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TMI Blog2013 (8) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 made to the banks on account of utilization of credit card facilities would be in the nature of bank charges and not in the nature of commission within the meaning of section 194H of the Act and hence no TDS is required to be deducted u/s 194 H of the Act - Following decision of DCIT V/s M/s Vah Magna Retail (P) Ltd [2013 (8) TMI 299 - ITAT HYDERABAD] - Decided against Revenue. Withhold of tax u/s 195(3) - Held that:- assessee has also filed a copy of certificates issued by the AO u/s 195(3) of the Act dated 27.4.2006, 30.3.2007, 31.3.2008 and 31.3.2008 which are addressed to Citibank N.A. for Financial Years 2006-07 to 2008-09 respectively. On perusal of the said certificates it is specifically mentioned that the said bank is authorized to receive the payments, interests without deduction of income tax u/s 195(1) of the Act in the respective Financial Years. Similarly, the assessee has also placed on record the copy of certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd agents relationship and therefore, the Ld. CIT(A) erred in not upholding the A.O's conclusion of bringing the charges paid by the airline company to the banks/credit card agencies within the purview of section 194H of the I.T Act, 1961. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the lower withholding of tax u/s 195(3) be applied to their retrospective operation. 5. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in ignoring well established principle that unless stated otherwise, any certificate or permission or approval as the case may be, is deemed to take effect from the date of issue or the date of its operation if specified and cannot take a retrospective effect, unless the same is clearly expressed to do so by the competent authority. 6. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary at the time of hearing of the case or thereafter." 3. In Ground Nos. 1 to 3 of the appeals, the issue involve is as to whether Ld.CIT(A) has erred on the facts and circumstances of the case, in holding that no TDS u/s 194H of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment made by the customer to it for orders placed through such facility by the such customer i.e the person holding credit card. That as per the agreement, there is no talk of any discount to be given by the assessee to the banks and such payments are the transactions charges. Therefore, such a payments made for use of the credit card, internet payment gateway to enable the assessee to collect the payments made by the customers to it for orders placed through facility by the said customers is squarely covered by the definition of "commission or brokerage" given in Explanation (i) below the third proviso to section 194H of the Act. Therefore, the AO has considered the following amounts subject to section 194H of the Act in the assessment years 2007-08 to 2009-10; and computed the default u/s 201(1) of the Act as under :- F.Y.2007-08 F.Y.2008-09 F.Y.2009-10 Amount subject to sec.194H 1,59,66,891 1,61,52,907 13,16,30,392 Applicable rate u/s 194H 5.66% 5.66% up to May 2007 11.33% 11.33% Tax u/s 194H 9,03,723 17,78,004 1,49,13,718 Interest u/s 201(1A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, the bank deducts a small percentage out of it which can be said a service charge or discount or by any other name. The ld. CIT(A) has stated that the provisions of section 194H will not be applicable to the transactions between principal to principal. Section 194H can be attracted only in those cases where there is an existence of agency between the two parties. He has stated that an extract of the agreement stated by the AO in the orders passed u/s 201(1)/201(1A) of the Act do not lead to a conclusion that there is an existence of agency between the bank and the airline. The bank is merely granting use of the facility of its credit card internet gateway to the assessee to enable it to receive payments for services sold by it to the customer who are credit card holders. He has stated that termination clause in the agreement between the bank and the airline does not give rise to the agency. It is merely clause whereby the bank has safeguarded its interest only. The ld. CIT(A) after considering the decisions relied upon by the assessee in the case of Mother Dairy India Ltd V/s ITO (2009) 28 SOT 42 (Delhi-Trib) and the decision of Pune Bench of the Tribunal in the case of Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distributors in the State. Under the Telecom Regulations, connection can be given only to customers producing identity, proof of address, etc. There was a distribution agreement, and under a distribution agreement, the distributor got customers for the assessee and all work in relation to collection of documents of identity of the customers, delivery of sim cards for giving connection to the customers, collection of charges, etc., was done by the distributor. That the assessee paid service charges to the distributor for the services rendered in regard to that service called 'post-paid services'. In that context the Hon'ble High Court held that the discount was given by the assessee, a Mobile cellular operator, to distributor for the services to be rendered by the distributor to the assessee and, so much so, it fall within the definition of commission or brokerage under the Explanation (i) to section 194H of the Act. The ld. AR submitted that in assessee's case there was no element of agency existing between the bank and the airline and the transactions between the banks and the assessee was based on principal to principal Hence the above case of Hon'ble Kerala High Court (supra) do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shop keeper. Therefore, in our considered view, there is no such relation between the bank and the shop keeper which establishes the relationship of a Principal and Commission Agent. Technically it may be written that bank will charge certain percentage of commission but this is not a commission because assessee sells its goods against credit cards, and on presentation of bills, the bank has to make the payment. It is not the case that bank has advised the assessee to sell their goods to its customers then he will pay the commission. It is reversed in a situation as bank issued credit cards to the credit card holders on certain fees or whatever the case may be and the card holder purchases material from the market through his credit card without making any payment and that shop keeper presents the bill to the bank against whose credit card the goods were sold and on presentation of bill as stated above the bank makes the payment. Therefore, in our considered view, provisions of section 194H are not attracted in this type of transaction. Therefore, we hold that addition made and confirmed by ld.CIT (A) was not justified. Accordingly, the addition made and confirmed by ld. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to make TDS under the said section arises only when a person acts on behalf of another person. In the case of commission retained by the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. 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. Accordingly, concluding that there was no requirement for making TDS on the 'Commission retained by the credit card companies, the disallowance of Rs.16,34,000 is deleted....." We find no infirmity in the above reasoning given by the CIT(A). We accordingly uphold the order of the CIT(A) and reject the grounds of the Revenue which are devoid of merit. " We also observe that the Bangalore Bench of the Tribunal by following the said decision of the Hyderabad Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. Representatives of the parties and the orders of the authorities below as well as Rule 29B(5) of the Rules. We also observe that the assessee has also filed a copy of certificates issued by the AO u/s 195(3) of the Act dated 27.4.2006, 30.3.2007, 31.3.2008 and 31.3.2008 which are addressed to Citibank N.A. for Financial Years 2006-07 to 2008-09 respectively. On perusal of the said certificates it is specifically mentioned that the said bank is authorized to receive the payments, interests without deduction of income tax u/s 195(1) of the Act in the respective Financial Years. Similarly, the assessee has also placed on record the copy of certificates dated 27.4.2006 and 28.4.2007 which are addressed to American Express Bank Ltd authorizing the said bank to receive interalia any sum without deduction of income tax under sub-section (1) of Section 195 of the Act for Financial Years 2006-07 and 2007-08 respectively. Similarly, Ld.AR has filed a copy of certificate of the AO dated 30.4.2008 addressed to American Express Banking Corporation relating to Financial Year 2008-09 to receive interest and other sums without deduction of tax at source in the said Financial Year. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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