Tds on credit card collecting bank's discounts / commission

TDS 1241 views 2 replies

Chirag Gala

Proprietor

30 Points Joined February 2012

Hi Friends,

It's been years that the Credit Card was introduced and widely accepted at various retail counters. Now, almost a smallest counter would have a machine as well.

However, till date retailers were not paying any TDS on charges of the collecting bank, as there was no clarity. Now, IT department has started serving notices to retailers for not deducting TDS and hence to pay the same with interest and so on.

Can any one throw light on what is the real nature of the transaction? As per IT Bank's are agent of assessee just because they are deducting certain amount and paying the rest to assessee and then collecting "on behalf" of assessee, which doesn't seem to be right!!

Pls share your valuable knowledge.

Regards,

CA Chirag Gala

Replies (2)

CA Suraksh Bhaskar Shetty

28 Points Joined September 2011

To fall within the provisions of Sec 194H , the payment received or receivable, directly or indirectly, is by a person acting on behalf of another person :

(i) For services rendered

(ii) For any services in the course of buying or selling of goods, or

(iii) In relation to any transaction relating to any asset, valuable article or thing. The element of agency has to be there in case of all services or transactions contemplates by Sec 194H-Mother Diary India Ltd vs ITO(2009) 28 SOT 42 Delhi.

The Bank is only a facilitator for collection of the amount due to the supplier of goods or service and the Bank is getting a nominal amount for this purpose. This is basically “Merchant Discount” and not Commission.

The Bank neither represents The party as its agent nor solicits business from the cardholder for and on behalf of the party.

Notices are issued by the ITO (TDS)currently and this also under dispute regarding the deduction of TDS, but we may consider this as Merchant Discount” and not Commission.

Chirag Gala

Proprietor

30 Points Joined February 2012

Hi Mr. Shetty,

Thanks for your sharing. There is also very recent citation / judgement by Hyderabad ITAT in DCIT v/s M/s Vah Manga Retail (P) Ltd. It is held that such payments are not commission and it is in the nature of normal bank charges.

Regards,

CA Chirag Gala