TaxTMI 
TaxTMI 
2013 (8) TMI 586
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....d 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 ticket bookings and by further holding that the banks/credit card agencies are not agents of the assessee and thereby clearly ignoring the fact that in the entire process of facilitation of credit card ticket bookings, the bank is nothing but a constructive agent for the airline companies and nothing else. 2. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in failing to appreciate the real and true nature of the relationship between the airline company and bank/credit card agencies. 3. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in failing to appreciate that in substance and in fact relationship between the airline company and bank/credit card agencies was in nature of principle and agents relationship and therefore, the Ld. CIT(A) erred in not upholding the A.O's conclusion of bringing the charges paid by the airline company to the banks/credit card agencies within the purview of section 194H of the I.T Act, 1961. 4. ....
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.... banks as the amounts retained by the banks is in the nature of discounting in consideration of immediate payment made by the banks to the assessee. That such charges partakes the character of discounts which are not subject to tax deduction at source under the prevailing provisions of the Act. That in case of discounting charges retained by the banks there would be no case where one person would be acting on behalf of another, since the sale is concluded by the assessee on his own behalf and not by the banks on behalf of the assessee. 6. However, the AO did not accept the submissions of the assessee. The AO has stated that as per the agreement between the banks and the assessee, the banks suppose to provide the assessee the facility of their credit card internet payment gateway to enable the assessee to collect the payment made by the customer to it for orders placed through such facility by the such customer i.e the person holding credit card. That as per the agreement, there is no talk of any discount to be given by the assessee to the banks and such payments are the transactions charges. Therefore, such a payments made for use of the credit card, internet payment gateway to ....
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.... of the Act cannot be upheld. He has stated that since the customers buy the tickets through credit card it became obligatory on the part of the banks whose credit card is being held by the customers to make the payment of the value of the ticket to the airlines immediately. That this payment is on behalf of the bank's customers holding credit card. While making the payment to the airlines the bank deducts a small percentage from the value of the tickets and retains the same as its service/discount charges etc. The ld. CIT(A) has stated that the bank in the normal discharge of its functions is making payments of the value of the tickets to the airline on behalf of its clients who are holding cards. While remitting the amount to the assessee, the bank deducts a small percentage out of it which can be said a service charge or discount or by any other name. The ld. CIT(A) has stated that the provisions of section 194H will not be applicable to the transactions between principal to principal. Section 194H can be attracted only in those cases where there is an existence of agency between the two parties. He has stated that an extract of the agreement stated by the AO in the orders passe....
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....galore Bench of the Tribunal in the case of Tata Teleservices Ltd V/s DCIT (2013)140 ITD 451(Bangalore) which has been decided by following the decision of Hyderabad Bench of the Tribunal in the case of DCIT V/s M/s Vah Magna Retail (P) Ltd in ITA No.905/Hyd/2011(AY-2007-08) dated 10.4.2012. The ld. AR filed the copies of the aforesaid orders to substantiate his above submissions. He further submitted that the reliance placed by the ld. DR on the decision of the Hon'ble Kerala High Court in the case of Vodafone Essar Celluar Ltd (supra) is not applicable to the facts of the case of the assessee as in that case, the assessee was carrying on the business of rendering a mobile telephone services to the customers through appointment of the distributors in the State. Under the Telecom Regulations, connection can be given only to customers producing identity, proof of address, etc. There was a distribution agreement, and under a distribution agreement, the distributor got customers for the assessee and all work in relation to collection of documents of identity of the customers, delivery of sim cards for giving connection to the customers, collection of charges, etc., was done by the dis....
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.... 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 the relationship of a Principal and Commission Agent. Technically it may be written that bank will charge certain percentage of commission but this is not a commission because assessee sells its goods against credit cards, and on presentation of bills, the bank has to make the payment. It is not the case that bank ha....
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....mmission 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 with in 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 the credit card companies however, it cannot be said that the bank acts on behalf of the merchant establishment or that even the merchant establishment conducts the transaction for the bank. The sale made on the basis of a credit card is clearly a transaction of the merchants establishment only and the credit c....
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....at the said certificates issued u/s 195(3) of the Act are applicable from the date of issuance of the certificates and not from the first day of concerned Financial Year. 14. On the other hand, the ld. AR supported the orders of the ld.CIT(A) and further submitted that Rule 29B (5) of the Income Tax Rules, 1962 also provides that the certificates issued u/s 195(3) authorizing to receive the payments without deduction of tax shall be valid for the Financial Year specified therein, unless it is cancelled by the AO at any time before the expiry of the said Financial Year. He submitted that the order of the ld. CIT(A) on this issue is in accordance with law and the same should be confirmed. 15. We have carefully considered the submissions of the ld. Representatives of the parties and the orders of the authorities below as well as Rule 29B(5) of the Rules. We also observe that the assessee has also filed a copy of certificates issued by the AO u/s 195(3) of the Act dated 27.4.2006, 30.3.2007, 31.3.2008 and 31.3.2008 which are addressed to Citibank N.A. for Financial Years 2006-07 to 2008-09 respectively. On perusal of the said certificates it is specifically mentioned th....