INCOME TAX ACT, 1961

Section 194H

Tax deduction at source - TDS under section 194H - Merchant discount/collection charges paid on acount of credit card transactions - Applicability

Assessee was engaged in business of running a hotel. Proceedings under section 201 were initiated by way of notice under section 201 read with 201(1A) and assessee was asked to furnish details of commission allowed to the various banks on credit card transactions. Assessee submitted that credit card commission was out of the realm of section 194H since there was no principal-agent relationship between the merchant establishment and the bank and, therefore, provisions relating to tax deduction at source were not attracted. CIT(A) also held that in case of credit card payment, there was no liability to deduct tax under section 194H.Held: The issue was squarely covered in favour of the assessee by judgment in the case of CIT v. JDS Apparels (P) Ltd. (2015) 370 ITR 454 (Del) : 2015 TaxPub(DT) 232 (Del-HC). wherein it has been held that since the bank was making the payment to assessee after deduction of bank charges, there was no occasion for assessee to deduct tax at source under section 194H and further the bank was not acting on behalf of assessee but was acting on behalf of customers while processing payment through debit cards and credit cards.

Followed:CIT-II v. JDS Apparels (P) Ltd. (2015) 370 ITR 454 (Del) : 2015 TaxPub(DT) 232 (Del-HC) and Dy. CIT v. P.C. Jeweller Ltd. [ITA No. 4942/Del/2015, dt. 28-1-2019].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

SUBSCRIBE FOR FULL CONTENT