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TMI Blog2016 (10) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS Vs. Jet Air Ways (India) Ltd. [2013 (8) TMI 586 - ITAT MUMBAI] followed - Decided in favor of assessee. - ITA No.793 & 794/Mum/2014 - - - Dated:- 1-9-2016 - SRI MAHAVIR SINGH, JM AND SRI B. R. BASKARAN, AM For The Appellant : Shri Ravichandran, DR For The Respondent : Shri Vijay Mehta, AR ORDER PER MAHAVIR SINGH, JM: These two appeals by the Revenue are arising out of the common order of CIT (Appeals)-13, Mumbai in appeal No.CIT (A)-13/IT/Rationalisation/Or. 602/12-13 dated 25-11-2013. Assessments were framed by ITO, TDS, Range-3 (4), Mumbai for financial year 2009-10 and 2010-11 vide his orders dated 26-03-2012 and 31-03-2012 u/s 201(1) and consequent interest u/s 201(1A) of the Income Tax Act, 1961 (hereinafter the Act‟). 2. The only common issue in these two appeals of the Revenue is against the order of the CIT (A) deleting the charging of TDS and consequential interest u/s 201(1) and 201 (1A) of the Act for holding the assessee in default for noon-deduction of TDS u/s 194H of the Act by the AO on the amount held by the bank / credit card agencies as service charges in respect of credit card services. The Revenue has raised identically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acquiring Bank for making payment to the Retail Merchant and the Acquiring Bank withholds its discount/commission against the services provided to the Retail Merchant. The Acquiring Bank recovers the bill amount from the Issuing Bank through BSA and thus, the Acquiring Bank facilitates recovery of bill amount for Retail Merchant by charging discount in the nature of commission and hence, it acts as agent of the Retail Merchant. On this basis, the AO held that the discount in the nature of commission withheld by the Acquiring Bank against making payment to the Retail Merchant be subjected to TDS as per provisions of Chapter XVII-B @10% u/s 194H of the Act. Accordingly, the AO noted that the acquiring bank is withholding amounts as transaction charges i.e. credit card collection charges while making payment of the bill amount on sales carried through the assessee Company i.e. Retail Merchant. According to the AO, the assessee has not deducted TDS as the payment of transaction charges are subjected to TDS u/s 194H of the Act. Accordingly, the AO treated the assessee in default and the assessee was held as assessee in default to the extent of payment made on account of transaction c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s commission or not and consequentially the same falls under the provisions of Section 194H of the Act for deduction of TDS. We find from the facts of the case that the transaction charges were withheld by HDFC Bank Ltd., Axis Bank and Punjab National Bank for the assessment year towards credit card collection charges which are in the nature of bank charges from the payments made by them for sale to customers. Thus, we understood that the bank pays the net amount of collection after deducting the bank charges. It is a fact that bank is a financial institution and financial intermediary, who accepts deposits and channel those deposits into lending and other business activities. Over and above this, bank also conducts various banking operations in its ordinary course of business activities i. e. bank guarantee, credit card collection, overdraft facilities etc. towards which the bank imposes charges/fee on principal to principal basis. Before us, in the instant case, the bank charged fee in respect of credit card collection charges on principal to principal basis. According to us, credit card charges are nothing but charges charged on principal to principal basis for the reason that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia) Ltd. [2014] 147 ITD 133 (Mumbai Tribunal) wherein similar issue was decided as under:- 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 M/s. 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 not a case of commission agent as assessee sold its goods through credit card and on presentation of bill issued against credit card, the TAXPUNDIT.ORG bank makes payment t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal in the case of Bhandari Jwellers (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 M/s 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 retail trading in consumer goods. Assessee claimed deduction of ₹ 16,34,000 on account of commission paid to the credit card companies, which has been disallowed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 . 7. In view of the facts and circumstances of this case, we are of the view that credit card charges are nothing but charges charged on principal to principal basis for the reason that bank accepts the commitment of making all credit card payments after deducting its own charges, which are related to this commitment and does not fall u/s 194H of the Act in term of commission . Accordingly, we are of the view that the provisions of section 194H of the Act are applicable in those cases where element of agency is present, which is absent in the present case and in our view the amount retained by the banks cannot be termed as commission so a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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