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October 10, 2023

TDS under Section 194H is not deductible because payments to gateway providers do not constitute brokerage

Corpus gifts are not taxable because they are capital in nature

Fact and issue of the case

The instant appeals filed by the assessee are directed against the order dated 16.01.2023 passed by the NFAC, Delhi arising out of the order dated 04.11.2019 passed by the Ld.DCIT, CPC, Bangalore u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 20 18-19 and against the order dated 18.0 1.2023 passed by the NFAC, Delhi arising out of the order dated 12.03.2021 passed by the National e-Assessment Centre, Delhi u/s. 143(3) r.w.sections 143(3A) & 143(3B) of the Act for A.Y. 20 18-19 respectively.

Since both the matters relate to the same assessee, these are heard analogously and are being disposed of by a common order for the sake of convenience

ITA No. 466/Bang/2023

The application is barred by limitation by 102 days. An application for condonation of delay has also been filed by assessee before us on 04.07.2023. The case of the assessee is this that the order impugned was served upon the assessee on 16.0 1.2023 and the appeal was, therefore, due to be filed by 17.03.2023. The order was served upon one of the staff members namely Suresh Kumar Reddy G, who left the organisation and after that the order got misplaced and therefore not brought to the notice of the management for filing appeal is the explanation given by the appellant before us Furthermore, the Managing Director was also out of station during the particular period of time. Hence the appeal could be filed on 17.03.2023 thereby causing 102 days delay.

It appears that sufficient cause has been explained by the assessee in preferring the appeal beyond date as mentioned above. The same seems to be genuine. Delay, therefore, is condoned.

Observation of the court

Further the Hon’ble Delhi High Court in case of PCIT vs. Make My Trip India (P.) Ltd. (supra) has observed as follows: “

The amount retained by the bank is a fee charged by them for having rendered the banking services and cannot be treated as a commission or brokerage paid in course of use of any services by a person acting on behalf of another for buying or selling of goods. The intention of the legislature is to include and treat commission or brokerage paid when a third person interacts between the seller and the buyer as an agent and thereby renders services in the course of buying and/or selling of goods. This happens when there is a middleman or an agent who interacts on behalf of one of the parties, helps the buyer/seller to meet, or participates in the negotiations or transactions resulting in the contract for buying and selling of goods. Thus, the requirement of an agent and principal relationship. This is the exact purport and the rationale behind the provision. The bank in question is not concerned with buying or selling of goods or even with the reason and cause as to why the card was swiped. It is not bothered or concerned with the quality, price, nature, quantum etc. of the goods bought/sold. The bank merely provides banking services in the form of payment and subsequently collects the payment. The amount punched in the swiping machine is credited to the account of the retailer by the acquiring bank, i.e. HDFC in this case, after retaining a small portion of the same as their charges. The banking services cannot be covered and treated as services rendered by an agent for the principal during the course of buying or selling of goods as the banker does not render any service in the nature of agency.”

From the case in hand, we find that the parties are service providers who collect fees from participants and they collect gateway payment commission from the appellant after returning the gateway charges they transfer the balance amount collected from the participants to the appellant.

We find that the payments made to gateway providers are not brokerage and TDS u/s. 194H of the Act is not liable to be deducted.

Thus taking into consideration the entire aspect of the matter and respectfully relying on the judgment passed by the different forums, we find that in the present facts and u/s. 194H. The addition, is, therefore, deleted. In the result, the appeal filed by the assessee stands allowed.

Order pronounced in the open court on 21st September, 2023.


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order from here


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