2019 (4) TMI 2127 - AT - Income Tax

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 ... TDS u/s 194J on payment of PSF[Passenger Service Fee] - HELD THAT:- As decided in assessee own case year 2012-13 [2019 (3) TMI 278 - ITAT DELHI] 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. It is undisputed that the amount handed over by the assessee airline to the Airport Operators has also not been claimed as expenditure by the asssesee in its books of account. See Jet Airways [2017 (1) TMI 899 - BOMBAY HIGH COURT] 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. Assessee was not required to deduct TDS u/s 194J on payment of PSF account of PSF. Decided against revenue. TDS u/s 194H - amounts retained by various banks for credit card commission - HELD THAT:- The issues involved in the present appeals are covered by the judgment of JDS Apparels (P.) Ltd [2014 (11) TMI 732 - DELHI HIGH COURT] wherein 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 against revenue. 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.