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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 ..... ces. The Revenue has raised identically worded grounds in both the years and hence we are reproducing the grounds as raised in financial year 2009-10 as under:- "i) On the facts and circumstances of the case and in law, the CIT (A) erred in holding that no TDS was deductible u/s. 194H by the assessee company on the amount held by the banks/credit card agencies as service charges in respect of credit card services provided and by further holding that the bank/credit card agencies are not agencies of the assessee and thereby clearly ignoring the fact that in the entire process of facilitation of credit card, the bank is nothing but a construction agent for the assessee company and nothing else. ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in failing to appreciate the real and true nature of the relationship between the assessee company and bank/credit card agencies. iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in failing to appreciate that in substance and in fact relationship between the assessee company and bank/credit card agencies was in the nature of principal and agents relationship and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction charges for credit card collection charges of Rs. 6,90,97,097/-.Therefore, he charged TDS u/s 201(1) at Rs. 71,17,000/- and also charged consequential interest u/s 201(1A) of the Act for 36 months at Rs. 25,62,120/-. Therefore, he created the demand of Rs. 96,79,121/-. Aggrieved, the assessee preferred appeal before the CIT (A) who relying on the decision of Mumbai Tribunal in the case of ITO Vs Jet Air Ways India Ltd. in ITA No.7439 to 7441/Mum/2010 dated 17-07-2013 allowed the claim of the assessee by observing in Para 3.2 and 3.3 of his appellate Order as under:- "3.2 I have gone through the details and facts in the case. It is not disputed that appellant is retail merchant, doing business of trading of mobile handsets for which has received payments through the credit card of its customers and for collecting the credit sale amount for appellant, the bank has been paid bank charges. The question involved is whether the bank charges paid to HDFC by the appellant were liable for TDS, or not. I find that issue is squarely covered in favour of appellant by the decision given in the case of DCIT Vs. M/s. Vah Magna Retail (P) Ltd., Hyderabad in 905/HYD/2011 and also in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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". 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. But, in the present case, there is no such element of agency between the assessee and the bank. The above payments represent the charges paid to the bank for facilitating the payments by the customers. This is the modern and easiest way of doing business, which has been internationally accepted all over the world. Since there is no existence of agency, we are of the view that the provisions of section 194H of the Act cannot be applied to the assessee. 5. Further, from the above discussion, an inference can be drawn that the commission and brokerage is required to be paid directly or indirectly to a person acting on behalf of another person for services rendered or for any service in the course of buying and selling of goods or in relation to any transaction relating to any asset, valuable article or things, not being securities. A close look at the provision of section 194H of the Act wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fees as per terms and conditions in case of credit card. This is not a commission payment but a fees deducted by the bank. If there is an agreement, that is agreement between the credit cardholder and the bank. Bank is a Principal and to spread over its business, a scheme is floated by bank i.e. issuance of credit cards. Bank issues credit card to the various customers who purchase the various credit cards on the agreed terms and conditions. One of the major condition is that if credit card holder does not make payment within the prescribed time limit then they charge 2% penal amount of bill which is raised by the shop keeper against sale of its items through credit card. Bank cannot refuse the payment to the shop keeper who sale their goods through credit card. Only in those cases where goods are found damaged and credit card holder inform the bank that the material purchased by them is damaged or defective and request the bank not to make the payment, in such cases only bank can withhold the payment, otherwise the bank has to make the payment to the shop keeper. Therefore, in our considered view, there is no such relation between the bank and the shop keeper which establishes t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of the failure of the assessee to deduct tax at source in terms of S.194H of the Act, while making the said commission payments. It was the contention of the assessee before the lower authorities that the assessee only receives the payment form the bank/credit card companies concerned, after deduction of commission thereon, and thus, this is only in the nature of a post facto accounting and does not involve any payment or crediting of the account of the banks or any other account before such payment by the assessee. Considering these submission of the assessee, the CIT(A) accepted the claim of the assessee for deduction of the amount of Rs. 16,34,000 on the following reasoning : "9.8 On going through the nature of transactions, I find considerable merit in the contention of the appellant that commission paid to the credit card companies cannot be considered as falling within the purview of S.194H. Even though the definition of the term "commission or brokerage" used in the said section is an inclusive definition, it is clear that the liability 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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