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. Accordingly, concluding that there was no requirement for making TDS on the ‘Commission retained by the credit card companies.
INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI
BEFORE SHRI B.R. MITTAL, JM AND SHRI RAJENDRA, AM
I.T.A. No. 7439, 7440 and 7441/Mum/2010
Assessment Years: 2009-10,2007-08 and 2008-09
Income Tax Officer-(TDS)-2(1)
Vs.
M/s Jet Airways (India) Ltd.
Date of Pronouncement : 17.7.2013
O R D E R
PER B.R.MITTAL JM:
These three appeals are filed by the department against three separate orders of ld. CIT(A) of dated 27.8.2010 for the assessment years 2007-08 to 2009-10 on similar grounds and similar facts, except that the amount involved varies. Therefore, we have heard these appeals together and dispose of the same by a common order for the sake of convenience.
2. All these three appeals are arising out of the orders passed by the AO u/s 201(1)/201(1A) of the Income Tax Act, 1961 (the Act) of dated 18.11.2009. Since the grounds of appeal and the facts are common, we consider it prudent to state the grounds of appeal which are as under :
“1 On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred 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. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the lower withholding of tax u/s 195(3) be applied to their retrospective operation.
5. On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in ignoring well established principle that unless stated otherwise, any certificate or permission or approval as the case may be, is deemed to take effect from the date of issue or the date of its operation if specified and cannot take a retrospective effect, unless the same is clearly expressed to do so by the competent authority.
6. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary at the time of hearing of the case or thereafter.”
3. In Ground Nos. 1 to 3 of the appeals, the issue involve is as to whether Ld.CIT(A) has erred on the facts and circumstances of the case, in holding that no TDS u/s 194H of the Act is required to be deducted by the assessee-company on the impugned retention by banks/credit card agencies in respect of ticket booked through credit card.
4. The relevant facts are that the assessee is a company engaged in the business of aviation i.e. transportation of passengers and cargo by air. A survey action u/s 133A of the Act was carried out on 5.01.2009. After survey, proceedings were initialed u/s 201(1)/201(1A) of the Act in connection with the applicability of TDS on amounts retained by the banks in respect of air tickets booked through credit cards. 5. The AO has stated break up of the amounts retained by the various banks from the air tickets sold through the credit cards in respect of Financial Years relevant to the assessment years under consideration as under:
