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2020 (1) TMI 318 - AT - Income TaxTDS u/s 194J - Tax deduction at source on the passengers services fees(PSF) - assessee is a public limited company engaged in the business of running a passenger airline under the name and style Indigo - HELD THAT - Security services are to be provided by the Airport Owners and operators, who will in turn obtain it from any government agency specified by Central Government. Further, the facility charges are undeniably, service provided by the Airport operators to the passengers of the Airline assessee. Therefore, it is apparent that these parties are providing to the assessee services . Thus, we do not find any reason to hold that the provisions of section 194C do not apply to the passenger service fee payments. It is also relevant to note that several private companies and joint ventures owned and operate the airports in the country. For the facility and security of the passengers the airlines are collecting such fees. Only for the security reasons CISF, as designated by central government, is deployed at those airports. The airline for this reason passenger service fees is collected in their bills by the Airline assessee. Against this the passengers who availed the services of the assessee are provided facility and security. Therefore, the payment by the assessee to the owner of the airport is for the purpose of work which is covered u/s 194C of the Act. Thus, we hold that assessee should have deducted tax at source u/s 194C Security portion is payable by the Airport Authority of India and others to CISF which is govt. Firstly, this argument is flawed because assessee does not pay any sum to CISF but it is paid by the owners and operators of the airport. Hence, in the case of the assessee it cannot take shelter u/s 196 of the Act as the assessee is not payee to CISF but airport operators pay it. Thus, we uphold the order of the ld CIT (A) to that extent. Deduction of tax at source on year-end provisions - According to the provisions of the income tax act the tax is required to be deducted as and when assessee becomes responsible for payment of above sum to other parties. The claim of the assessee is that it is maintaining its books of account on accrual basis of accounting and therefore the amount is required to be provided for. When the expenditure incurred by the assessee, the corresponding liability definitely arises for payment of such expenditure. The amount of expenditure incurred can be determined only if, there is a recipient identified of the sum, there is a methodology available for working out the amount payable by the assessee to the recipient, there is a corresponding liability arising out of the existing contract or customs by the assessee with the recipient. If generally these ingredients are not satisfied assessee cannot be said to have incurred the expenditure. In absence of one of one of these criteria, if provision is made, it is not an ascertained liability but an unascertained liability, which does not satisfied the concept of accrual of expenditure. There may be reasons for receiving the bills by the service providers after certain time lag but that does not absolve the assessee from the liability of deduction of tax at source. In the present case the provision is made under the specified head, provision is also made to on certain basis thereby ascertaining the amount. It is not the case of the assessee that it has made an ad hoc provision. Thus it cannot be said that the payee is not identified. Therefore, according to us, the tax is required to be deducted on the year-end provisions made by the assessee which are ascertained liabilities. No doubt, the learned CIT(A) has given the benefit of the assessee if tax is deducted by the assessee subsequently. Therefore we do not find any infirmity in the order of the learned CIT(A) in holding that assessee has failed to deducted tax at source on year-end provisions. Thus the order of the learned CIT(A) is upheld to that extent. Now if the recipient of the income has shown the above provision in the income by filing the return of income and paying tax thereon, the assessee should be granted the benefit of the proviso to section 201 of the income tax act. In view of this, the assessee is directed to submit the relevant details in form number 26A of the income tax act rules before the assessing officer. On receipt of the above information from the assessee, the AO may determine the amount of default by the assessee and then rework the liability arising on the assessee under section 201 of the income tax act. In view of this ground number three of the appeal of the assessee is also set aside to the file of the learned AO. Levy of interest under section 201(1A) - AO has charged the interest from the. Beginning from the month in which tax was deductible up to the end of the month in which the return was due to be filed by the deducted, without appreciating that interest under that section, if leviable, was required to be computed only till the end of the relevant previous year. To examine the above argument of the assessee the proviso to section 201(1A) is required to be seen which is added with effect from 01-07-2012 corresponding to the proviso added to section 201 of the income tax act. According to that proviso the interest shall be chargeable from the date on which such tax was deductible to the date of furnishing of return of income by the payee. However as the ground number two and three of the appeal of the assessee are set aside to the file of the learned assessing officer, the assessee is at liberty to raise the amount of chargeability of interest with respect to the period, we also set aside this ground of appeal to the file of the learned assessing officer with the liberty to assessee to raise all the pleas charging of interest. Accordingly ground number four of the appeal of the assessee is also set aside to the file of the learned assessing officer. Tax at source on credit card gateway facility fee - The identical issues covered in favour of the assessee by the decision of the coordinate bench for assessment year 2012 13 in case of SpiceJet Ltd wherein has held that assessee was not required to deduct except source on charges written by bank and credit card agencies out of the same consideration of ticket booked through credit/debit cards and the provisions of section 194H are not attracted. Therefore respectfully following the decision of the coordinate bench we find no infirmity in the order of the learned CIT(A). The assessee cannot be held to be an assessee in default with respect to the above payment. Accordingly ground number two of the appeal of the learned assessing officer is dismissed.
Issues Involved:
1. Deduction of tax at source on Passenger Services Fees (PSF). 2. Deduction of tax at source on year-end provisions. 3. Period of levy of interest under section 201(1A) of the Income Tax Act. 4. Deduction of tax at source on credit card gateway facility fee. Detailed Analysis: 1. Deduction of Tax at Source on Passenger Services Fees (PSF): - Facts and Circumstances: The assessee, a public limited company running a passenger airline, collected PSF from passengers and paid it to airport operators. PSF consists of two components: security and facilitation. The assessee did not deduct tax on the security component, citing section 196, and deducted tax at 2% on the facilitation component. - Assessing Officer's (AO) Decision: The AO held that tax should have been deducted under section 194J, considering both components as professional fees. - CIT(A) Decision: The CIT(A) ruled that tax should be deducted at 2% under section 194C, not 10% under section 194J. - Tribunal's Decision: The Tribunal upheld the CIT(A)’s decision, stating that the services provided were standard facilities and did not qualify as technical or professional services under section 194J. The Tribunal also directed the assessee to furnish necessary details to avail the benefit of the proviso to section 201, which could prevent the assessee from being deemed in default if the airport operators included the PSF in their taxable income. 2. Deduction of Tax at Source on Year-End Provisions: - Facts and Circumstances: The assessee made year-end provisions for various expenses without deducting tax at source, arguing that the payees were not identifiable at the time of making the provisions. - Assessing Officer's (AO) Decision: The AO rejected the assessee’s explanation, stating that tax should be deducted as the provisions were ascertained liabilities. - CIT(A) Decision: The CIT(A) agreed with the AO but noted that tax was deducted in the subsequent year when the provisions were utilized. - Tribunal's Decision: The Tribunal upheld the CIT(A)’s decision, emphasizing that the provisions made were ascertained liabilities, and tax should be deducted at the time of making the provisions. However, the Tribunal allowed the assessee to submit relevant details in Form 26A to determine if the payees had included the provisions in their taxable income, potentially relieving the assessee from being deemed in default. 3. Period of Levy of Interest under Section 201(1A): - Facts and Circumstances: The AO charged interest from the month in which tax was deductible until the end of the month in which the return was due. - Tribunal's Decision: The Tribunal noted the proviso to section 201(1A) and set aside this issue to the AO, allowing the assessee to raise arguments regarding the period for which interest is chargeable. 4. Deduction of Tax at Source on Credit Card Gateway Facility Fee: - Facts and Circumstances: The assessee entered into agreements with banks for credit card gateway services. The AO argued that tax should be deducted under section 194H. - CIT(A) Decision: The CIT(A) held that the liability to deduct tax was on the banks, not the assessee. - Tribunal's Decision: The Tribunal upheld the CIT(A)’s decision, referencing a circular that no deduction is required on such payments and a coordinate bench decision that supported this view. The Tribunal found no infirmity in the CIT(A)’s order and dismissed the revenue’s appeal on this ground. Conclusion: For the assessment year 2010-11, the assessee's appeal was partly allowed, and the revenue's appeal was dismissed. For the assessment year 2011-12, the decisions mirrored those of 2010-11, with the assessee's appeal being partly allowed and the revenue's appeal dismissed. The Tribunal emphasized compliance with relevant sections and allowed the assessee to provide additional evidence to potentially avoid being deemed in default.
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