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TMI Blog2019 (3) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 in the Explanation to section 194J of the I.T. Act and the assessee was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Ld. CIT (Appeals) has correctly allowed the claim made of the assessee. In this regard, the Ld. AR, relying on the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Ld. CIT (Appeals), two broad objections were raised by the assessee challenging the findings recorded by the AO alleging that payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 operated and can be utilized by airport concerned only to meet the security related expenses of that airport. 13. Further it is pertinent to note that the CBDT in its Office Memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 regard the Hon'ble High Court has held as under:- (e) We find in the present facts the respondent collects PSF from only its embarking passengers for and on behalf of the Airport Operator. In terms of Rule 88 of the Indian Aircraft Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Apex Court in Singapore Airlines (supra) would cover the issue in favour of the respondentassessee. Consequently, the proposed question of law does not give rise to any substantial question of law. Thus not entertained." 5.5 The Ld. AR has further cited CBDT Circular No.21 of 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 TTJ 229 (Mum) has held that PSF is not an income u/s 2(24) of the Act in hands of the relevant Airport Operator. The Coordinate Bench has further held that the CBDT Office Memorandum is not binding on the Tribunal and the same cannot override the provisions of the Act. In this regard, the Coordinate Bench has held as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OCA. 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 the assessee. None of the authorities have stated that under what provisions of law, the aforesaid amount can be brought to tax in the hands of the assessee. The CBDT in its Office Memorandum has made a reference to the judgment of the Hon'ble Supreme Court in the case of Chowringhee Sales Bureau (supra). But facts of that case have n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 119 which says that no such orders, instructions or directions shall be issued:- (a) so as to require any income-tax authority to make a particular assessment or to dispose a particular case in a particular manner; or (b) so as to interfere with the discretion of the Commissioner (Appeals) in exercise of his appellate functions. It is clear from the perusal of afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provision of the Act. Also, a circular cannot impose on the taxpayer a burden higher than what the Act itself on a true interpretation, envisages. The task of interpretation of the law is exclusively the domain of the Courts. However, the Board has the statutory power u/s. 119 to tone down the rigour of the law for the benefit of the assessee by issuing circulars to ensure proper adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kers 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 (Del). 6.2 Before us, the Ld. CIT (DR) relied on the order passed by the AO. 6.3 Per contra, the Ld. AR submitted that the issue is now settled by the order of Jurisdictional High court in the case of M/s JDS Apparel (supra) and submitted that, therefore, the findings of Ld. CIT (A) should be upheld. 6.4 We have carefully considered the facts of the case and the submissions made by the rival parties. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t who interacts on behalf of one of the parties, helps the buyer/seller to meet, or participates in the negotiations or transactions resulting in the contract for buying and selling of goods. Thus, the requirement of an agent and principal relationship. This is the exact purport and the rationale behind the provision. The bank in question is not concerned with buying or selling of goods or even with the reason and cause as to why the card was swiped. It is not bothered or concerned with the quality, price, nature, quantum etc. of the goods bought/sold. The bank merely provides banking services in the form of payment and subsequently collects the payment. The amount punched in the swiping machine is credited to the account of the retailer by the acquiring bank, i.e. HDFC in this case, after retaining a small portion of the same as their charges. The banking services cannot be covered and treated as services rendered by an agent for the principal during the course of buying or selling of goods as the banker does not render any service in the nature of agency." 6.5 The issue involved in present appeal being identical to that decided by the Hon'ble Jurisdictional High Court, respectfu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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