2016 (1) TMI 1213 - HC - Income Tax

TDS u/s 194I - PSF paid by the asssessee to the airport operators - non deduction of tds - assessee is engaged in the business of transportation by aircraft - ITAT deleted tds liability - Held that - We have to keep in mind the substance behind such charges. When the matter is looked into from this angle keeping in view the full and larger picture in mind it becomes very clear that the charges are not for use of the land per se and therefore it cannot be treated as rent within the meaning of section 194-I of the Act. It may be observed that the Apex Court did further observe that in view of the explanation to Section 194-I of the Act the normal/popular meaning of the word rent stood expanded. However primary requirement is that the payment must be for use of the land or building and mere incidental/minor/insignificant use of the same while providing other facilities and services would not make it a payment made for use of land/buildings. This is more so as the submission of the Revenue itself before us is that the payment of PSF is for use of secured building and furniture. Therefore the use of land/or building in this case is only incidental. Thus the ratio of the decision of the Apex Court in Singapore Airlines (2015 (8) TMI 185 - SUPREME COURT) would apply on all fours to the present facts. As the substance of the PSF is not for use of land or building but for providing security services and facilities to the embarking passengers the decision of the Apex Court in Singapore Airlines (2015 (8) TMI 185 - SUPREME COURT ) would cover the issue in favour of the respondent-assessee. No substantial question of law. Appeal admitted on second substantial question of law Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding the order of the CIT(A) and holding that the amount retained by a bank/credit card agency out of the sale consideration of the tickets booked through credit cards is not covered under the definition of commission or brokerage given in the Explanation (i) to Section 194H of the Act and the assessee was not liable to deduct tax at source under Section 194H in respect of this amount?

Summary

Issues Involved:
1. Interpretation of the definition of "rent" under Section 194-I of the Income Tax Act, 1961 in relation to Passenger Service Fees (PSF) paid by an assessee to airport operators.
2. Determination of whether the amount retained by a bank/credit card agency from the sale consideration of tickets booked through credit cards falls under the definition of "commission or brokerage" under Section 194H of the Act.

Analysis:

Issue 1: Interpretation of "Rent" under Section 194-I of the Act in relation to PSF:
- The respondent-assessee, engaged in aircraft transportation, collected PSF from passengers and handed it over to airport operators.
- The Revenue claimed that PSF constituted "rent" under Section 194-I, thus requiring tax deduction at source (TDS).
- The CIT(A) held that PSF was not rent, relieving the assessee from TDS obligations.
- The Tribunal, citing Indian Aircraft Rules and legal precedents, determined that PSF was for security services, not rent for land/building use.
- The Tribunal's decision aligned with the Supreme Court's ruling in a similar case, emphasizing the substance of charges over technical definitions.
- As PSF was for security services, not land/building use, the Tribunal upheld the CIT(A) decision, dismissing the Revenue's appeal.

Issue 2: Treatment of Amount Retained by Bank/Credit Card Agency under Section 194H:
- The second issue involves whether the amount retained by a bank/credit card agency from ticket sales qualifies as "commission or brokerage" under Section 194H.
- The detailed analysis and decision on this issue were not provided in the summarized text, as the appeal was admitted solely on the substantial question of law related to the first issue.

Conclusion:
- The High Court dismissed the appeal concerning the interpretation of "rent" under Section 194-I in relation to PSF, ruling in favor of the respondent-assessee based on the nature of the charges as security fees rather than rent for land/building use.
- The decision highlighted the importance of substance over form in determining tax liabilities and emphasized the specific purpose of charges in assessing tax obligations under the Income Tax Act.