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Facts
The revenue appealed against the CIT(A)'s order, which held that the assessee, a travel agent, was not an e-commerce operator liable to deduct TDS under Section 194-O of the Income Tax Act. The assessee books air tickets through CRS systems owned and operated by third-party companies.
Held
The Tribunal held that the assessee is not an e-commerce operator as defined under Section 194-O of the Act because it neither owns, operates, nor manages the CRS platform. The assessee merely uses the platform as a travel agent to book tickets for clients.
Key Issues
Whether the assessee, a travel agent booking tickets via third-party CRS platforms, qualifies as an e-commerce operator under Section 194-O of the Income Tax Act, 1961, making it liable for TDS deduction.
Sections Cited
194-O, 250, 133A(2A), 201(1), 201(1A), 164, 194J
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI. OM PRAKASH KANT, AM
O R D E R Per Kavitha Rajagopal, J M: These captioned appeals have been filed by the revenue, challenging the order of the learned Commissioner of Income Tax (Appeals) 54, Mumbai (‘ld. CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s. 250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2021-22 and 2022-23. 2. As the facts in all these appeals are common, we hereby pass a consolidated order by taking as a lead case. 3. The revenue has raised the following grounds of appeal:
1. , 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd. a) “On the facts and in the circumstances of the case and law, the Ld. CIT(A) erred in holding that the assessee cannot be treated as an ecommerce operator within the meaning of section 194-O of the Act for the purpose of booking of tickets in the FCC segment through CRS system and hence, the assessee falls outside the ambit of definition of “e-commerce operator” and not liable to deduct tax under section 194-O of the act, without appreciating the fact that the assessee actively operates and manages the CRS platform after getting rights under SSAs of other entities and performs all primary functions required to enable the rendering of services of ticket booking from passenger to Airline through such platform thus would qualify as an e-commerce operator.” b) “On the facts and in the circumstances of the case and law, the Ld. CIT(A) erred in holding that the assessee cannot be treated as an ecommerce operator within the meaning of section 194-O of the Act by citing the case of Asia Satellite Telecommunications Co. Ltd (197 taxmann 263)(Delhi) without appreciating the fact that in the case of Asia Satellite Telecommunications Co. Ltd assessee gave only access to a broadband available from the transponder to its customers, but retained control over the transponder whereas in this instant case the assessee operates or manages the platform with the user access thus would qualify as an e-commerce operator.” c) "On the facts and in the circumstances of the case and law, the Lá. CIT(A) has erred in citing the decision of the Hon'ble Supreme Court in the case of Rashtriya Ispat Nigam Limited the "operate and manage" means transfer of effective control of an assets without appreciating the fact that in the case of Rashtriya Ispat Nigam Limited the respondent supplied sophisticated machinery to the contractors for the purpose of being used in execution of contracted works and received charges for the same whereas in the case under consideration the assessee operates or manages the platform which is intangible and cannot be compared with the tangible asset as it was in the case cited above." d)"On the facts and in the circumstances of the case and law, the La. CIT(A) has erred in holding that the assessee cannot be treated as an e-commerce operator within the meaning of section 194-0 of the Aca without appreciating the fact that the expression used in sec. 194-0 defining the e-commerce operator is mentioned as person who owns, operates or manages the digital or electronic facility, whereas the word "owns" is separated by punctuation whereas the word operates is separated from the word manages with word "or". Hence, applying the principles of Nocitur Socii, an e-commerce operator shall be a person who 'owns' the digital platform or the person who ‘operates or manages' the platform.”
Brief facts of the case are that the assessee is engaged in a business of providing global travel services including Air Consolidation, Corporate Travel Management, Retail Travel Services, Packaged Holidays, Religious Tours, Cruise Tours, Training in Travel & Tourism. The assessee is also engaged in hotel booking, air tickets, Visa, travel Insurance, airport assistance, forex and car rental services and has offices at 70 , 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd. locations in India and also outside India in USA, Canada and UAE. The assessee also submits that it undertakes business directly as well as provides through agents. The survey action u/s. 133A(2A) of the Act dated 09.11.2021 was carried out in assessee’s case at the registered/corporate offices u/s. 133A(2A) of the Act. The learned Assessing Officer (‘ld. AO’ for short) observed that the assessee has made payments under the Billing and Settlement (BSP) Mechanism to BSP IATA for air tickets of Full Cost Carrier (FCC) airlines booked through e-commerce platform viz. CRS System. It was further observed that the assessee has failed to deduct TDS under section 194-O of the Act for which the ld. AO issued show cause notice u/s. 201(1) and 201(1A) of the Act dated 15.11.2021 which duly was issued to the assessee for non-compliance of TDS provisions as per Section 194-O of the Act for which the assessee is to be treated as “an assessee in default”. The assessee is said to have furnished details. The ld. AO not satisfied with the assessee’s submission held the assessee to be “an assessee in default” as per Section 194-O of the Act where the assessee was an e-commerce operator which was operating and managing the CRS platform duly recognized by SSA of other entities and computed tax u/s. 201(1) and interest u/s. 201(1A) of the Act aggregating to Rs. 1,12,63,078/- and Rs. 12,21,845/- for the period from 31.10.2022 to 31.03.2021 respectively.
Aggrieved the assessee was in appeal before the Ld. CIT(A), challenging the impugned assessment order.
The ld. CIT(A) vide order dated 25.09.2023 held that the assessee is merely an agent booking tickets on behalf of its clients using the CRS system for which it has no right and does not own, operate and manage such CRS companies. Further, the ld. CIT(A)
, 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd. held that the entire control of the CRS system is with the respective CRS company and not with the assessee as per the agreements entered into by the assessee and the CRS companies. The ld. CIT(A) further held that since the effective right or control over the platform is not with the assessee which is merely an user of the said platform, the assessee cannot be considered as an e-commerce operator as per Section 194-O of the Act and thereby holding the assessee to be not ‘an assessee in default’ as it was not liable to deduct TDS as per Section 194-O of the Act.
Aggrieved by the said order, the revenue is in appeal before us challenging the order of the ld. CIT(A).
We have heard the rival submissions and perused the materials available on record. Before getting into the issue in dispute, it is relevant to understand the nature of the business of the assessee for which based on the assessee’s submission the facts are culled out hereafter. The assessee is an air travel agent accredited by International Air Transport Association (IATA) which is a trade association for airline which aims at supporting various aviation activities and in helping to formulate industry policy on critical aviation issues. The assessee is provided with a specific IATA code which is used by the assessee for buying airline tickets for international and domestic travel which are normally booked by the assessee or the sub agents on an e-commerce platform (in short ‘CRS’) which are basically owned, operated and managed by the concerned CRS companies, in assessee’s case Amadeus IT Group SA (Amadeus), Interglobe Technology Quotient Pvt. Ltd. (Galileo) and Sabre Asia Pacific Pte Ltd. (Sabre). The Billing and Settlement Payment (BSP) mechanism is used for making payments for these air tickets which are paid to IATA which in turn makes payment , 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd.
to the concerned airlines. This system is used worldwide across various countries which serves to simplify the process which enables the assessee/sub-agent to verify the availability of air tickets of different airlines and the cost of air tickets using any of the three CRS systems mentioned above which displays all the available air tickets for sale when a retail client has to book air tickets for any FCC, domestic or international airline. When the retail client chooses the suitable air ticket, the assessee/sub-agent makes a reservation of the air tickets were a PNR is generated for the purpose of tracking details of the booked tickets and the sub-agent sends the PNR to RTT through the CRS system for issuing the air ticket. After this, RTT books a ticket using CRS system for which the sub-agent’s account or client’s account is debited and the same is credited in BSP IATA account and any discount or commission if eligible is given directly to the client/ sub-agent through the invoice of the sale of air tickets and TDS is also deducted on the commission paid to sub-agent through the same invoice. For this entire process, the CRS system is utilized which the assessee claims to have no exclusive right upon the same neither can the assessee make any alteration or modification to the CRS system, for the reason that the same is not owned, managed or operated by the assessee. The assessee claims that the payment for the tickets can be made to BSP IATA through RTT which pays for the air tickets booked between 1st to 7th of the month to BSP on the 14th of the month or when the ticket is booked on 8th to 14th of the month, the same is paid to BSP on 21st of the month and likewise. The sub-agents are also given such credits to make payment to RTT. The assessee claims that payment is made to BSP IATA in accordance with the statement produced by it which will remit the same to the , 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd. participating airlines. It is also stated that payments are made through credit cards which option is given by some airlines to travel agents at the time of booking of the air tickets in which case, the payments are directly made to the airlines through booking platform i.e., CRS system. The BSP statement which is issued on weekly basis also contains the said transactions made through card payments.
The assessee contends that the assessee denies it to be an e-commerce operator and is merely a travel agent booking tickets for its clients using a digital platform (CRS) which is a computerized system which stores and retrieves information for transactions related to air travel.
The ld. AO observed that the assessee has more than 20,000 active agents all over the country where booking of air tickets is done through BSP for FCC (Full Cost Carriers), FCC airline tickets for domestic and foreign airlines and for LCC (Low- Cost Carriers) for tickets booked through Riya Connect Application (Mobile App) for both foreign as well as domestic airline tickets.
The learned Departmental Representative (ld. DR for short) contended that the assessee’s role in booking the air tickets is vital to the said transaction and alleged that the assessee is in control and management of the entire CRS platform for which incentives are paid to the assessee. The ld. DR further states that the assessee collects payment from the passengers and remits the same from the airlines through BSP which is again controlled and managed by the assessee. The ld. DR further stated that ownership of the platform is not a mandatory condition and the assessee herein this case technically operates or manages the platform, would be liable to deduct tax u/s. 194-O of the Act. The ld. DR relied on the order of the ld. AO.
, 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd.
The learned Authorised Representative (ld. AR for short) for the assessee on the other hand contended that Section 194-O of the Act applicable for e-commerce operators’ casts upon a liability to deduct TDS @1% at the time of the credit arising out of sale of goods, services or both with a condition that e-commerce operators should be resident of India. The ld. AR further contended that the assessee is not an e-commerce operator for the purpose of Section 194-O of the Act, for the reason that the CRS system is never owned, operated or managed by the assessee of which it does not have any control over it and it is only the CRS companies which are liable to deduct TDS @1% as per Section 194-O of the Act. The ld. AR further iterated that the term ‘Own’, ‘Operate and ‘Manage’ does not apply to the assessee were it neither possess nor has control over it. Further, the ld. Counsel submitted that the assessee is restricted only to using the CRS system which is owned, operated and managed by the assessee companies viz. Amadeus IT Group SA (Amadeus), Interglobe Technology Quotient Pvt. Ltd. (Galileo) and Sabre Asia Pacific Pte Ltd. (Sabre) for the purpose of booking airline tickets for which the assessee is entitled to CRS commission. The ld. AR brought to our attention to the subscriber agreement entered into by the assessee with CRS provider companies for the purpose of corroborating his contentions. The ld. AR relied on various decisions in support of his contentions.
On perusal of the rival contentions, the only moot issue to be adjudicated upon in this appeal is whether the assessee is entitled to deduct TDS in accordance with the Section 194-O of the Act on the bookings made through CRS system. The transaction of the assessee could be bifurcated into two segments which is transaction with BSP for FCC (Full Cost Carrier) and transaction with foreign/domestic airlines as LCC , 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd.
(Low-Cost Carrier) for tickets booked through mobile application/website which are similar in nature except for the mode of payment where in FCC category it is made through BSP and in LCC category it is made directly through the airlines. The ld. AO observed that the assessee has deducted tax u/s. 194-O of the Act only on the bookings made through Riya Connect Application i.e., for domestic LCC airlines but has not deducted TDS on the bookings made through BSP IATA for FCC category. The ld. AO emphasized that as both categories fall under the same operation methods except for the mode of payment, the assessee has defaulted in not deducting TDS on payments made to BSP. The ld. AO explained the definition of e-commerce operator as one who operates or manages digital or electronic facility and ‘e-commerce’ to be supply of goods or services or both, including digital products, over digital or electronic network. The ld. AO draws support of Section 164 of the Act which includes e-commerce supply of services, online sale of goods or provisions of services or both, facilitated by the e-commerce operator where online means a facility or service or right or benefit or access that is obtained through the internet or any other form of digital or telecommunication network. The ld. AO perused the agreements entered into by the assessee with the 3 CRS companies which it was primarily dealing with and found that the assessee was paid commission for utilizing these platforms for accessibility to the consumers and have also paid advance commission to incentivize the assessee for using their platform. The ld. AO observed that the said companies have given access to their platforms through SSA through internet services for assessee to facilitate and retrieve information or the purpose of booking air tickets and other allied transactions. The ld. AO observed that the assessee has not entered into , 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd. any written agreement with IATA except the Passenger Sales Agency Agreement (PSAA) dated 15.05.1994 as per which the assessee was a member of IATA for which it pays annual fee. The payment made to BSP is one single payment which includes all sales pertaining to BSP airlines which in turn makes one consolidated payment to each airline as per the sales made by the agents. The ld. AO held that though payments are made in different modes it all gets credited to the respective airlines. The ld. AO also stated that the CSR companies have not admitted that they are the owners which is operating or managing the platform and neither the assessee nor these companies are accepting the liability of deducting TDS u/s. 194-O and where it was obvious that TDS has not been deducted at any stage. It is also noted that the entire transaction requires planning, coordinating and controlling all the resources which even if the role of assessee fails the entire transaction could not be carried out which impliedly means that the assessee does have the control or management of this platform. The ld. AO held that the assessee is nevertheless an e-commerce operator as well as manager of the platform and having held that the assessee was entitled to deduct TDS as per Section 194-O of the Act, failing which the assessee is said to be ‘an assessee in default’. No doubt the same applies only to the participants who are resident of India and therefore payment made towards booking of tickets of foreign airlines which are liable to tax outside India does not come under the preview of TDS payments which are made to BSP IATA. The ld. AO substantiated this by stating that the selling of goods and providing services over digital or electronic network will come under the preview of e-commerce and therefore the assessee is to be treated as an e-commerce operator which is liable to deduct TDS u/s. 194-O of the Act.
, 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd.
The ld. CIT(A) held that the software used by the CSR companies are owned for which the assessee will not acquire any right and held that the assessee is merely an agent who books air tickets on behalf of the clients using the CRS system. Further, the CRS companies have given only limited access to the assessee to use the system for booking tickets. The ld. CIT(A) relied on the decision of the Delhi High Court in the case of Asia Satellite Telecommunication (197 taxmann 263) (Delhi) which held that mere access to broadband from the transponder to its customer cannot be said to be tried to use when the control over the transponder was not with the assessee. The ld. CIT(A) also relied on the judgement of the Hon’ble Apex Court in the case of Rashtriya Ispat Nigam Limited (126 STC 114)(SC) to interpret the expression ‘operate and manage’ which has to be controlled over the digital platform which in the case remains with the CRS companies. The ld. CIT(A) held that the assessee is not ‘an assessee in default’ and was not liable to deduct tax u/s. 194-O of the Act.
From the above factual matrix of the case, it is pertinent to note that in order to determine whether the assessee would fall under the preview of Section 194-O of the Act for the payments made to BSP IATA, it is essential to reproduce Section 194-O of the Act for ease of reference. 194O. Payment of certain sums by e-commerce operator to e-commerce participant. 1) Notwithstanding anything to the contrary contained in any of the provisions of Part B of this Chapter, where sale of goods or provision of services of an e- commerce participant is facilitated by an e-commerce operator through its digital or electronic facility or platform (by whatever name called), such e-commerce operator shall, at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e- commerce participant by any mode, whichever is earlier, deduct income-tax at the rate of one per cent of the gross amount of such sales or services or both.
, 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd. Explanation.—For the purposes of this sub-section, any payment made by a purchaser of goods or recipient of services directly to an e-commerce participant for the sale of goods or provision of services or both, facilitated by an e- commerce operator, shall be deemed to be the amount credited or paid by the e- commerce operator to the e-commerce participant and shall be included in the gross amount of such sale or services for the purpose of deduction of income-tax under this sub-section. 2) No deduction under sub-section (1) shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of an e- commerce participant, being an individual or Hindu undivided family, where the gross amount of such sale or services or both during the previous year does not exceed five lakh rupees and such e-commerce participant has furnished his Permanent Account Number or Aadhaar number to the e-commerce operator. 3) Notwithstanding anything contained in Part B of this Chapter, a transaction in respect of which tax has been deducted by the e-commerce operator under sub- section (1), or which is not liable to deduction under sub-section (2), shall not be liable to tax deduction at source under any other provision of this Chapter: Provided that the provisions of this sub-section shall not apply to any amount or aggregate of amounts received or receivable by an e-commerce operator for hosting advertisements or providing any other services which are not in connection with the sale or services referred to in sub-section (1). 4) If any difficulty arises in giving effect to the provisions of this section, the Board may, with the approval of the Central Government, issue guidelines for the purpose of removing the difficulty. 5) Every guideline issued by the Board under sub-section (4) shall be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the e-commerce operator. 6) For the purposes of this section, e-commerce operator shall be deemed to be the person responsible for paying to e-commerce participant. Explanation.—For the purposes of this section,— a) "electronic commerce" means the supply of goods or services or both, including digital products, over digital or electronic network; b) "e-commerce operator" means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce; c) "e-commerce participant" means a person resident in India selling goods or providing services or both, including digital products, through digital or electronic facility or platform for electronic commerce; d) "services" includes "fees for technical services" and fees for "professional services", as defined in the Explanation to section 194J.]”
, 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd.
The above provision mandates that the sale of goods of provision of services of e- commerce participants is carried on by the e-commerce operator through its digital or electronic facility or platform then the e-commerce operator shall deduct TDS @1% on the gross amount of such sales or services or both either during the credit of the amount or any other time were payment is made to the e-commerce participant whichever mode may be. The explanation to the above provision is defined as electronic commerce, e-commerce operators and e-commerce participants which has categorically specified that the e-commerce operator is a person who owns, operates or manages digital or electronic facility or platform for electronic commerce.
Here in the present case, there is no iota of doubt that the CRS system is not owned by the assessee and even otherwise as per the subscriber agreement entered into by the assessee Interglobe Technology Quotient Pvt. Ltd. (ITQPL), the assessee shall be provided access to the software system solely for the purpose of using the Galileo system for obtaining information about the schedules, fares, seat availability, etc. and other services and also for making bookings. It also specifies that the Galileo system is owned and operated by the Travelport Global Distribution System B.V. and ITQPL is merely a distributor of Galileo system in India and not an agent of Travelport Global Distribution System B.V. The ITQPL is also entrusted to monitor or test the employees of the assessee and the right to remove or recover the software from the locations in case of any breach is vested with ITQPL. It also narrates the obligation of the assessee and specifies that the assessee cannot without prior consent modified, enhance, or make copies of old or part of the software and also categorically states that the ownership of the software is with ITQPL. It also facilitates the calculations of , 4191 & 4193/Mum/2023 (A.Y. 2021-22 & 2022-23) Riya Travels and Tours (India) Pvt. Ltd. incentives and payments to the assessee and also restricts productivity incentive payments in case the assessee failed to achieve the target segments in any quarter. The recital of the agreement does not in any manner create the ownership right neither does it let the assessee operate or manage the CSR system.
In the absence of any of these we find no justification in holding the assessee to be e- commerce operator and resultantly Section 194-O is not applicable in assessee’s case and hence the assessee is held to be not liable to deduct TDS and therefore is not ‘an assessee in default’. Form the above observation, we find no infirmity in the order of the ld. CIT(A).
In the result, the appeal filed by the revenue is dismissed.
& 4193/Mum/2023 (Assessment Year: 2022-23) 20. The findings given in A.Y. 2021-22 shall applies mutatis mutandis to these appeals also. 21. In the result, the appeals filed by the revenue are dismissed.