2005 (7) TMI 581 - AT - Income Tax

Interest levied u/s 201(1A) - Non deduction of tax at source either u/s 194-I landing and parking charges Or u/s 194J in respect of navigational charges - Assessee-in-default - HELD THAT - After considering the entire factual situation in the case of landing and parking of aircraft in the airport, a co-ordinate Bench of this Tribunal in the case of Japan Airlines 2004 (10) TMI 281 - ITAT DELHI-B , came to a conclusion that the International Airport Authority of India never intended to give out exclusive possession of any part of the landed property in relation to landing and parking area. Since the International Airport Authority of India granted permission for landing and parking without providing any exclusive right or interest in any specific portion of the land, the payment made by airline company cannot be construed as payment of rent. Therefore, the co-ordinate Bench of this Tribunal came to the conclusion that section 194-I is not applicable with regard to payment of landing and parking charges. However, the Delhi Bench of this Tribunal found that the payment attracts the provisions of section 194C since there was a contract between the assessee-company and the International Airport Authority of India. Therefore, the assessee is liable to deduct tax at the rate of 2%. By following the decision of Delhi Bench of this Tribunal in the case of Japan Airlines (supra) and for the very same reasons stated therein, we hold that the payment of landing and parking charges cannot be termed as payment of rent. Therefore, the provisions of section 194-I is not attract. As held by the Delhi Bench of this Tribunal, the payment attracts the provisions of section 194C. Therefore, the assessee is liable to deduct tax at the rate of 2%. Navigational facilities - In view of the clarification made by the learned counsel for the assessee that the assessee was in fact getting technical services apart from using the equipments for the purpose of communication between the aircraft and the air traffic controller, in our opinion, the provisions of section 194J would be applicable. Accordingly the assessee ought to have deducted tax as provided u/s 194J in respect of payment made for navigational facility. Application of section 201(1) and 201(1A) - Since the recipient company, admittedly, paid the tax, in our opinion, any further recovery from assessee would amount to double taxation which is not permissible under the Act. Accordingly, we hold that there is no justification to treat the assessee as assessee-in-default. When the Assessing Officer himself revised the order by making a rectification u/s 154, in our opinion, there is no justification on the part of the first Appellate Authority to restore the original order with respect to section 201(1). Levy of interest - Following the Gujarat High Court in the case of Rishikesh Apartments Co-operative Housing Society Ltd. 2001 (6) TMI 17 - GUJARAT HIGH COURT , we do not find any justification for levying tax till the month of October 1999. Since the actual date of payment of tax by the International Airport Authority of India is not available on the file of this Tribunal, the Assessing Officer may verify the actual date on which the taxes were paid by International Airport Authority of India and thereafter compute the interest from the date on which the deduction has to be made till the date of actual payment at the rate applicable as per the statutory provision. In the result, the order of the lower authority is set aside with regard to treating the assessee as assessee-in-default u/s 201(1) and levying interest u/s 201(1A). The Assessing Officer shall recompute the interest on the amount of tax as per the order of this Tribunal from the date on which deduction has to be made till the date of actual payment of tax by International Airport Authority of India after giving sufficient opportunity to the assessee in accordance with law. In the result, all the appeals filed by the assessee are partly allowed. However, there will be no order as to cost.

Issues Involved:
1. Liability for deduction of tax at source on landing and parking charges.
2. Liability for deduction of tax at source on navigational charges.
3. Application of Section 201(1) and 201(1A) regarding assessee-in-default status and interest levy.

Detailed Analysis:

1. Liability for Deduction of Tax at Source on Landing and Parking Charges:
The primary contention was whether the landing and parking charges paid by the assessee to the International Airport Authority of India (IAAI) should be treated as rent under Section 194-I of the Income-tax Act, necessitating a 20% tax deduction at source. The assessee argued, citing the Delhi Bench Tribunal's decision in Dy. CIT v. Japan Airlines, that such charges do not constitute rent but are contractual payments covered under Section 194C, requiring only a 2% tax deduction. The Tribunal agreed, stating that IAAI did not provide exclusive possession of any part of the property, thus Section 194-I was not applicable. Consequently, the assessee was liable to deduct tax at 2% under Section 194C.

2. Liability for Deduction of Tax at Source on Navigational Charges:
The assessee initially compared navigational charges to services provided by cell phone operators, suggesting they did not constitute technical services under Section 194J. However, upon further clarification, it was conceded that the services included technical support such as weather reports and flight instructions, which are necessary for aircraft navigation. Therefore, the Tribunal concluded that these payments indeed fell under Section 194J, requiring tax deduction at source for technical services.

3. Application of Section 201(1) and 201(1A) Regarding Assessee-in-Default Status and Interest Levy:
The Tribunal addressed whether the assessee should be treated as an assessee-in-default under Section 201(1) and the interest levied under Section 201(1A). It was established that IAAI had paid the taxes on the amounts received from the assessee. Hence, the Tribunal opined that the assessee should not be treated as an assessee-in-default since the tax had already been paid, preventing double taxation. The Tribunal also cited the CBDT Circular and the Gujarat High Court's judgment in CIT v. Rishikesh Apartments Co-operative Housing Society Ltd., which supported the view that interest should only be levied until the tax was actually paid by the recipient. The Tribunal remanded the issue back to the Assessing Officer to verify the exact date of tax payment by IAAI and recompute the interest accordingly.

Conclusion:
The Tribunal set aside the lower authority's order regarding treating the assessee as an assessee-in-default and the interest levy under Section 201(1A). The matter was remitted to the Assessing Officer for recomputation of interest from the date the tax was deductible until the actual date of payment by IAAI. All appeals filed by the assessee were partly allowed, with no order as to costs.

← Previous Next →