Credit card processing charges and passenger service fee were held outside TDS under sections 194H and 194I.

Amounts retained by banks on credit card settlements were treated as bank processing charges, not commission or brokerage, so they fell outside TDS under section 194H. Passenger service fee collected in relation to airport services was treated as a statutory levy and conduit collection, not rent for any lease, tenancy, or right to use premises, so it fell outside TDS under section 194I. The Tribunal relied on the nature of the payments, the absence of an agency relationship in the first issue, and the absence of a rental arrangement in the second, and upheld relief to the assessee on both issues.

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Issues: (i) Whether commission retained by banks and credit card companies on credit card transactions was subject to deduction of tax at source under section 194H of the Income-tax Act, 1961. (ii) Whether passenger service fees collected and remitted in relation to airport services was liable for deduction of tax at source under section 194I of the Income-tax Act, 1961.

Issue (i): Whether commission retained by banks and credit card companies on credit card transactions was subject to deduction of tax at source under section 194H of the Income-tax Act, 1961.

Analysis: The disputed amount represented charges retained by banks while settling credit card payments, not commission paid by a principal to an agent. The Tribunal followed its earlier consistent view that the merchant establishment only receives payment after deduction of bank charges, and the card-issuing bank does not act as a commission agent for the assessee. The nature of the transaction was treated as payment of bank charges and not commission or brokerage within the meaning of section 194H.

Conclusion: The amount was not liable to TDS under section 194H, and the assessee succeeded on this issue.

Issue (ii): Whether passenger service fees collected and remitted in relation to airport services was liable for deduction of tax at source under section 194I of the Income-tax Act, 1961.

Analysis: Passenger service fee was held to be a statutory levy under Rule 88 of the Indian Aircraft Rules, 1937, collected by the airline as a conduit for the airport operator and not as consideration for lease, sub-lease, tenancy, or any arrangement amounting to rent. The Tribunal relied on the statutory character of the levy, the allocation of the security component, CBDT clarification, and the absence of any demarcated premises taken on rent. On that reasoning, the payment did not fall within the ambit of section 194I.

Conclusion: The payment was not liable to TDS under section 194I, and the assessee succeeded on this issue.

Final Conclusion: The revenue's appeal failed in full, and the order granting relief to the assessee was upheld.

Ratio Decidendi: Amounts retained by banks as credit card processing charges are not commission for section 194H purposes, and statutory passenger service fees collected merely as a conduit do not constitute rent under section 194I absent a lease, tenancy, or comparable right to use premises.

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