2019 (5) TMI 117 - HC - Income Tax

TDS u/s 194H - commission paid to the banks on processing of Credit Card Transactions - TDS liability - HELD THAT - As relying on M/S. HOTEL LEELA VENTURE LTD., 2018 (12) TMI 1637 - BOMBAY HIGH COURT The so called bank guarantee commission is not in the nature of commission paid to an agent but it is in the nature of bank charges for providing one of the banking service. The requirement of Section 194H of the Act, therefore, would not arise. - Decided in favour of assessee. Tds u/s 194I or 194C - use of lounge premises paid by the assessee - payments for contract of work under section 194C OR nature of rent as per section 194I - HELD THAT - Assessee would enter into an agreement with the agency which has rented out the lounge space at the Airport from the Airport Authority. Under such agreement, the assessee would pay committed charges be it on lumpsum basis or on the basis of customer flow to such agency. This in turn would enable the passengers of the Airlines to utilize the lounge facilities while in transit. We accept the suggestion of Mr.A.R. Malhotra appearing for the revenue that service of providing beverages and refreshments was not the dominant part of service. It may only be incidental to providing quiet, comfortable and clean place for customers to spend some spare time. We do not descreen element of rent being paid by the assessee to the agency. The assessee did not rent out the premises. The assessee did not have exclusive use to the lounge for its customers. The customers of the Airlines along with customers of other Airlines of specified categories, would be allowed to use all such facilities. Section 194I governs the situation where a person is responsible for paying any rent. In such a situation deduction of tax at source while making such payment is obligated. We do not find that the revenue is correct in invoking section 194I of the Act. - Decided against revenue.

Summary

Issues:
1. Interpretation of section 194H of the Income Tax Act regarding the deduction of tax at source on amounts retained by a bank/credit card agency.
2. Classification of payments for lounge premises as either contract work under section 194C or rent under section 194I of the Income Tax Act.

Issue 1: Interpretation of Section 194H:
The High Court considered 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" as per section 194H of the Income Tax Act. The Court referred to a previous judgment involving a Company engaged in the hotel business where the Tribunal had held that the bank did not act as an agent of the Company while processing credit card payments. The Court agreed with this view, emphasizing that the bank's role was that of a service provider rather than an agent facilitating the buying or selling of goods. The Court concluded that the bank's fee for banking services cannot be treated as commission or brokerage, as there was no agency relationship involved. Therefore, the Court upheld the Tribunal's decision, stating that no question of law arose.

Issue 2: Classification of Payments for Lounge Premises:
The second issue involved determining whether payments made by an Airlines Company for lounge premises should be treated as payments for contract work under section 194C or as rent under section 194I of the Income Tax Act. The Court noted that the Airlines Company provided lounge services to its customers through an agency, and the revenue contended that the payments made were for rent, thus requiring tax deduction at source under section 194I. However, the Court referred to a Supreme Court judgment overturning a Delhi High Court decision, which clarified that payments for certain services need to be analyzed based on the nature of the services provided. In this case, the Court found that the payments made by the Airlines Company for lounge space did not constitute rent as the Company did not have exclusive use of the premises, and customers from various airlines could use the facilities. Therefore, the Court dismissed the appeal, stating that section 194I of the Act was not applicable in this scenario.

In conclusion, the High Court upheld the Tribunal's decisions in both issues, emphasizing the importance of analyzing the nature of transactions to determine the applicability of tax deduction provisions under the Income Tax Act.