Credit card commission not subject to TDS under section 194H.

The ITAT Hyderabad upheld the CIT(A)'s decision that commission paid to credit card companies does not fall under section 194H for TDS purposes. The court found that credit card companies do not act on behalf of the merchant but facilitate electronic payments, akin to bank charges. Therefore, the commission retained by credit card companies is not subject to TDS under section 194H. The Revenue's appeal was dismissed, affirming the assessee's entitlement to the deduction claimed.

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Issues:
Interpretation of section 194H for commission paid to credit card companies.

Analysis:
The appeal by the Revenue was against the CIT(A)-V Hyderabad's order for the assessment year 2007-08. Despite the absence of the Respondent-assessee during the hearing and no application for adjournment, the appeal was disposed of ex-parte. The effective grounds of the Revenue included errors in facts and law by the CIT(A) regarding the commission paid to credit card companies not falling under section 194H, which led to the disallowance of a deduction claimed by the assessee. The assessing officer disallowed the deduction due to the failure of the assessee to deduct tax at source under section 194H while making commission payments to credit card companies.

The CIT(A) accepted the claim of the assessee for deduction based on the argument that the commission paid to credit card companies does not fall within the purview of section 194H. The CIT(A) reasoned that the liability to make TDS under section 194H arises only when a person acts on behalf of another person, which was not the case with commission retained by credit card companies. The CIT(A) highlighted that the credit card company merely facilitates electronic payments for a charge and does not act on behalf of the merchant establishment. Therefore, the commission retained by credit card companies is akin to normal bank charges and not commission or brokerage for acting on behalf of the merchant establishment.

The ITAT Hyderabad upheld the order of the CIT(A) and rejected the grounds of the Revenue. The ITAT found no infirmity in the reasoning provided by the CIT(A) and dismissed the appeal of the Revenue. The order was pronounced on 10.4.2012.

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