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2015 (8) TMI 185 - SC - Income TaxTDS u/s 194-C or under Section 194-I - Payment of charges for landing the aircrafts and parking thereof at New Delhi Airport - whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean to use of the land ? Held that - The charges which are taken from the aircrafts for landing and even for parking of the aircrafts are not dependent upon the use of the land. On the contrary, the protocol prescribes a detailed methodology of fixing these charges. Chapter 4 of Airport Economics Manual issued by International Civil Aviation Organization deals with Determine the cost basis for charging purposes . The charges on air-traffic which includes Landing Charges, Lighting Charges, Approach and Aerodrome Control Charges, Aircraft Parking Charges, Aerobridge Charges, Hangar Charges, Passenger Service Charges, Cargo Charges etc. are to be fixed applying the formulae stated therein. A reading thereof would clearly point out the cost analysis which is to be done for fixing these charges. Thus, when the airlines pay for these charges, treating such charges as charges for use of land would be adopting a totally naove and simplistic approach which is far away from the reality. We have to keep in mind the substance behind such charges. When 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 land per se and, therefore, it cannot be treated as rent within the meaning of Section 194-I of the Act. The nature of charges that are paid by the airlines for landing and parking charges which is not, in substance, for use of land but for various other facilities extended by the AAI to the airlines. Use of land, in the process, become incidental. Once it is held that these charges are not covered by Section 194-I of the Act, it is not necessary to go into the scope of Section 194-C of the Act. View in COMMISSIONER OF INCOME TAX, CHENNAI Versus M/s SINGAPORE AIRLINES LTD 2012 (8) TMI 643 - MADRAS HIGH COURT confirmed while Commissioner of Income-tax Versus Japan Airlines Co. Ltd. 2008 (10) TMI 341 - DELHI HIGH COURT rejected - Decided in favour of assessee.
Issues Involved:
1. Deduction of tax at source (TDS) under Section 194-C versus Section 194-I of the Income Tax Act, 1961. 2. Interpretation of the term "rent" under Section 194-I. 3. Whether landing and parking charges paid by airlines to the Airports Authority of India (AAI) fall under Section 194-I or Section 194-C. Detailed Analysis: 1. Deduction of TDS under Section 194-C vs. Section 194-I: The primary issue in these appeals is whether the tax deducted at source (TDS) on payments made by foreign airlines (JAL and SAL) to the Airports Authority of India (AAI) for landing and parking charges should be under Section 194-C (contract work) at 2% or under Section 194-I (rent) at 20%. The Income Tax Authorities argued that TDS should be under Section 194-I, while the airlines contended it should be under Section 194-C. 2. Interpretation of "Rent" under Section 194-I: Section 194-I defines "rent" broadly to include payments made under any lease, sub-lease, tenancy, or any other agreement or arrangement for the use of land or buildings. The Delhi High Court had earlier interpreted this to mean that landing and parking charges were for the "use of land" and thus fell under Section 194-I. Conversely, the Madras High Court held that these charges were for various services and facilities provided by AAI, not merely for land use, and thus fell under Section 194-C. 3. Whether Landing and Parking Charges Fall under Section 194-I or Section 194-C: The Supreme Court considered the broader context and substance of the charges. It noted that the charges for landing and parking were not merely for the use of land but for a range of services and facilities provided by AAI, including air traffic services, ground safety services, aeronautical communication facilities, and navigational aids, among others. The Court emphasized that these services were mandated by international protocols and were essential for the safe landing, take-off, and parking of aircraft. Judgment: The Supreme Court concluded that the charges paid by the airlines to AAI were not for the "use of land" per se but for a comprehensive range of services and facilities. Therefore, these charges did not fall under the definition of "rent" in Section 194-I. The Court upheld the judgment of the Madras High Court, which had ruled that the charges fell under Section 194-C, and overruled the judgment of the Delhi High Court. The Court also clarified that the broader definition of "rent" in Section 194-I did not apply to the charges in question because the substance of the charges was for services and facilities, not merely land use. Consequently, the appeals filed by JAL were allowed, and those filed by the Revenue against the judgment of the Madras High Court were dismissed. There was no order as to costs.
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