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TMI Blog2016 (3) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... EMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri G.M. Doss For The Assessee : Shri Vipul Joshi ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the Revenue, being ITA No. 2612/Mum/2014, is directed against the order dated 29-01-2014 passed by the learned Commissioner of Income Tax (Appeals)- 16, Mumbai (Hereinafter called the CIT(A) ), for the assessment year 2010-11. 2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Tribunal read as under:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred the disallowance u/s 40(a)(ia) of Credit Card Charges ₹ 5,30,13,348/- without appreciating that the said charges are in the nature of Commission or brokerage and payment/credit thereof is liable for TDS u/s.194-H of the IT Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred the disallowance u/s 40(a)(ia) of Credit Card Charges ₹ 5,30,13,348/- relying on the decision of Hon'ble ITAT, Mumbai, in the case of ITO(TDS) vs. Jet Airways (India) Ltd. (IT-Appeal Nos.7439, 7440 74 (Mum) of 2010 dated 17/07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no TDS is applicable on credit card charges paid. The A.O., however, rejected the contention of the assessee company after analyzing the transaction process in detail and held that the credit card transaction is in the nature of the commission for providing the complex services by using the sophisticated professional skills and technology under an agreement, hence, the provisions of section 194-H of the Act is attracted. The A.O. held that this is a different mode of payment in which the assessee company is not making any payment but the service provider itself deduct the commission from the amount payable and this mode of payment between the assessee company and the banks is clearly covered by the provisions of section 194H of the Act. Provision of section 194H of the Act is clearly attracted to the transactions between the banks and the assessee company for charging commission on providing credit card services. The AO held that the assessee company is liable to deduct the tax on the payment of commission which the assessee company did not do, hence, provisions of section 40(a)(ia) of the Act is attracted because as per the said Act any payment of commission on which no TDS has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee]. The CIT(A) also observed that similar issue has been considered by the Jaipur Bench of the Tribunal in the case of Gems Paradise in ITA No. 746/JP/2011 for the assessment year 2008-09 dated 2-2-2012 wherein the Tribunal held that the provisions of section 194H of the Act are not applicable as the banks make payments to the taxpayer after deducting certain fees as per the terms and conditions in the credit card and it is not a commission but a fee deducted by the banks. 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 CIT (A), in nutshell, held that payments made to the banks on account of utilization on 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 194H of the Act. The CIT(A) also relied upon decision of Jaipur Bench of the Tribunal in the case of Bhandari Jewellers in ITA no. 745/JP/2011 dated 02-02-2012 for assessment year 2008-09 and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of commission within the meaning of Section 194H of the Act , and therefore no tax is required to be deducted at source on the same u/s 194H of the Act. The finding of the Tribunal in Jet Airways India Limited (supra) are reproduced hereunder: 9. We have carefully considered the submissions of the ld. Representatives of the parties and the orders of the authorities below. We have also carefully considered the provisions of section 194H of the Act. We observe that the similar issue has been considered by the Jaipur Bench of the Tribunal in the case of Gems Paradise (supra) and the Tribunal held vide paragraph 27 of the said order that the provisions of section 194H of the Act are not applicable as the banks make payments to the assessee after deducting certain fees as per the terms and conditions in the credit card and it is not a commission but a fee deducted by the banks. The said paragraph 27 of the order is reproduced below : 27. After considering the orders of the AO and ld. CIT (A), we find that assessee deserves to succeed in this regard. Section 194H is applicable where any commission has been paid by the Principal to the commission agent. This is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly, the addition made and confirmed by ld. CIT (A) is deleted. 10. We observe that the said issue was again considered by the Jaipur Bench of the Tribunal in the case of Bhandari Jewellers (supra) and following the above decision of the Tribunal, the Tribunal vide paragraph 7 of the said order again held that the provisions of section 194H of the Act are not attracted in this type of transactions. It was held that no TDS is required to be deducted on the fees charged by the bank on credit card transactions. We also observe that the similar issue again come up before the Hyderabad Bench of the Tribunal in the case of Vah Magna Retail (P.) Ltd. (supra) and the Tribunal vide paragraph 4 of the said order dismissed the appeal of the department by holding that the amount retained by the principal contractor from the payments made to the contracting persons and there was no requirement for making TDS on the amount. The said paragraph 4 of the order reads as under : '4. We heard the Learned Departmental Representative and perused the orders of the lower authorities and other material on record. Assessee is a company engaged in the business of direct retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserve that the Bangalore Bench of the Tribunal by following the said decision of the Hyderabad Bench of the Tribunal has held that the 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. In view of the above we hold that the issue is squarely covered in favour of the assessee. Respectfully following the decisions of the Co-ordinate Benches of the Tribunal we uphold the order of the ld. CIT(A) and reject the grounds No.1 to 3 taken by the department for all the three assessment years under consideration. Respectfully following the decision of the co-ordinate Bench of the Mumbai Tribunal in the case of Jet Airways India Ltd. (supra) which is later on again followed by Mumbai Tribunal in the case of Jet Airways India Limited for succeeding assessment year i.e. 2010-11 in 40 taxmann.com 178(Mum-Trib.), we hereby uphold and sustain the orders of the CIT(A) dated 29-01-2014 ordering deletion of the addition of ₹ 5,30,13,348/- made by the AO u/s 40(a)(ia) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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