Question And Answer
Subject: Applicability of TDS under Income tax Act.
Querist: P. Kasat
Answered by:
Tags: ,
Date: May 31, 2022
Query asked by P. Kasat

1. Assessee is running a Proprietorship Business of Vendor Payment Services and Gift Cards Processing. FY 2020-21 Turnover was Rs. 96.60 lk.
Current year FY 21-22 Turnover is Rs. 13.50 crores.

2. Considering the turnover of previous year – No TDS applicability for Current FY 2021-22 for Section 194C/ 194H and 194J. However, it exceeded Rs. 50 lacs transactions with single parties and hence is covered under Section 194M.

3. Total two parties where the Turnover exceed Rs. 50 Lacs.

a. First Party- Availed Gateway Services for vendor payment. This party has its registered domain and known for its gateway.

b. Second Party- Availed Gateway Services for vendor payment and also Gift card processing.
This party uses the gateway of others, basically it works as sub-Gateway provider.
This party is a *related Party*. Assessee is Director in this company.

a. First Party:
No TDS deducted.
However, Judicial pronouncement regarding Non applicability for TDS on gateway charges there.

1. ACIT Vs. Head Infotech India Pvt. Ltd., Hyderabad
2. Dcit 9(3)(2), Mumbai vs Futura Value Retail Ltd, Mumbai,
3. MakeMy Trip (India) Pvt. Ltd., Vs DCIT,Circle-6(1), New Delhi

1. Whether the view in case of First Party is right?

2. What will be the view for Second Party w.r.t Gift card processing- TDS applicability?

3. What will be the view for Second Party w.r.t Sub gateway used and Related Party?

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Answer given by

In case of TDS when there is a doubt it is desirable to deduct the TDS . The Tribunals have taken the view that if the payee has filed the return and paid the tax no disallowance can be made ,however the interest is leviable .Refer , Surat District Co-op. Milk Producer’s Union Ltd. v. DCIT (2021) 191 ITD 612 (Surat) (Trib.) ,ARSS Infrastructure Project Ltd.v. DCIT (2021) 187 ITD 727 (Cuttack) (Trib.), Nitesh Estates Ltd. v. Dy. CIT (2021) 85 ITR 421 (Bang) (Trib), United Teleservices Ltd. v. ACIT (2021)86 ITR 36 (SN) (Kol) (Trib)

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