TaxTMI 
TaxTMI 
2019 (3) TMI 1359
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....The question of law sought to be urged by the Revenue reads as under: "Whether the ITAT erred in deleting the addition of Rs. 12,52,49,946/- made by the Assessing officer under Section 40(a)(ia) of the Income Tax Act,1961 being non deduction of TDS on account of payment gateway charges?" 3. The facts in brief are that the Assessee is engaged in the business of selling its travel products to the customers through the website makemytrip.com. A customer can log on to the Assessee's website, choose from its various travel products displayed there. Once the customer enters into a transaction, payment therefor is made by using the facility of an Internet Payment Gateway, which automatically opens. The payment gateway, which is provided in t....
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....iti Bank by virtue of which the said Banks could receive payments of the charges for payment gateway facility provided by them without deduction of TDS. The CIT (A) accepted the Assessee's submission that the payment gateway charges in the sums of Rs. 1,39,75,886/- paid to American Express Bank Ltd. and Rs. 7,84,06,562/- to Citi Bank were not subject to TDS and therefore Section 40 (a) (ia) of the Act was not applicable to such payments. However, the CIT (A) treated the sums paid to HDFC and ICICI towards payment gateway charges as commission and concurred with the AO that from the said sums TDS was required to be deducted by the Assessee under Section 194 H of the Act while making payment. The Assessee's appeal was thus allowed in part. ....
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....o the website which uses the various products displayed at the website and once he makes a transaction, payment is made using the facility of 'internet payment gateway'. The customer is directed to a secure gateway of the bank which provides the facility. In effect, the payment gateway authenticates the transaction for which payment is made by using a credit card. Thus, it provides a facility of secure fund settlements without manual intervention. It is sought to be contended by the Revenue that the amount deducted by the Bank in this process is actually a commission earned by the payment gateway and, therefore, would attract Section 194-H of the Act requiring deduction of tax at source. 9. The decision in Commissioner of Income Tax v. J....
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....nd selling of goods. Thus, the requirement of an agent and principal relationship. This is the exact purport and the rationale behind the provision. The bank in question is not concerned with buying or selling of goods or even with the reason and cause as to why the card was swiped. It is not bothered or concerned with the quality, price, nature, quantum etc. of the goods bought/sold. The bank merely provides banking services in the form of payment and subsequently collects the payment. The amount punched in the swiping machine is credited to the account of the retailer by the acquiring bank, i.e. HDFC in this case, after retaining a small portion of the same as their charges. The banking services cannot be covered and treated as services r....