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Judgment
This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act) takes exception to order dated 23rd October, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2010-2011.
This appeal raises the following questions of law for our consideration :-
"(i) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in upholding the order of the Commissioner of Income Tax (Appeals) (CIT(A)) and holding that the PSF paid by the asssessee to the airport operators was not covered under the definition of rent given in the Explanation (i) to Section 194-I of the Act and the assessee was not liable to deduct tax at source under Section 194-I of the Act?
(ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding the order of the CIT(A) and holding that the amount retained by a bank/credit card agency out of the sale consideration of the tickets booked through credit cards is not covered under the definition of "commission or brokerage" given in the Explanation (i) to Section 194H of the Act and the assessee was not liable to deduct tax at source under Section 194H in respect of this amount?"
Regarding question No. (i):-
(a) The respondent-assessee is engaged in the business of transportation by aircraft and for that purpose use and occupy airports run by Airport Operators. In the course of its business the respondent-assessee collects on behalf of the Airport Operators, a Passenger Service Fees (PSF) and hands it over to the Airport Operators. However, as no tax was deducted at source while handing over the PSF to the Airport Operator, a notice under Section 201(1)/201(1A) of the Act was issued seeking the respondent-asessee''s explanation. The basis of the notice was that the PSF paid over to the Airport Operator was "Rent" falling within the scope under Section 194I of the Act. It was contended by the respondent that the PSF is collected by it from its passengers and handed over to the Airport Operator and would not be in the nature of rent. It was pointed out that the amount of PSF which is paid by the respondent to the Airport Operator consists of two components i.e. security component and facilitation component. However, the ACIT (TDS) by an order dated 22nd February, 2012 did not accept the respondent''s submission and held the respondent liable to deduct and pay the amount of tax at source (TDS) and the interest thereon under Section 201(1) and 201(1A) of the Act.
(b) Being aggrieved the respondent carried the issue in appeal to the Commissioner of Income Tax (Appeals) (CIT(A)). By an order dated 10th May, 2012, the CIT(A) held that the PSF collected from the passengers and paid over to the Airport Operator was not in the nature of rent as defined in Section 194-I of the Act. Consequently there was no obligation on the respondent to deduct tax at source under Section 194-I of the Act while handing over the amounts received from its passengers.
(c) Being aggrieved with the order of the CIT(A) the Revenue carried the issue in appeal to the Tribunal. The impugned order of the Tribunal placed reliance upon Rule 88 of the Indian Aircraft Rules, 1937 which inter alia provides that licensee i.e. (Airport Operator) is entitled to collect fees (PSF) from embarking passengers at such rate as the Central Government may specify. In the above view, the impugned order holds that the same is in the nature of a statutory liability. Besides the impugned order further holds that the Airport Operator is entitled under the above Rule to collect PSF from the passengers and the collection of PSF by the respondent-assessee is handed over to the Airport Operator. Thus the collection by the respondent-assessee is on behalf of the Airport Operator. It further records that the payment which is made by the passenger to the Airport Operator through the Airline cannot be considered as rent as no area is demarcated or earmarked for the use of the individual passenger. In support, reliance was placed by the impugned order upon the decision of the Madras High Court in Commissioner of Income Tax v. Singapore Airlines Ltd. (2012) 252 CTR (Mad) 429 wherein it has been held that a payment made to the Airport Operator as landing charges is not a payment for use of land but for various services and the use of land was only incidental to it.
(d) The grievance of the Revenue before us is that the passenger service fee is in fact rent paid within the meaning of the Explanation to Section 194-I of the Act. Mr. Chhotaray, the learned counsel appearing for the Revenue invites our attention to paragraph (e) of his grounds of appeal to submit that the PSF which has been collected is essentially for providing for use of a secure building and furniture. At this we are asked Mr. Chhotaray to identify the facts as reflected in the orders of the Revenue Authorities in support of the aforesaid submissions. Our attention was invited to page 17 of the order dated 10th May, 2012 of the CIT(A) where it is observed that PSF is consideration paid by the passengers for security, handling of baggage, toilets, etc.
(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 Rules the Airport Operator is entitled to collect PSF 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."
(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 Rs. 200/- collected per passenger, an amount of Rs. 70/- would be retained by the Airport Operator towards passenger facilitation while the balance Rs. 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). This decision of the Madras High Court was carried in appeal by the Revenue to the Supreme Court. By its decision reported as CIT v. Singapore Airlines Ltd., the view of the Madras High Court was upheld. In the case before the Supreme Court, the issue for consideration was whether landing and take-off charges paid by the airline to the Airport Operator would be covered within the meaning of rent as provided under Section 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 and parking charges, "treating such charges as charges for "use of the land" would be adopting a totally naive and simplistic approach 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 meaning 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 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 respondent-assessee. Consequently, the proposed question of law does not give rise to any substantial question of law. Thus not entertained.
The Appeal admitted on the substantial question of law at question no.(ii) above.
Registry is directed to communicate a copy of this order to the Tribunal. This would enable the Tribunal to keep the papers and proceedings relating to the present appeal available, to be produced when sought for by the Court.