No tds on sum paid to banks for utilization of credit card

Hi

No TDS on sum paid to banks for utilization of credit card facilities as the same in the nature of bank charges and not commission.

 

Can anyone please explain the logic behind the above statement?? 

 

I tried to read the case laws related to this but could not get the logic.

 

Any help is highly appreciated.

 

Thanks & Regards

Replies (2)

Hi,

TDS, as the name suggests, is the spot deduction of tax from the INCOME source itself, at the time of earning. This is to simplify the taxation procedure for the government and to ensure that the payment making and receiving individual / company is accounting the same without fail.

As all the transactions of a bank has a track,  there is less scope that it will not be recorded. So the main purpose of TDS has been fulfilled. So no TDS.

So probably that could be the logic.

Dear Rohan,

                       Kindly read the belowmention para carefully :

On going through the nature of transactions, we find considerable merit in the contention of the appellant that commission paid to the credit card companies cannot be considered as falling within 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 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.

I hope above given para helps u to better undersatnding.

 

Thnaks/Regards,

Ranu Purohit

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