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M/s Japan Airlines Co. Ltd. & SINGAPORE AIRLINES LTD. Versus Commissioner of Income Tax, New Delhi

2015 (8) TMI 185 - SUPREME COURT

TDS 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 .....

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hich 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 .....

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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. - Civil Appeal No. 9875 of 2013, Civil Appeal Nos. 9876-9881 of 2013 - Dated:- 4-8-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Appellant Rep. by : Ms. Meera Mathur, Adv. Mrs. Anil Katiyar, Adv. For the Respondent : Mr. Arijit Prasad, Adv. Ms. Swarupa .....

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g 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 .....

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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 ho .....

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he 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 Organ .....

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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 oubound air traffic to and from .....

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es @2% under Section 194-C. JAL, accordingly, starting making TDS @2%. In the relevant assessement year, it paid AAI a sum of ₹ 61,60,486/- towards landing and parking charges. On this amount, TDS comes to ₹ 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 .....

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ide 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 t .....

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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 the use of land began when the wheels of an aircraft touched the surface of the airfield and similarly, there was use of land .....

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ments 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 .....

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"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. i .....

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tion 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 Finan .....

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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 Section, it becomes clear that TDS is to be made on the 'rent'. The expression 'rent' is given much wider meaning under this provision than what is normally known in common parlance. In the first instance, it means any payment which is made under any lease, sub-lease, t .....

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ver name called and 'any other agreement or arrangement' have the widest import. Likewise, payment made for the 'use of any land or any building' widens the scope of the proviso. 15. In the present case, we find that these Airlines are allowed to land and take-off their Aircrafts at IGIA for which landing fee is charged. Likewise, they are allowed to park their Aircrafts at IGIA for which parking fee is charged. It is done under an agreement and/or arrangement with AAI. The moot .....

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High Court held that the word 'rent' as defined in the provision has a wider meaning than 'rent' in common parlance. It includes any agreement or arrangement for use of land. In the opinion of the High Court, "when the wheels of an aircraft coming into an airport touch the surface of the airfield, use of the land of the airport immediately begins." Similarly, for parking the aircraft in that airport, there is use of the land. This is the basic, nay, the only reason give .....

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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 .....

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ng and take-off services as well as for parking of aircrafts are not for the 'use of the land'. That would be too simplistic an approach, ignoring other relevant details which would amply demonstrate that these charges are for services and facilites offered in connection with the aircraft operation at the airport. To point out at the outset, these services include providing of air traffic services, ground safety services, aeronautical communication facilities, installation and maintenanc .....

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ports to construct the airports of desired standards which are stipulated in the protocols. The services which are required to be provided by these authorities, like AAI, are aimed at passengers' safety as well as on safe landing and parking of the aircrafts. Therefore, it is not mere 'use of the land'. On the contrary, it is the facilities, that are to be compulsarily offered by the AAI in tune with the requirements of the protocol, which is the primary focus. 20. For example, runwa .....

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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 .....

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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 landing the aircraft is light on fuel and usually less than 5% of the weight of the aircraft touches the runway in one go. On take-off the aircraft is heavy but as the aircraft accelerates the weight gradually moves from the wheels to the wings. It is while the aircraft is being loaded and taxiing prior to departure, that the apron experience signifi .....

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these facilities. 21. In fact, 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, App .....

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ity. 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. 22. We, therefore, are of the considered opinion that the view taken by the Madras High Court is correct and we are unable to subscribe to the view taken by Delhi Hig .....

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;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 p .....

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