ACIT, New Delhi V. M/s. Spice Jet Ltd., Gurgaon

ITA 6103/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3101 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 13-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPIKA MITTAL
• Assessee Lawyers: TARUNDEEP SINGH
• Keywords: Question of law; TDS
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI G.D.AGRAWAL, VICE PRESIDE NT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-6103/DEL/2015 ( ASSESSMENT YEAR: 2012-13) ACIT CIRCLE-77(1) NEW DELHI VS . SPICE JET LTD. 319, UDYOG VIHAR, PHASE-IV GURGAON PAN : AACCR1459F APPELLANT RESPONDENT ASSESSEE BY : SH. TARUNDEEP SINGH, ADV. REVENUE BY : MS. DEEPIKA MITTAL, CIT(DR ) ORDER PER SUDHANSHU SRIVASTAVA, J.M.: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 28.08.2015 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- 41, NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A COMPANY ENGAGED IN THE BUSINESS OF CIVIL AVIATION. FOR THE YEAR UNDER CONSIDERATION, AN ORDER DATED 19 TH MARCH, 2014 U/S 201(1)/(1A) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) WAS PASSED BY THE DATE OF HEARING 26 .0 2 .201 9 DATE OF PRONOUNCEMENT 28 . 0 2 .201 9 2 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) ASSESSING OFFICER (AO), WHEREIN THE AO HELD THE ASS ESSEE TO BE AN ASSESSEE IN DEFAULT FOR NON-DEDUCTION OF TDS IN R ESPECT OF FOLLOWING ITEMS : (A) PASSENGER SERVICE FEE (PSF) COLLECTED BY THE ASSESSEE FROM EMBARKING PASSENGERS AND HANDED OVER TO VARIOU S AIRPORTS / AUTHORITIES; AND, (B) AMOUNTS RETAINED BY BANKS FOR RENDERING CREDIT CARD PROCESSING SERVICES FROM THE PAYMENTS RECEIVED BY S UCH BANKS FROM THE PASSENGERS FOR BOOKING TICKETS TO FLY IN T HE AIRCRAFTS OPERATED BY THE ASSESSEE. 2.1 BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL B EFORE LD. CIT (APPEALS). THE LD. FIRST APPELLATE AUTHORITY ALLOWE D THE APPEAL AND HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT T DS ON THE ABOVE ITEMS. AGGRIEVED, THE DEPARTMENT IS NOW IN APPEAL B EFORE THE ITAT AND THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN HOLDING THA T THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FORM THE PAY MENT OF PASSENGER SERVICE FEE (PSF) MADE BY IT TO THE AIRPO RT OPERATORS PARTICULARLY WHEN THE ASSESSEE, ON ITS OWN, HAS DED UCTED AT SOURCE FROM THE PAYMENTS OF PSF FROM 2012 ONWARDS. 3 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) 1.1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN HOLDING THA T THE PSF PAID BY THE ASSESSEE TO THE AIRPORT OPERATORS WAS NOT CO VERED 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 LIABLE TO DEDUCT TAX AT SOURCE UNDER SECTIO N 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 ON WARDS? 1.2 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT (A) WAS JUSTIFIED IN NOT CONFIR MING THE ORDER OF THE ASSESSING OFFICER TREATING THE ASSESSEE AS AN A SSESSEE 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 PA RTICULARLY 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 O F THE CASE AND IN LAW, THE CIT (A) WAS JUSTIFIED IN NOT CONFIR MING THE ORDER OF THE ASSESSING OFFICER TREATING THE ASSESSEE AS AN A SSESSEE 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 T HE I.T. ACT PARTICULARLY WHEN THE ASSESSEE, ON ITS OWN, HAS DED UCTED 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 TH AT THE AMOUNT RETAINED BY A BANK/CREDIT CARD AGENCY OUT OF THE SA LE CONSIDERATION OF THE TICKETS BOOKED THROUGH CREDIT /DEBIT CARDS IS NOT COVERED UNDER THE DEFINITION OF COMMISSION OR BROKERAGE 4 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) GIVEN IN THE EXPLANATION (I) TO SECTION 194H OF THE I.T.ACT AND THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE UND ER SECTION 194H IN RESPECT OF THIS AMOUNT PARTICULARLY WHEN TH E CBDT NOTIFICATION NO.56/2012 DATED 31.12.2012 WAS NOT EF FECTIVE FOR THE RELEVANT YEAR? 2.1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT (A) WAS JUSTIFIED IN NOT CONFIR MING THE ORDER OF THE ASSESSING OFFICER TREATING THE ASSESSEE AS AN A SSESSEE IN DEFAULT U/S 201(1) IN RESPECT OF THE AMOUNT OF TAX WHICH HAS NOT BEEN DEDUCTED UNDER SECTION 194H AND LEVYING INTERE ST THEREON UNDER SECTION 201(1A) OF THE I.T. ACT? 2.2 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT (A) WAS JUSTIFIED IN HOLDING TH AT A BANK / CREDIT CARD AGENCY IS NOT AN AGENT OF THE ASSESSEE AND THEREBY CLEARLY IGNORING THE FACTS THAT IN THE ENTIRE PROCE SS OF FACILITATION OF CREDIT / DEBIT CARD BOOKING, THE BANK / CREDIT CARD AGENCY IS NOTHING BUT A CONSTRUCTIVE AGENT FOR THE AIRLINE CO MPANY? 2.3 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE CIT (A) WAS JUSTIFIED IN IGNORING T HAT 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 TH E 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 5 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) ACT, IT WAS SUBMITTED BY HER THAT THE LD. CIT (A) H AS ERRONEOUSLY ALLOWED THE CLAIM MADE BY THE ASSESSEE. THE LD. CIT (DR) FURTHER RELIED UPON OFFICE MEMORANDUM DATED 30 TH JUNE, 2008 ISSUED BY THE CBDT IN SUPPORT OF HER CONTENTION THAT PSF WAS A RE CEIPT TAXABLE IN HANDS OF THE RELEVANT AIRPORT AUTHORITY AND, THEREF ORE, THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS ON SAID PAYMENTS. 4. ON THE OTHER HAND, THE LD. AR, SHRI TARANDEEP SI NGH, ADVOCATE SUBMITTED THAT THE LD. CIT (APPEALS) HAS CORRECTLY ALLOWED THE CLAIM MADE OF THE ASSESSEE. IN THIS REGARD, THE LD. AR, R ELYING ON THE DECISION OF THE MUMBAI BENCH OF THE ITAT IN THE CAS E OF JET AIRWAYS SUBMITTED THAT SINCE PSF WAS COLLECTED BY THE ASSES SEE FROM THE PASSENGERS ON BEHALF OF THE AIRPORT AUTHORITY THERE WAS NO LEGAL MANDATE TO DEDUCT TDS. THE LD. AR FURTHER SUBMITTED THAT THE COORDINATE BENCH DECISION IN THE CASE OF JET AIRWAY S HAS ALSO BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT WHICH HAS B EEN REPORTED IN 395 ITR 230 (BOM). THE LD. AR FURTHER CITED CBDT CIRCULAR NO.21/2017 DATED 12 TH JUNE, 2017 WHEREIN IT IS STATED THAT THE DEPARTMENT HAS ACCEPTED THE DECISION OF HONBLE BOM BAY HIGH COURT AND THAT NO FURTHER APPEAL HAS BEEN FILED BEFORE TH E HONBLE APEX COURT. 6 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) 5.0 WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE 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 FURTHE R, IT WOULD BE RELEVANT TO FIRST CONSIDER THE NATURE OF PSF. PSF I S A FEE WHICH IS COLLECTED BY THE AIRLINE COMPANIES ON BEHALF OF AIR PORT OPERATORS AS PER RULE 88 OF THE INDIAN AIRCRAFT RULES 1937. PSF INCLUDES TWO COMPONENTS I.E., SECURITY COMPONENT AND FACILITATIO N COMPONENT. FEE IS LEVIED ON THE PASSENGERS BY AIRPORT AUTHORIT Y OF INDIAN (AAI) TO MEET THE EXPENDITURE ON SECURITY AND PASSENGER FACI LITIES AT THE AIRPORT. SECURITY COMPONENT COLLECTED BY THE AIRPOR T OPERATOR IS KEPT SEPARATELY IN AN ESCROW ACCOUNT WHICH IS PRIMARILY USE TO PAY FOR SECURITY RELATED EXPENSES TO CISF. IN ORDER TO FACI LITATE COLLECTION OF PSF FROM PASSENGERS AND FOR ADMINISTRATIVE CONVENIE NCE, THE AIRLINES COMPANIES HAVE BEEN INSTRUCTED WITH THE RESPONSIBIL ITY OF COLLECTING PSF FROM THE PASSENGERS AND SUBSEQUENTLY DEPOSIT TH E SAME WITH THE AIRPORT OPERATOR. IN HIS ORDER PASSED U/S 201(1) TH E AO HAS HELD THAT THE ASSESSEE WAS LIABLE TO DEDUCT TDS ON PAYMENT OF PSF AS PER PROVISION OF SECTION 194J OF THE ACT. IN THIS REGAR D, IT WAS HELD BY THE AO AS UNDER:- 4.4 THE NATURE OF PAYMENT ON ACCOUNT OF PSF MADE TO AIR PORT OPERATOR(S) BY THE AIRLINE COMPANIES IS TO MEET THE SECURITY RELATED 7 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) EXPENSES OF THE AIRPORT, AND CONSIDERING THE TWO CO MPONENTS THEREOF, NAMELY (A) SECURITY COMPONENT FOR THE PU RPOSE OF PROVIDING SECURITY RELATED SERVICE ALONG WITH RELAT ED EQUIPMENT AND (B) FACILITATION COMPONENT FOR THE PURPOSE OF F ACILITATING SCANNING FACILITY, EXTENSION OF WATCH HOURS, MAINTE NANCE OF AIRPORTS, ETC. THE NATURE OF PAYMENT MADE BY WAY OF PSF BY THE AIRLINE COMPANIES TO THE AIRPORT OPERATORS ARE, THE REFORE, CLEARLY COMES UNDER THE REALM OF THE PROVISIONS OF SECTION 194J OF THE ACT AND THE PAYER OF PSF I.E., THE AIRLINE COMPANY OUGH T TO HAVE DEDUCTED TAX ON SUCH PSF. 4.5 MORE SO, IT IS PERTINENT TO ELICIT THAT THE AIR PORTS ECONOMIC REGULATORY AUTHORITY (AERA), A STATUTORY BODY CONST ITUTED UNDER THE AIRPORTS ECONOMIC REGULATORY AUTHORITY OF INDIA ACT, 2008 DETERMINES VARIOUS TARIFF FOR THE AERONAUTICAL SERV ICES 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 TER MS 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 OPERA TORS AND IT SHALL BE THE RESPONSIBILITY OF THE AIRPORT OPERATOR S 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 OBJECTI ONS WERE RAISED BY THE ASSESSEE CHALLENGING THE FINDINGS RECORDED BY T HE AO ALLEGING THAT PAYMENT OF PSF ATTRACTED TDS. FIRST, THE ASSESSEE R ELIED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CARGO LINKERS 8 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) REPORTED IN 218 CTR 695 (DEL) AND THE DECISION OF T HE 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 BEFO RE THE LD. FIRST APPELLATE AUTHORITY THAT AS PER THESE DECISIONS PAY MENT OF PSF DOES NOT ATTRACT TDS LIABILITY. SECONDLY, IT WAS SUBMITT ED THAT THE PAYEE HAS ACCOUNTED FOR PSF IN ITS TAXABLE INCOME AND, TH EREFORE, 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 A BOVE SUBMISSIONS. IN THE IMPUGNED ORDER, FOLLOWING THE D ECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF CARGO LINKE RS (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 A IRPORT AUTHORITY. THE LD. CIT (APPEALS) ALSO FOUND MERIT IN THE ALTER NATIVE 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 TH E AMOUNT IN QUESTION WAS DISCLOSED BY RECIPIENTS IN THEIR RETUR NED INCOME. THIS HAS BEEN DISCUSSED IN PARA 3.1 ON PAGE 15 TO 1 7. THE APPELLANT HAD VERY MUCH SUBMITTED CERTIFICATE FROM COCHIN INTERNATIONAL AIRPORT. FOR AIRPORT AUTHORITY OF IND IA, THE APPELLANT HAD PLEADED THAT AIRPORT AUTHORITY OF INDIAS ACCOU NTS ARE SUBJECT 9 ITA N O. 6103/DEL/2015 (SPICE JET LTD.) TO CAG AUDIT; LASTLY IN RESPECT OF MIHAN INDIA PVT. LTD., THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE (CLOSIN G DOWN OF BUSINESS OPERATIONS) FROM SUBMITTING CA CERTIFICATE . THE AO WAS IN A POSITION TO ACCEPT ASSESSEES SUBMISSIONS BUT HE CHOSE TO IGNORE THEM. 5.3 IN OUR CONSIDERED OPINION, THE FINDINGS RECORDE D BY THE LD. FIRST APPELLATE AUTHORITY MERIT TO BE UPHELD. THE ISSUE A S TO WHETHER THE PAYMENT OF PSF ATTRACTS LIABILITY TO DEDUCT TAX AT SOURCE IS NOW WELL SETTLED. THE COORDINATE BENCH OF THIS TRIBUNAL IN C ASE OF JET AIRWAYS (SUPRA) HAS CONSIDERED IDENTICAL ISSUE AND HAS OPINED AS UN DER :- 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT MATERIAL EVIDENCE BROUGHT ON RECORD. LET US FIRST S EE THE CAUSE OF PSF, CAUSE LIES IN RULE 88 OF THE INDIAN AIRCRAFT R ULES, 1937, WHICH PROVIDES AS UNDER: 'THE LICENSEE IS ENTITLED TO COLLECT FEES TO BE CAL LED AS PASSENGERS SERVICES FEES(PSF) FROM THE EMBARKING PASSENGERS AT SUCH RATE AS THE CENTRAL GOVERNMENT MAY SPECIFY AND IS ALSO L IABLE TO PAY FOR SECURITY COMPONENT TO ANY SECURITY AGENCY DESIG NATED BY THE CENTRAL GOVERNMENT FOR PROVIDING THE SECURITY SERVI CES' A PERUSAL OF THE AFOREMENTIONED RULE CLEARLY SHOWS THAT IT IS A STATUTORY LIABILITY FOR EVERY LICENSEE TO COLLECT P SF. SINCE IT IS A STATUTORY LIABILITY AND THE MEANING GIVEN BY THE ST ATUTE HAS TO BE CONSIDERED AND IN THIS CASE THE INDIAN AIRCRAFT RUL ES, 1937 HAS USED THE TERM 'FEES', THEREFORE, SAME MEANING HAS T O BE GIVEN WHILE CONSIDERING THE PSF. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ONLY ACTING AS A CONDUIT BETWEEN THE EMBARKING PASSENGER S AND THE 10 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) CENTRAL GOVERNMENT AGENCY. THIS VIEW IS ALSO FORTIF IED BY THE FACT THAT OUT OF RS.200/-, RS.130/- IS THE SECURITY COMP ONENT, WHICH IS DEPOSITED IN A SEPARATE ESCROW ACCOUNT, WHICH IS OP ERATED AND CAN BE UTILIZED BY AIRPORT CONCERNED ONLY TO MEET THE S ECURITY RELATED EXPENSES OF THAT AIRPORT. 13. FURTHER IT IS PERTINENT TO NOTE THAT THE CBDT I N ITS OFFICE MEMORANDUM DATED 30-06-2008 HAS CLEARLY STATED THE FACT THAT THE LICENSEE OF THE AIRPORT I.E. THE AIRPORT OPERATOR, IS REQUIRED TO COLLECT THE PSF IS INITIALLY COLLECTED BY THE CONCERNING AI RLINES FROM THE PASSENGERS AND THEN HANDED OVER TO THE RESPECTIVE A IRPORT OPERATOR/AUTHORITY. THUS, IT IS ABSOLUTELY CLEAR TH AT THE ASSESSEE ONLY COLLECTS THE PSF FROM THE PASSENGERS FOR AND O N BEHALF OF THE AIRPORT AUTHORITY/OPERATOR AND PASSES THE SAME TO T HE AIRPORT AUTHORITY/OPERATOR. THIS VIEW WOULD ALSO BE MADE VE RY CLEAR BY THE ANSWER TO QUESTION NO.24 GIVEN BY THE CBDT IT IS CI RCULAR NO.715, DATED 8TH AUGUST, 1995, WHICH RELATES TO CLARIFICAT ION OF VARIOUS PROVISIONS RELATING TO TAX DEDUCTION AT SOURCE. QUE STION NO.24 READS AS UNDER: 'QUESTION 24: WHETHER IN A CASE OF COMPOSITE ARRANG EMENT FOR USER OF PREMISES AND PROVISION OF MANPOWER FOR WHIC H 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 T AKEN ON RENT , NOR IT IS A CASE OF SYSTEMATIC USE OF LAND SPECIFIE D FOR CONSIDERATION UNDER AN ARRANGEMENT, WHICH CARRIES THE CHARACTERIS TICS OF LEASE OR 11 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) TENANCY. A MERE USE OF THE LAND AND PAYMENT CHARGED , WHICH IS NOT FOR THE USE OF THE LAND BUT FOR MAINTENANCE OF THE VARIOUS SERVICES INCLUDING TECHNICAL SERVICES WOULD NOT TECHNICALLY BRING THE TRANSACTION AND THE CHARGES WITHIN THE MEANING OF E ITHER LEASE OR SUB-LEASE OR TENANCY OR ANY OTHER AGREEMENT OR ARRA NGEMENT OR ANY NATURE OF LEASE OR TENANCY AND RENT. FOR THESE OBSE RVATIONS, WE DRAW SUPPORT FROM THE DECISION OF THE HON'BLE MADRA S HIGH COURT IN THE CASE OF CIT V. SINGAPORE AIRLINES LTD. [2012] 2 09 TAXMAN 581/24 TAXMANN.COM 200. 14. IT WOULD NOT BE OUT OF PLACE TO CONSIDER THE CB DT CIRCULAR NO.1/2008, DATED 10TH JANUARY, 2008 RELATING TO THE CLARIFICATION REGARDING THE APPLICABILITY OF PROVISIONS OF SECTIO N 194-I OF THE ACT TO PAYMENTS MADE BY THE CUSTOMERS ON ACCOUNT OF COOLIN G CHARGES TO THE COLD STORAGE OWNERS, WHEREIN THE CBDT HAD THE O CCASION TO CONSIDER THE REPRESENTATIONS IN RESPECT OF THE ISSU E, 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, THU S, CLARIFIED THAT THE CUSTOMER IS ALSO NOT GIVEN ANY RIGHT TO USE ANY DEMARCATED SPACE/PLACE OR THE MACHINERY OF THE COLD STORAGE AN D 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 PROV ISIONS 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 REVENU E FAILS AND THE 12 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) 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 (S UPRA) HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT. IN THIS RE GARD THE HONBLE HIGH COURT HAS HELD AS UNDER:- (E) WE FIND IN THE PRESENT FACTS THE RESPONDENT CO LLECTS PSF FROM ONLY ITS EMBARKING PASSENGERS FOR AND ON BEHAL F OF THE AIRPORT OPERATOR. IN TERMS OF RULE 88 OF THE INDIAN AIRCRAF T RULES THE AIRPORT OPERATOR IS ENTITLED TO COLLECT PSF WHICH PROVIDES AS UNDER: 'THE LICENSEE IS ENTITLED TO COLLECT FEES TO BE CAL LED AS PASSENGERS SERVICES FEES (PSF) FROM THE EMBARKING PASSENGERS A T SUCH RATE AS THE CENTRAL GOVERNMENT MAY SPECIFY AND IS ALSO L IABLE TO PAY FOR SECURITY COMPONENT TO ANY SECURITY AGENCY DESIG NATED BY THE CENTRAL GOVERNMENT FOR PROVIDING THE SECURITY SERVI CES.' (F) THEREAFTER ATTENTION WAS INVITED TO AN ORDER D ATED 9TH MAY, 2006 OF THE MINISTRY OF CIVIL AVIATION (GOVERNMENT OF INDIA) WHICH ENTITLE THE AIRPORT OPERATOR TO COLLECT THE PSF FRO M THE EMBARKING PASSENGERS AND OUT OF RS. 200/- COLLECTED PER PASSE NGER, AN AMOUNT OF RS. 70/- WOULD BE RETAINED BY THE AIRPORT OPERAT OR TOWARDS PASSENGER FACILITATION WHILE THE BALANCE RS. 130/- WOULD BE HANDED OVER TO CISF FOR SECURITY ARRANGEMENTS. THUS THIS C ANNOT BE CONSIDERED TO BE AS A PAYMENT MADE BY THE AIRLINE-R ESPONDENT. 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 C LAIMED AS AN EXPENDITURE BY THE RESPONDENT-ASSESSEE. FURTHER THE IMPUGNED ORDER PLACES RELIANCE UPON THE DECISION OF THE MADR AS HIGH COURT IN SINGAPORE AIRLINES (SUPRA). THIS DECISION OF THE MADRAS HIGH COURT 13 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) WAS CARRIED IN APPEAL BY THE REVENUE TO THE SUPREME COURT. BY ITS DECISION REPORTED AS JAPAN AIRLINES CO. LTD. V. CIT [2015] 60 TAXMANN.COM 71/234 TAXMAN 175/377 ITR 372,THE VIEW OF THE MADRAS HIGH COURT WAS UPHELD. IN THE CASE BEFORE TH E SUPREME COURT, THE ISSUE FOR CONSIDERATION WAS WHETHER LAND ING AND TAKE-OFF CHARGES PAID BY THE AIRLINE TO THE AIRPORT OPERATOR WOULD BE COVERED WITHIN THE MEANING OF RENT AS PROVIDED UNDER SECTIO N 194-I OF THE ACT. THE APEX COURT WHILE UPHOLDING THE VIEW OF THE MADRAS HIGH COURT HELD THAT WHEN THE AIRLINES PAY FOR LANDING A ND PARKING CHARGES, 'TREATING SUCH CHARGES AS CHARGES FOR 'USE OF THE LAND' WOULD BE ADOPTING A TOTALLY NAIVE AND SIMPLISTIC AP PROACH WHICH IS FAR AWAY FROM REALITY. WE HAVE TO KEEP IN MIND THE SUBSTANCE BEHIND SUCH CHARGES. WHEN THE MATTER IS LOOKED INTO FROM THIS 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 M EANING 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 MU ST BE FOR USE OF THE LAND OR BUILDING AND MERE INCIDENTAL/MINOR/I NSIGNIFICANT USE OF THE SAME WHILE PROVIDING OTHER FACILITIES AND SE RVICES WOULD NOT MAKE IT A PAYMENT MADE FOR USE OF LAND/BUILDINGS. T HIS IS MORE SO AS THE SUBMISSION OF THE REVENUE ITSELF BEFORE US I S THAT THE PAYMENT OF PSF IS FOR USE OF SECURED BUILDING AND F URNITURE. 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 PR ESENT FACTS. 14 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) (G) AS THE SUBSTANCE OF THE PSF IS NOT FOR USE OF LAND OR BUILDING BUT FOR PROVIDING SECURITY SERVICES AND FA CILITIES TO THE EMBARKING PASSENGERS THE DECISION OF THE APEX COURT IN SINGAPORE AIRLINES (SUPRA) WOULD COVER THE ISSUE IN FAVOUR OF THE RESPONDENT- ASSESSEE. CONSEQUENTLY, THE PROPOSED QUESTION OF LA W DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS NOT E NTERTAINED. 5.5 THE LD. AR HAS FURTHER CITED CBDT CIRCULAR NO.2 1 OF 2017 WHEREIN THE CBDT HAS STATED THAT IT HAS ACCEPTED TH E ABOVE VIEW OF HONBLE MUMBAI HIGH COURT. IN THIS REGARD, THE CBDT CIRCULAR STATES AS UNDER:- 2. A DISPUTE AROSE ON APPLICABILITY OF THE PROVISI ONS OF SECTION 194-I OF THE ACT, ON PAYMENT OF PASSENGER SERVICE FEES (P SF) BY AN AIRLINE TO AN AIRPORT OPERATOR. THE HON'BLE HIGH COURT OF B OMBAY IN CIT V. JET AIRWAYS (INDIA) LTD. DECLINED TO ADMI T 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 AIRLINES 2 WHERE THE APEX COURT HELD THAT IN VIEW OF EXPLANAT ION TO SECTION 194-I OF THE ACT, THOUGH, THE NORMAL MEANIN G OF THE WORD 'RENT' STOOD EXPANDED, HOWEVER, THE PRIMARY REQUIRE MENT IS THAT THE PAYMENT MUST BE FOR THE USE OF LAND AND BUILDING AN D MERE INCIDENTAL/MINOR/INSIGNIFICANT USE OF THE SAME WHIL E PROVIDING OTHER FACILITIES AND SERVICE WOULD NOT MAKE IT A PA YMENT FOR USE OF LAND AND BUILDINGS SO AS TO ATTRACT SECTION 194-I O F THE ACT. 15 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) 3. THE BOARD HAS ACCEPTED THE ABOVE VIEW OF THE HIG H COURT OF BOMBAY. ACCORDINGLY, IT IS NOW A SETTLED POSITION T HAT SECTION 194-I OF THE ACT, WILL NOT APPLY ON PSF. 4. IN VIEW OF THE ABOVE, HENCEFORTH, APPEALS MAY NO T BE FILED BY THE DEPARTMENT ON THE ABOVE SETTLED ISSUE, AND THOSE AL READY FILED MAY BE WITHDRAWN/NOT PRESSED UPON. 5.6 FROM THE ABOVE DECIDED PRECEDENTS, IT IS CLEAR THAT THE ISSUE IN DISPUTE IS NOW NO MORE RES INTEGRA . IN THE CASE OF JET AIRWAYS (SUPRA) IT WAS CLAIMED BY THE DEPARTMENT THAT PAYMENT OF PS F ATTRACTED TDS LIABILITY U/S 194-I OF THE ACT AND IN THE INSTANT C ASE IT IS HELD BY THE AO THAT PAYMENT OF PSF ATTRACTED TDS LIABILITY U/S 194J OF THE ACT. HOWEVER, THIS TOO, IN OUR CONSIDERED VIEW WOULD NOT MAKE ANY DIFFERENCE. AS IS CLEAR FROM THE FINDINGS RECORDED BY THE COORDINATE BENCH IN THE CASE OF JET AIRWAYS (SUPRA) WHICH HAVE BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT, PSF CANNOT BE CONSID ERED TO BE A PAYMENT MADE BY THE ASSESSEE AIRLINE. PSF IS A PAYM ENT MADE BY THE PASSENGER WHICH IS ONLY ROUTED THROUGH THE ASSESSEE AIRLINE. IT IS UNDISPUTED THAT THE AMOUNT HANDED OVER BY THE ASSES SEE AIRLINE TO THE AIRPORT OPERATORS HAS ALSO NOT BEEN CLAIMED AS EXPENDITURE BY THE ASSSESEE IN ITS BOOKS OF ACCOUNT. THE HONBLE BOMBA Y HIGH COURT HAS FURTHER HELD THAT PSF IS A STATUTORY LEVY AND THE A SSESSEE AIRLINE IS ONLY ACTING AS A CONDUIT BETWEEN THE EMBARKING PASS ENGERS AND THE CENTRAL GOVERNMENT AGENCY. CLEARLY THEREFORE, EVEN THE PROVISIONS OF 16 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) SECTION 194J OF THE ACT WOULD NOT APPLY. RESPECTFUL LY 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 ADV ANCED BY THE LD. CIT (DR). THE LD. DEPARTMENTAL REPRESENTATIVE H AS RELIED ON THE CBDT OFFICE MEMORANDUM DATED 30 TH JUNE, 2008. CBDT IN ITS OFFICE MEMORANDUM HAS OPINED THAT PSF IS AN INCOME WHICH I S CHARGEABLE TO TAX IN THE HANDS OF RELEVANT AIRPORT AUTHORITY. IN THIS REGARD IT IS RELEVANT TO NOTE THAT THE COORDINATE BENCH OF TRIBU NAL 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 COORDIN ATE BENCH HAS FURTHER HELD THAT THE CBDT OFFICE MEMORANDUM IS NOT BINDING ON THE TRIBUNAL AND THE SAME CANNOT OVERRIDE THE PROVISION S OF THE ACT. IN THIS REGARD, THE COORDINATE BENCH HAS HELD AS UNDER :- 14.18 THE AFORESAID DISCUSSION TAKES US TO THE SEC OND ISSUE WHEREIN WE HAVE BEEN CALLED UPON TO DECIDE ABOUT TH E BINDING LEGAL FORCE OF THE OPINION EXPRESSED BY CBDT AND MO CA VIDE THEIR OFFICE MEMORANDUM/INSTRUCTIONS FOR DETERMINING TAXA BILITY OF THE IMPUGNED AMOUNT. IT IS ADMITTED FACT ON RECORD THAT THE ASSESSEE COMPANY COLLECTED PSF-SC IN VIEW OF THE ORDER ISSUE D BY MOCA VIDE ITS ORDER DATED 09 TH MAY, 2006. THE TERMS OF THE ORDER HAVE BEEN MODIFIED/AMENDED FROM TIME TO TIME AS PER THE 17 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) REQUIREMENTS. ONE SUCH ORDER ISSUED BY MOCA WAS ISS UED ON 20 TH JUNE, 2007. SUBSEQUENTLY, CBDT ISSUED AN OFFICE MEMORANDUM DATED 30/06/2008 IN PURSUANCE TO THE REQ UEST MADE BY THE CONCERNED OFFICIALS OF MOCA REGARDING T AXABILITY OF PSFSC, 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 AMOU NT COLLECTED BY THE ASSESSEE IN THE FORM OF PSF-SC WAS IN THE NA TURE 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 SALES BUREAU (SUPRA) WITH A VIEW TO FORTIFY ITS OPINION. SUBSEQUENTLY, MINISTRY OF CIVIL AVIATION'S OFFICE ISSUED AN ORDER DATED 19-01- 2009 LAYING DOWN ACCOUNTING/AUDIT PROCEDURE IN RESP ECT OF PSF SC. IT WAS INTENDED TO ACT AS STANDARD OPERATING PR OCEDURE (SOP) FOR ACCOUNTING/AUDIT OF PSFSC BY THE AIRPORT OPERA TOR. IN THE AFORESAID DOCUMENT, THE WHOLE PROCEDURE WAS DULY EX PLAINED HOW THE AMOUNT HAS TO BE COLLECTED AND TO BE KEPT I N ESCROW ACCOUNT AND TO BE DISBURSED FOR THE PURPOSE OF SECU RITY. RELYING UPON THE OFFICE MEMORANDUM ISSUED BY THE CBDT DATED 30-06- 2008, IT WAS MENTIONED THEREIN THAT THE TAX COMPONE NT MAY BE CHARGED TO THE PSFSC ACCOUNT IN PROPORTION TO ITS LIABILITY ON STANDALONE BASIS. THE ASSESSEE WAS OF THE OPINION T HAT THE AFORESAID AMOUNT WAS NOT TAXABLE IN THE HANDS OF TH E ASSESSEE COMPANY, AND THEREFORE, 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 ASS ESSEE IN VIEW 18 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) 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 BEFO RE THE CBDT AS WELL AS MOCA. IN RESPONSE, MOCA ISSUED A LETTER DAT ED 15-11- 2010 WHEREIN IT WAS STATED THAT THE MATTER WAS EXAM INED WITH THE MINISTRY OF FINANCE AND ACCORDINGLY IT IS CLARI FIED THAT THE WHOLE AMOUNT OF PSF SC INCLUDING SECURITY COMPONE NT WAS REVENUE RECEIPT, AND THUS IT WAS TAXABLE UNDER THE INCOME-TAX ACT. 14.19 THE ASSESSEE CHALLENGED BEFORE US, THE VALIDI TY AND BINDING FORCE OF THE AFORESAID OFFICE MEMORANDUM ISSUED BY THE CBDT AND CLARIFICATION RECEIVED BY MOCA. IT HAS BEEN NOT ED BY US FIRSTLY THAT IN NONE OF THESE DOCUMENTS, THERE SEEMS TO HAV E BEEN MADE ANY APPLICATION OF MIND BY THE CONCERNED AUTHORITIE S WHILE EXPRESSING THEIR OPINION. NONE OF THE AUTHORITIES H AVE CONSIDERED THE ASPECT THAT THE IMPUGNED AMOUNT WAS COLLECTED I N THE FIDUCIARY CAPACITY BY THE ASSESSEE. NONE OF THE AUT HORITIES HAVE STATED THAT UNDER WHAT PROVISIONS OF LAW, THE AFORE SAID AMOUNT CAN BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE. THE CBDT IN ITS OFFICE MEMORANDUM HAS MADE A REFERENCE TO THE J UDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CHOWRINGHE E SALES BUREAU (SUPRA). BUT FACTS OF THAT CASE HAVE NOT BEE N DISCUSSED. THE AFORESAID 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), WH EREAS THE FACTS ARE TOTALLY DIFFERENT IN THE CASE BEFORE US. THE AM OUNT HERE WAS COLLECTED PURELY IN FIDUCIARY CAPACITY AND THE SAME WAS DEPOSITED 19 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) IN ESCROW ACCOUNT ON WHICH ASSESSEE HAD NO CONTROL AT ALL; THE ASSESSEE HAD NO DISCRETION AT ALL UPON ITS USAGE. N O REASONING HAS BEEN MADE OUT BY THE CBDT WHILE ISSUING ITS OPI NION AS TO HOW THE SAID JUDGMENT WAS APPLICABLE ON THE FACTS O F THIS CASE. IT IS NOTED BY US THAT AFORESAID JUDGMENT CAME UP FOR CONSIDERATION BEFORE MANY COURTS WHEREIN ITS TRUE MEANING AND SCO PE OF ITS APPLICABILITY WAS EXPLAINED TIME TO TIME. IN ONE SU CH 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 A CCOUNTABLE FOR THE RECOVERY (CALLED AS MARKET FEE) WHICH HE MA DE FROM THE SELLERS OF AGRICULTURAL PRODUCE IN TERMS OF KRISHI UTPADAN MANDI RULES FRAMED UNDER THE U.P. KRISHI UTPADAN MANDI AD HINIYAM, 1964. THE REVENUE TREATED THE AMOUNT SO COLLECTED B Y THE AGENT AS PART OF ITS TAXABLE INCOME BEING A TRADING RECEI PT IN VIEW OF JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CH OWRINGHEE SALES BUREAU, SUPRA. AFTER ANALYSING THE FACTS OF T HE CASE, IT WAS HELD BY THE HON'BLE COURT THAT THE MARKET FEE REALI SED BY THE COMMISSION AGENT DOES NOT FORM PART OF HIS TRADING RECEIPT AS HE (THE COMMISSION AGENT) HELD THIS AMOUNT ONLY AS A T RUSTEE FOR AND ON BEHALF OF THE MARKET COMMITTEE. HON'BLE COURT AP PLIED THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CI T V. SITALDAS TIRATHDAS [ 1961] 41 ITR 367 AND DISTINGUISHED THAT OF CHOWRINGHEE SALES BUREAU (P.) LTD.(SUPRA). 14.20 THUS, AT THE OUTSET, IT IS CLEARLY VISIBLE TH AT BOTH THE AUTHORITIES EXPRESSED THEIR OPINIONS WITHOUT PROPER APPLICATION OF 20 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) MIND AND WITHOUT EXAMINING THE NATURE OF IMPUGNED R ECEIPT WITHIN THE FRAMEWORK OF PROVISIONS OF INCOME-TAX AC T, 1961. 14.21 APART FROM THAT, THE BINDING EFFECT OF OFFICE MEMORANDUM ISSUED BY CBDT, CLARIFICATION ISSUED BY MOCA IS ALS O UNDER QUESTION. IT HAS BEEN ARGUED THAT IT HAS BEEN HELD BY HON'BLE SUPREME COURT MANY TIMES THAT CIRCULARS ISSUED BY T HE BOARD ARE BINDING UPON THE AUTHORITIES WORKING UNDER IT, VIZ. THE AO, ETC. BUT THESE ARE NOT BINDING UPON THE APPELLATE AUTHORITIE S INCLUDING INCOME TAX APPELLATE TRIBUNAL. WE HAVE EXAMINED THI S 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 AU THORITIES WORKING UNDER IT FOR PROPER ADMINISTRATION OF THE I.T. ACT. AND IT HAS ALSO BEEN PROVIDED THAT THIS SHALL BE BINDING UPON THE I NCOME-TAX AUTHORITIES. BUT IT IS FURTHER NOTED THAT A PROVISO HAS BEEN ADDED TO SUB SECTION (1) OF SECTION 119 WHICH SAYS THAT N O SUCH ORDERS, INSTRUCTIONS OR DIRECTIONS SHALL BE ISSUED:- (A) SO AS TO REQUIRE ANY INCOME-TAX AUTHORITY TO MAKE A PARTICULAR ASSESSMEN T OR TO DISPOSE A PARTICULAR CASE IN A PARTICULAR MANNER; O R (B) SO AS TO INTERFERE WITH THE DISCRETION OF THE COMMISSIONER ( APPEALS) IN EXERCISE OF HIS APPELLATE FUNCTIONS. IT IS CLEAR FR OM THE PERUSAL OF AFORESAID PROVISO THAT NEITHER THE BOARD HAS POWER TO DECIDE THE TAXABILITY OF A PARTICULAR RECEIPT NOR HAS IT GOT A NY POWER TO INTERFERE WITH THE APPELLATE FUNCTIONS OF COMMISSIO NER (APPEALS), WHICH IS JUDICIAL IN NATURE. THUS, IN VIEW OF THE A FORESAID LEGAL SCENARIO COUPLED WITH FACTS OF THIS CASE AS DISCUSS ED ABOVE, WE HAVE STRONG DOUBTS IF AT ALL THE BOARD COULD HAVE I SSUED ANY INSTRUCTIONS TO DECIDE THE TAXABILITY OF AMOUNT COL LECTED BY THE 21 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) 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 DESIGNATE D AO, WHO IS OBLIGED UNDER THE LAW TO DETERMINE THE SAME STRICTL Y IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME-TAX AC T, 1961. 14.22 FURTHER, AFORESAID CLARIFICATION ISSUED BY TH E BOARD IN THIS CASE IS ACTUALLY AN 'OFFICE MEMORANDUM'. IT IS AN I NTER DEPARTMENTAL COMMUNICATION. IN OUR VIEW, OFFICE MEM ORANDUM WOULD NOT CARRY THE LEGAL FORCE OF BINDING EFFECT. FURTHER, IT HAS BEEN PROVIDED IN SECTION 119 THAT ORDERS, INSTRUCTI ONS AND DIRECTIONS SHALL BE BINDING UPON THE INCOME-TAX AUT HORITIES. IT IS NOTED THAT INCOME-TAX APPELLATE TRIBUNAL DOES NOT F ALL UNDER THE LIST OF INCOME-TAX AUTHORITIES AS HAS BEEN PROVIDED IN SECTION 116 OF THE ACT. THUS, THESE ORDERS, INSTRUCTIONS AND DI RECTIONS SHALL NOT BE BINDING UPON THE INCOME-TAX APPELLATE TRIBUNAL. FURTHER IT IS NOTED THAT THESE HAVE BEEN HELD TO BE NOT BINDING U PON THE CIT (A) AS STATED ABOVE. THEREFORE, THERE IS NO QUESTION OF THERE BEING ANY BINDING EFFECT UPON THE INCOME-TAX APPELLATE TRIBUN AL OF ANY SUCH COMMUNICATION ISSUED BY THE BOARD. 14.23 IT IS NOTED BY US THAT THIS ISSUE IS NOT RES INTEGRA, AS IT HAS BEEN SETTLED BY HON'BLE JURISDICTIONAL HIGH COURT A ND HON'BLE SUPREME COURT IN MANY CASES. IT WAS HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF BANQUE NATIONALE DE PARIS (SUPRA) THAT CIRCULARS CANNOT OVERRIDE OR DETRACT FROM THE PROVI SIONS OF THE ACT IN AS MUCH AS SECTION 119 OF THE ACT HAS EMPOWERED THE CBDT TO ISSUE ORDERS, INSTRUCTIONS OR DIRECTIONS FOR THE PR OPER ADMINISTRATION OF THE ACT. HON'BLE HIGH COURT HAS T AKEN INTO CONSIDERATION VARIOUS EARLIER JUDGMENTS OF HON'BLE SUPREME COURT 22 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) ON THIS ISSUE. SIMILARLY, THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCLES (P.) LTD. (SUPRA) HELD THAT CIRCULAR S 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 F URTHER NOTED THAT LAW IN THIS REGARD WAS FURTHER ANALYSED BY HON'BLE SUPREME COURT IN THE CASE OF UCO BANK (SUPRA). IT WAS OBSER VED BY THE HON'BLE SUPREME COURT THAT CBDT HAS POWER TO TONE D OWN THE RIGOUR OF THE LAW AND ENSURE ENFORCEMENT OF ITS PRO VISIONS OF ISSUING CIRCULARS. THE BOARD HAS BEEN GIVEN FOR THE PURPOSE OF JUST, PROPER AND EFFICIENT MANAGEMENT OF WORK OF AS SESSMENT. HOWEVER, THESE ARE NOT MEANT FOR CONTRADICTING OR N ULLIFYING 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 W AS INTER-ALIA OBSERVED THAT BOARD CANNOT PRE-EMPT JUDICIAL INTERP RETATION 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 TAS K 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 ADMINISTRATION OF THE FISCAL STATUTE AND SUCH CIRCULARS WOULD BE BINDING ON THE AUTHORITIES ENSHR INED IN THE ACT. 14.24 THUS, TAKING GUIDANCE FROM THE AFORESAID LEGA L 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 AM OUNT AS TAXABLE, IF THE SAME IS OTHERWISE NOT TAXABLE AS PER THE 23 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) PROVISIONS OF THE INCOME-TAX ACT, 1961. FURTHER, AS FAR AS THE CLARIFICATION ISSUED BY MOCA IS CONCERNED, IT IS NO TED THAT THE ROLE OF MOCA WAS CONFINED TO ISSUING STANDARD OPERATING PROCEDURES AND OTHER GUIDELINES TO THE AIRPORT OPERATORS TO EN SURE 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 N O 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 WE LL AS BY THE APPELLATE COURTS WHILE DETERMINING THE TAXABILITY O F THE IMPUGNED AMOUNT. 5.8 FOR THE REASONS STATED ABOVE, GROUNDS 1 TO 1.2 ARE DISMISSED. 6.0. IN GROUND NOS.2 TO 2.3, THE REVENUE CHALLENGES RELIEF GRANTED BY THE LD. CIT(APPEALS) BY HOLDING THAT THE AMOUNT RET AINED BY BANKS/ CREDIT CARD AGENCIES OUT OF SALE CONSIDERATION OF T HE TICKETS BOOKED THROUGH CREDIT / DEBIT CARDS IS NOT COVERED UNDER T HE DEFINITION OF COMMISSIONER OR BROKERAGE AS PER SECTION 194H OF THE ACT. IN THIS REGARD, IN THE ORDER U/S 201(1) OF THE ACT, THE AO HELD THAT THERE IS AN IMPLIED AGENCY RELATIONSHIP BETWEEN THE ASSESSEE AI RLINE AND THE BANKS AND, THEREFORE, THE CHARGES RETAINED BY THE B ANKS ARE IN THE NATURE OF COMMISSION OR BROKERAGE. IN HIS ORDER IT IS HELD BY THE AO AS UNDER:- 24 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) 3.2 IN THE INSTANT CASE, THE FIRST CONDITION I.E., FOR ANY SERVICES RENDERED IS CLEARLY COVERED. THE BANKERS RECEIVED P AYMENT FROM THE MERCHANT ESTABLISHED I.E., THE ASSESSEE FOR THE PAYMENT GATEWAY SERVICES RENDERED BY THE BANKERS. THE SERVI CES RENDERED BY THE BANKERS ARE CLEARLY IN THE NATURE OF RECOVER Y OF BILLS FROM THE CUSTOMERS ON BEHALF OF THE ASSESSEE AND THE PAY MENTS 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 DIR ECTLY RECEIVED THE PAYMENTS FROM THE CUSTOMERS, BUT IT IS THE BANK S WHICH ARE COLLECTING THE PAYMENTS FOR THE ASSESSEE FROM THE C USTOMERS AND GIVING IT TO THE ASSESSEE. HENCE THE BANKS ARE CLEA RLY ACTING AS AN AGENT ON BEHALF OF THE ASSESSEE ALBEIT THE AGREEMEN T, ENTERED BETWEEN THE PARTIES, DOES NOT VISIBLY DEPICT THE RE LATIONSHIP BETWEEN THEM AS PRINCIPAL AND AGENT. 6.1 THE LD. CIT (APPEALS) HAS, IN THE IMPUGNED ORDE R, HELD THAT THE CHARGES RETAINED BY THE CREDIT CARD COMPANIES/BANKS ARE NOT IN THE NATURE OF COMMISSION OR BROKERAGE. WHILE ARRIVING A T THIS CONCLUSION, THE LD CIT (A) HAS FOLLOWED THE DECISION OF HONBLE 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 25 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) (SUPRA) AND SUBMITTED THAT, THEREFORE, THE FINDINGS OF LD. CIT (A) SHOULD BE UPHELD. 6.4 WE HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND THE SUBMISSIONS MADE BY THE RIVAL PARTIES. WE FIND THAT THE ISSUE IN DISPUTE STANDS FULLY COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JDS APPARE L (SUPRA) WHEREIN THE HONBLE HIGH COURT HAS HELD AS UNDER :- 15. APPLYING THE ABOVE CITED CASE LAW TO THE FACTU AL 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 R ESPONDENT- ASSESSEE. ONCE THE PAYMENT WAS MADE BY HDFC, IT WAS RECEIVED AND CREDITED TO THE ACCOUNT OF THE RESPONDENT-ASSES SEE. 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 CRE DIT CARD WAS USED, GOT ACCESS TO THE INTERNET GATEWAY OF THE ACQ UIRING BANK RESULTING IN THE REALISATION OF PAYMENT. SUBSEQUENT LY, THE ACQUIRING BANK REALISED AND RECOVERED THE PAYMENT F ROM THE BANK WHICH HAD ISSUED THE CREDIT CARD. HDFC HAD NOT UNDE RTAKEN ANY ACT ON 'BEHALF' OF THE RESPONDENT-ASSESSEE. THE REL ATIONSHIP BETWEEN HDFC AND THE RESPONDENT-ASSESSEE WAS NOT OF AN AGENCY BUT THAT OF TWO INDEPENDENT PARTIES ON PRINC IPAL TO PRINCIPAL BASIS. HDFC WAS ALSO ACTING AND EQUALLY P ROTECTING THE INTEREST OF THE CUSTOMER WHOSE CREDIT CARD WAS USED IN THE SWIPING MACHINES. IT IS NOTICEABLE THAT THE BANK IN QUESTION OR THEIR EMPLOYEES WERE NOT PRESENT AT THE SPOT AND WE RE NOT 26 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) ASSOCIATED WITH BUYING OR SELLING OF GOODS AS SUCH. UPON SWIPING THE CARD, THE BANK MADE PAYMENT OF THE BILL AMOUNT TO THE RESPONDENT-ASSESSEE. THUS, THE RESPONDENT ASSESSEE RECEIVED THE SALE CONSIDERATION. IN TURN, THE BANK IN QUESTION H AD TO COLLECT THE AMOUNT FROM THE BANKERS OF THE CREDIT CARD HOLDER. THE BANK HAD TAKEN THE RISK AND ALSO REMAINED OUT OF POCKET FOR SOMETIME AS THERE WOULD BE A TIME GAP BETWEEN THE DATE OF PAYME NT AND RECOVERY OF THE AMOUNT PAID. 16. THE AMOUNT RETAINED BY THE BANK IS A FEE CHARGE D BY THEM FOR HAVING RENDERED THE BANKING SERVICES AND CANNOT BE TREATED AS A COMMISSION OR BROKERAGE PAID IN COURSE OF USE OF AN Y SERVICES BY A PERSON ACTING ON BEHALF OF ANOTHER FOR BUYING OR SELLING OF GOODS. THE INTENTION OF THE LEGISLATURE IS TO INCLUDE AND TREAT COMMISSION OR BROKERAGE PAID WHEN A THIRD PERSON INTERACTS BET WEEN THE SELLER AND THE BUYER AS AN AGENT AND THEREBY RENDER S SERVICES IN THE COURSE OF BUYING AND/OR SELLING OF GOODS. THIS HAPPENS WHEN THERE IS A MIDDLEMAN OR AN AGENT WHO INTERACTS ON B EHALF OF ONE OF THE PARTIES, HELPS THE BUYER/SELLER TO MEET, OR PAR TICIPATES IN THE NEGOTIATIONS OR TRANSACTIONS RESULTING IN THE CONTR ACT FOR BUYING AND SELLING OF GOODS. THUS, THE REQUIREMENT OF AN A GENT AND PRINCIPAL RELATIONSHIP. THIS IS THE EXACT PURPORT A ND THE RATIONALE BEHIND THE PROVISION. THE BANK IN QUESTION IS NOT C ONCERNED 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 CONC ERNED WITH THE QUALITY, PRICE, NATURE, QUANTUM ETC. OF THE GOODS B OUGHT/SOLD. THE BANK MERELY PROVIDES BANKING SERVICES IN THE FORM O F PAYMENT AND SUBSEQUENTLY COLLECTS THE PAYMENT. THE AMOUNT P UNCHED IN THE SWIPING MACHINE IS CREDITED TO THE ACCOUNT OF T HE RETAILER BY 27 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) THE ACQUIRING BANK, I.E. HDFC IN THIS CASE, AFTER R ETAINING A SMALL PORTION OF THE SAME AS THEIR CHARGES. THE BANKING S ERVICES CANNOT BE COVERED AND TREATED AS SERVICES RENDERED BY AN A GENT 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 IDEN TICAL TO THAT DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT, R ESPECTFULLY FOLLOWING THE VERDICT OF M/S JDS APPAREL (SUPRA) IT IS HELD THAT THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TDS ON CHARGES RETAINED BY BANK / CREDIT CARD AGENCIES OUT OF THE SALE CONSIDE RATION OF TICKETS BOOKED THROUGH CREDIT / DEBIT CARDS. IT IS HELD THA T PROVISION OF SECTION 194H ARE NOT ATTRACTED. AS A RESULT, GROUND S 2 TO 2.3 ARE DISMISSED. 7.0 IN THE FINAL RESULT, THE APPEAL OF THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2019. SD/- SD/- (G.D.AGRAWAL) (SUDHANSHU SRIVA STAVA) VICE PRESIDENT JUDICIAL MEMBER DATED: 28.02.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY 28 ITA NO. 6103/DEL/2015 (SPICE JET LTD.) ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DICTATED ON DRAGON DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER