2019 (3) TMI 278 - AT - Income Tax

TDS u/s 194J - payment of Passenger Service Fee (PSF) to the Airport Operators - considering the nature of PSF - income u/s 2(24) - HELD THAT - As is clear from the findings recorded in case of Jet Airways (2017 (1) TMI 899 - BOMBAY HIGH COURT) PSF cannot be considered to be a payment made by the assessee airline. PSF is a payment made by the passenger which is only routed through the assessee airline. As undisputed that the amount handed over by the assessee airline to the Airport Operators has also not been claimed as expenditure by the assessee in its books of account. PSF is a statutory levy and the assessee airline is only acting as a conduit between the embarking passengers and the Central Government Agency. Clearly therefore, even the provisions of section 194J of the Act would not apply. Respectfully following decision of Jet Airways (supra) it is held that assessee was not required to deduct TDS u/s 194J on payment of PSF. DR has relied on the CBDT Office Memorandum dated 30th June, 2008. CBDT in its office Memorandum has opined that PSF is an income which is chargeable to tax in the hands of relevant Airport Authority. Tribunal in the case of Mumbai International Airport Pvt. Ltd. 2017 (2) TMI 640 - ITAT MUMBAI held that PSF is not an income u/s 2(24) in hands of the relevant Airport Operator. The Coordinate Bench has further held that the CBDT Office Memorandum is not binding on the Tribunal and the same cannot override the provisions of the Act. - Decided in favour of assessee TDS u/s 194H - commissioner or brokerage - amount retained by Banks/ Credit Card Agencies out of Sale consideration of the tickets booked through credit / debit cards - AO held that there is an implied agency relationship between the assessee airline and the banks - HELD THAT - We find that the issue in dispute stands fully covered by the decision in the case of JDS Apparel 2014 (11) TMI 732 - DELHI HIGH COURT it is held that the assessee was not required to deduct TDS on charges retained by Bank / credit card agencies out of the sale consideration of tickets booked through credit / debit cards. It is held that provision of section 194H are not attracted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the assessee was liable to deduct TDS on the Passenger Service Fee (PSF) paid to Airport Operators under section 194J of the Income Tax Act.
2. Whether the amount retained by banks/credit card agencies out of the sale consideration of tickets booked through credit/debit cards is covered under the definition of "commission or brokerage" under section 194H of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. TDS on Passenger Service Fee (PSF):
The primary issue was whether the assessee was liable to deduct TDS on the PSF paid to Airport Operators under section 194J of the Income Tax Act. The assessee, a company engaged in the business of Civil Aviation, collected PSF from passengers and handed it over to various airports/authorities. The Assessing Officer (AO) held the assessee as an "assessee in default" for non-deduction of TDS on PSF payments. The AO argued that the nature of PSF payments fell under the realm of section 194J, which pertains to fees for professional or technical services.

The Ld. CIT (Appeals) allowed the appeal of the assessee, holding that the assessee was not required to deduct TDS on PSF. The CIT (A) relied on the decision of the Hon’ble Delhi High Court in Cargo Linkers and the Mumbai ITAT in Jet Airways, which held that PSF does not attract TDS liability. The CIT (A) also noted that the payee had accounted for PSF in its taxable income, thus the assessee could not be held as an "assessee in default."

The ITAT upheld the findings of the CIT (A), noting that PSF is a statutory levy collected by the airline companies on behalf of Airport Operators as per Rule 88 of the Indian Aircraft Rules 1937. The Tribunal cited the decision of the Mumbai ITAT in Jet Airways, which was upheld by the Hon’ble Bombay High Court, and the CBDT Circular No. 21/2017, which accepted the High Court's view. The Tribunal concluded that PSF cannot be considered a payment made by the assessee airline but is a payment made by the passenger routed through the airline. Therefore, the provisions of section 194J do not apply.

2. TDS on Amount Retained by Banks/Credit Card Agencies:
The second issue was whether the amount retained by banks/credit card agencies out of the sale consideration of tickets booked through credit/debit cards is covered under the definition of "commission or brokerage" under section 194H of the Income Tax Act. The AO held that there is an implied agency relationship between the assessee airline and the banks, and thus the charges retained by the banks are in the nature of commission or brokerage.

The Ld. CIT (Appeals) held that the charges retained by the credit card companies/banks are not in the nature of commission or brokerage, following the decision of the Hon’ble Jurisdictional High Court in CIT vs. JDS Apparels Pvt. Ltd. The High Court held that the relationship between the bank and the assessee is not of an agency but of two independent parties on a principal-to-principal basis. The bank provides banking services and the amount retained is a fee for these services, not commission or brokerage.

The ITAT upheld the findings of the CIT (A), noting that the issue is fully covered by the decision of the Hon’ble Jurisdictional High Court in JDS Apparels. The Tribunal concluded that the assessee was not required to deduct TDS on charges retained by banks/credit card agencies out of the sale consideration of tickets booked through credit/debit cards, as the provisions of section 194H are not attracted.

Conclusion:
The ITAT dismissed the appeal of the department, upholding the CIT (A)’s decision that the assessee was not required to deduct TDS on PSF payments under section 194J and on amounts retained by banks/credit card agencies under section 194H. The Tribunal relied on established judicial precedents and CBDT circulars to reach its conclusions.