Airlines not required to deduct TDS on PSF payments or credit card commissions retained by banks

ITAT DELHI ruled in favor of the assessee airline on two TDS issues. Regarding PSF payments, the tribunal held that airlines act merely as conduits between passengers and airport operators, with PSF being a statutory levy not constituting airline expenditure, thus exempting it from TDS u/s 194J. For credit card commission amounts retained by banks, following JDS Apparels precedent, the tribunal determined that section 194H provisions do not apply to charges retained by banks from ticket sale proceeds, as these do not constitute payments by the assessee requiring TDS deduction.

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Issues:
1. Taxability of Passenger Service Fee (PSF) under Section 194J of the IT Act, 1961.
2. Tax deduction on amounts retained by banks for credit card commission under Section 194H of the Act.

Issue 1: Taxability of Passenger Service Fee (PSF) under Section 194J:
The appeal by the Revenue challenged the CIT(A)'s order regarding the taxability of PSF paid by the appellant on behalf of customers under Section 194J. The Revenue contended that PSF receipts are taxable as income in the hands of Airport Operators. However, the ITAT, referring to a previous decision in the assessee's own case, held that PSF is a payment made by passengers, not the airline, and therefore, not subject to TDS under Section 194J. The ITAT upheld the CIT(A)'s decision based on the precedent and rejected the Revenue's appeal on this ground.

Issue 2: Tax Deduction on Credit Card Commission under Section 194H:
The second ground raised by the Revenue concerned the tax deduction on amounts retained by banks for credit card commission under Section 194H. The ITAT, relying on a decision of the Jurisdictional High Court in another case, concluded that the relationship between the bank and the assessee was not that of an agent but of two independent parties on a principal-to-principal basis. The ITAT held that the bank's retention of a fee for banking services did not fall under the purview of commission or brokerage paid in the course of buying or selling goods. Therefore, Section 194H was not applicable, and the assessee was not required to deduct TDS on such charges. The ITAT upheld the CIT(A)'s order on this point as well, dismissing the Revenue's appeal concerning credit card commission.

In summary, the ITAT, in the judgment, addressed the taxability of Passenger Service Fee (PSF) under Section 194J and the tax deduction on credit card commission under Section 194H. The decisions were based on precedents and interpretations of the relevant provisions of the IT Act. The ITAT ruled in favor of the assessee in both issues, upholding the CIT(A)'s orders and dismissing the Revenue's appeal.

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