Section 194 H : No TDS by E seva Provider

Where assessee e-seva provider and bank launched co-branded credit card, for commission paid by bank to retail merchant assessee would not have TDS liability

[2015] 57 taxmann.com 92 (Hyderabad - Trib.)

IN THE ITAT HYDERABAD BENCH 'B'

Twin EDS (E-Seva)

v.

Income-tax Officer, Ward-14(3), Hyderabad

Section 194H, read with sections 194C and 201(1A) of the Income-tax Act, 1961 - Deduction of tax at source - Commissioner or brokerage etc. (Banks, in case of) - Assessment year 2010-11 - Assessee was involved in e-seva on behalf of State Government and it had entered into an agreement with a bank for providing co-branded credit cards - As per terms of agreement, bank gave discount/commission to retail merchant for utilizing facility of bank - Whether since assessee was nowhere connected with commission paid by bank to retail merchant Assessing Officer had wrongly invoked provisions of section 194H against assessee - Held yes, - Whether further, no services were rendered by assessee to bank or vice-versa and, hence, it did not involve any contract between these parties so as to invoke provisions of section 194C - Held, yes - Whether since sections 194H and194C were not applicable making assessee liable to TDS and, hence, demand raised by Assessing Officer could not be sustained - Held, yes [Para 6.1] [In favour of assessee]

Circulars and Notifications : Circular No. 681, dated 8-3-1994