2015 (8) TMI 1476 - AT - Income Tax

Appeal Upheld: Bank Charges Not 'Commission' for TDS

Dy. Commissioner of Income Tax (OSD) -8 (2), Versus M/s. Hotel Leelaventures Ltd.

The appeal was filed against the deletion of an addition under section 40(a)(ia) of the Income Tax Act for commission paid to banks on credit card ... Addition u/s 40(a)(ia) - TDS u/s 194H - HELD THAT:- JDS APPARELS PRIVATE LIMITED [2014 (11) TMI 732 - DELHI HIGH COURT]  payment of commission to banks with regard to the processing of credit card transactions was not liable to be considered as a ‘commission’ within the meaning of section 194H. The bank does not act as an agent of the assessee while processing the credit card payments and a charge collected by the bank for such service does not amount to ‘commission’ within the meaning of section 194H. In view of the aforesaid Judgment of Hon’ble Delhi High Court in the case of JDS Apparels P. Ltd. (supra), we hereby affirm the conclusion of the CIT(A) to the effect that the impugned disallowance made by the AO by invoking section 40(a)(ia) is unsustainable. Thus, Revenue fails on this Ground also. - Decided against revenue. Issues:- Appeal against deletion of addition under section 40(a)(ia) of the Income Tax Act, 1961.- Interpretation of tax deduction at source under section 194H of the Act for commission paid to banks on credit card transactions.Analysis:Issue 1: Appeal against deletion of addition under section 40(a)(ia)The appeal was filed by the assessee against the appellate order passed by CIT(A)-17, Mumbai for the assessment year 2010-11. The main contention in this appeal was the deletion of an addition of Rs. 1,96,68,165/- made by the Assessing Officer under section 40(a)(ia) of the Income Tax Act. The CIT(A) had deleted this addition, ruling that the commission paid to banks for processing credit card payments did not fall within the purview of tax deduction at source under section 194H of the Act. The CIT(A) based this decision on a previous ruling in the assessee's own case for the assessment year 2009-10. The Tribunal affirmed the CIT(A)'s decision based on the precedent set by the Hon'ble Delhi High Court, stating that the bank charges for credit card services did not constitute 'commission' under section 194H of the Act. Consequently, the Revenue's appeal was dismissed, upholding the CIT(A)'s decision.Issue 2: Interpretation of tax deduction at source under section 194HThe Assessing Officer disallowed the expenditure of Rs. 6,34,22,030/- as the assessee did not deduct tax at source under section 194H for commission paid to banks on credit card transactions. The Assessing Officer considered the bank charges as commission subject to TDS under section 194H. However, the CIT(A) disagreed and relied on a decision by the Hyderabad Bench of the Tribunal, stating that payments made to banks for credit card services were not within the purview of section 194H. The Tribunal upheld the CIT(A)'s decision, citing the judgment of the Hon'ble Delhi High Court, which clarified that bank charges for credit card services did not constitute 'commission' under section 194H. This interpretation was supported by the decision of the Mumbai Bench of the Tribunal and the Hon'ble Delhi High Court, leading to the dismissal of the Revenue's appeal.In conclusion, the judgments in both issues revolved around the interpretation of tax deduction at source under section 194H of the Income Tax Act, with the decisions favoring the assessee based on the nature of payments made to banks for credit card services. The Tribunal's rulings were consistent with the precedents set by higher courts, ultimately resulting in the dismissal of the Revenue's appeal.