Payment Gateway Charges Paid By MakeMyTrip To Banks Are Not Commission, Not Liable For TDS: ITAT Delhi

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed the Revenue's appeal against MakeMyTrip India Pvt. Ltd., holding that payment gateway charges paid to banks are fees for banking services and not commission or brokerage.

Upholding the Commissioner (Appeals)' order deleting the disallowance, the tribunal followed the Delhi High Court's ruling in MakeMyTrip's own case and observed, "Respectfully following the decision of the Hon'ble Jurisdictional High Court, we hold that no TDS was required to be made u/s 194H in respect of payment of gateway charges made to the Banks and, therefore, revenue's appeal on this issue is dismissed."

A bench of Judicial Member Kavitha Rajagopal and Accountant Member Renu Jauhri also rejected the Revenue's challenge to the relief granted on depreciation claimed on website development costs, advertisement, marketing, and publicity (AMP) expenditure, and the disallowance relating to payments made to MMT Inc., USA.

MakeMyTrip, a travel agent and tour operator, filed its return for Assessment Year 2010-11 declaring nil income.

After the case was selected for scrutiny, the Assessing Officer completed the assessment and made several additions. These included a disallowance of ₹29.33 crore under Section 40(a)(ia) for failure to deduct tax at source on payment gateway charges paid to banks.

The officer also restricted depreciation on website development costs, disallowed part of the advertisement and publicity expenditure, and disallowed payments made to MMT Inc., USA.

The Commissioner (Appeals) granted relief on all four issues. Aggrieved by the decision, the Revenue approached the tribunal.

On payment gateway charges, the revenue argued that the charges retained by banks while facilitating online transactions constituted commission and therefore attracted deduction of tax at source under Section 194H. MakeMyTrip, however, contended that the Delhi High Court had already settled the issue in its own case.

The tribunal agreed with MakeMyTrip's submissions and noted that the Commissioner (Appeals) had rightly relied on the Delhi High Court's ruling in the company's own case.

It similarly declined to interfere with the relief granted on AMP expenditure, noting that coordinate benches had consistently decided the issue in the company's favour for earlier assessment years.

The revenue had also challenged the deletion of the disallowance relating to payments made to MMT Inc., USA. The tribunal observed that the issue was already covered by its earlier decision in MakeMyTrip's own case on identical facts. Finding no reason to take a different view, it upheld the Commissioner (Appeals)' order on this issue as well.

Accordingly, the tribunal dismissed the revenue's appeal in its entirety

For Assessee: Advocates Somil Aggarwal,Deepesh Garg and Saksham Aggarwal, CA

For Revenue: Mahesh Kumar, CIT(DR)