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TMI Blog2015 (8) TMI 185X X X X Extracts X X X X X X X X Extracts X X X X ..... ixing 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act thereof. The Madras High Court has taken the note of the judgment of the Delhi High Court but has differed with its view. Thus, the two judgments are in conflict with each other and we have to determine as to which judgment should be treated in consonance with the legal position and be allowed to hold the field. 3. For the sake of convenience, we are mentioning the facts of JAL's case, with the reiteration that the operations of the two Airlines on the basis of which the case is to be decided is identical. 4. JAL is a foreign company incorporated in Japan and is engaged in the business of international air traffic. It transports passengers and cargo by air across the globe and provides other related services. The assessement year involved in this appeal is the assessement year 1998-1999, corresponding to the financial year ending on 31.03.1998. The International Civil Aviation Organization ('ICAO') to which India is also a contracting state has framed certain guidelines and rules which are contained in the Airports Economic Manual and ICAO's Policies on Charges for Airports and Air Navigation Services. All member States abide by the guidelines and rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged the order of CIT(Appeals) by filing appeal before the Income Tax Tribunal. ITAT dismissed this appeal on 25.10.2004 confirming the order of the CIT(Appeals). 8. The Revenue persisted with its view that the matter was covered by Section 194-I and, therefore, dissatisfied with the orders of the ITAT, it went to the High Court by way of further appeal under Section 260A of the Act. Two questions were raised - (i) whether the Tribunal was correct in holding that the landing/parking charges paid by the JAL to the AAI were payments for a contract of work under Section 194-C and not in the nature of 'rent' as defined in Section 194-I; and (ii) whether the Tribunal was correct in law in holding that the JAL was not an assessee-in-default. The High Court allowed the appeal by answering the questions in favour of the respondent following its earlier decision in the case of United Airlines v. CIT 287 ITR 281. In that case, the High Court had taken the view that the term 'rent' as defined in Section 194-I had a wider meaning than 'rent' in the common parlance as it included any agreement or arrangement for use of land. The High Court further observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land appurtenant thereto, whether or not such building is owned by the payee. 12. Since the main discussion in the impugned judgment rendered by the High Court of Delhi and also the High Court of Madras centres around the interpretation that is to be accorded to Section 194-I of the Act, we would first discuss as to whether the case is covered by this provison or not. In fact, even before us the main focus of the counsel for the assessees as well as counsel for the Revenue was on this very issue. Otherwise also, the fate of these appeals would depend on the answer to the question as to whether the case is covered by the provisions of Section 194-I of the Act or not. 13. Section 194-I of the Act, which was inserted by Finance Act, 1994 w.e.f. June 01, 1994, provides for deduction of tax at source in respect of payment of 'rent' by any person, other than an individual and a hindu undivided family, at the time of payment or credit, whichever is earlier. The rate at which deduction of tax is to be made at source is 20%. There have been amendments in this Section in the years 2002, 2007 and 2009 and with these amendments, the scope of this Section has been enlarge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt immediately begins. Similarly, for parking the aircraft in that airport, there is use of the land. This is the basic, nay, the only reason given by the High Court in support of its conclusion. 17. The Madras High Court, on the other hand, had a much bigger canvass before it needed to paint a clearer picture with all necessary hues and colours. Instead of taking a myopic view taken by the Delhi High Court by only considering use of the land per se, the Madras High Court examined the matter keeping wider perspective in mind thereby encompassing the utilization of the airport providing the facility of landing and take-off of the airplanes and also parking facility. After taken into consideration these aspects, the Madras High Court came to the conclusion that the facility was not of 'use of land' per se but the charges on landing and take-off by the AAI from these airlines were in respect of number of facilities provided by the AAI which was to be necessarily provided in compliance with the various international protocol. The charges, therefore, were not for land usage or area allotted simpliciter. These were the charges for various services provided. The substance of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice, or salt). Specialised kind of orientation and dimensions are needed for these runways which are prescribed with precision and those standards are to be adhered to. Further, there has to be proper runway lighting, runway safety area, runway markings etc. Technical specifications for such lighting, safety area and markings are stipulated which have to be provided. Insofar as runway lighting is concerned which is essentially used at airports that allow night landings, requires that there has to be Runway End Identification Lights, Runway End Lights, Runway Edge Lights, Runway Centerline Lighting System, Touchdown Zone Lights, Taxiway Centerline Lead-Off Lights, Taxiway Centerline Lead-On Lights, Land and Hold Short Lights, Approach Lighting System etc. Technical specifications for all these lights have to be complied with. Same applies to runway markings. Runway markings and signs on most large runways include Threshold, Touch Down Zone, Fixed Distance Marks, Center Line etc. and all these have specific purpose. So much so, designs and quality of pavement on these runways are also to be taken compliant. All these technical specifications keep in mind the basic fact, namely, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in United Airlines case as well as the impugned judgment of the Delhi High Court are accordingly over-ruled. 23. At this stage, we would like to make one comment about the judgment of the Madras High Court. Madras High Court has given one more reason in support of its view that the charges paid by the Airlines to the AAI do not come within the definition of the 'rent' as defined under Section 194-I. The High Court has held that the words 'any other agreement or arrangement for the use of any land or any building' have to be read ejusdem generis and it should take it colour from the earlier portion of the definition namely lease, sub-lease and tenancy . Thereby, it has tried to limit the ambit of words 'any other agreement or arrangement'. This reasoning is clearly fallacious. A bare reading of the definition of 'rent' contained in explanation to Section 194-I would make it clear that in the first place, the payment, by whatever name called, under any lease, sub-lease, tenancy which is to be treated as 'rent'. That is rent in traditional sense. However, second part is independent of the first part which gives much wider scope to the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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