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2016 (10) TMI 314 - AT - Income TaxShort deduction of TDS - TDS u/s 194C OR 194I - PSF and X-Ray charges - AO held that the payment made by the assessee was covered by the provisions of section 194-I and treated the assessee in default for not deducting the taxed at higher rate - Held that - Payment made by the assessee to MIAL cannot be treated rent, as per the provisions of section 194-I of the Act. There was no use of land by the assessee for both the charges collected by it. Thus, the basic ingredient i. e. use of land, plant, machinery etc. is missing and hence it can safely be held that the assessee had rightly deducted the tax at the rate of 2%, as per the provisions of section 194-C of the Act. PSF charges paid by the assessee on behalf of its customer, did not attract the provisions of section 194-I. See Jet Airways (India) case 2014 (9) TMI 650 - ITAT MUMBAI
Issues Involved:
1. Short deduction of TDS on Passenger Service Fees (PSF) and X-Ray charges. 2. Applicability of Section 194-I vs. Section 194-C for TDS deduction. 3. Treatment of PSF and X-Ray charges as rent. 4. Liability of the assessee in default under Section 201(1)/201(1A). 5. Interest calculation under Section 201(1A). Issue-wise Detailed Analysis: 1. Short deduction of TDS on Passenger Service Fees (PSF) and X-Ray charges: The Assessing Officer (AO) identified that the assessee deducted TDS at 2% on PSF and X-Ray charges instead of 10%. The AO issued a show cause notice to the assessee, who responded that the TDS was correctly deducted at 2% as per the certificate under Section 197 issued by the DC/ACIT TDS. The AO, however, calculated a short deduction of tax on PSF and X-Ray charges and issued notices under Section 201(1)/201(1A). 2. Applicability of Section 194-I vs. Section 194-C for TDS deduction: The AO argued that the payments made by the assessee for PSF and X-Ray charges fell under Section 194-I (rent) rather than Section 194-C (contractual payments). The assessee contended that these charges were for services provided by MIAL and not for the use of premises, thus falling under Section 194-C. The First Appellate Authority (FAA) agreed with the assessee, stating that PSF and X-Ray charges were not rent but payments for services. 3. Treatment of PSF and X-Ray charges as rent: The AO treated PSF and X-Ray charges as rent, leading to a higher TDS rate under Section 194-I. The FAA, however, held that PSF charges were collected by the assessee in a fiduciary capacity and handed over to airport operators, and X-Ray charges were for contractual services provided by MIAL. Therefore, these charges could not be categorized as rent under Section 194-I. 4. Liability of the assessee in default under Section 201(1)/201(1A): The FAA concluded that the assessee was not in default for deducting TDS at 2% under Section 194-C, as PSF and X-Ray charges did not constitute rent. The FAA directed the AO to delete the demands raised under Section 201(1)/201(1A). 5. Interest calculation under Section 201(1A): The AO calculated interest on the short deduction of tax under Section 201(1A). The FAA, however, held that the assessee was not liable for the principal amount of TDS where MIAL had discharged its tax liability. The assessee was only liable to pay interest until the date of payment of taxes by the payee. Conclusion: The Tribunal upheld the FAA's order, concluding that PSF and X-Ray charges were not rent and should be subject to TDS under Section 194-C at 2%. The Tribunal dismissed the AO's appeals and allowed the cross objections of the assessee for statistical purposes. The judgment clarified that the payments made by the assessee to MIAL could not be treated as rent under Section 194-I, and the assessee had correctly deducted TDS at 2% as per Section 194-C.
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