ITAT Delhi: Rulings on Credit Card Commission, Staff Expenses, Legal Charges

The Appellate Tribunal ITAT Delhi allowed the assessee's appeals regarding the disallowances of credit card commission, staff recruitment expenses, and legal charges. The Tribunal held that the credit card commission retained by the bank did not fall under the purview of TDS requirements, and staff recruitment expenses below the threshold limit were not subject to TDS. Additionally, the legal charges were deemed to be for government duties, not professional services, justifying non-deduction of TDS. The judgments were pronounced on 07/06/2022.

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Issues:
1. Disallowance of credit card commission under Section 40(a)(ia) of the Income Tax Act.
2. Disallowance of staff recruitment expenses for non-deduction of TDS.
3. Disallowance of legal charges under Section 40(a)(ia) of the Income Tax Act.

Issue 1: Disallowance of Credit Card Commission:
The assessee challenged the disallowance of Rs. 20,83,340/- on credit card commission under Section 40(a)(ia) of the Income Tax Act. The contention was that the commission retained by the credit card company did not fall under the purview of Section 194H as it was not in the nature of commission contemplated under the Act. Citing the judgment in CIT vs. JDS Apparels Pvt. Ltd., it was argued that the commission to the bank on credit card transactions was not liable to TDS under Section 194H. The Tribunal agreed with the assessee, stating that no obligation arose for charges incurred for facilitating payments through credit/debit cards under Section 194H. The Tribunal also rejected the Revenue's argument regarding TDS on charges attributable to foreign banks, emphasizing that such differentiation was not justified by judicial precedents.

Issue 2: Disallowance of Staff Recruitment Expenses:
The Assessing Officer disallowed Rs. 83,387/- on staff recruitment expenses due to non-deduction of TDS. The assessee argued that individual payments were small and fell below the threshold limit specified under Section 194C of the Act. Supporting details were provided to substantiate this claim. The Tribunal found merit in the assessee's plea for non-deduction of TDS on such payments below the threshold limit, thereby allowing Ground No. 2 of the appeal.

Issue 3: Disallowance of Legal Charges:
Regarding the disallowance of Rs. 1,53,750/- on legal charges, the assessee contended that the payments were primarily for stamp duty and registration charges of lease deeds, not professional services. The Tribunal agreed, stating that the expenses were towards government duties and documentation charges, not professional services, and thus found merit in the assessee's argument for non-deduction of TDS under Section 194J. Consequently, Ground No. 3 was allowed.

In conclusion, the Tribunal allowed both appeals of the assessee concerning the disallowances of credit card commission, staff recruitment expenses, and legal charges. The judgments were pronounced on 07/06/2022 by the Appellate Tribunal ITAT Delhi, with detailed reasoning provided for each issue addressed.

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