BY TIOL News Service

NEW DELHI, MAR 09, 2019: THE issue at hand before the bench is whether PSF can be treated as payment made by the airline companies, which would warrant deduction of TDS u/s 194J. NO is the answer. It also held that Passenger Service Fee is payment made by air passengers payable to the Airport Authority of India (AAI) & which is only routed through airline companies. It was also held that TDS need not be deducted u/s 194H by an airline company on charges retained by bank & credit card agencies out of the sale consideration of tickets booked through credit & debit cards.

Facts of the case

THE assessee-company is engaged in the civil aviation business. In the assessment order passed u/s 201(1) & 201(1a) for the relevant AY, the assessee was held to have defaulted due to non-deduction of TDS on Passenger Service Fee collected by the assessee from embarking passengers & which is handed over to the relevant airport authorities. It was also alleged that the assessee did not deduct TDS on 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. On appeal, the CIT(A) reversed such findings of the AO, holding that the assessee was not liable to deduct TDS on these amounts. Hence the Department's appeal.

On appeal, the Tribunal held that,

++ the issue in dispute is now no more res integra. In the case of ACIT vs. Jet Airways Ltd. it was claimed by the Department that payment of PSF attracted TDS liability u/s 194-I of the Act and in the instant case it is held by the AO that payment of PSF attracted TDS liability u/s 194J of the Act. However, this too would not make any difference. As is clear from the findings recorded by the Coordinate Bench in the case of Jet Airways which have been upheld by the Bombay High Court, PSF cannot be considered 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 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 it is held that assessee was not required to deduct TDS u/s 194J on payment of PSF;

++ the Department also challenges relief granted by the CIT(Appeals), holding that the amount retained by Banks/Credit Card Agencies out of Sale consideration of the tickets booked through credit/debit cards is not covered under the definition of "commissioner or brokerage" as per section 194H of the Act. This issue stands settled by the High Court of Delhi in CIT vs. JDS Apparels Pvt. Ltd. Following relevant findings in this case, 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.

(See 2019-TIOL-611-ITAT-DEL)