Tribunal rules bank not liable for TDS on credit card transactions

The Tribunal upheld the decision of the Commissioner (Appeals) to delete the disallowance under section 40(a)(ia) for the assessment year 2013-14. The Tribunal dismissed the revenue's appeal, citing previous decisions and legal interpretations that the bank's role in credit card transactions did not amount to acting as an agent for the assessee. Therefore, the disallowance was deleted as the amount retained by the bank was considered a fee for banking services, not commission or brokerage, and did not attract section 194H. The appeal was dismissed, and the order was pronounced on 08/03/2021.

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Issues:
Deletion of disallowance under section 40(a)(ia) of the Income-tax Act, 1961.

Analysis:
The appeal by the revenue was against the deletion of disallowance of Rs. 1,85,38,431/- made under section 40(a)(ia) of the Income-tax Act, 1961 for the assessment year 2013-14. The assessing officer disallowed the amount for non-deduction of tax at source on commission paid by the assessee to various banks. The assessee contested the disallowance before the Commissioner (Appeals), who deleted it after considering the submissions and noting that a similar disallowance in the previous assessment year was deleted. The Tribunal found that the issue was covered by its decisions in the assessee's own case for earlier assessment years, where similar disallowances were deleted based on the nature of the transactions involving credit card commissions.

The Tribunal observed that the issue was squarely covered by its previous decisions in the assessee's case for Assessment Years 2011-12 & 2012-13. The Tribunal upheld the decision of the Commissioner (Appeals) in deleting the disallowance in those years. The Tribunal referred to the decision of the Hon'ble Delhi High Court in a similar case, emphasizing that the bank's role in credit card transactions did not constitute acting as an agent for the assessee. The Tribunal concluded that the amount retained by the bank was a fee for banking services and not commission or brokerage, thereby not attracting section 194H.

Based on the precedent set in earlier years and the legal interpretations provided by the Tribunal and the Hon'ble High Court, the Tribunal upheld the decision of the Commissioner (Appeals) to delete the disallowance under section 40(a)(ia) for the assessment year 2013-14. The Tribunal dismissed the revenue's appeal, stating that the facts were identical to previous cases and there was no reason to interfere with the decision of the Commissioner (Appeals). Consequently, the appeal was dismissed, and the order was pronounced on 08/03/2021.

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