012, exempting such charges from TDS, was clarificatory and reflected the prevailing interpretation. 2. Deductibility of Interest Paid on Delayed Remittances of Service Tax: The AO disallowed the interest paid on delayed remittances of service tax, treating it as a penalty under Explanation to Section 37(1) of the Act. The CIT(A) upheld this view, relying on the Supreme Court's decision in Star India (P) Ltd. The Tribunal, however, referred to the Kolkata Bench's decision in DCIT v. Narayani Ispat Pvt. Ltd. and the Gujarat High Court's decision in CIT v. Kaypee Mechanical India (P) Ltd., which held that such interest is compensatory and not penal, thus allowable as a business expenditure. The Tribunal distinguished the Star India case, noting that it dealt with retrospective liability and not the nature of interest on delayed service tax. Consequently, the Tribunal allowed the deduction of interest on delayed service tax payments. 3. Deductibility of Interest Paid Under Section 201(1A) on Delayed Remittances of TDS: The AO disallowed the interest paid under Section 201(1A) on delayed remittances of TDS, treating it as akin to income tax, which is not deductible. The CIT(A) upheld this disallowance, relying on the Madras High Court's decision in CIT v. Chennai Properties and Investment Ltd., which held that such interest is in the nature of tax and not allowable as a business expenditure. The Tribunal agreed with this view, emphasizing judicial discipline and the precedence of the High Court's decision over the Tribunal's contrary decision in Narayani Ispat Pvt. Ltd. Therefore, the Tribunal upheld the disallowance of interest on delayed TDS payments. Conclusion: The Tribunal dismissed the revenue's appeal regarding the applicability of TDS on credit card commission expenses and allowed the assessee's appeal concerning the deductibility of interest on delayed service tax remittances. However, it upheld the disallowance of interest on delayed TDS remittances. The assessee's appeal was partly allowed, and the revenue's appeal was dismissed.
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