IT (TDS) 3(5), MUMBAI V. VIJAY SALES, MUMBAI

ITA 2470/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2027 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 28-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non-deduction of tax
• Section: 133A; 201(1); 12

Judgement Text

F IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 2470 /MUM/2014 ( / ASSESSMENT YEAR : 2010-11) ./ I.T.A. NO. 2471 /MUM/2014 ( / ASSESSMENT YEAR : 2011-12) THE INCOME TAX OFFICER (TDS)3(5), ROOM NO. 1008, 10 TH FLOOR, SMT. K.G. MITTAL AYURVEDIC HOSPITAL BLDG., CHARNI ROAD, (W), MUMBAI 400 002. / V. M/S VIJAY SALES, 108, HINGORANI BUILDING, LADY JAMSHEDJI ROAD, NEAR SITLADEVI TEMPLE, MAHIM, MUMBAI- 400 016. ./ PAN : AAAFV0219J ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY SHRI SANJEEV KASHYAP ASSESSEE BY : NONE / DATE OF HEARING : 28-12-2015 / DATE OF PRONOUNCEMENT : 28-12-2015 !' / O R D E R PER BENCH : THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAI NST THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 13 , MUMBAI (HEREINAFTER CALLED THE CIT(A)) DATED 16-01-2014 PERTAINING TO THE ASSESSMENT YEARS 2010-11 AND 2011-12. SINCE , SIMIL AR GROUNDS ARE RAISED IN BOTH THESE APPEALS, WE HAVE DISPOSED OF BOTH THESE APPEALS BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA 2470 & 2471/MUM/2014 2 2. WE ARE FIRST TAKING UP THE APPEAL FOR THE ASSESS MENT YEAR 2010-11 VIDE ITA NO. 2470/MUM/2014 . THE FOLLOWING GROUNDS OF A PPEAL HAVE BEEN RAISED BY THE REVENUE IN THE MEMO OF APPEAL FILED WITH THE TRIBUNAL :- I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT NO TDS WAS DEDUCTIBLE U/S.194 H BY THE ASSESSEE COMPANY ON THE AMOUNT HELD BY THE BANKS/ C REDIT CARD AGENCIES AS SERVICE CHARGES IN RESPECT OF CREDIT CA RD SERVICES PROVIDED BY IT. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE 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 C ASE AND IN LAW, THE LD.CIT(A) ERRED IN FAILING TO APPRECIATE THAT IN SU BSTANCE 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 TH E AO'S CONCLUSION OF BRINGING THE CHARGES CHARGED TO THE ASSESSEE COMPAN Y 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 CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE INTEREST U/S 2 01(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 INTE REST DELETION IS CONSEQUENTIAL TO THE QUANTUM DELETION FOR WHICH FUR THER APPEAL HAS BEEN RECOMMENDED VIDE GROUND NO. I TO III. 2. AT THE TIME OF HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE, THEREFORE, WE PROCEED TO DISPOSE OF THE APPEAL AFTE R HEARING THE LD. D.R.. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/ S 133A OF THE INCOME TAX ACT, 1961(HEREINAFTER CALLED THE ACT) WAS CONDUCT ED BY THE REVENUE IN THE CASE OF HDFC BANK LIMITED. IT WAS REVEALED DURING T HE COURSE OF THE AFORE- STATED SURVEY PROCEEDINGS THAT DURING THE PREVIOUS YEAR UNDER CONSIDERATION, HDFC BANK LIMITED HAS WITHHELD AN AMOUNT OF RS. 2,7 8,90,471/- AS DISCOUNT/COMMISSION CHARGES WHILE MAKING PAYMENT OF THE BILL/INVOICE ITA 2470 & 2471/MUM/2014 3 AMOUNT OF THE SALES CARRIED OUT THROUGH THE CREDIT CARDS TO THE ASSESSEE AND THE SAID CHARGES HAS NOT BEEN SUBJECTED TO TDS BY T HE ASSESSEE U/S 194H OF THE ACT. A SHOW-CAUSE NOTICE DATED 5.3.2012 WAS ISS UED TO THE ASSESSEE BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) TO EXPLAIN AS TO WHY THE ASSESSEE SHOULD NOT BE TREATED AS AN ASSESSEE IN DE FAULT U/S 201(1) OF THE ACT. IN REPLY, THE ASSESSEE SUBMITTED ITS EXPLANATI ON WHICH DID NOT FOUND FAVOUR WITH THE A.O. THE A.O. EXAMINED THE NATURE A ND MANNER OF SERVICES BEING PROVIDED BY DIFFERENT PARTIES INVOLVED IN CRE DIT CARD TRANSACTIONS AND FUNCTIONS, WHICH IS ELABORATED IN HIS ORDERS U/S 2 01(1) AND 201(1A) OF THE ACT DATED 30-03-2012 AS UNDER:- 3.2 AN ISSUING BANK ISSUES CREDIT CARD TO A CUSTOM ER. AN ACQUIRING BANK PROVIDES SWIPING MACHINE TO RETAIL MERCHANT. BILL SETTLING AGENCY I.E. BSA WHICH IS VISA/MASTER CARD IN THIS FACILITI ES TRANSFER OF BILL AMOUNT. 3.3. WHEN A RETAIL MERCHANT SWIPES A CREDIT CARD FO R RECEIVING PAYMENT FROM CUSTOMER THEN BILL DETAILS AND AMOUNT ARE FORWARDED TO THE ACQUIRING BANK WHICH MAKES PAYMENT OF THE BILL AMOUNT TO THE RETAIL MERCHANT AND WITHHOLDS IS DISCOUNT IN NATURE OF COMMISSION FOR PROVIDING SERVICES TO THE RETAIL MERCHANT. THE ACQ UIRING BANK THEN THROUGH BILL SETTLING AGENCY RECOVERS THE BILL AMOU NT FROM THE ISSUING BANK. THUS THE ACQUIRING BANK FACILITATES RECOVERY OF BILL AMOUNT ON BEHALF OF RETAIL MERCHANT FOR WHICH IT CHARGES DISC OUNT IN NATURE OF COMMISSION. THE ACQUIRING BANK RENDERS SERVICES FO R RECOVERY OF THE BILL AMOUNT TO THE RETAIL MERCHANT AND HENCE ACTS A S AGENT OF THE RETAIL MERCHANT. THEREFORE, THE DISCOUNT IN NATURE OF COM MISSION WITHHELD BY THE ACQUIRING BANK WHILE MAKING PAYMENT TO THE RETA IL MERCHANT SHOULD BE SUBJECTED TO TDS U/S 194H@10%. 3.4 IT IS CLEAR FROM SECTION 194H THAT PAYMENT INCL UDES 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 O R BY ANY OTHER MODE. FROM THE ARRANGEMENT BETWEEN THE ASSESSEE AND THE A CQUIRING BANK, IT IS CLEAR THAT THEIR RELATIONSHIP IS OF PRINCIPAL AN D AGENT. IT IS SEEN THAT THE SWIPING MACHINE WHICH IS THE PRIMARY EQUIPMENT TO CARRY OUT TRANSACTIONS THROUGH CREDIT CARD, IS OWNED BY THE A CQUIRING BANK. THE ARRANGEMENT BETWEEN THE ACQUIRING BANK AND THE ASSE SSEE IS THAT OF PROVIDING SWIPING MACHINE TO THE ASSESSEE AND COLLE CTING BILL AMOUNTS OF ITS SALES TRANSACTED THROUGH CREDIT CARDS. THE A CQUIRING BANK PROVIDES ITS SWIPING MACHINES TO THE RETAIL MERCHAN T (ASSESSEE) FOR FACILITATING THE PAYMENT BY THE CUSTOMER THROUGH CR EDIT CARDS. THE ITA 2470 & 2471/MUM/2014 4 ACQUIRING BANK FURTHER FACILITATES THE RECOVERY OF BILL AMOUNT FROM THE ISSUING BANK BY COORDINATING BETWEEN THE ISSUING BA NK AND THE BILL SETTLING AGENCY. THUS IN THE WHOLE PROCESS OF SALE THROUGH CREDIT CARDS, THE ACQUIRING BANK IS INSTRUMENTAL NOT ONLY IN PROV IDING NECESSARY EQUIPMENT FOR CARRYING OUT SALE TRANSACTIONS THROUG H CREDIT CARDS BUT ALSO IN REALIZING THE BILL AMOUNT FROM THE ISSUING BANK. FOR RENDERING ABOVE SERVICES, THE ACQUIRING BANK IS ALLOWED TO RE TAIN CERTAIN PERCENTAGE AS ITS COMMISSION FROM THE BILL PAYMENT REALIZED FROM ISSUING BANK BEFORE REMITTING THE BALANCE TO THE AS SESSEE. THIS ARRANGEMENT OF WITHHOLDING CERTAIN PERCENTAGE OUT O F BILL RECOVERED BY THE ACQUIRING BANK FROM THE ISSUING BANK AND PAYABL E TO ASSESSEE IS NOTHING BUT A PAYMENT MADE TO ACQUIRING BANK IN ADV ANCE BY THE ASSESSEE BEFORE REMITTANCE OF NET BILL AMOUNT TO IT BY THE ACQUIRING BANK. IT IS CLEAR FROM SECTION 194H THAT PAYMENT IN CLUDES 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 O R BY ANOTHER MODE. THUS THE PAYMENT RECEIVED BY ACQUIRING BANK FOR REN DERING SERVICES OF FACILITATING PAYMENT OF SALES MADE THROUGH CREDIT C ARDS BY THE CUSTOMERS OF RETAIL MERCHANT AND COLLECTION OF BILL AMOUNT ON BEHALF OF RETAIL MERCHANT FROM THE ISSUING BANK IS SQUARELY C OVERED UNDER THE DEFINITION OF COMMISSION AS PER EXPLANATION TO SECT ION 194H OF THE ACT. 3.5 THE FACT THAT THE COLLECTION CHARGES ARE NOT BE ING PAID DIRECTLY BY THE RETAIL MERCHANT BUT IN FACT BEING RETAINED BY T HE ACQUIRING BANK FROM THE AMOUNT COLLECTED ON BEHALF OF RETAIL MERCH ANT WILL MAKE NO DIFFERENCE ALSO IN VIEW OF CBDT CIRCULAR NO. 619 DA TED 04-12-1991 WHICH IN PARA 6 SAYS A QUESTION MAY ARISE WHETHER THERE WOULD BE DEDUCTION OF TAX AT SOURCE UNDER SECTION 194H WHERE COMMISSION OR BROKERAGE IS RETAINED BY THE CONSIGNEE/AGENT AND NO T REMITTED TO THE CONSIGNOR/PRINCIPAL WHILE REMITTING THE SALE CONSID ERATION. IT MAY BE CLARIFIED THAT SINCE THE RETENTION OF COMMISSION BY THE CONSIGNEE/AGENT AMOUNTS TO CONSTRUCTING PAYMENT OF THE SAME TO HIM BY THE CONSIGNOR/PRINCIPAL, DEDUCTION OF TAX AT SOURCE IS REQUIRED TO BE MADE FROM THE AMOUNT OF COMMISSION. THEREFORE, THE CONSI GNOR/PRINCIPAL WILL HAVE TO DEPOSIT THE TAX DEDUCTIBLE ON THE AMOUNT OF COMMISSION INCOME TO THE CREDIT OF THE CENTRAL GOVERNMENT, WITHIN THE PR ESCRIBED TIME. AND THE ASSESSEE WAS TREATED AS IN DEFAULT U/S 201( 1)/201(1A) OF THE ACT BY THE AO VIDE ORDERS DATED 30-03-2012 , FOR NOT DEDUC TING THE TAX AT SOURCE U/S 194H OF THE ACT ON PAYMENT OF DISCOUNT/COMMISSION C HARGES OF RS. 2,78,90,471/- . THE DEFAULT WAS WORKED AS UNDER BY THE AO :- AMO UNT(RS) COMMISSION PAID ON ACCOUNT OF CREDIT CARD TRANSACTION RS. 2,78,90,471/- TAX ON THE ABOVE @ 10.33% 28,81,085/- ITA 2470 & 2471/MUM/2014 5 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 30-03-20 12, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTH ORITY I.E. THE CIT(A) AND SUBMITTED THAT THE ASSESSEE IS A SMALL RETAILER SEL LING GOODS TO CUSTOMERS THROUGH CREDIT CARDS AND THE BANK OF THE ASSESSEE G IVES CREDIT IN RESPECT OF THE SALE VALUES AFTER DEDUCTING DISCOUNT THERE-FROM AND IN TURN THE ASSESSEES BANK COLLECTS THE MONEY FROM VARIOUS BANKS AND FINA NCIAL INSTITUTIONS WHOSE CREDIT CARD WERE USED IN PAYMENT BY CUSTOMERS. THE ASSESSEE MADE WRITTEN SUBMISSION AND SUBMITTED THAT COMMISSION PAID TO TH E 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 CHARG ES NOT SUBJECT TO TDS U/S 194H OF THE ACT AS THE SAME ARE NOT IN THE NATURE O F COMMISSION WITH IN THE MEANING OF SECTION 194H OF THE ACT. THE ASSESSEE A LSO RELIED UPON THE DECISION IN THE CASE OF TATA TELESERVICES LTD. IN A PPEAL NOS 308 TO 310 AND 393 TO 396 (BANG.) AND STATED AS UNDER:- WE ARE ALSO ENCLOSING HEREWITH NOTIFICATION NO. 56/ 2012 [F.NO. 275/53/2012 IT (B)] DATE 31/12/2012 WHICH CLASSIFIE S IN ITEM VII. SECTION 197A OF THE INCOME TAX ACT, 1961 DEDUCTIO N OF TAX AT SOURCE NO DEDUCTION IN CERTAIN CASES SPE CIFIED PAYMENT UNDER SECTION 197A (IF). NOTIFICATION NO. 56/2012 [F. NO. 275/53/2012 IT ( B)] DATED 31- 12-2012. IN EXERCISE OF THE POWERS CONFERRED BY SUB-SECTION (IF) OF SECTION 197A OF THE INCOME TAX ACT, 1961 (43 OF 1961), THE CENTR AL GOVERNMENT HEREBY NOTIFIES THAT NO DEDUCTION OF TAX UNDER CHAP TER XVII OF THE SAID ACT SHALL BE MADE ON THE PAYMENTS OF THE NATURE SPE CIFIED BELOW, IN CASE SUCH PAYMENT IS MADE BY A PERSON TO A BANK LIS TED IN THE SECOND SCHEDULE TO THE RESERVE BANK OF INDIA ACT, 1934 (2 OF 1934) EXCLUDING A FOREIGN BANK, NAMELY:- (I) BANK GUARANTEE COMMISSION ITA 2470 & 2471/MUM/2014 6 (II) CASH MANAGEMENT SERVICE CHARGES (III) DEPOSITORY CHARGES ON MAINTENANCE OF DEMAT ACCOUNTS (IV) CHARGES FOR WAREHOUSING SERVICES FOR COMMODITIES (V) UNDERWRITING SERVICE CHARGES (VI) CLEARING CHARGES (MICR CHARGES) (VII) CREDIT CARD OR DEBIT CARD COMMISSION FOR TRANSACTIO N BETWEEN THE MERCHANT ESTABLISHMENT AND ACQUIRE BANK. 2. THIS NOTIFICATION SHALL COME INTO FORCE THE IST DAY OF JANUARY,2013. THE CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE BY RELYING UPON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CA SE OF ITO V. JET AIRWAYS INDIA LTD. (2013) 37 TAXMANN.COM 379 (MUMBAI TRIB UNAL) WHEREIN THE TRIBUNAL HELD AS UNDER:- 1. SECTION 194H OF THE INCOME TAX ACT, 1961 DEDUC TION OF TAX AT SOURCE, COMMISSION OR BROKERAGE (CREDIT CARD CHARGE S) ASSESSMENT YEAR 2007-08 TO 2009-10 WHETHER, PAYMENTS TO BANK S ON ACCOUNT OF UTILIZATION OF CREDIT CARD FACILITIES ARE IN NATURE OF BANK CHARGES, AND NOT IN NATURE OF COMMISSION WITHIN MEANING OF SECTI ON 194H, AND THEREFORE, NO TAX IS REQUIRED TO BE DEDUCTED ON SAM E HELD, YES (PARA 10)[IN FAVOUR OF ASSESSEE]. II. SECTION 195 OF THE INCOME TAX ACT, 1961 DEDUC TION OF TAX AT SOURCE PAYMENT TO NONRESIDENT [CERTIFICATE FOR NO N-DEDUCTION]- ASSESSMENT YEAR 2007-08 TO 2009-10 WHETHER, WHERE CERTIFICATE UNDER SECTION 195(3) WAS ISSUED TO BANK FOR RECEIVING PAY MENTS WITHOUT DEDUCTION OF TAX AT SOURCE FOR SPECIFIC FINANCIAL Y EARS MENTIONED THEREIN, IT COULD NOT BE HELD THAT IT WAS EFFECTIVE ONLY FROM DATE OF ISSUANCE HELD, YEAS [PARA 15] [IN FAVOUR OF ASSES SEE]. THE CIT(A) BY FOLLOWING THE DECISION OF THE AFORE-S TATED DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF JET AIRWAYS INDIA LI MITED(SUPRA), ALLOWED THE APPEAL OF THE ASSESSEE AND THE ADDITION MADE U/S 20 1/201(IA) OF THE ACT WAS HELD TO BE NOT SUSTAINABLE BY THE CIT(A) VIDE ORDE RS DATED 16-01-2014. HENCE , THE CIT(A) VIDE ORDERS DATED 16-01-2014 ORD ERED THE DELETION OF THE DEMAND OF RS.39,18,280/- RAISED BY THE AO VIDE ORDE RS U/S 201(1) AND 201(1A) OF THE ACT DATED 30-03-2012 . ITA 2470 & 2471/MUM/2014 7 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 ASSESS EE HAS MADE PAYMENTS OF RS.2,78,90,471/- TOWARDS THE CREDIT CARD COMMISS ION WHICH IS RECOVERED BY THE HDFC BANK LIMITED FROM THE ASSESSEE BY DEDUC TING FROM THE PAYMENTS MADE FOR THE INVOICES RAISED BY THE ASSESS EE. THE LD. D.R. FAIRLY CONCEDED THAT THIS ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF JET AIRWAYS INDIA LTD. (SUPRA). 7. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATER IAL AVAILABLE ON RECORD AND THE CASE LAWS RELIED UPON. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF JET AIRWAYS INDIA LTD. (SUP RA) WHEREBY IT WAS HELD THAT THE CREDIT CARD COMMISSION TO THE BANKS ARE IN THE NATURE OF NORMAL BANK CHARGES AND ARE NOT IN THE NATURE OF COMMISSION WIT HIN THE MEANING OF SECTION 194H OF THE ACT , AND THEREFORE NO TAX IS R EQUIRED TO BE DEDUCTED AT SOURCE ON THE SAME U/S 194H OF THE ACT. THE FINDING OF THE TRIBUNAL IN JET AIRWAYS INDIA LIMITED(SUPRA) ARE REPRODUCED HEREUND ER: 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E LD. REPRESENTATIVES OF THE PARTIES AND THE ORDERS OF TH E AUTHORITIES BELOW. WE HAVE ALSO CAREFULLY CONSIDERED THE PROVISIONS OF SE CTION 194H OF THE ACT. WE OBSERVE THAT THE SIMILAR ISSUE HAS BEEN CONSIDER ED BY THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF GEMS PARADISE (SUPRA) AND THE TRIBUNAL HELD VIDE PARAGRAPH 27 OF THE SAID ORDER T HAT THE PROVISIONS OF SECTION 194H OF THE ACT ARE NOT APPLICABLE AS THE B ANKS MAKE PAYMENTS TO THE ASSESSEE AFTER DEDUCTING CERTAIN FEES AS PER THE TERMS AND CONDITIONS IN THE CREDIT CARD AND IT IS NOT A COMMI SSION BUT A FEE ITA 2470 & 2471/MUM/2014 8 DEDUCTED BY THE BANKS. THE SAID PARAGRAPH 27 OF THE ORDER IS REPRODUCED BELOW : '27. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A), WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS REGARD. S ECTION 194H IS APPLICABLE WHERE ANY COMMISSION HAS BEEN PAID BY TH E PRINCIPAL TO THE COMMISSION AGENT. THIS IS NOT A CASE OF COMMISS ION AGENT AS ASSESSEE SOLD ITS GOODS THROUGH CREDIT CARD AND ON PRESENTATION OF BILL ISSUED AGAINST CREDIT CARD, THE BANK MAKES PAY MENT TO THE ASSESSEE AFTER DEDUCTING AGREED FEES AS PER TERMS A ND CONDITIONS IN CASE OF CREDIT CARD. THIS IS NOT A COMMISSION PA YMENT BUT A FEES DEDUCTED BY THE BANK. IF THERE IS AN AGREEMENT, THA T IS AGREEMENT BETWEEN THE CREDIT CARDHOLDER AND THE BANK. BANK IS A PRINCIPAL AND TO SPREAD OVER ITS BUSINESS, A SCHEME IS FLOATE D BY BANK I.E. ISSUANCE OF CREDIT CARDS. BANK ISSUES CREDIT CARD T O THE VARIOUS CUSTOMERS WHO PURCHASE THE VARIOUS CREDIT CARDS ON THE AGREED TERMS AND CONDITIONS. ONE OF THE MAJOR CONDITION IS THAT IF CREDIT CARD HOLDER DOES NOT MAKE PAYMENT WITHIN THE PRESCR IBED TIME LIMIT THEN THEY CHARGE 2% PENAL AMOUNT OF BILL WHIC H IS RAISED BY THE SHOP KEEPER AGAINST SALE OF ITS ITEMS THROUGH C REDIT CARD. BANK CANNOT REFUSE THE PAYMENT TO THE SHOP KEEPER WHO SA LE THEIR GOODS THROUGH CREDIT CARD. ONLY IN THOSE CASES WHERE GOOD S ARE FOUND DAMAGED AND CREDIT CARD HOLDER INFORM THE BANK THAT THE MATERIAL PURCHASED BY THEM IS DAMAGED OR DEFECTIVE AND REQUE ST THE BANK NOT TO MAKE THE PAYMENT, IN SUCH CASES ONLY BANK CA N WITHHOLD THE PAYMENT, OTHERWISE THE BANK HAS TO MAKE THE PAY MENT TO THE SHOP KEEPER. THEREFORE, IN OUR CONSIDERED VIEW, THE RE IS NO SUCH RELATION BETWEEN THE BANK AND THE SHOP KEEPER WHICH ESTABLISHES THE RELATIONSHIP OF A PRINCIPAL AND COMMISSION AGEN T. TECHNICALLY IT MAY BE WRITTEN THAT BANK WILL CHARGE CERTAIN PERCEN TAGE OF ITA 2470 & 2471/MUM/2014 9 COMMISSION BUT THIS IS NOT A COMMISSION BECAUSE ASS ESSEE SELLS ITS GOODS AGAINST CREDIT CARDS, AND ON PRESENTATION OF BILLS, THE BANK HAS TO MAKE THE PAYMENT. IT IS NOT THE CASE THAT BA NK HAS ADVISED THE ASSESSEE TO SELL THEIR GOODS TO ITS CUSTOMERS T HEN HE WILL PAY THE COMMISSION. IT IS REVERSED IN A SITUATION AS BA NK 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 CARD WITHOUT MAKING ANY P AYMENT AND THAT SHOP KEEPER PRESENTS THE BILL TO THE BANK AGAI NST WHOSE CREDIT CARD THE GOODS WERE SOLD AND ON PRESENTATION OF BIL L AS STATED ABOVE THE BANK MAKES THE PAYMENT. THEREFORE, IN OUR CONSIDERED VIEW, PROVISIONS OF SECTION 194H ARE NOT ATTRACTED IN THIS TYPE OF TRANSACTION. THEREFORE, WE HOLD THAT ADDITION MADE AND CONFIRMED BY LD. CIT (A) WAS NOT JUSTIFIED. ACCORDINGLY, THE ADDITION MADE AND CONFIRMED BY LD. CIT (A) IS DELETED.' 10. WE OBSERVE THAT THE SAID ISSUE WAS AGAIN CONSIDERE D BY THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF BHANDARI JEWEL LERS (SUPRA) AND FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, THE T RIBUNAL VIDE PARAGRAPH 7 OF THE SAID ORDER AGAIN HELD THAT THE PROVISIONS OF SECTION 194H OF THE ACT ARE NOT ATTRACTED IN THIS TYPE OF TRANSACTIONS. IT WAS HELD THAT NO TDS IS REQUIRED TO BE DEDUCTED ON THE FEES CHARGED BY T HE BANK ON CREDIT CARD TRANSACTIONS. WE ALSO OBSERVE THAT THE SIMILAR ISSU E AGAIN COME UP BEFORE THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF VAH MAGNA RETAIL (P.) LTD. (SUPRA) AND THE TRIBUNAL VIDE PARAGRAPH 4 OF T HE SAID ORDER DISMISSED THE APPEAL OF THE DEPARTMENT BY HOLDING T HAT THE AMOUNT RETAINED BY THE PRINCIPAL CONTRACTOR FROM THE PAYME NTS MADE TO THE CONTRACTING PERSONS AND THERE WAS NO REQUIREMENT FO R MAKING TDS ON THE AMOUNT. THE SAID PARAGRAPH 4 OF THE ORDER READS AS UNDER : ITA 2470 & 2471/MUM/2014 10 '4. WE HEARD THE LEARNED DEPARTMENTAL REPRESENTATIV E AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF DIRECT RETAIL TRADING IN CONSUMER GOODS. ASSESSEE CLAIMED DEDUCTION OF RS.16,34,000 O N ACCOUNT OF COMMISSION PAID TO THE CREDIT CARD COMPANIES, WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER IN TERMS OF S.4 0(A)(IA) ON ACCOUNT OF THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE IN TERMS OF S.194H OF THE ACT, WHILE MAKING THE SAID COMMISSION PAYMENTS. IT WAS THE CONTENTION OF THE ASSESSEE BEFORE THE LOWER AUTHORI TIES THAT THE ASSESSEE ONLY RECEIVES THE PAYMENT FORM THE BANK/CREDIT CARD COMPANIES CONCERNED, AFTER DEDUCTION OF COMMISSION THEREON, A ND THUS, THIS IS ONLY IN THE NATURE OF A POST FACTO ACCOUNTING AND DOES N OT INVOLVE ANY PAYMENT OR CREDITING OF THE ACCOUNT OF THE BANKS OR ANY OTHER ACCOUNT BEFORE SUCH PAYMENT BY THE ASSESSEE. CONSIDERING TH ESE SUBMISSION OF THE ASSESSEE, THE CIT(A) ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE AMOUNT OF RS.16,34,000 ON THE FOLLOWING REAS ONING : '9.8 ON GOING THROUGH THE NATURE OF TRANSACTIONS, I FIND CONSIDERABLE MERIT IN THE CONTENTION OF THE APPELLA NT THAT COMMISSION PAID TO THE CREDIT CARD COMPANIES CANNOT BE CONSIDERED AS FALLING WITH IN THE PURVIEW OF S.194H. EVEN THOU GH THE DEFINITION OF THE TERM 'COMMISSION OR BROKERAGE' USED IN THE S AID SECTION IS AN INCLUSIVE DEFINITION, IT IS CLEAR THAT THE LIABI LITY TO MAKE TDS UNDER THE SAID SECTION ARISES ONLY WHEN A PERSON AC TS 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 T HE MERCHANT ESTABLISHMENT CONDUCTS THE TRANSACTION FOR THE BANK . THE SALE MADE ON THE BASIS OF A CREDIT CARD IS CLEARLY A TRA NSACTION OF THE MERCHANTS ESTABLISHMENT ONLY AND THE CREDIT CARD CO MPANY ONLY ITA 2470 & 2471/MUM/2014 11 FACILITATES THE ELECTRONIC PAYMENT, FOR A CERTAIN C HARGE. THE COMMISSION RETAINED BY THE CREDIT CARD COMPANY IS T HEREFORE IN THE NATURE OF NORMAL BANK CHARGES AND NOT IN THE NATURE OF COMMISSION/BROKERAGE FOR ACTING ON BEHALF OF THE ME RCHANT ESTABLISHMENT. ACCORDINGLY, CONCLUDING THAT THERE W AS NO REQUIREMENT FOR MAKING TDS ON THE 'COMMISSION RETAI NED BY THE CREDIT CARD COMPANIES, THE DISALLOWANCE OF RS.16,34 ,000 IS DELETED....' WE FIND NO INFIRMITY IN THE ABOVE REASONING GIVEN B Y THE CIT(A). WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A) AND REJE CT THE GROUNDS OF THE REVENUE WHICH ARE DEVOID OF MERIT.' WE ALSO OBSERVE THAT THE BANGALORE BENCH OF THE TRI BUNAL BY FOLLOWING THE SAID DECISION OF THE HYDERABAD BENCH OF THE TRI BUNAL HAS HELD THAT THE PAYMENTS MADE TO THE BANKS ON ACCOUNT OF UTILIZ ATION OF CREDIT CARD FACILITIES WOULD BE IN THE NATURE OF BANK CHARGES A ND NOT IN THE NATURE OF COMMISSION WITHIN THE MEANING OF SECTION 194H OF TH E ACT AND HENCE NO TDS IS REQUIRED TO BE DEDUCTED U/S 194 H OF THE ACT . IN VIEW OF THE ABOVE WE HOLD THAT THE ISSUE IS SQUARELY COVERED IN FAVOU R OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDI NATE BENCHES OF THE TRIBUNAL WE UPHOLD THE ORDER OF THE LD. CIT(A) AND REJECT THE GROUNDS NO.1 TO 3 TAKEN BY THE DEPARTMENT FOR ALL THE THREE ASSE SSMENT YEARS UNDER CONSIDERATION. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF JET AIRWAYS INDIA LTD. (SUP RA) WHICH IS LATER AGAIN FOLLOWED BY MUMBAI TRIBUNAL IN THE CASE OF JET AIRW AYS INDIA LIMITED FOR SUCCEEDING ASSESSMENT YEAR I.E. 2010-11 IN 40 TAXMA NN.COM 178(MUM-TRIB.), WE HEREBY UPHOLD AND SUSTAIN THE ORDERS OF THE CIT( A) DATED 16-01-2014 ORDERING DELETION OF THE DEMAND OF RS.39,18,280/- R AISED BY THE AO VIDE ITA 2470 & 2471/MUM/2014 12 ORDERS U/S 201(1) AND 201(1A) OF THE ACT DATED 30- 03-2012 . WE ORDER ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA N0. 2470/MUM/2014 FOR THE ASSESSMENT YEAR 2010-11 IS DI SMISSED. 9. OUR ABOVE DECISION IN ITA NO 2470/MUM/2014 FOR T HE ASSESSMENT YEAR 2010-11 SHALL APPLY MUTATIS MUTANDIS TO THE APPEAL FOR THE ASSESSMENT YEAR 2011-12 IN ITA NO. 2471/MUM/2014.WE ORDER ACCORDING LY. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA N0. 2471/MUM/2014 FOR ASSESSMENT YEAR 2011-12 IS ALSO D ISMISSED. 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2015. !' # $% &! ' 28-12-2015 ( ) (SANJAY GARG) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 8 MUMBAI ; &! DATED 28-12-2015 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ 8 / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. ' / BY ORDER, = 9 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 8 / ITAT, MUMBAI