The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently allowed the plea of Make My Trip, deleted the order of the assessing officer making addition on account of TDS on payment gateway charges, directed to follow the guidelines issued by the Delhi High Court earlier in the year 2017.
The assessee, MMT India is engaged in the business of online selling of travel products and solutions, offers comprehensive services for the global traveler including air tickets, hotel reservations, car bookings, and holidays. Once the customer enters into a transaction, payment therefor is made by using the facility of an Internet Payment Gateway, which automatically opens. The payment gateway, which is provided in this case by four banks viz., HDFC, ICICI, Citibank and American Express, 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 cardholder.
During the relevant year, the Assessing Officer observed that gateway charges were received by the Indian Branches on their own account and payments have been duly declared in their respective return of income only in India and therefore, held that there is no human intervention involved at the time of clearance of the payments through gateway facility. He also held that the provisions of section 194H would be applicable to payment gateway charges paid to banks.
Failed to secure a favorable order from the first appellate authorities, the assessee approached the Tribunal.
The department held that the provisions of Explanation (2) to section 195 are applicable to the assessee according to which tax is required to be deducted from any payment made to a non-resident outside India.
The Tribunal observed that the assessee has the option to obtain a No-deduction Certificate from the AO which he has not done in the instant case.
“It is the submission of the Ld. Counsel for the assessee that identical issue had come up before the Tribunal in assessee’s own case for A.Y. 2009-10 and the Tribunal, vide order dated 26th September 2017, has decided the issue pertaining to non-deduction of taxes on payment gateway charges in favor of the assessee with certain directions/observations. Further, the appeal filed by the Revenue was dismissed by the Hon’ble High Court. Under these circumstances and considering the totality of the facts of the case, we deem it proper to restore this issue to the file of the AO with a direction to decide the issue afresh in the light of the decision of the Tribunal in assessee’s own case for A.Y. 2009-10 and decide the issue as per fact and law. Needless to say, the AO shall give the due opportunity of being heard to the assessee while deciding the issue. We hold and direct accordingly,” the Tribunal said.
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