(1)
TECH INVEST INDIA (PVT.) LTD. Vs.
ASSAM POWER AND ELECTRICALS LTD. AND OTHERS .....Respondent D.D
11/08/2015
(2)
A.N. SACHDEVA AND OTHERS Vs.
MAHARSHI DAYANAND UNIVERSITY AND OTHERS .....Respondent D.D
10/08/2015
(3)
LAXMI FIBRES LTD. Vs.
A.P. INDUSTRIAL DEV. CORPN. LTD. AND OTHERS .....Respondent D.D
07/08/2015
(4)
RAM NARAIN Vs.
STATE OF UTTAR PRADESH .....Respondent D.D
07/08/2015
(5)
M/S JAYASWAL NECO LTD. Vs.
COMMISSIONER OF CENTRAL EXCISE, RAIPUR .....Respondent D.D
06/08/2015
(6)
M/S TATA CHEMICALS LTD. Vs.
COLLECTOR OF CENTRAL EXCISE, AHMEDABAD .....Respondent D.D
06/08/2015
(7)
SREE BALAJI MEDICAL COLLEGE AND HOSPITAL AND OTHERS Vs.
UNION OF INDIA AND OTHERS .....Respondent D.D
06/08/2015
(8)
BALESHWAR DAYAL JAISWAL Vs.
BANK OF INDIA AND OTHERS .....Respondent D.D
05/08/2015
(9)
JAPAN AIRLINES CO. LTD. Vs.
COMMISSIONER OF INCOME TAX, NEW DELHI .....Respondent
Sections, Acts, Rules, and Article mentioned:
Section 194C, Section 194C(1), Section 194I, Section 201(1), Section 260A: Income Tax Act, 1961
SUBJECT:
Deduction of Tax - Interpretation of Sections 194-C and 194-I of the Income Tax Act, 1961
HEADNOTES:
FACTS:
Japan Airlines Company Limited (JAL) and Singapore Airlines Limited (SAL), both foreign airlines, operated international flights, including to and from New Delhi's Indira Gandhi International Airport (IGIA).
The Airports Authority of India (AAI) levied charges on JAL and SAL for landing and parking their aircraft at IGIA.
JAL deducted tax at source (TDS) at a rate of 2% under Section 194-C of the Income Tax Act, 1961 (the Act), while the Income Tax Authorities contended that TDS should be deducted at 20% under Section 194-I of the Act.
Disputes arose regarding whether the charges were for the 'use of land' (Section 194-I) or for other facilities and services provided by AAI (Section 194-C).
ISSUES:
Whether the charges for landing and parking aircraft at IGIA should be subject to TDS under Section 194-C or Section 194-I of the Income Tax Act.
Which judgment - that of the High Court of Delhi or the High Court of Madras - should prevail in resolving the conflicting interpretations of the Act.
HELD:
The Supreme Court held that the charges paid by airlines for landing and parking were not merely for the 'use of land', but for various facilities and services provided by AAI. The court emphasized the technical specifications and safety standards required for airport operations, highlighting that the charges were for services and facilities rather than mere land usage. Thus, the charges did not fall under the definition of 'rent' as per Section 194-I of the Act.
The judgment of the High Court of Madras was upheld, as it correctly interpreted the charges as not constituting 'rent' under Section 194-I. The Delhi High Court's judgment was overruled as it failed to appreciate the nature of the charges paid by airlines.
REFERRED CASES:
United Airlines Vs. Commissioner of Income Tax and Others, (2006) 202 CTR 184 : (2006) 287 ITR 281 : (2006) 152 TAXMAN 516
JUDGMENT
A.K. Sikri, J—In these appeals, the issue involved relates to the deduction of tax at source ('TDS'). In both the cases, Assessees are foreign Airlines. One is Japan Airlines Company Limited (hereinafter referred to as the 'JAL') and the other is Singapore Airlines Limited (hereinafter referred to as the 'SAL'). As both are international Airlines, they are flying their aircrafts to various destinations across the world. Their services include inward and outbound air traffic to and from New Delhi as well. For landing the aircrafts and parking thereof at New Delhi Airport i.e. Indira Gandhi International Airport ('IGIA'), New Delhi, the Airports Authority of India ('AAI') which manages IGIA levies charges on these two Airlines. For payment of landing and parking charges in respect of its aircrafts, the two Airlines are deducting TDS Under Section 194-C of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). The TDS Under Section 194-C of the Act is deductible @ 2%. After deducting this TDS while making payment to AAI, the same is deposited with the Income Tax Authorities. The Income Tax Authorities, however, are of the view that the TDS is to be deducted under the provisions of Section 194-I of the Act which calls for deduction @ 20%. Thus, the dispute is as to whether TDS to be deducted Under Section 194-C or Under Section 194-I of the Act.
2. We may point out at this stage itself that in the appeal pertaining to JAL, it is the JAL which is the Appellant as the High Court of Delhi by the impugned judgment dated 23.10.2008 has taken the view that the TDS is to be deducted Under Section 194-I of the Act. In the other appeal which involves SAL, it is the Commissioner of Income Tax/Revenue which has filed the appeals as the High Court of Madras in its judgment dated 13.07.2012 has taken contrary view holding that the case is covered Under Section 194-C of the Act and not Under Section 194-I of the 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 assessment year involved in this appeal is the assessment 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 prescribed for various charges to be levied for facilities and services provided including landing/parking charges.
5. The AAI under the provisions of the Airport Authority of India Act, 1994 has been authorized to fix and collect charges for landing, parking of aircrafts and any other services and facilities offered in connection with aircraft operations at the airport and for providing air traffic services such as ground safety services, aeronautical communications and navigational aids, meteorological services and others at the airport.
6. JAL is a member of the International Air Transport Agreement ('IATA') and during the relevant year it serviced inward and outbound air traffic to and from New Delhi, India. The AAI levied certain charges on the JAL for landing and also for parking its aircrafts. The JAL paid the charges after deducting tax at source Under Section 194-C of the Act. The JAL received letter dated 02.08.1996 from the AAI informing it that AAI had applied to the Income Tax Authorities for exemption from the tax deduction and were awaiting the clearance. It was further stated in the said letter that in the meanwhile JAL should deduct the tax on landing and parking charges @ 2% Under Section 194-C. JAL, accordingly, starting making TDS @ 2%. In the relevant assessment year, it paid AAI a sum of Rs. 61,60,486/- towards landing and parking charges. On this amount, TDS comes to Rs. 1,57,082/- when calculated @ 2% which was deducted from the payments made to AAI and deposited with the Revenue. The JAL thereafter filed its annual return in Form 26-C for the financial year 1997-1998.
7. The Assessing Officer passed an order Under Section 201(1) of the Act on 04.06.1999 holding the JAL as an Assessee-in-default for short deduction of tax of Rs. 11,59,695/- at source. He took the view that payments during landing and parking charges were covered by the provisions of Section 194-I and not Under Section 194-C of the Act and, therefore, the JAL ought to have deducted tax @ 20% instead of @ 2%. The JAL filed the appeal against this order before the Commissioner of Income Tax (Appeals). The CIT(A) accepted the contention of the JAL and allowed the appeal vide order dated 31.01.2001, holding that landing and parking charges were inclusive of number of services in compliance with the International Protocol of the ICAO. The Revenue challenged 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 Vs. Commissioner of Income Tax and Others, (2006) 202 CTR 184 : (2006) 287 ITR 281 : (2006) 152 TAXMAN 516 . 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 the use of land began when the wheels of an aircraft touched the surface of the airfield and similarly, there was use of land when the aircraft was parked at the airport.
9. Special leave petition was filed against the aforesaid judgment of the High Court in which leave was granted and that is how the present appeal arises for consideration of the issue at hand.
10. Before proceeding further, it would be apposite to take note of the provisions of Section 194-C as well as 194-I of the Act. Insofar as Section 194-C is concerned, our purpose would be served by reproducing Sub-section (1) which deals that the nature of payments on which tax at source is to be deducted. It reads as under:
Section 194C. (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to-
(i) one per cent. where the payment is being made or credit is being given to an individual or a Hindu Undivided family;
(ii) two per cent. where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family, of such sum as income-tax on income comprised therein.
11. Section 194-I, on the other hand, which was in force at the relevant time, reads as under:
Section 194-I Any person, not being an individual or a Hindu undivided family, who is responsible for paying to any person any income by way of rent, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of-
(a) fifteen per cent. if the payee is an individual or a Hindu undivided family; and
(b) twenty per cent. in other cases.
"rent" means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or any building (including factory building), together with furniture, fittings and 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 provision 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 enlarged. However, as the assessment year in question is prior to 2002 and otherwise also, the later amendments have no bearing insofar as the Assessees are concerned, it is not necessary to spell out the amendments made to this Section.
14. From the reading of this D.D
04/08/2015