This is what I read in a Tax Talk Column in Hindu.
Please clarify the applicability of the provisions relating to deduction of tax at source for the following payments:
Certification charges paid to nationalised banks at the time of export
Commission paid to credit card companies e.g. Citibank, on sales effected through credit cards
Hire charges (monthly rental) paid for use of vehicles particularly in the light of the amendment to section 194-I. C. P. Ethirajan
The payment in the nature of certification charges to nationalised banks will not come within the purview of the TDS requirement, there being no provision to require the deduction of tax at source.
Commission paid to credit card companies will not fall within the purview of the requirement to deduct tax at source. Section 194H deals with tax deducted at source on commission and brokerage, and the Explanation to the Section defines the term to include any payment received or receivable directly or indirectly by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities. The definition makes it clear that only when one person acts on behalf of another, the requirement to deduct tax at source under Section 194H will arise. Where a commission is paid to credit card companies there would be no case where one person would be acting on behalf of another since the sale is concluded by the vendor on his own behalf and not on behalf of the credit card companies and, therefore, the same would not be covered by Section 194H. It may be noted that though the definition is inclusive in nature the scope of the definition cannot be extended to such an extent to cover what is otherwise intended.
In case of hire charges paid, the transaction will have to be looked into to see whether the same is in the nature of a hire purchase or lease. If the transaction were in the nature of the former, there would be a requirement to deduct tax at source only on the interest under Section 194A. This Section, however, excludes the requirement to deduct tax at source if payment is made to a banking company or a co-operative society engaged in the business of banking and, therefore, where the hire is from a bank etc., as mentioned above, there would be no requirement to deduct tax at source on the interest. If the transaction were in the nature of lease there would be a requirement to deduct tax at source under Section 194-I in respect of the lease rentals paid or payable on or after July 13, 2006. It may be noted that Section 194-I was amended with effect from this date to cover within the ambit of the Section rent paid on plant and machinery as well and a car or any other vehicle would be classified as plant and machinery for the purposes of the Act.
It seems that whatever banks charge, they call commission. Basically they are all bank charges no matter what you term them. After all a wolf is a wolf even in sheeps clothing. Finally we have to only see whether bank transaction charges come under any purview of TDS. Yes, the author rightfully says leasing of plant and machinery from a Bank is covered if it is not a loan. That is if a bank attaches its hypothecated machines and gives them on hire to someone else to run to recover the dues of its defaulting borrower, you would have to deduct TDS on the payments. I am not an expert in these matters.It is just as I get obsessed with these matters as they become big problems if wrongly handled.
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