TaxTMI 
TaxTMI 
2019 (3) TMI 278
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....ts / authorities; and, (b) Amounts retained by banks for rendering credit card processing services from the payments received by such banks from the passengers for booking tickets to fly in the aircrafts operated by the assessee. 2.1 Being aggrieved, the assessee filed an appeal before Ld. CIT (Appeals). The Ld. First Appellate Authority allowed the appeal and held that the assessee was not required to deduct TDS on the above items. Aggrieved, the department is now in appeal before the ITAT and the following grounds of appeal have been raised:- "1. Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in holding that the assessee was not liable to deduct tax at source form the payment of Passenger Service Fee (PSF) made by it to the Airport Operators particularly when the assessee, on its own, has deducted at source from the payments of PSF from 2012 onwards. 1.1 Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in holding that the PSF paid by the assessee to the Airport Operators was not covered under the definition of fee for professional of technical services given....
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....ess of facilitation of credit / debit card booking, the bank / credit card agency is nothing but a constructive agent for the airline company? 2.3 Whether on the facts and in the circumstances of the case and in law, the CIT (A) was justified in ignoring that the Explanation (i) to section 194H gives an inclusive definition of "commission or brokerage" and has wide coverage to clearly include the percentage of the sale consideration of the ticket, booked through credit / debit cards, retained by the bank / credit card agency?" 3. Before us, the Ld. CIT (DR) vehemently contended that the assessee was liable to deduct TDS on payment of PSF. By relying upon the findings recorded by the AO in his order u/s 201(1) of the Act, it was submitted by her that the Ld. CIT (A) has erroneously allowed the claim made by the assessee. The Ld. CIT (DR) further relied upon Office Memorandum dated 30th June, 2008 issued by the CBDT in support of her contention that PSF was a receipt taxable in hands of the relevant Airport Authority and, therefore, the assessee ought to have deducted TDS on said payments. 4. On the other hand, the Ld. AR, Shri Tarandeep Singh, Advocate submitted that ....
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....acilitation component for the purpose of facilitating scanning facility, extension of watch hours, maintenance of airports, etc. The nature of payment made by way of PSF by the airline companies to the Airport Operators are, therefore, clearly comes under the realm of the provisions of section 194J of the Act and the payer of PSF i.e., the Airline company ought to have deducted tax on such PSF. 4.5 More so, it is pertinent to elicit that the Airports Economic Regulatory Authority (AERA), a statutory body constituted under the Airports Economic Regulatory Authority of India Act, 2008 determines various tariff for the aeronautical services in India has laid out Standard Operating Procedure for Account / Audit of Passenger Service Fee (Security Component) for the Airport Operators, wherein it has been spelled that, in terms of clarification dated 30.6.2008 issued by the Central Board of Direct Taxes (CBDT), the receipts on account of PSF (SC) are taxable as income in the hands of the airport operators and it shall be the responsibility of the Airport Operators to account for the Tax Deducted At Source, if any, by the Airlines from the payments on account of PSF" 5.1 Before....
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....perused the orders of the authorities below and the relevant material evidence brought on record. Let us first see the cause of PSF, cause lies in Rule 88 of the Indian Aircraft Rules, 1937, which provides as under:- "the licensee is entitled to collect fees to be called as Passengers Services Fees(PSF) from the embarking passengers at such rate as the Central Government may specify and is also liable to pay for security component to any security agency designated by the Central Government for providing the security services" A perusal of the aforementioned rule clearly shows that it is a statutory liability for every licensee to collect PSF. Since it is a statutory liability and the meaning given by the statute has to be considered and in this case the Indian Aircraft Rules, 1937 has used the term "Fees", therefore, same meaning has to be given while considering the PSF. It is not in dispute that the assessee is only acting as a conduit between the embarking passengers and the Central Government agency. This view is also fortified by the fact that out of Rs. 200/-, Rs. 130/- is the security component, which is deposited in a separate escrow account, which is oper....
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....cooling charges to the cold storage owners, wherein the CBDT had the occasion to consider the representations in respect of the issue, whether the customer hires the building, plant and machineries etc., without packages for reservation for a required period are kept in cold storage after paying cooling charges. The CBDT, thus, clarified that the customer is also not given any right to use any demarcated space/place or the machinery of the cold storage and thus does not become a tenant. Therefore, the provisions of 194-I is not applicable to the cooling charges paid by the customers of the cold storage. Applying the same analogy, the PSF charges paid by the assessee on behalf of its customers, do not attract the provisions of Section 194-I of the Act. 15. Considering all these judicial decisions in the light of the facts of the case, we do not find any error/omission in the findings of the CIT(A). Hence, the assessee succeeds and the revenue fails and the findings of the CIT (A) are confirmed. Accordingly, grounds No.1 & 2 are hereby dismissed." 5.4 The decision of Tribunal in case Jet Airways (supra) has been upheld by the Hon'ble Bombay High Court. In this re....
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....s angle, keeping in view the full and larger picture in mind, it becomes very clear that the charges are not for use of the land per se and therefore it cannot be treated as rent within the meaning of section 194-I of the Act." It may be observed that the Apex Court did further observe that in view of the explanation to Section 194-I of the Act, the normal/popular meaning of the word "rent" stood expanded. However, primary requirement is that the payment must be for use of the land or building and mere incidental/minor/insignificant use of the same while providing other facilities and services would not make it a payment made for use of land/buildings. This is more so as the submission of the Revenue itself before us is that the payment of PSF is for use of secured building and furniture. Therefore the use of land/or building in this case is only incidental. Thus the ratio of the decision of the Apex Court in Singapore Airlines (supra) would apply on all fours to the present facts. (g) As the substance of the PSF is not for use of land or building but for providing security services and facilities to the embarking passengers the decision of the A....
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....nsidered 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. The Hon'ble Bombay High Court has further held that 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. 5.7 We may also deal with the other contentions advanced by the Ld. CIT (DR). The Ld. Departmental Representative 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. In this regard it is relevant to note that the Coordinate Bench of Tribunal in the case of Mumbai International Airport Pvt. Ltd. reported in 184....
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....refore, while filing the return the same was not included in the taxable income by the assessee. But during the course of assessment proceedings, the AO was of the opinion that the said amount was taxable in the hands of the assessee in view of Office Memorandum of CBDT dated 30-06-2008 and instructions dated 19-01-2009 issued by MOCA. With a view to clarify the situation, representation was made before the CBDT as well as MOCA. In response, MOCA issued a letter dated 15-11-2010 wherein it was stated that the matter was examined with the Ministry of Finance and accordingly it is clarified that the whole amount of PSF - SC including security component was revenue receipt, and thus it was taxable under the Income-tax Act. 14.19 The assessee challenged before us, the validity and binding force of the aforesaid Office Memorandum issued by the CBDT and clarification received by MOCA. It has been noted by us firstly that in none of these documents, there seems to have been made any application of mind by the concerned authorities while expressing their opinion. None of the authorities have considered the aspect that the impugned amount was collected in the fiduciary capacity by ....
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....d distinguished that of Chowringhee Sales Bureau (P.) Ltd.(supra). 14.20 Thus, at the outset, it is clearly visible that both the authorities expressed their opinions without proper application of mind and without examining the nature of impugned receipt within the framework of provisions of Income-tax Act, 1961. 14.21 Apart from that, the binding effect of Office Memorandum issued by CBDT, clarification issued by MOCA is also under question. It has been argued that it has been held by Hon'ble Supreme Court many times that circulars issued by the Board are binding upon the authorities working under it, viz. the AO, etc. but these are not binding upon the appellate authorities including Income Tax Appellate Tribunal. We have examined this aspect also carefully. It is noted that as per section 119 of the Act, the CBDT has been empowered by the legislature to issue orders, instructions or directions to all the Income-tax authorities working under it for proper administration of the I.T. Act. And it has also been provided that this shall be binding upon the Income-tax authorities. But it is further noted that a proviso has been added to sub section (1) of section ....
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....ered the CBDT to issue orders, instructions or directions for the proper administration of the Act. Hon'ble High Court has taken into consideration various earlier judgments of Hon'ble Supreme Court on this issue. Similarly, the Hon'ble Supreme Court in the case of Hero Cycles (P.) Ltd. (supra) held that circulars can bind the Income-tax Officer but will not bind the appellate authority or the Tribunal or the Court or even the assessee. It is further noted that law in this regard was further analysed by Hon'ble Supreme Court in the case of UCO Bank (supra). It was observed by the Hon'ble Supreme Court that CBDT has power to tone down the rigour of the law and ensure enforcement of its provisions of issuing circulars. The Board has been given for the purpose of just, proper and efficient management of work of assessment. However, these are not meant for contradicting or nullifying any provision of the statute. Relying upon its earlier judgement comprising of three judges in the case of Keshavji Ravji& Co. v. CIT [1990] 49 Taxman 87/183 ITR 1 (SC), it was inter-alia observed that Board cannot pre-empt judicial interpretation and the scope and ambit of a p....
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....vered. The bankers received payment from the merchant established i.e., the assessee for the Payment Gateway services rendered by the bankers. The services rendered by the bankers are clearly in the nature of recovery of bills from the customers on behalf of the assessee and the payments made against this service by the assessee is undoubtedly in the nature of commission which is being charged by the bankers on each such transaction. More so, the assessee has not directly received the payments from the customers, but it is the banks which are collecting the payments for the assessee from the customers and giving it to the assessee. Hence the banks are clearly acting as an agent on behalf of the assessee albeit the agreement, entered between the parties, does not visibly depict the relationship between them as "Principal and Agent". 6.1 The Ld. CIT (Appeals) has, in the impugned order, held that the charges retained by the credit card companies/banks are not in the nature of commission or brokerage. While arriving at this conclusion, the Ld CIT (A) has followed the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. JDS Apparels Pvt. Ltd. reported in 370 ITR 454 ....