TMI Blog2019 (3) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... income which is chargeable to tax in the hands of relevant Airport Authority. Tribunal in the case of Mumbai International Airport Pvt. Ltd.[2017 (2) TMI 640 - ITAT MUMBAI] held that PSF is not an income u/s 2(24) 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. - Decided in favour of assessee TDS u/s 194H - commissioner or brokerage - amount retained by Banks/ Credit Card Agencies out of Sale consideration of the tickets booked through credit / debit cards - AO held that there is an implied agency relationship between the assessee airline and the banks - HELD THAT:- We find that the issue in dispute stands fully covered by the decision in the case of JDS Apparel [2014 (11) TMI 732 - DELHI HIGH COURT] it is 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 in favour of assessee. - ITA No.-6103/Del/2015 - - - Dated:- 28-2-2019 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Whether on the facts and in the circumstances of the case and in law, the CIT (A) was justified in not confirming the order of the Assessing Officer treating the assessee as an assessee in default u/s 201(1) in respect of the amount of tax which has not been deducted under section 194J of the I.T. Act particularly when the Assessee, on its own, has deducted tax at source from the payments of PSF from 2012 onwards? 1.3 Whether on the facts and in the circumstances of the case and in law, the CIT (A) was justified in not confirming the order of the Assessing Officer treating the assessee as an assessee in default u/s 201(1) in respect of the amount of tax which has not been deducted under section 194J from the payments of PSF and levying interest thereon under section 201(1A) of the I.T. Act particularly when the assessee, on its own, has deducted tax at source from the payments of PSF from 2012 onwards ? 2. Whether on the facts and in the circumstances of the case and in law, the CIT (A) was justified in holding that the amount retained by a bank/credit card agency out of the sale consideration of the tickets booked through credit /debit cards is not covered under the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority there was no legal mandate to deduct TDS. The Ld. AR further submitted that the coordinate Bench decision in the case of Jet Airways has also been upheld by the Hon ble Bombay High Court which has been reported in 395 ITR 230 (Bom). The Ld. AR further cited CBDT Circular No.21/2017 dated 12th June, 2017 wherein it is stated that the Department has accepted the decision of Hon ble Bombay High Court and that no further appeal has been filed before the Hon ble Apex Court. 5.0 We have carefully considered the facts of the case and the arguments advanced by both the sides. In Grounds 1 to 1.2 the dispute is whether TDS ought to have been deducted on payment of Passenger Service Fee (PSF). Before dwelling further, it would be relevant to first consider the nature of PSF. PSF is a fee which is collected by the airline companies on behalf of Airport Operators as per Rule 88 of the Indian Aircraft Rules 1937. PSF includes two components i.e., Security Component and Facilitation Component. Fee is levied on the passengers by Airport Authority of Indian (AAI) to meet the expenditure on security and passenger facilities at the Airport. Security Component collected by the Airport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decision of the Mumbai Bench of the ITAT in the case of ACIT vs. Jet Airways Ltd. reported in 146 ITD 682(Mum). It was submitted by the assessee before the Ld. First Appellate Authority that as per these decisions payment of PSF does not attract TDS liability. Secondly, it was submitted that the payee has accounted for PSF in its taxable income and, therefore, as far as assessee is concerned it could not be held to be an assessee in default . 5.2 The Ld. CIT (Appeals) found merit in both the above submissions. In the impugned order, following the decisions of Hon ble Delhi High Court in the case of Cargo Linkers (supra) and Mumbai ITAT in the case of Jet Airways (supra), it was held by the Ld. CIT (Appeals) that the assessee was not required to deduct TDS on PSF collected by it and passed on to the relevant Airport Authority. The Ld. CIT (Appeals) also found merit in the alternative contention advanced by the assessee and held as under:- 4.5.7 Further, as clarified by the appellant in its letter dated 24.08.2015, the appellant had offered proof that the amount in question was disclosed by recipients in their returned income. This has been discussed in para 3.1 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollect the PSF is initially collected by the concerning airlines from the passengers and then handed over to the respective airport operator/authority. Thus, it is absolutely clear that the assessee only collects the PSF from the passengers for and on behalf of the airport authority/operator and passes the same to the airport authority/operator. This view would also be made very clear by the answer to question No.24 given by the CBDT it is Circular No.715, dated 8th August, 1995, which relates to clarification of various provisions relating to tax deduction at source. Question No.24 reads as under:- Question 24: Whether in a case of composite arrangement for user of premises and provision of manpower for which consideration is paid as a specified percentage of turnover, section 194-I of the Act would be attracted ? Answer: If the composite arrangement is in essence the agreement for taking premises on rent, the tax will be deducted under section 194-I from payments thereof. The facts under consideration show that the PSF is a statutory liability without demarcating/earmarking the area taken on rent , nor it is a case of systematic use of land specified for consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. (f) Thereafter attention was invited to an order dated 9th May, 2006 of the Ministry of Civil Aviation (Government of India) which entitle the Airport Operator to collect the PSF from the embarking passengers and out of ₹ 200/- collected per passenger, an amount of ₹ 70/- would be retained by the Airport Operator towards passenger facilitation while the balance ₹ 130/- would be handed over to CISF for security arrangements. Thus this cannot be considered to be as a payment made by the Airline-respondent. It is payment made by the passenger which is only routed through the airline. For this reason the order also records the fact that the above amount handed over to the Airport Operator is not claimed as an expenditure by the respondent-assessee. Further the impugned order places reliance upon the decision of the Madras High Court in Singapore Airlines (supra). Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of Hon ble Mumbai High Court. In this regard, the CBDT Circular states as under:- 2. A dispute arose on applicability of the provisions of section 194-I of the Act, on payment of Passenger Service Fees (PSF) by an Airline to an Airport Operator. The Hon'ble High Court of Bombay in CIT v. Jet Airways (India) Ltd. declined to admit the ground relating to applicability of provisions of section 194-I of the Act on PSF charges holding that no substantial question of law arises. While doing so it relied on the judgment of the Hon'ble Supreme Court dated 4-8-2015 in the case of Japan Airlines and Singapore Airlines2 where the Apex Court held that in view of Explanation to section 194-I of the Act, though, the normal meaning of the word 'rent' stood expanded, however, the primary requirement is that the payment must be for the use of land and building and mere incidental/minor/insignificant use of the same while providing other facilities and service would not make it a payment for use of land and buildings so as to attract section 194-I of the Act. 3. The Board has accepted the above view of the High Court of Bombay. Accordingly, it is now a settled posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n takes us to the second issue wherein we have been called upon to decide about the binding legal force of the opinion expressed by CBDT and MOCA vide their office memorandum/instructions for determining taxability of the impugned amount. It is admitted fact on record that the assessee company collected PSF-SC in view of the order issued by MOCA vide its order dated 09th May, 2006. The terms of the order have been modified/amended from time to time as per the requirements. One such order issued by MOCA was issued on 20th June, 2007. Subsequently, CBDT issued an Office Memorandum dated 30/06/2008 in pursuance to the request made by the concerned officials of MOCA regarding taxability of PSF SC, wherein it has been observed that since the assessee company was collecting this amount in the course of business and assessee was rendering facilitation and securities services whether in-house or outsourced, therefore, the amount collected by the assessee in the form of PSF-SC was in the nature of income of the assessee and liable to be taxed in its hands. In support of its view, reliance has been placed by the Board on the judgement of Hon'ble Supreme Court in the case of Chowringhee S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid judgment has different facts, wherein, the amount of sales-tax was received by the said assessee and deposited in its bank account. The funds got mixed in assessee's accounts. Thus, in case of non payment by the said assessee, the same became income of the seller (the said assessee), whereas the facts are totally different in the case before us. The amount here was collected purely in fiduciary capacity and the same was deposited in escrow account on which assessee had no control at all; the assessee had no discretion at all upon its usage. No reasoning has been made out by the CBDT while issuing its opinion as to how the said judgment was applicable on the facts of this case. It is noted by us that aforesaid judgment came up for consideration before many courts wherein its true meaning and scope of its applicability was explained time to time. In one such matter having similar facts as to the assessee before us, Hon'ble Allahabad High Court explained correct application of aforesaid judgment in the case of CIT v. Sita Ram Sri Kishan Das [1982] 11 Taxman 52/[1983] 141 ITR 685 (All.). In this case, the facts were that said assessee was a commission agent and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either the Board has power to decide the taxability of a particular receipt nor has it got any power to interfere with the appellate functions of Commissioner (Appeals), which is judicial in nature. Thus, in view of the aforesaid legal scenario coupled with facts of this case as discussed above, we have strong doubts if at all the Board could have issued any instructions to decide the taxability of amount collected by the assessee company on account of PSF SC in a purely fiduciary capacity. This task of determination of taxability has been left by the legislature upon the shoulders of the designated AO, who is obliged under the law to determine the same strictly in accordance with the provisions of the Income-tax Act, 1961. 14.22 Further, aforesaid clarification issued by the Board in this case is actually an Office Memorandum . It is an inter departmental communication. In our view, Office Memorandum would not carry the legal force of binding effect. Further, it has been provided in section 119 that orders, instructions and directions shall be binding upon the income-tax authorities. It is noted that Income-tax Appellate Tribunal does not fall under the list of Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fiscal statute and such circulars would be binding on the authorities enshrined in the Act. 14.24 Thus, taking guidance from the aforesaid legal discussion as has been clarified by the Hon'ble jurisdictional High Court as well as by Hon'ble Supreme Court, it is clear that the Office Memorandum issued by CBDT to MOCA cannot hold an amount as taxable, if the same is otherwise not taxable as per the provisions of the Income-tax Act, 1961. Further, as far as the clarification issued by MOCA is concerned, it is noted that the role of MOCA was confined to issuing Standard Operating Procedures and other guidelines to the airport operators to ensure that funds collected by the assessee company in the fiduciary capacity on behalf of MOCA are properly kept and disbursed for the designated purposes only. It has no jurisdiction to determine the taxability of the impugned amount. It clearly had no jurisdiction in holding the same as taxable and, therefore, to that extent its order/clarification has no authority in the eyes of law and the same has been rightly ignored by the assessee as well as by the appellate courts while determining the taxability of the impugned amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties. We find that the issue in dispute stands fully covered by the decision of the Hon ble Jurisdictional High Court in the case of JDS Apparel (supra) wherein the Hon ble High court has held as under :- 15. Applying the above cited case law to the factual matrix of the present case, we feel that Section 194H of the Act would not be attracted. HDFC was not acting as an agent of the respondentassessee. Once the payment was made by HDFC, it was received and credited to the account of the respondent-assessee. In the process, a small fee was deducted by the acquiring bank, i.e. the bank whose swiping machine was used. On swiping the credit card on the swiping machine, the customer whose credit card was used, got access to the internet gateway of the acquiring bank resulting in the realisation of payment. Subsequently, the acquiring bank realised and recovered the payment from the bank which had issued the credit card. HDFC had not undertaken any act on behalf of the respondent-assessee. The relationship between HDFC and the respondent-assessee was not of an agency but that of two independent parties on principal to principal basis. HDFC was also acting and equally protect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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