Credit Card Commission to banks: Whether TDS attracted?
CASE LAW DETAILS
CASE NAME: ACIT Vs The Indian Hotels Company Ltd.( Taj Palace)
DATE OF JUDGEMENT /ORDER: 13.02.2019
RELATED ASSESSEMENT YEAR: 2012-13
COURT: ITAT, Delhi
FACTS OF THE CASE:
- The assessee is engaged in the business of running a hotel in the name of ‘Taj Palace’.
- Proceedings u/s 201 of the Income Tax Act , 1961 were initiated by way of notice u/s 201 r/w 201(1A) of the Act and the assessee was asked to furnish details of commission allowed to the various banks on credit card transactions during the year under consideration.
- The assessee relied on Notification No. 56 dated 31.12.2012 issued by the CBDT wherein it had been clarified that credit card commission was exempt from TDS.
- However, the Assessing Officer was of the opinion that there was an implied agency
relationship between the assessee and the banker and, thereafter, relying upon Circular no. 619 dated 4.12.1991, the Assessing Officer proceeded to hold that the assessee was liable to deduct tax at source from the payments received on account of credit card payments. This resulted in creation of a demand of Rs. 28,31,225/-.
- The Tribunal observed that the issue is squarely covered in favor of the assessee by the judgment of the Delhi High Court in the case of C.I.T. vs. JDS Apparels Pvt. Ltd. wherein it has been held that since the bank was making the payment to the assessee after deduction of bank charges.
- There was no occasion for the assessee to deduct tax at source and further the bank was not acting on behalf of the assessee but on the other hand was acting on behalf of the customers while processing payment through debit cards and credit cards.
- Hence, the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the provisions of tax deduction at source (TDS) under section 194H of the Income Tax Act, 1961 are not applicable to credit card commission paid to Banks.