TaxTMI 
TaxTMI 
2015 (11) TMI 583
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....and in the circumstances of the case, the Learned Commissioner of Income-tax (Appeals) erred in deleting the disallowance of commission payment of Rs. 98,03,623/- to the Banks on credit cards, made u/s 40(a)(ia) of the Income-tax Act, 1961, on the ground that such payment did not fall within the ambit of section 194H of the Income-tax Act, 1961. 2. The appellant craves leave to add alter or amend any or all the grounds of appeal." 3. The solitary issue involved in the appeal is as to whether the CIT(A) committed error in holding that no TDS under section 194H of the Act is required to be deducted by the assessee company on the impugned payments retained by the banks/credit card agencies in respect of Hotel bookings through credit card....
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.... commission amount paid to the banks/credit card agencies due to failure of the assessee to deduct the TDS while making commission payment. 5. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the CIT(A). 6. The assessee contended before the CIT(A) that for an expenditure/amount to fall under the definition of "Commission or Brokerage", as provided in section 194H of the Act, there has to be a principal agent relationship between receiver and payer and in the assessee's case, the banks are not working as an agent, it is just providing infrastructure for facilitating the whole transaction and charging specific fee for providing this infrastructure. The fee paid in lieu thereafter is therefore noth....
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....olders. The payments retained by the bank are akin to discounting in consideration of immediate payment made by the banks to the assessee. The impugned charges can partake the character of discounts which are not subject to tax deduction at source under the prevailing provisions of the Act. Since, the sale is concluded by the assessee on its own behalf and not by the banks on behalf of its credit card holder customers. The amounts retained by the banks are not in the nature of commission payments for rendering services, due to absence of agencies. 7. The CIT(A) agreed with the contentions of the assessee and decided the issue in its favour. The relevant operative part of the order of the CIT(A) is reproduced below for ready reference :- ....
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....on the basis of a credit card is clearly a transaction of the Merchants Establishment only and the credit card company only facilitates the electronic payment, for a certain charge. Further, the material placed on record does not indicate that the banks concerned have advised the appellant to sell their goods or provide services to its customers on a commission. Moreover, the appellant receives the payment from the bank/credit card companies concerned after deduction of commission thereon, and thus, this is only in the nature of a post facto accounting and does not involve any payment or crediting of the commission to the account of the banks or any other account by the appellant. In this background, relation between the bank and the appell....
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....covered in favour of the appellant by catena of decisions of the Co-ordinate Benches of the Tribunal and no contrary decision on this issue has come to my knowledge. It is also important to note that a certificate/order u/s 195(3) issued to AEBC and CITI Bank by the ITO (TDS), International Taxation, New Delhi and DDIT, International Taxation, Mumbai, applicable for FY 2009-10 was also filed by the appellant in the present proceedings, which state that these banks are authorized to receive the payment of interest and other sums from various clients/customers without deduction of tax. 4.4.2 For the reasons set out above, it is held that the impugned payments made to the banks are in the nature of 'bank charges' and the provisions of sec. ....
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....alf of the principal. The expression "commission" and "discount" were also distinguished. It was held by the Hon'ble High Court that bank has not undertaken any act on behalf of the assessee therein placed in the similar circumstances. The relationship between the bank and the assessee was not of an agency but that of two independent parties on principal to principal basis. The bank was also acting and equally protecting the interest of the customers whose credit card was used in the swiping machines. The bank was not associated with buying and selling of goods as such. The amount retained by the bank is a fee charged by them for having rendered the banking services and cannot be treated as a commission or brokerage paid in the course of us....