DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-4(1)(2), BANGALORE vs. M/S MYSORE SAREE UDYOG PVT LTD, BANGALORE

This appeal is preferred by the revenue against the order of CIT(Appeals) inter alia on the following grounds:-

During the course of hearing, the ld. Counsel for the assessee has contended that the impugned issue is squarely covered by the order of the Tribunal in assessee’s own case for the AY 2010-11. Copy of the order of the Tribunal is placed on record.

The ld. DR, on the other hand, has placed reliance on the order of the AO.

Having carefully examined the orders of the authorities below in the light of rival submissions, we find that the assessee company has claimed an amount of Rs.48,46,930 as credit card commission charges paid to banks for collection of payments for sales through credit cards. Assessee was asked to explain the reasons for not making TDS on such charges. In response thereto, it was stated that charges are levied by banks at a certain percentage of the transaction value and gets automatically debited to the assessee’s bank account. The banks only collect these payments from the account of the credit card holders and pay to the account of the merchant company. It was also contended that there is no agent-principal relationship between the two and banks cannot be regarded as agent and hence the application of section 194H of the I.T. Act is not warranted. This explanation furnished by the assessee was not accepted by the AO and he made a disallowance of Rs.48,46,930 u/s. 40(a)(ia) for non-deduction of tax u/s. 194 H of the Act.

Against the disallowance, the assessee preferred an appeal before the CIT(Appeals) and the CIT(Appeals) following the order of the Tribunal in assessee’s own case for the AY 2010-11, has held that credit card commission is in the nature of bank charges and not commission for which the provisions of section 194H may be attracted. He accordingly deleted the disallowance.

The order of the Tribunal still holds the field as it has not been reversed by the appellate authorities. So long as the order of the Tribunal holds the field, the subordinate authorities are supposed to follow the same. The CIT(Appeals), following the same, has decided the issue in favour of the assessee. Therefore, we do not find any infirmity in the order of the CIT(Appeals). Accordingly, we confirm the same.

In the result, the appeal of the revenue stands dismissed.