TaxTMI 
TaxTMI 
2016 (2) TMI 786
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....ce charges in respect of credit card services provided by it. ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in failing to appreciate the real and true nature of the relationship between the assessee company and bank/ credit card agencies. iii) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in failing to appreciate that in substance and in fact relationship between the assessee company and bank/ credit card agencies was in the nature of principal and agents relationship and therefore, the Ld. CIT(A) erred in not upholding the AO's conclusion of bringing the charges charged to the assessee company by the bank/ credit card agencies within the purview of section 194H of the I.T. Act, 1961." iv) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the interest u/s 201(lA) of the IT Act, 1961 on the non-deduction of tax determined by the AO as the tax determined has already been deleted by her and interest deletion is consequential to the quantum deletion for which further appeal has been recommended vide ground No. i to iii." 2. At t....
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....clear from section 194H that payment includes credit of such sum to the account of the payee or at the time of payment of such income in cash or by the issue of cheque or draft or by any other mode. From the arrangement between the assessee and the acquiring bank, it is clear that their relationship is of Principal and Agent. It is seen that the Swiping machine which is the primary equipment to carry out transactions through credit card, is owned by the acquiring bank. The arrangement between the acquiring bank and the assessee is that of providing swiping machine to the assessee and collecting bill amounts of its sales transacted through credit cards. The acquiring bank provides its swiping machines to the retail merchant (assessee) for facilitating the payment by the customer through credit cards. The acquiring bank further facilitates the recovery of bill amount from the issuing bank by coordinating between the issuing bank and the bill settling agency. Thus in the whole process of sale through credit cards, the acquiring bank is instrumental not only in providing necessary equipment for carrying out sale transactions through credit cards but also in realizing the bill amount fr....
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.... Tax on the above @ 10.33% 28,81,085/- Interest u/s 201(1A) for the period from 1.4.2009 to March 2012 (36 months) @1% 10,37,191/- Total liability of tax 39,18,276/- Rounded off to 39,18,280/- 4. Aggrieved by the orders of the AO dated 30-03-2012, the assessee preferred an appeal before the first appellate authority i.e. the CIT(A) and submitted that the assessee is a small retailer selling goods to customers through credit cards and the bank of the assessee gives credit in respect of the sale values after deducting discount there-from and in turn the assessee's bank collects the money from various banks and financial institutions whose credit card were used in payment by customers. The assessee made written submission and submitted that commission paid to the credit card companies cannot be considered as falling within the purview of section 194H of the Act but rather it is in the nature of normal bank charges not subject to TDS u/s 194H of the Act as the same are not in the nature of commission with in the meaning of Section 194H of the Act. The assessee also relied upon the decision in the case of Tata Teleservices Ltd. in Appeal Nos 308 to 3....
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....s mentioned therein, it could not be held that it was effective only from date of issuance - Held, yeas [para 15] [in favour of assessee]." The CIT(A) by following the decision of the afore-stated decision of the Mumbai Tribunal in the case of Jet Airways India Limited(supra), allowed the appeal of the assessee and the addition made u/s 201/201(IA) of the Act was held to be not sustainable by the CIT(A) vide orders dated 16-01-2014. Hence, the CIT(A) vide orders dated 16-01-2014 ordered the deletion of the demand of Rs. 39,18,280/- raised by the AO vide orders u/s 201(1) and 201(1A) of the Act dated 30-03-2012 . 5. Aggrieved by the orders of the CIT(A) dated 16-01-2014, the Revenue is in appeal before the Tribunal. 6. The ld. D.R. submitted before us that the assessee has made payments of Rs. 2,78,90,471/- towards the credit card commission which is recovered by the HDFC Bank Limited from the assessee by deducting from the payments made for the invoices raised by the assessee. The ld. D.R. fairly conceded that this issue is squarely covered in favour of the assessee by the decision of the Mumbai Bench of the Tribunal in the case of Jet Airways India Ltd. (supra). 7. We ....
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....ed 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 has advised the assessee to sell their goods to its customers then he will pay the commission. It is reversed in a situation as bank issued credit cards to the credit card holders on certain fees or whatever the case may be and the card holder purchases material from the market through his credit c....
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....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 card company only facilitates the electronic payment, for a certain charge. The commission retained by the credit card company is therefore in the nature of normal bank charges and not in the nature of commission/brokerage for acting on behalf of the merchant establishment.....