ACIT (TDS) RG 2(2), MUMBAI V. QANTAS AIRWAYS LTD, MUMBAI

ITA 4601/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71790 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 06-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NOS. 4601, 4604, 4605 & 4606/MUM/2012 ( / ASSESSMENT YEARS: 2008-09 TO 11-12) ASST. CIT (TDS)-2(2) ROOM NO.703, 7 TH FLOOR, SMT. K. G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD, MUMBAI-400 002 / VS. QANTAS AIRWAYS LTD. 4 TH FLOOR, REAR WING, SUNTECK CENTRE, 37-40, SUBHASH ROAD, VILE PARLE (E), MUMBAI-400 057 ' ./# ./PAN/GIR NO. AAACQ 1452 H ( '$ /APPELLANT ) : ( % '$ / RESPONDENT ) '$ & / APPELLANT BY : SHRI R. K. SAHU % '$ ' & / RESPONDENT BY : SHRI NITESH JOSHI ( )*+ ' , / DATE OF HEARING : 21.11.2013 -./ ' , / DATE OF PRONOUNCEMENT : 27.11.2013 0 / O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF FOUR APPEALS BY THE REVENUE AGITAT ING THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-14, MUMBAI (C IT(A) FOR SHORT) DATED 30.04.2012 FOR FOUR CONSECUTIVE YEARS, BEING FINANC IAL YEARS 2007-08 TO 2010-11, PARTLY ALLOWING THE ASSESSEES APPEALS CONTESTING I TS ASSESSMENTS U/SS.201(1) AND 201(1A) OF THE INCOME TAX ACT, 1961 (THE ACT HERE INAFTER) FOR THE RELEVANT YEARS. 2 ITA NOS. 4601, 4604, 4605 & 4606/MUM/2012 (A.YS. 2008-09 TO 2011-12) ASST. CIT (TDS) VS. QANTAS AIRWAYS LTD. 2.1 THE SHORT AND THE COMMON QUESTION INVOLVED IN T HIS SET OF APPEALS, IS AS TO WHETHER THE PAYMENT MADE BY THE ASSESSEE, AN INTERN ATIONAL AIRLINES, TO M/S. OBEROI FLIGHT SERVICES (OFS FOR SHORT) FOR LOUNGING AND CATERING SERVICES IS RENT WITHIN THE MEANING OF THE TERM U/S.194I OF THE ACT. 2.2 THE BACKGROUND FACTS OF THE CASE ARE THAT THE A SSESSEE-COMPANY HAS ENTERED INTO AN AGREEMENT WITH OFS FOR PROVIDING LOUNGING SERVIC ES, WHICH INCLUDES AN ASSORTMENT OF VEGETARIAN, NON-VEGETARIAN, HOT AND COLD SNACKS AND ALCOHOLIC DRINKS, TO ITS FIRST CLASS AND CLUB CLASS PASSENGERS. TREATING THE SAME AS CATERIN G SERVICES, THE ASSESSEE-PAYER DEDUCTED TAX AT SOURCE U/S.194C OF THE ACT @ 2%. IN THE REVE NUES VIEW, HOWEVER, THE SAME ARE ESSENTIALLY LOUNGING SERVICES, PROVIDED FOR BY THE ASSESSEE FOR ITS SPECIFIED CUSTOMERS AND, THUS, THE PAYMENT IN ITS RESPECT QUALIFIES FOR BEIN G RENT WITHIN THE MEANING OF THE TERM AS DEFINED U/S.194I OF THE ACT, WHICH IS WIDELY WOR DED AS UNDER: RENT 194-I. ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDI VIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY INC OME 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 INC OME-TAX THEREON AT THE RATE OF (A) TEN PER CENT FOR THE USE OF ANY MACHINERY OR P LANT OR EQUIPMENT; (B) FIFTEEN PER CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUD ING FACTORY BUILDING) OR FURNITURE OR FITTINGS WHERE THE PAYEE IS AN INDIVID UAL OR A HINDU UNDIVIDED FAMILY; AND (C) TWENTY PER CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUD ING FACTORY BUILDING) OR FURNITURE OR FITTINGS WHERE THE PAYEE IS A PERSON O THER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY. THE FOREGOING CLAUSES (A) TO (C) STAND SUBSTITUTED FOR THE FOLLOWING BY FINANCE (NO.2) ACT, 2009 W.E.F. 01.10.2009: 3 ITA NOS. 4601, 4604, 4605 & 4606/MUM/2012 (A.YS. 2008-09 TO 2011-12) ASST. CIT (TDS) VS. QANTAS AIRWAYS LTD. ( A ) TWO PER CENT FOR THE USE OF ANY MACHINERY OR PLA NT OR EQUIPMENT; AND ( B ) TEN PER CENT FOR THE USE OF ANY LAND OR BUILDING (INCLUDING FACTORY BUILDING) OR LAND APPURTENANT TO A BUILDING (INCLUD ING FACTORY BUILDING) OR FURNITURE OR FITTINGS: PROVIDED THAT NO DEDUCTION SHALL BE MADE UNDER THIS SECTION WHERE THE AMOUNT OF SUCH INCOME OR, AS THE CASE MAY BE, THE A GGREGATE OF THE AMOUNTS OF SUCH INCOME CREDITED OR PAID OR LIKELY TO BE CRE DITED OR PAID DURING THE FINANCIAL YEAR BY THE AFORESAID PERSON TO THE ACCOU NT OF, OR TO, THE PAYEE, DOES NOT EXCEED [ONE HUNDRED AND EIGHTY THOUSAND RU PEES: PROVIDED FURTHER THAT AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO SE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BU SINESS OR PROFESSION CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIF IED UNDER CLAUSE ( A ) OR CLAUSE ( B ) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIA TELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH INCOME BY WAY OF R ENT IS CREDITED OR PAID, SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SEC TION. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( I ) 'RENT' MEANS ANY PAYMENT, BY WHATEVER NAME CALLE D, UNDER ANY LEASE, SUB-LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANG EMENT FOR THE USE OF (EITHER SEPARATELY OR TOGETHER) ANY, ( A ) LAND; OR ( B ) BUILDING (INCLUDING FACTORY BUILDING); OR ( C ) LAND APPURTENANT TO A BUILDING (INCLUDING FACTOR Y BUILDING); OR ( D ) MACHINERY; OR ( E ) PLANT; OR ( F ) EQUIPMENT; OR ( G ) FURNITURE; OR ( H ) FITTINGS, WHETHER OR NOT ANY OR ALL OF THE ABOVE ARE OWNED BY THE PAYEE; ( II ) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHE THER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOO KS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDI TING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT O F THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDIN GLY. THE SAME IS, THEREFORE, LIABLE FOR TAX DEDUCTION AT SOURCE @ 20%. ACCORDINGLY, THE ASSESSEE WAS CONSIDERED AS IN DEFAULT FOR THE DIFFE RENCE IN TAX, AND THE DEMAND IN ITS 4 ITA NOS. 4601, 4604, 4605 & 4606/MUM/2012 (A.YS. 2008-09 TO 2011-12) ASST. CIT (TDS) VS. QANTAS AIRWAYS LTD. RESPECT RAISED, AS ALSO FOR THE INTEREST THEREON. T HE ASSESSEE BEING SUCCESSFUL IN APPEAL; THE LD. CIT(A) ENDORSING ITS VIEW, THE REVENUE IS I N APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 CLEARLY, THE NATURE OF THE SERVICES FOR WHICH T HE IMPUGNED PAYMENTS STAND MADE IS OF PRIME RELEVANCE. THE AGREEMENT BETWEEN THE TWO, I.E., THE PAYER AND THE PAYEE, PURSUANT TO WHICH THE IMPUGNED PAYMENTS HAVE BEEN M ADE, IS NOT ON RECORD. SURPRISINGLY, THERE IS ALSO NO REFERENCE THERETO IN THE ORDERS OF THE AUTHORITIES BELOW. THE NATURE OF THE SERVICES FOR WHICH THE PAYMENTS STAND MADE IS THEREFORE GATHERED FROM AND TAKEN AS STATED IN THE ORDERS OF THE AUTHORITIES BE LOW, INCLUDING THE ASSESSEES SUBMISSIONS BEFORE THEM, AS WELL AS PER THE GROUNDS OF APPEAL A ND STATEMENT OF FACTS. 3.2 COMING TO THE RESPECTIVE CASES OF THE TWO PARTI ES, WHILE IN THE VIEW OF THE ASSESSEE THE SAID SERVICES ARE ONLY CATERING SERVICES, THE R EVENUE CONSIDERS THEM AS ESSENTIALLY LOUNGING SERVICES FOR ITS PASSENGERS, COUPLED WITH THE PROVISION OF FOOD AND DRINKS, WHICH THOUGH WOULD NOT DILUTE THE PRIMARY PURPOSE FOR WHI CH THE AGREEMENT STANDS ENTERED INTO, I.E., FOR LOUNGING, SO AS TO PROVIDE A RELAXED AND SEPARATE SPACE WITHIN THE AIRPORT PREMISES FOR ITS PREMIUM CUSTOMERS WHILE WAITING FO R THEIR FLIGHTS, MAKING THEIR TRAVEL COMFORTABLE AS WELL AS PRODUCTIVE, AS THEY COULD AT TEND TO THEIR WORK IN A PEACEFUL ENVIRONMENT, CATCH UP WITH READING, HAVE A NAP, ETC . PROVISION OF FOOD AND DRINKS TO THE WAITING CUSTOMERS FREE OF COST, THOUGH A SIGNIFICAN T AND INTEGRAL PART OF THE SERVICES, WOULD NOT OPERATE TO ALTER OR DEFINE THE BASIC CHAR ACTER OF THESE SERVICES. 3.3 THE QUESTION, THEREFORE, THAT ARISES IS IF THE CONTRACT COULD BE CONSIDERED AS TOWARD LOUNGING SERVICES ONLY OR AS CATERING SERVICES ONLY . IN OUR CONSIDERED OPINION, NEITHER VIEW REPRESENTS CORRECTLY THE CHARACTER OF THE SERV ICES, BEING AN AMALGAM OF THE TWO. CONSIDER, FOR EXAMPLE, A CASE OF A (PAYING) GUEST H OUSE. THE GUEST PAYS FOR BOTH BOARDING AND LODGING FACILITIES. IT CANNOT BE DENIED THAT TH ERE IS A USER OF LAND AND BUILDING WHILE ENJOYING THE GUEST HOUSE OR THE STAY THEREAT. AT TH E SAME TIME, THE SAME CANNOT BE CONSIDERED AS RENT ONLY AS, APART AND DISTINCT FROM THE LODGING FACILITIES, THERE IS A 5 ITA NOS. 4601, 4604, 4605 & 4606/MUM/2012 (A.YS. 2008-09 TO 2011-12) ASST. CIT (TDS) VS. QANTAS AIRWAYS LTD. PROVISION OF MEALS AND OTHER BOARDING FACILITIES, B ESIDES AMENITIES REQUIRED FOR A COMFORTABLE LEAVING. NOW, EVEN AS THE USE OF THE AM ENITIES COULD BE CONSIDERED AS TOWARD PROPER ENJOYMENT OF THE HOUSING, AND THUS A PART OF OR TOWARD USER OF LAND AND BUILDING, SO AS TO BE COVERED UNDER THE BROADER DEFINITION OF THE RENT, WHICH W.E.F. 01.06.2007 ALSO COVERS THE USE OF, APART FROM FURNITURE AND FI XTURE, PLANT OR MACHINERY OR EQUIPMENT (ALBEIT AT A DIFFERENT RATE OF TDS), THE PROVISION OF MEALS, AN INTEGRAL PART OF THE ARRANGEMENT, CAN BY NO STRETCH OF IMAGINATION OR BY ANY MEANS BE CONSIDERED AS TOWARD THE USE OF LAND AND BUILDING. THE CONSIDERATION FOR OTHER THAN THE MEALS, WOULD, ON THE OTHER HAND, QUALIFY AS RENT U/S.194I. 3.4 COMING TO THE FACTS OF THE PRESENT CASE, WITHOU T DOUBT THE PAYMENT OTHER THAN FOR FOOD AND REFRESHMENTS, I.E., FOR LOUNGING SERVICES PER SE , IS ONLY TOWARD THE USE OF LAND AND BUILDING, BEING ONLY TOWARD PROVIDING AMBIENCE, RELAXATION AND SPENDING TIME, AKIN TO A REST OR A WAITING ROOM. THE DICTIONARY MEANING OF LOUNGE IS TO STAND, MOVE, SIT, LIE, ETC., IN A RELAXED OR A LAZY WAY; TO SPEND TIME IN IDLENESS, AND ALSO INCLUDES A PLACE ROOM, THEATRE, CAR, ETC. FOR THE PURPOSE. THE SAME IS, THUS, CERTAINLY RENT U/S.194I. IT IS IN THIS CONTEXT THAT DURING THE COURSE OF HEARING, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WAS QUERIED AS TO IF THE PAYMENT FOR FOOD AND BEVER AGES TO PASSENGERS IS COMPUTED OR ARRIVED AT SEPARATELY, TO NO DEFINITE REPLY. EVEN T HE ORDER OF THE ASSESSING OFFICER (A.O.) IS SILENT ON THIS. IF IT IS A CASE OF A CONSOLIDATE D PAYMENT, AS APPEARS TO BE THE CASE, NO PART THEREOF CAN BE SAID TO BE RENT INASMUCH AS IT IS NOT PERMISSIBLE TO ARTIFICIALLY BIFURCATE THE PAYMENT/S MADE OR TO BE MADE UNDER THE AGREEMEN T TOWARD TWO LIMBS OR COMPONENT SERVICES IN VIEW OF THE TWO ATTRACTING DIFFERENTIAL TAX, PARTICULARLY WHERE THEY FORM, AS IN THE PRESENT CASE, PART OF A SINGLE ARRANGEMENT FOR PROVISION OF COMPOSITE SERVICES. THE SAME IN THAT CASE WOULD ONLY BE CONSIDERED AS A CON TRACTUAL PAYMENT, AS HAS BEEN CONSIDERED BY THE ASSESSEE. 3.5 WE MAY NEXT DISCUSS THE CASE LAW RELIED UPON, H AVING BEEN PERUSED BY US IN DECIDING THE ISSUE BEFORE US. THE TWO DECISIONS CIT ED BEFORE US UPHOLD DIFFERENT VIEWS IN 6 ITA NOS. 4601, 4604, 4605 & 4606/MUM/2012 (A.YS. 2008-09 TO 2011-12) ASST. CIT (TDS) VS. QANTAS AIRWAYS LTD. RESPECT OF LANDING AND PARKING CHARGES PAID BY AIRL INES TO THE AIRPORT AUTHORITY. WHILE THE HONBLE DELHI HIGH COURT IN UNITED AIRLINES VS. CIT [2006] 287 ITR 281 (DEL), FOLLOWED BY IT IN CIT VS. JAPAN AIRLINES CO. LTD. [2010] 325 ITR 298 (DEL), CONFIRMED THE SAID PAYMENT AS RENT U/S.194I, THE HONBLE MADRAS HIGH COURT HAS IN CIT VS. SINGAPORE AIRLINES LTD. [2012] 252 CTR 429 (MAD.), TAKEN A DIFFERENT/CONTR ARY VIEW. WHILE THE VIEW OF THE HONBLE DELHI HIGH COURT IS BASED ON TH E FACT THAT THE SAME IS NOTHING BUT AN ARRANGEMENT FOR THE USE OF THE AIRPORT LAND, COUPLE D WITH THE LEGAL POSITION THAT THE TAX STATUES ARE TO BE STRICTLY CONSTRUED, THE VIEW EXPR ESSED BY THE HONBLE MADRAS HIGH COURT RESTS ON THE BASIS THAT IT IS ESSENTIALLY FOR THE U SE OF NAVIGATIONAL FACILITIES INVOLVED IN LANDING AND TAKEOFF, SO THAT IT CANNOT BE CONSIDERE D AS A SIMPLE CASE OF USE OF LAND, AS, FOR EXAMPLE, THE VEHICLES PLYING ON THE ROAD. THE QUEST ION, THUS, AGAIN REVOLVES ON THE REAL CHARACTER OF THE SERVICES CONTRACTED FOR; EACH COUR T EMPHASIZING ON ONE ASPECT OF THE TRANSACTION. TARMAC OR THE RUNWAY, BEING A SPECIAL STRUCTURE, WOULD QUALIFY TO BE A PLANT, ALBEIT ATTACHED TO LAND, SO THAT IT IS TOWARD USER OF LAND AND PLANT, USER OF WHICH IS ALSO COVERED UNDER THE EXTENDED DEFINITION OF RENT W.E.F . 01.06.2007. THE USE OF NAVIGATIONAL FACILITIES, ALSO PAID TO THE AIRPORT AUTHORITY, BEI NG INTEGRAL TO LANDING AND TAKEOFF, THERE IS NO SCOPE FOR DISINTEGRATING THE PAYMENT INTO TWO CO MPONENTS. THE PARKING FACILITIES THOUGH WOULD ONLY BE TOWARD THE USE OF LAND AND BUI LDING. THE FACTS INVOLVED IN THE TWO CASES BEING DIFFERENT, WE ARE UNABLE TO SEE AS TO H OW THE SAME COULD BE OF ASSISTANCE. IN FACT, TO THE EXTENT THE COMPOSITE SERVICES DO NOT A NSWER THE DESCRIPTION OF RENT, THE DECISION BY THE HONBLE DELHI HIGH COURT, RELIED UP ON BY THE REVENUE, WOULD SUPPORT OUR VIEW INASMUCH AS A TAX STATUTE, EVEN AS EMPHASIZED BY THE SAID COURT, IS TO BE STRICTLY CONSTRUED, SO THAT WHERE A CASE IS NOT COVERED WITH IN THE FOUR CORNERS OF THE TAXING STATUTE, NO TAX COULD BE LEVIED BY INFERENCE OR BY ANALOGY. 3.6 IN VIEW OF THE FOREGOING, WE, WHILE AGREEING IN PRINCIPLE THAT PURE LOUNGING FACILITIES RESERVED THROUGH A CONTRACTUAL ARRANGEME NT BY AN AIRLINES FOR A CLASS OF ITS PASSENGERS WOULD ATTRACT TDS PROVISION FOR RENT, WE CONFIRM IT TO BE NOT SO IN THE CASE OF COMPOSITE SERVICES FOR A SINGLE CONSIDERATION, AS I N THE INSTANT CASE, SO THAT THE SAME 7 ITA NOS. 4601, 4604, 4605 & 4606/MUM/2012 (A.YS. 2008-09 TO 2011-12) ASST. CIT (TDS) VS. QANTAS AIRWAYS LTD. WOULD FALL UNDER THE GENERALIZED CONTRACTUAL CATEGO RY U/S.194C, AS HAS BEEN CONSIDERED BY THE ASSESSEE, WHO THUS SUCCEEDS. FINALLY, IT MAY NOT BE OUT OF PLACE TO STATE THAT THE REVENUE HAS NOT APPLIED ITSELF IN THE MATTER. BESID ES NOT BRINGING THE FULL FACTS TO THE FORE PER ITS ORDERS, WITH EVEN THE RELEVANT AGREEMENT/S BEING NOT ON RECORD, IT HAS ALSO NOT CONSIDERED THE ASSESSEES ALTERNATE CONTENTION THAT THE PAYEE HAVING ACCOUNTED FOR THE ENTIRE RECEIPT AS ITS INCOME, PAYING TAXES THEREON, NO TAX COULD BE RECOVERED. THE SAME IS BY NOW A WELL SETTLED PROPOSITION, SO THAT, WHERE S O, NO TAX COULD BE RECOVERED, AND THE REVENUE IS ONLY ENTITLED TO THE INTEREST U/S. 201(1 A) FOR THE DIFFERENCE IN THE TIME PERIOD, I.E., EVEN ASSUMING THAT TAX WAS TO BE DEDUCTED AT A HIGHER RATE. FURTHER, WE ALSO OBSERVE THAT IT (REVENUE) HAS APPLIED THE TDS ON RENT @ 20% FOR ALL THE YEARS, WHILE THE RATES STANDS, POST 01.10.2009, MODIFIED TO 10%. WE DECID E ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEALS FOR ALL THE YEARS ARE DISMISSED. 1/ 2 * ' 3 1 ' 45 ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 27, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( + MUMBAI; 6) DATED : 27.11.2013 *.)../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. % '$ / THE RESPONDENT 3. ( 7 ( ) / THE CIT(A) 4. ( 7 / CIT - CONCERNED 5. :*;< % )=> , , =>/ , ( + / DR, ITAT, MUMBAI 6.