Income Tax Appellate Tribunal - Delhi
M/S. Makemytrip (India) Private ... vs Addl.Cit, New Delhi on 26 September, 2017
1
I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCHES: "E" NEW DELHI ]
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND SHRI L. P. SAHU, ACCOUNTANT MEMBER.
I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
Makemy Trip India Pvt. Ltd., Addl. Commissioner
243, Ground Floor, Tower A, Vs. of Income Tax,
SP Infocity, Udyog Vihar, Phase-I, Range : 6,
Gurgaon [Haryana] - 122 016. New Delhi.
PAN : AADCM 5146 R
(Appellant) (Respondent)
Assessee by : Shri Tarandeep Singh, C. A.;
Department by : Ms. Renu Amitabh, CIT [DR];
Date of Hearing : 20.09.2017
Date of Pronouncement : 26.09.2017
O R D E R.
PER BHAVNESH SAINI, J. M. :
This appeal by the assessee has been directed against the order
of the ld. CIT (Appeals)-XXIX, New Delhi, dated 13.06.2014 for the
assessment year 2009-10.
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
2. We have heard the learned counsels of both the parties and
perused the findings of the authorities below.
3. The assessee on ground No. 1 challenged the disallowance under
section 40(a)(ia) of the Income Tax Act, 1961 of Payment Gateway
Charges for a sum of Rs.8,38,85,754/-. The Assessing Officer disallowed
Rs.12,52,49,946/- for want of non-deduction of TDS under section 194H
of the I. T. Act. The assessee submitted before the ld. CIT (Appeals) that
it is engaged in the business of selling its travel products to the
customers. The products sold were through the website operated by the
company i.e. makemytrip.com. In this case, a customer can log in to the
above website from anywhere, choose from various travel products
displayed on the website and make a transaction on line. For such
transaction undertaken payment is made by the customer using the
facility of an Internet Payment Gateway (payment gateway). Once a
travel product is selected, the customer is directed to the secure payment
gateway of banks which provide this facility of making payment through
internet. The payment gateways are secured websites and are used by
e-Commerce companies like assessee for the purpose of automatic and
instant fund settlement of any transaction authenticated and authorised
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
by VISA and Master Cards. The transaction is authorised by VISA /
Master Card to ensure that the customer, while using his credit card on
the payment gateway has sufficient credit limit to purchase the product.
In other words, payment gateway website provides the facility for secure
fund settlement in e-Commerce transaction electronically, automatically,
instantly, round the clock, without involving manual intervention and as
system driven transaction. In the nut-shell, the website of the assessee
automatically opens for payment gateway as soon as the customer
selects the product and clicks the payment option. The payment gateway
website electronically transfers the customer data to the credit card
issuer through VISA / Master Card, for the approval of the issuer and
consequently the amount is debited by the issuer to the card-holder.
Instantly the payment gateway website confirms approval to the
merchant e-Commerce website and the transaction with respect to the
customer gets concluded. The net price after deduction of facility
charges by payment gateway have automatically credited to the bank
account of the merchant. The amount retained by the payment gateway
facility provider includes the charges for the facility of secured payment
gateway and whatever are charges of VISA net / issuer. The secured
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
payment gateway facilities are provided to all e-Commerce customers
and are in the nature of standard facilities.
3.1 The Assessing Officer has disallowed the payment gateway
charges paid to the banks - HDFC, ICICI, American Express and Citi
Banks aggregating to Rs.12,52,49,946/- under section 40(a)(ia) of the
Act, holding that TDS should have been deducted under section 194H of
the Act treating as payment of "commission" or "brokerage". With regard
to applicability of section 194H of the Act, the AO stated that the services
rendered by the bank are in the nature of recovery of bills from
customers on behalf of the merchant. The payment made against the
service is in the nature of commission i.e. being charged by the bank per
transaction. Accordingly, the AO disallowed the payment gateway
charges paid to the bank by treating the same as commission under
section 194H of the Act. During the course of assessment proceedings
the assessee also filed the 'NIL' with-holding tax certificate under section
195 of the Act with respect to payments received by American Express
and Citi Bank. The assessee submitted that the payment gateway
charges paid to the banks is not in the nature of commission or
brokerage under section 194H of the Act. The provisions of section 194H
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
of the Act deals with the deduction of tax at source on the payments in
the nature of brokerage and commission. From the perusal of provisions
of section 194H itself amply clear that for a payment to fall within the
ambit of term 'commission or brokerage', it is necessary that such
payment is received or receivable, directly or indirectly, by a person
acting on behalf of other persons for :- (i) services rendered (not being
professional charges) in the course of buying or selling of goods or (ii) in
relation to any transaction relating to any asset, valuable article or
things, not being securities. The assessee, therefore, submitted that if
the payment is made by one principal to another principal, then it
would not be in the nature of commission. The detailed submissions of
the assessee are noted in the impugned order along with case laws on
which assessee relied upon along with the issue of notification under
section 197A of the Income Tax Act by the Government of India. The
assessee, therefore, pleaded that section 194H of the I. T. Act would not
apply in the case of assessee because there is no transaction of
commission or brokerage. The assessee also submitted that American
Express Bank Ltd. and Citi Bank have issued 'NIL' TDS certificate
under section 195(3) of the Act by the DDIT, Mumbai and copies of
the same were placed before AO. As per certificate, these banks can
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
receive payment of interest and other sum without any TDS. The
assessee submitted that in any view of the matter, payment gateway
charges of Rs.1,39,75,886/- paid to American Express Bank Ltd. And
Rs.7,84,06,562/- to the Citi Bank would not have been subject to
TDS and there is no default in not deducting the TDS and,
therefore, provisions of section 40(a)(ia) of the Income Tax Act are not
applicable in this case.
3.2 The learned CIT (Appeals) considered this issue in detail
in the light of the Notification of the Government of India and section
194H of the Income Tax Act, 1961 and noted that these payments
are collected by the said banks for and on behalf of the assessee
and after deducting its commission balance is transferred to the
bank account of the assessee. Thus, the banks are providing service
in the course of buying of the goods from the assessee. Hence, payment
received by the banks for providing such services to the assessee
are in the nature of commission or brokerage and, therefore, subject
to TDS. The learned CIT (Appeals) also noted that the assessee has
furnished certificates from Citi Bank and American Express Bank
wherein it has been mentioned that gateway charges were received
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
by Indian branches on their own account and these payments have
been duly declared in their respective returns of income filed in India.
In view of these facts, the learned CIT (Appeals) held that assessee
was not under obligation to deduct tax while making payments of
gateway charges to Citi Bank and American Express Bank. The learned
CIT (Appeals), therefore, held that provisions of section 194H would
be applicable to payment gateway charges paid to the banks, since
assessee has not made TDS as per provisions of section 194H on
these payments, the action of the Assessing Officer in disallowing
these payments under section 40(a)(ia) of the Act was upheld.
However, payments made to Citi Bank and American Express Bank
were not to be considered for the purpose of disallowance under the
above provision. Appeal of the assessee was partly allowed.
4. The learned counsel for the assessee, at the outset, submitted
that the issue is covered by the order of the ITAT, SMC Bench, in the
case of same assessee for assessment years 2010-11 and 2011-12 in
I. T. Appeal Nos. 7054 and 7055/Del/2014 vide order dated 30 th
January, 2017, in which an identical issue was decided, ld. CIT (Appeals)
deleted the addition and Department's appeal has been dismissed.
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
The findings of the Tribunal in para Nos. 6 to 9.1 of the above order
are reproduced as under :-
" 6. The Assessing Officer levied interest under section
201(1A) and raised demand of Rs.11,36,600/- in the
assessment year 2010-11 and Rs.20,29,758/- in the
assessment year 2011-12 on account of default under section
201(1) for non-deduction of tax on payment of gateway
charges retained/paid to bank under section 194H of the Act
and in consequence also charged interest under section
201(1A). The ld. CIT (Appeals) has also deleted the addition
made on account of default on account of provisions made in
the books of account, because as per the appellant, TDS has
to be made on payment or credit whichever is earlier. The ld.
CIT (Appeals) has deleted these demands, which have been
questioned by the Revenue.
7. At the outset of hearing, the ld. AR pointed out that the
issue raised is fully covered by the decision of Hon'ble
jurisdictional High Court of Delhi in the case of CIT Vs. J.D.S.
Apparels Pvt. Ltd., Income Tax Appeal No. 608/2014 dated
18.11.2014. He submitted that gateway charges incurred is
neither commission nor brokerage and with this observation
the Hon'ble jurisdictional High Court has decided the issue in
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
favour of the assessee in the above cited decision. He also
placed reliance on the following decisions and Notification of
the CBDT :-
" (i) CIT Vs. JDS Apparels Pvt. Ltd. (Del.)
(ITA. No. 608/2014) (Paras 16 & 17);
(ii) DCIT Vs. Vah Magna Retail (Pvt.) Ltd.
(ITA. No. 905/Hyd./2011);
(iii) ITO Vs. Jet Airways India (Pvt.) Ltd.
36 Taxman.com 379;
(iv) Tata Teleservices Ltd. Vs. DCIT
29 Taxman.com 261 (Bang.);
(v) Copy of the assessment order passed under section
143(3) of the Act for assessment year 2011-12
in the respondent's case;
(vi) CBDT Notification No. SO3069(E)56/2012
Dated 1.01.2013;
(vii) Industrial Development Bank of India Vs. ITO
[ JO SOT 397 ];
(viii) Pfizer Ltd. Vs. ITO (TDS),
( ITA. No. 1667/Mum./2010). "
8. The ld. Sr. DR, on the other hand, placed reliance on
the assessment order.
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
9. Having gone through the above cited decisions
especially the decision of Hon'ble jurisdictional High Court of
Delhi in the case of CIT Vs. J.D.S. Apparels Pvt. Ltd. (supra), I
find that an identical issue has already been decided in favour
of the assessee. The Assessing Officer was of the view that the
payments on account of gateway charges made by the
assessee to the banks constitutes "commission" as
contemplated by section 194H of the Act and levied interest
under section 201(1A) on non-deduction of tax on the
payment. The payment gateways are secured website and are
used by e-commerce companies like assessee for the purpose
of automatic and instant fund settlement of any transaction
authenticated and authorized by VISA and Master Card
(VISA/Master Card). The transaction is authorized by
VISA/Master Card to ensure that the customer, while using
his credit card on the payment gateway, has sufficient credit
limit to purchase the product.
9.1 The contention of the assessee remained that provisions
of section 194 of the Act deal with deduction of tax at source
on the payments in the nature of brokerage and commission
and for a payment to fall within the ambit of the term
"commission or brokerage", it is necessary that such payment
is received or receivable, directly or indirectly by a person
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
acting on behalf of another person for (i) services rendered
(not being professional services) or in the course of buying and
selling of goods; or (ii) in relation to any transaction relating
to any asset, valuable article or thing not being securities.
Thus recipient of commission is an agent, representative of
the payer being the principal. If the payment is made by one
principal to another principal, as in the present case, then
it would not be in the nature of commission. The Hon'ble
jurisdictional High Court of Delhi in the case of the CIT Vs.
J.D.S. Apparels Pvt. Ltd. (supra) has decided the issue in
favour of the assessee. The relevant finding given in para Nos.
15 and 16 are being reproduced hereunder :-
" 15. Applying the above cited case law to the factual matrix of the present
case, we feel that Section 194H of the Act would not be attracted. HDFC
was not acting as an agent of the respondent-assessee. Once the payment
was made by HDFC, it was received and credited to the account of the
respondent-assessee. In the process, a small fee was deducted by the
acquiring bank, i.e. the bank whose swiping machine was used. On swiping
the credit card on the swiping machine, the customer whose credit card was
used, got access to the internet gateway of the acquiring bank resulting in
the realisation of payment. Subsequently, the acquiring bank realised and
recovered the payment from the bank which had issued the credit card.
HDFC had not undertaken any act on "behalf" of the respondent-assessee.
The relationship between HDFC and the respondent-assessee was not of an
agency but that of two independent parties on principal to principal basis.
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
HDFC was also acting and equally protecting the interest of the customer
whose credit card was used in the swiping machines. It is noticeable that
the bank in question or their employees were not present at the spot and
were not associated with buying or selling of goods as such. Upon swiping
the card, the bank made payment of the bill amount to the respondent-
assessee. Thus, the respondent assessee received the sale consideration. In
turn, the bank in question had to collect the amount from the bankers of the
credit card holder. The Bank had taken the risk and also remained out of
pocket for sometime as there would be a time gap between the date of
payment and recovery of the amount paid.
16. 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
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
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. "
In view of above decision and the decisions cited by the
assessee before the ld. CIT (Appeals), I am of the view that the
ld. CIT (Appeals) has rightly held that the provisions of section
194H of the Act are not applicable in the present case and
thus, the assessee was not in default under section 201(1) on
account of gateway payment charges and hence levy of interest
under section 201(1A) of the Act by the Assessing Officer was
not justified. He thus has rightly deleted the additions made
on account of default under section 201(1) of the Act and
interest levied under section 201(1A) in consequent to the
above default under section 201(1) of the Act in both the
assessment years. The same are upheld. "
5. The learned CIT [DR], however, relied upon the orders of
the authorities below.
6. On consideration of the rival submissions in the light
of the earlier order of the Tribunal dated 30th January, 2017
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
(supra) we find that this issue is already decided in favour of
the assessee by the Tribunal following the decision of the Hon'ble
Delhi High Court in the case of CIT Vs. JDS Apparels (P.) Ltd.
(2015) 370 ITR 454 (Del.) in which it was held "that commission
to bank on payments received from customers who had made
purchase through credit cards is not liable to TDS under section
194H of the I. T. Act." The issue is covered in favour of the
assessee by order of ITAT, Delhi Bench in the case of same
assessee vide order dated 30th January, 2017. Therefore, there
is no justification for the authorities below to sustain addition
on this issue.
7. Learned counsel for the assessee further submitted that
assessee also moved before the Addl. Commissioner of Income Tax
for direction under section 144A of the Income Tax Act for
assessment year 2011-12 on the identical issue in which the
learned Addl. Commissioner issued the directions vide order
dated 20th March, 2015 directing the Assessing Officer to follow
decision of the Hon'ble jurisdictional High Court in the case of
JDS Apparels (P.) Ltd. (supra). It, therefore, stands concluded
that assessee is not liable to make TDS on payments gateway
charges. Therefore, provisions of section 194H of the Income Tax
Act would not apply to the facts and circumstances of the case.
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
We accordingly set aside the orders of the authorities below and
delete the entire addition.
8. In the result, ground No. 1 of appeal of the assessee is
allowed.
9. On ground No. 2 the assessee challenged the disallowance
of Rs.1,63,257/- on account of rate of depreciation on computer
peripherals. During the assessment year under appeal the assessee
has included various computer peripherals, which form an
integral part of the computer system under the block "Computer
including software". The computer peripherals so includes routers,
printers, UPS batteries, modems etc. The assessee submitted that
while passing the assessment order, the Assessing Officer has
allowed depreciation on computer peripherals @ 15% as plant and
machinery instead of 60% as computer including software. The
assessee has relied upon certain case laws in support of the
contentions, which are reproduced in the appellate order and
prayed that depreciation on computer peripherals may be allowed
at the rate of 60%.
10. The learned CIT (Appeals) considering the details of items
on which higher depreciation has been claimed, found that most
of the items are UPS, modems, printers and routers. All these items
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
have been held by various judicial authorities to be computer
peripherals, which are subjected to depreciation @ 60%. However,
the list includes certain items like digital call logger board and
software protection, Nortel equipment, head-sets, and time
attendance system. These items do not satisfy the criterion of the
computer peripherals as enunciated by various judicial authorities.
Hence, these items are subject to depreciation like plant
and machinery. This issue was partly allowed in favour of the
assessee.
11. After considering the rival submissions, we do not find
any justification to interfere with the order of the learned CIT
(Appeals). New Appendix 1, applicable to assessment year under
appeal, Income Tax Rules in Part III(5) provides depreciation @
60% on computers including computer software. Notes 7 below
the table provides "Computer software" means any computer program
recorded on any disc, tape, perforated media or other information
storage device, as follows :-
" 1
[NEW APPENDIX I
[Effective from assessment year 2006-07 onwards]
[See rule 5]
TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSIBLE
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
Block of assets
............ ............ ............
I. Building [See Notes 1 to 4 below this Table]
............ ............ ............
III. Machinery and Plant
............ ............ ............
(5) Computers including computer software (See Note 7 below this Table) = 60%
............ ............ ............
............ ............ ............
Notes:
1. "Buildings" include roads, bridges, culverts, wells and tubewells.
............ ............ ............
............ ............ ............
7. "Computer software" means any computer program recorded on any
disc. tape, perforated media or other information storage device.
.............. .............. ..............
.............. .............. .............. "
11.1 The learned counsel for the assessee has not pointed out
any error in the order of the learned CIT (Appeals) in declining part
depreciation on the items which were not part of the computer
software. The learned CIT (Appeals) did not allow higher depreciation
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
on items like digital call logger board and software protection,
Nortel equipment, head-sets and time attendance system, because
they would not fall within the definition of computer or computer
software. In the absence of any serious challenge to the findings of
the learned CIT (Appeals), we do not find any justification to interfere
with the order of the learned CIT (Appeals). We confirm the findings
of the learned CIT (Appeals) and dismiss the ground of the
assessee.
12. In the result, the appeal of the assessee is partly
allowed.
13. The order is pronounced in the Open Court on : 26 th September,
2017.
Sd/- Sd/-
( L. P. SAHU ) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : the 26th September, 2017.
*MEHTA*
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I. T. Appeal No. 4721/Del/2014
Assessment Year : 2009-10.
Copy of the Order forwarded to :-
1. Appellant;
2. Respondent;
3. CIT;
4. CIT (Appeals);
5. DR, ITAT, ND.
BY ORDER
ASSISTANT REGISTRAR 20 I. T. Appeal No. 4721/Del/2014 Assessment Year : 2009-10.
Date Draft dictated on 20-25.09.2017 Draft placed before author 21-26.09.2017 Draft proposed & placed before the 26.09.2017 second member Draft discussed/approved by 26.09.2017 Second Member.
Approved Draft comes to the 26.09.2017 Sr.PS/PS Kept for pronouncement on 26.09.2017 File sent to the Bench Clerk 26.09.2017 Date on which file goes to the AR Date on which file goes to the Head Clerk.
Date of dispatch of Order.
21I. T. Appeal No. 4721/Del/2014 Assessment Year : 2009-10.