Tds on credit card collection service

This query is : Resolved

rajiv (Querist)
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12 May 2012 ONE OF MY CLIENTS HAS AGREEMENT WITH HDFC BANK FOR COLLECTING CREDIT CARD DUES ON BANK BEHALF. FOR THIS, BANK GIVES COMMISSION TO MY CLIENT AFTER DEDUCTING TDS U/S 194J i.e. TREATING IT AS PROFESSIONAL RECEIPTS. FOR A.YR 2011-2012, HIS TOTAL RECEIPTS WERE NEAR 39 LAKH. I FILED ITR U/S 44AD DECLARING DEEMED PROFITS @ 10% AND CLAIMED REFUND OF NEAR 3.5 LAKH RUPEES. BUT CIT NOTED THAT THE TDS HAS BEEN DEDUCTED U/S 194J,SO, THE ASSESSEE IS A PROFESSIONAL AND CAN NOT FILE ITR U/S 44AD AND WAS LIABLE TO TAX AUDIT.
BUT IN MY VIEW, HDFC BANK HAS DEDUCTED TDS UNDER WRONG SECTION. THE CORRECT SECTION SHOULD HAVE BEEN 194H AS THIS IS NOT PROFESSION BUT BUSINESS ONLY.
I REQUEST THE EXPERIENCED EXPERTS TO HELP ME WITH THEIR VIEWS AND GUIDES.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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24 May 2012 Even if TDS was deducted u/s 194H, it amounts to commission or brokerage income.

Section 44AD has been retrospectively amended to provide that the benefit of Section 44AD is not available for commission or brokerage income.

In this case, although the commission income is business income, assessee CANNOT avail benefit of Section 44AD and has to file normal ITR 4.