Short Overview: Where assessee sold travel products through online website and paid fees to banks for providing payment gateway facility, the payment to banks could not be treated as commission or brokerage liable to TDS compliance under section 194H, as it was of the nature of fee and not a commission.

Assessee was engaged in business of selling its travel products to the customers through the website makemytrip.com. The payment gateway was provided by banks to assessee. The net price after deduction of facility charges by the payment gateway was automatically credited to the bank account of the merchant. The amount retained by the payment gateway facility provider included the charges for the facility of secured payment gateway and the charges of VISA/Mastercard. AO disallowed the payment made by the assessee to banks towards charges for providing the payment gateway facility alleging that the same was of the nature of commission liable to TDS compliance under section 194H.

It is held that the services provided by the payment gateway is such that the charges collected by it has to be necessarily treated as fees and not as a commission. The payment in fact is made by one principal to another and it is only being facilitated by the payment gateway by providing a service.

Decision: In assessee’s favour