TMI Blog2017 (7) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... to have deliberately avoided making payment of tax so as to attract penalty under Section 271 C of the Act. - Decided in favour of assessee. - ITA 73, 75, 77, 78, 79, 80, 81, 82, 86, 100, 113, 123. 200, 561/2005, & CM APPL. Nos. 10469/2005 & 10470/2005, ITA 633/2005, ITA 688/2005 & CM APPL. 11621/2005 - - - Dated:- 4-7-2017 - S. Muralidhar And Prathiba M. Singh, JJ. For the Appellant : Through: Mr. Zoheb Hossain, Senior Standing Counsel with Mr. Deepak Anand, Junior Standing Counsel, Mr. Asheesh Jain, Senior Standing Counsel with Mr. Vikrant A. Maheshwari, Advocate For the Respondent : Mr. Ajay Vohra, Senior Advocate with Ms. Kavita Jha Mr. Bhuwan Dhoopar, Advocates ORDER Dr. S. Muralidhar, J. 1. These are 16 appeals by the Revenue under Section 260A of the Income Tax Act, 1961 ( Act ). 8 of them are quantum appeals and the remaining 8 are penalty appeals. As far as the quantum appeals are concerned, these are ITA Nos. 73, 75, 77, 78, 82, 86, 113 and 123 of 2005 which are directed against the common order dated 16th March, 2004 passed by the Income Tax Appellate Tribunal ( ITAT ) in ITA (T.D.S.) Nos. 31 to 38/Del/2002 for the Financial Years (FYs) 1994-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the first year of the contract, with the provision that the said royalty shall be subject to 10% annual compound escalation in the subsequent years of the contract and shall be paid in Advance on or before the 10th of each month. (b) In addition to the said royalty, the Licensee shall pay to the authority licencee fee for space allotted for operating the Lounge Premises at the rates as may be fixed from time to time. The licencee fee payable in respect of the Lounge premises shall be AAI and the licensee shall pay such revised licence fee. The area of the lounge premises is 230 sq. meters and the present licence fee is ₹ 402.62 per sq. meter per month. 6. A controversy arose regarding the failure on the Assessee s part to deduct tax at source in terms of Section 194-I of the Act read with Section 201(1) thereof from the payments made by it to AAI under the LA. The stand taken by the Assessee was that the payment was not in the nature of rent but in the nature of royalty. 7. By an order dated 29th January, 2002, which was common to FYs 1994-95 to 2001-2002, the Assistant Commissioner of Income Tax, Circle 50(1) (hereafter the Assessing Officer - AO) held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h AAI having paid taxes on the income by way of royalty, there was no question for levy of interest for the alleged default of non-deduction of tax at source. 11. The Assessee s appeals were allowed by the ITAT by the impugned order for the following reasons: 1. Under the Airports Authority Act of India, the AAI is obliged to, inter alia, establish and maintain hotels, restaurant and restrooms at or near the airport . The authority is also entitled in law to charge fees or rent from persons who are given by the authority any facility for carrying on any trade or business at any airport, heliport or airstrip . 2. The tender floated by AAI required the tenderer to quote royalty amount that the tenderer is offering to pay. The licence fee which is already fixed by AAI and is mentioned in the tender documents is in addition to the royalty. The successful bidder is one who quotes the highest fixed royalty. 3. The licence fee is determined by AAI having regard to the area made available to the successful bidder and can be unilaterally revised by AAI, whereas the royalty is quoted by the bidder and accepted by AAI and is not open for revision. 4. The royalty is pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that it was the payment for the use of space alone which could be construed as rent for the purpose of Section 194- I of the Act. He submitted that the payment was for the grant of two different rights. Even where both the rights were granted under the same LA, the payments for each of them had to be treated as two distinct payments. He referred to the certificate issued by the AAI to the effect that both payments were distinct. Reliance was also placed on the decisions in CIT v. NIIT Limited (2009) 318 ITR 289 (Del) and TRIL Infopark Limited v. ITO (2016) 385 ITR 465 (Mad). In support of the proposition that the payment of royalty is essentially a payment for the right to do business , reliance was placed on the decision in Shankar Trading (P) Limited v. CIT 208 Taxman 526 (Del). In support of the contention that a term used in the statute should be contextually interpreted, reliance was placed by Mr. Vohra on the decision in CIT v. DLF Commercial Developers Limited (2013) 261 CTR 127 (Del). 17. The relevant clauses in the LA have been extracted hereinabove. Although a plain reading of Clause 2 of the LA might show that the payment by the Assessee to the AI for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment would still fall within the ambit of 'rent' under Section 194-I of the Act. 19.1 In Japan Airlines Co. Limited v. CIT (supra) the above position was reiterated by the Supreme Court. There the question was whether the charges collected by the AAI for landing and parking of aircraft and other services and facilities offered in connection therewith could be characterized as rent within the meaning of Section 194-I of the Act. In paras 14 and 15 of the said decision, the Court observed as under: 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, tenancy. Once the payment is made under lease, sub-lease or tenancy, the nomenclature which is given is inconsequential. Such payment under lease, sub-lease and/or tenancy would be treated as rent . In the second place, such a payment made even under any other 'agreement or arrangement for the use of any land or any building' would also be treated as & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the definition of rent under Section 194-I of the Act had to be given the statute. In para 23 it is observed as under: 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 sco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts. In TRIL Infopark Limited (supra) the payment of ₹ 1412 crores by the lessee to the lessor was determined in the competitive bidding that took place even before the joint venture partner in whose favour the lease was to be granted was incorporated. The said amount was to be paid as a lumpsum to the lessor who in turn was required to make it over to the Government. It was in those circumstances that the Madras High Court held that once it is understood to be a consideration paid to the Government, the question of deducting tax at source does not arise. The said decision is, therefore, of no of assistance to the Assessee in the present case. 22. In CIT v. NIIT Limited (supra) the question that arose was whether the Assessee was liable to deduct tax at source under Section 194-I of the Act in respect of the payments made to the franchisee under the head Infrastructural claims . It was held on fact that the relationship between the parties was not of a lessor and lessee. The limited purpose was to run an education centre offering NIIT courses as specified in the franchisee agreement. Although the charges were broken up under two heads, viz., as marketing claim and i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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