2014 (9) TMI 650 - AT - Income Tax

Non-deduction of TDS on commission paid to banks on credit cards Held that - As decided in assessee s own case for the earlier assessment year, it has been held in Income Tax Officer-(TDS) -2(1) Versus M/s Jet Airways (India) Ltd. 2013 (8) TMI 586 - ITAT MUMBAI - the provisions of section 194H of the Act are not applicable as the banks make payments to the assessee after deducting certain fees as per the terms and conditions in the credit card and it is not a commission but a fee deducted by the banks - there is no relation between the bank and the shop keeper which establishes the relationship of a Principal and Commission Agent - provisions of section 194H are not attracted in this type of transaction - addition made and confirmed by CIT (A) was not justified - the payments made to the banks on account of utilization of credit card facilities would be in the nature of bank charges and not in the nature of commission within the meaning of section 194H of the Act and no TDS is required to be deducted u/s 194 H of the Act Decided against revenue. Short deduction of TDS on Passenger Service Fees Order u/s 201(1) and 201(1A) Held that - It is a statutory liability for every licensee to collect PSF - Since it is a statutory liability and the meaning given by the statute has to be considered and in this case the Indian Aircraft Rules, 1937 has used the term Fees , therefore, same meaning has to be given while considering the PSF - the assessee is only acting as a conduit between the embarking passengers and the Central Government agency - the assessee only collects the PSF from the passengers for and on behalf of the airport authority/operator and passes the same to the airport authority/operator - The CBDT, thus, clarified that the customer is also not given any right to use any demarcated space/place or the machinery of the cold storage and thus does not become a tenant - the provisions of 194-I is not applicable to the cooling charges paid by the customers of the cold storage - the PSF charges paid by the assessee on behalf of its customers, do not attract the provisions of Section 194-I of the Act - the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:

1. Short deduction of TDS on Passenger Service Fees (PSF).
2. Non-deduction of tax on commission paid to banks on credit cards.

Issue-wise Detailed Analysis:

1. Non-deduction of tax on commission paid to banks on credit cards:

The revenue's second grievance, covered in grounds No. 3 to 5, relates to the non-deduction of tax under Section 194H on commission retained by credit card companies/banks. The Tribunal's previous orders for assessment years 2007-08, 2008-09, and 2009-10, which were decided in favor of the assessee, are pertinent here. The AO had added Rs. 48,45,64,490/- for TDS and interest payable due to non-deduction under Section 194H. However, the CIT(A) followed earlier Tribunal decisions, which held that such deductions by banks are fees, not commissions, and thus not subject to Section 194H. The Tribunal cited cases from Jaipur, Bangalore, and Hyderabad Benches, reinforcing that the relationship between the bank and the shopkeeper does not constitute a Principal and Commission Agent relationship. The Tribunal upheld the CIT(A)'s findings, confirming that no TDS is required on these transactions, thus dismissing grounds No. 3, 4, and 5.

2. Short deduction of TDS on Passenger Service Fees (PSF):

The revenue's first grievance, covered in grounds No. 1 and 2, pertains to the short deduction of TDS on 35% of total PSF. The AO believed TDS should have been deducted under Section 194-I for payments to the Airport Authority of India. The assessee contended that PSF is a statutory levy collected in a fiduciary capacity and not claimed as an expense. The CIT(A) agreed, stating that PSF does not constitute rent under Section 194-I, as it is not a lease, sub-lease, or tenancy. The Tribunal supported this view, noting that PSF is a statutory fee collected and passed to the airport operators without being charged to the profit and loss account. The Tribunal referenced the Indian Aircraft Rules, 1937, and CBDT Circulars, which clarified that such fees do not attract Section 194-I. The Tribunal upheld the CIT(A)'s findings, confirming that the assessee is not liable for TDS on PSF, thus dismissing grounds No. 1 and 2.

Conclusion:

The appeal by the revenue was dismissed in its entirety. The Tribunal confirmed the CIT(A)'s findings on both issues, ruling that no TDS is required on commission retained by credit card companies and that PSF does not fall under the purview of Section 194-I. The order was pronounced in open court on 23/10/2013.