2004 (10) TMI 281 - AT - Income Tax

Deduction Of Tax At Source - Payment of landing and parking charges - Applicability of section 194C to payments made to contractors and sub-contractors - Whether landing and parking charges are considered as rent u/s 194-I - HELD THAT - The term 'rent' has been attempted to be defined in section 194 itself and by way of Explanation super added to section 194-I, there has to be either lease, sub-lease, tenancy agreement or arrangement for governing the use of any land. Such land to be specific portion of land and lease etc. of such land has to regulate the manner of use of such land or building and its tenure as well as manner of payment in lieu thereof. After taking into consideration the definition of rent, it apparently appears to be a composite concept. So far as the landing and parking facilities provided by Airport Authority of India to the assessee on its airport land is concerned, the same is regulated on the formula of weight and maximum permissible take off weight and not with regard to any specified area of land and its exclusive use by the assessee. In the case of Smt. Rajbir Kaur v. S. Chokesiri Co. 1988 (8) TMI 413 - SUPREME COURT the Hon'ble Supreme Court observed that a tenancy is created if tenant is granted the right to enjoyment of the property. It was further held that it is sufficient if the nature of the act done by the grantor shows that it was intended to have the right to exclusive possession. In the present case such intention is not found. The grantor i.e. the authority never intended to give out the exclusive possession to the assessee in relation to landing and parking area. Thus, we hold that the assessee was not a lessee of the premises nor there was any agreement to that effect between the said parties. The Airport Authorities of India simply granted permission to landing and parking. It did not grant any exclusive right or interest to J.A.L. in any specific portion of land or building. It granted a license and also provided certain other facilities not necessarily for use of land but for safe landing and parking in pursuance of the guidelines referred to above. Hence, the payments made by the assessee cannot be termed as payment of rent so as to be covered within the purview of section 194-I of the Act. We, therefore, do not find much force in the arguments of the learned DR and uphold the findings of learned CIT(A) on this issue and decide the issue in negative i.e. against the Revenue. Payments made to contractors and sub-contractors are regulated by section 194C of the Income-tax Act - In view of the conditions laid down in 194C, it is clear that one of the conditions is that there must be a contract between the person responsible for making the payment and the contractor; and secondly, the contract must be for carrying out any work and work must be carried out through such contractor. In the present case these conditions are fully satisfied as there was a legally enforceable covenant or contract between the contractor i.e. Airport Authority of India and the contractee i.e. JAL and the services and facilities were provided in pursuance of such a contract. Hence, in our opinion, the requisite conditions for section 194C are satisfied in the case of the assessee on the facts on record in this case. Thus, made above, the legal position in relation to the applicability of provisions contained under sections 194C, 194-I and 194J of the Income-tax Act may be summarized by culling out the following postulations (I) For ascertaining the applicability of section 194C the nature of the work contract is to be seen by applying the following tests (i) There must be a contract between the person responsible for making the payment and the contractor; (ii) Any work or works should be carried out through a contractor including obtaining a supply of labour under a contract with the contractor and any of the organizations specified in sub-section (1) of section 194C. In the present case, the conditions laid down in proposition No. (I) are satisfied and those of Nos. (II) and (III) are not satisfied, hence we hold that the assessee had rightly deposited TDS u/s 194C in relation to charges paid for landing and parking. The view taken by the learned CIT(A), wherein he accepted the contention of the assessee, is upheld. From the above letter, it is clear that against landing and parking charges, TDS was to be deducted at 2% u/s 194C of the I.T. Act. Thus, there was no fault on the part of the assessee who acted as per the advice of the Authority. Thus, it is found that in the case of the present assessee the ingredients of section 194C are fully satisfied in as much as the assessee has been provided landing and parking facilities in compliance to the commitment made by the Airport Authority of India on behalf of the Government of India in compliance to the policy guidelines of ICAO and in pursuance of the agreements of IATA. To reiterate, the charging of fee etc. for these facilities was in accordance with the settled conditions which were applicable as per the policy protocol laid down for air traffic services. Further, the rule of consistency also requires that the Department should have adopted a consistent approach in all the years when the facts remain unchanged. In any case, no fault can be found against the assessee in depositing the TDS under section 194C as even the Airport Authority of India had advised it accordingly. The Assessing Officer, therefore, was not justified in invoking the provisions of section 201(1) of the Income-tax Act in working out the short deduction of Rs. 11,59,695. In our considered opinion, therefore, the learned CIT(A) was justified in deleting the same. Accordingly, we do not find any reason to interfere in the order of learned CIT(A) and as such the ground taken by the Revenue in this appeal stands rejected. In the result, Revenue's appeal stands dismissed.

Summary

Issues Involved:
1. Whether payments for landing and parking charges are fees for professional and technical services u/s 194J.
2. Whether landing and parking charges amount to rent u/s 194-I.
3. Whether such payments are to contractors and subcontractors u/s 194C.

Summary:

Issue 1: Fees for Professional and Technical Services u/s 194J
The court examined whether the landing and parking charges paid by the assessee to the Airport Authority of India (AAI) could be classified as fees for professional and technical services under section 194J. It was determined that these services do not fall under this category as they are not provided by professionals or technical personnel. The court noted, "the composite services relating to landing and parking may involve component of technical services but it cannot be said that all these services are provided by professionals and technical personnel." Therefore, section 194J is not applicable.

Issue 2: Rent u/s 194-I
The court analyzed whether the landing and parking charges could be considered rent under section 194-I. The Assessing Officer had argued that these charges were for the lease of premises. However, the court found that the charges were based on weight formulae and not for the use of any specific portion of land. The court stated, "the services provided by the Authority to the assessee for landing and parking of its aircrafts do not amount to lease of the property and therefore the payments are not in the nature of rent as envisaged under section 194-I of the Act." Consequently, the payments do not qualify as rent under section 194-I.

Issue 3: Payments to Contractors and Subcontractors u/s 194C
The court considered whether the payments made for landing and parking facilities could be classified under section 194C as payments to contractors. It was concluded that the services provided by AAI fall under the category of work contracts. The court noted, "the requisite conditions for section 194C are satisfied in the case of the assessee on the facts on record in this case." Therefore, the payments were rightly subjected to TDS under section 194C.

Conclusion
The court upheld the decision of the learned CIT(A), confirming that the payments made by the assessee for landing and parking charges were correctly treated under section 194C and not under sections 194-I or 194J. The Revenue's appeal was dismissed.