2025 (3) TMI 927 - AT - Income Tax

TDS u/s 194O - TDS liability on bookings made through CRS system - assessee has made payments under the Billing and Settlement (BSP) Mechanism to BSP IATA for air tickets of Full Cost Carrier (FCC) airlines booked through e-commerce platform viz. CRS System - assessee contends that the assessee denies it to be an e-commerce operator and is merely a travel agent booking tickets for its clients using a digital platform (CRS) which is a computerized system which stores and retrieves information for transactions related to air travel. HELD THAT - Section 194O mandates that the sale of goods of provision of services of e-commerce participants is carried on by the e-commerce operator through its digital or electronic facility or platform then the e-commerce operator shall deduct TDS @1% on the gross amount of such sales or services or both either during the credit of the amount or any other time were payment is made to the e-commerce participant whichever mode may be. Here in the present case there is no iota of doubt that the CRS system is not owned by the assessee and even otherwise as per the subscriber agreement entered into by the assessee Interglobe Technology Quotient Pvt. Ltd. (ITQPL) assessee shall be provided access to the software system solely for the purpose of using the Galileo system for obtaining information about the schedules fares seat availability etc. and other services and also for making bookings. It is also narrates the obligation of the assessee and specifies that the assessee cannot without prior consent modified enhance or make copies of old or part of the software and also categorically states that the ownership of the software is with ITQPL. It also facilitates the calculations of incentives and payments to the assessee and also restricts productivity incentive payments in case the assessee failed to achieve the target segments in any quarter. The recital of the agreement does not in any manner create the ownership right neither does it let the assessee operate or manage the CSR system. In the absence of any of these we find no justification in holding the assessee to be e-commerce operator and resultantly Section 194-O is not applicable in assessee s case and hence the assessee is held to be not liable to deduct TDS and therefore is not an assessee in default . No infirmity in the order of the ld. CIT(A). Appeal filed by the revenue is dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

a) Whether the assessee qualifies as an "e-commerce operator" under Section 194-O of the Income Tax Act, 1961, and is thus liable to deduct tax at source (TDS) on transactions conducted through the Computer Reservation System (CRS) platform.

b) Whether the assessee, by operating and managing the CRS platform, falls within the ambit of Section 194-O, which mandates TDS deduction by e-commerce operators.

ISSUE-WISE DETAILED ANALYSIS

Issue a) Qualification as an E-commerce Operator under Section 194-O

Relevant Legal Framework and Precedents: Section 194-O of the Income Tax Act mandates that an e-commerce operator must deduct TDS at 1% on the gross amount of sales or services facilitated through its digital or electronic platform. The section defines an e-commerce operator as a person who owns, operates, or manages a digital or electronic facility or platform for electronic commerce.

Court's Interpretation and Reasoning: The Tribunal examined whether the assessee owns, operates, or manages the CRS platform. It was determined that the assessee merely uses the platform provided by CRS companies (Amadeus, Galileo, and Sabre) and does not have ownership or control over it. The Tribunal referenced the subscriber agreement, which explicitly stated that the assessee was granted access solely for booking purposes and did not have rights to modify or control the platform.

Key Evidence and Findings: The subscriber agreements with CRS companies were pivotal, indicating that the assessee had limited access for specific purposes and that ownership and operational control remained with the CRS providers. The agreements also detailed restrictions on the assessee's ability to alter or manage the software.

Application of Law to Facts: The Tribunal applied the definition of an e-commerce operator under Section 194-O and concluded that the assessee did not meet the criteria, as it neither owned nor operated the CRS platform. The assessee's role was limited to using the platform for booking tickets, without any control or management rights.

Treatment of Competing Arguments: The revenue argued that the assessee's involvement in booking and managing transactions implied control over the platform. However, the Tribunal found that the operational and managerial aspects were retained by the CRS companies, not the assessee.

Conclusions: The Tribunal concluded that the assessee does not qualify as an e-commerce operator under Section 194-O and is not liable to deduct TDS on transactions conducted through the CRS platform.

Issue b) Operation and Management of the CRS Platform

Relevant Legal Framework and Precedents: The Tribunal referenced the definition of "operate and manage" as requiring control over the digital platform, as interpreted in previous cases like Asia Satellite Telecommunications and Rashtriya Ispat Nigam Limited.

Court's Interpretation and Reasoning: The Tribunal emphasized that the assessee's role was limited to using the CRS system without any operational control. The agreements with CRS providers confirmed that the assessee did not have rights to operate or manage the platform.

Key Evidence and Findings: The Tribunal relied on the agreements and the nature of the assessee's business, which involved using the CRS platform for booking without altering or controlling it.

Application of Law to Facts: The Tribunal applied the legal definitions and concluded that the assessee's activities did not constitute operating or managing the CRS platform, as these functions were retained by the CRS companies.

Treatment of Competing Arguments: The revenue's assertion that the assessee's involvement implied control was rejected, as the Tribunal found that the agreements and factual circumstances did not support this claim.

Conclusions: The Tribunal concluded that the assessee did not operate or manage the CRS platform and was therefore not liable to deduct TDS under Section 194-O.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The ownership and operational control of the CRS system remain with the CRS companies, and the assessee's role is limited to accessing the system for booking purposes."

Core Principles Established: The definition of an e-commerce operator under Section 194-O requires ownership, operation, or management of a digital platform. Mere access or use does not suffice.

Final Determinations on Each Issue: The Tribunal held that the assessee is not an e-commerce operator under Section 194-O and is not liable to deduct TDS on transactions conducted through the CRS platform. The appeal by the revenue was dismissed.

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