2014 (8) TMI 956 - AT - Income Tax

Levy of TDS on payment of passenger service fee - Violation of principle of natural justice - Opportunity of hearing not provided - Held that - It is amply clear that the Assessing Officer should be provided an opportunity of being heard which was not provided by the learned Commissioner of Income-tax (Appeals) to the Assessing Officer. Therefore the impugned order is contrary to the principles of natural justice as well as the provisions of section 250(2)(b) of the Income-tax Act 1961 thus it is liable to be cancelled and we cancel the impugned order and also direct the learned first appellate authority to decide the issues in dispute in accordance with law after giving the adequate opportunity to the Assessing Officer in terms of section 250(2)(b) of the Income-tax Act 1961. - Decided in favour of Revenue.

Summary

Issues:
1. Whether TDS provisions are attracted on the payment of passenger service fee (PSF)?
2. Whether the learned Commissioner of Income-tax (Appeals) erred in not granting an opportunity of being heard to the Assessing Officer before adjudicating the appeal in favor of the assessee-company?
3. Whether the payment of passenger service fee is subject to TDS under section 194J of the Income-tax Act, 1961?

Analysis:
1. The appeals by the Revenue challenged the order of the Commissioner of Income-tax (Appeals) regarding the applicability of TDS provisions on passenger service fee (PSF). The Tribunal noted that the issues in both appeals were common. The grounds of appeal primarily focused on the alleged errors made by the Commissioner of Income-tax (Appeals) in deleting the demand based on TDS provisions not being attracted to PSF payments. The Tribunal proceeded to consolidate the appeals for convenience.

2. The Revenue contended that the Commissioner of Income-tax (Appeals) erred in law by not granting an opportunity of being heard to the Assessing Officer before deciding in favor of the assessee-company. The Departmental representative highlighted the violation of natural justice principles and cited section 250(2)(b) of the Income-tax Act, 1961. The Tribunal, after considering both parties' arguments and the relevant provisions, concluded that the Assessing Officer should have been given an opportunity to be heard. Consequently, the Tribunal canceled the impugned order and directed the first appellate authority to re-decide the issues after providing the Assessing Officer with a proper opportunity.

3. Another issue raised was whether the payment of passenger service fee was subject to TDS under section 194J of the Income-tax Act, 1961. The Tribunal observed that the Commissioner of Income-tax (Appeals) had not fully appreciated the deduction of tax by the assessee-company under section 194J on PSF payments from the financial year 2009-10. The Tribunal's decision to cancel the impugned order for procedural reasons did not delve into the merits of this issue.

In conclusion, the Tribunal allowed the appeals filed by the Revenue for statistical purposes, emphasizing the importance of providing the Assessing Officer with a proper opportunity to be heard in accordance with the principles of natural justice and the provisions of the Income-tax Act, 1961.