Statutory levy and card-processing charges do not trigger TDS when no service payment or agency relationship exists.

Passenger Service Fee collected by an airline as a statutory levy and passed on to the airport authority was treated as a conduit receipt, not as payment for technical or professional services, so tax deduction at source under section 194J was held inapplicable and the airline could not be treated as an assessee in default under sections 201(1) and 201(1A). Amounts retained by banks or credit card agencies from ticket sale proceeds were also held outside section 194H because the relationship was principal to principal, the retention represented payment-processing charges, and no agency relationship existed. The Revenue's challenge therefore failed and the relief to the assessee was sustained.

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Issues: (i) Whether Passenger Service Fee collected and passed on by the airline was liable to tax deduction at source under section 194J of the Income-tax Act, 1961, and whether the assessee could be treated as an assessee in default under section 201(1) and section 201(1A); (ii) Whether the amount retained by banks or credit card agencies from ticket sale proceeds was liable to tax deduction at source under section 194H of the Income-tax Act, 1961.

Issue (i): Whether Passenger Service Fee collected and passed on by the airline was liable to tax deduction at source under section 194J of the Income-tax Act, 1961, and whether the assessee could be treated as an assessee in default under section 201(1) and section 201(1A).

Analysis: Passenger Service Fee was treated as a statutory levy collected by the airline under Rule 88 of the Indian Aircraft Rules, 1937, only as a conduit between passengers and the airport authority. The amount was not a payment by the airline for technical or professional services, and the character of the receipt remained that of a statutory charge routed through the airline for onward remittance. The earlier judicial view on Passenger Service Fee was followed, and the administrative circular relied upon by the Revenue could not override the statutory position.

Conclusion: Section 194J was not attracted. The assessee was not liable to deduct tax at source on Passenger Service Fee and could not be treated as an assessee in default under section 201(1) or section 201(1A).

Issue (ii): Whether the amount retained by banks or credit card agencies from ticket sale proceeds was liable to tax deduction at source under section 194H of the Income-tax Act, 1961.

Analysis: The bank or credit card agency was held to act on a principal to principal basis and not as an agent of the airline. The amount retained represented banking or payment-processing charges for services rendered by the acquiring bank, not commission or brokerage paid to a person acting on behalf of the assessee in the course of buying or selling goods. The existence of an agency relationship, which is essential to section 194H, was absent.

Conclusion: Section 194H was not attracted. The assessee was not liable to deduct tax at source on the amount retained by the bank or credit card agency.

Final Conclusion: The Revenue's challenge failed on both counts, and the relief granted to the assessee was sustained, resulting in dismissal of the appeal.

Ratio Decidendi: A statutory levy routed through an intermediary without constituting payment for technical or professional services does not attract section 194J, and banking or card-processing charges retained by an acquiring bank on a principal to principal basis do not constitute commission or brokerage under section 194H in the absence of an agency relationship.

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