ITO (TDS) (OSD) 1(2), MUMBAI V. EMIRATES, MUMBAI

ITA 6397/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9089 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 17-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDHE
• Assessee Lawyers: ALIASGER RAMPURWALA
• Section: 194C

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND PAWA N SINGH,JUDICIAL MEMBER ./ITA/6397/MUM/2014 , ,, , /ASSESSMENT YEAR:2011-12 DCIT (OSD) TDS-1(2), ROOM NO.812, K.G. MITTAL, HOSPITAL BLDG. CHARNI ROAD MUMBAI-400 002. VS. M/S. EMIRATES, MITTAL CHAMBERS, 228, NARIMAN POINT, GROUND FLOOR MUMBAI-400 021. PAN:AAACE 1237 C ( /APPELLANT ) ( / RESPONDENT) /C.O/63/MUM/2016,AY.2011-12 M/S. EMIRATES, NARIMAN POINT MUMBAI-400 021. VS. DCIT (OSD) TDS-1(2), MUMBAI-400 002. (CROSS OBJECTOR) ( / RESPONDENT ) REVENUE BY: SH.VISHWAS MUNDHE - DR ASSESSEE BY: SH.ALIASGER RAMPURWALA- AR / DATE OF HEARING: 03.01.2017 / DATE OF PRONOUNCEMENT: 03.01.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , CHALLENGING THE ORDER,DATED 01/08/2014,OF THE CIT(A )-14,MUMBAI,THE ASSESSING OFFICER (AO)AND THE ASSESSEE HAVE FILED APPEAL/CROSS OBJECT IONS(CO) FOR THE ABOVE-MENTIONED THREE AY.S,RAISING VARIOUS GROUNDS.AS THE ISSUES INVOLVED IN THE APPEAL/ CO.S.ARE COMMON,SO,FOR THE SAKE OF CONVENIENCE,WE ARE ADJUDICATING BOTH TH E MATTERS BY A SINGLE ORDER.ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF OPERATION OF AIRCRAFT AND OTHER RELATED ACTIVITIES. ITA/6397/MUM/2014-AY.2011-12 2. DURING THE COURSE OF HEARING BEFORE US, REPRESENTAT IVES OF BOTH THE SIDES AGREED THAT THE ISSUE,RAISED BY THE AO IN THE APPEAL FOR THE YEAR U NDER CONSIDERATION,IS COVERED AGAINST HIM BY THE ORDER OF THE TRIBUNAL(ITA.S.4982-84/MUM/2013 ,AY.S.2008-09 TO 2010-11,DATED 03. 08.2016). 3. WE FIND THAT THE EFFECTIVE GROUND OF APPEAL IS ABOU T ALLOWING RELIEF OF TAX U/S. 201(1)AND INTEREST U/S.201(1A)OF THE ACT FOR SHORT DEDUCTION OF TDS ON PASSENGER SERVICE FEES.WE WOULD LIKE TO REFER TO THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL FOR EARLIER YEARS WHERE THE IDENTICAL ISSUE HAS BEEN DEALT IN FOLLOWING MAN NER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD.WE FIND THAT THE ASSESSEE HAD PAID PSF AND X-RAY CHARGES TO MIAL AS PER THE AGREEMENT ENTERED WITH IT, THAT IT HAD DEDUCTED TAX AT THE RATE OF 2% , THAT THE AO HAD HELD THAT THE PAYMENT MADE 6397-EMI RATES,2011-12 2 BY THE ASSESSEE WAS COVERED BY THE PROVISIONS OF SE CTION 194-I OF THE ACT,THAT HE TREATED THE ASSESSEE IN DEFAULT FOR NOT DEDUCTING THE TAXED AT HIGHER RATE,THAT IT HAD HIRED A OFFICE PREMISES AT THE INTERNATIONAL AIRPORT, THAT A SEPAR ATE AGREEMENT WAS ENTERED INTO WITH REGARD TO HIRING OF THAT PREMISES, THAT IT WAS DEDUCTING T AX AS PER THE PROVISIONS OF SECTION 194-I OF THE ACT FOR THE SAID PREMISES.IN OUR OPINION PSF/X- RAY CHARGES CANNOT BE TREATED AS RENT AS ENVISAGED BY SECTION 194 I. IN THE CASE OF JAPAN AI RLINES CO. LTD. & OTHERS(377 ITR 372)THE HONBEL APEX COURT HAS DEFINED THE WORD RENT AS UND ER: THE EXPRESSION RENT IS GIVEN A MUCH WIDER MEANIN G U/S. 194-I THAN 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 GIV EN IS INCONSEQUENTIAL. SUCH PAYMENT UNDER LEASE, SUB-LEASE OR TENANCY WOULD BE TREATED AS RENT. IN THE SECOND PLACE, SUCH A PAYMENT MADE EVEN UNDER ANY OTHER AG REEMENT OR ARRANGEMENT FOR THE USE OF ANY LAND OR ANY BUILDING WOULD ALSO BE TREA TED AS RENT. WHETHER OR NOT SUCH BUILDING IS OWNED BY THE PAYEE IS NOT RELEVANT. THE EXPRESSIONS ANY PAYMENT, BY WHATEVER NAME CALLED AND ANY OTHER AGREEMENT OR AR RANGEMENT HAVE THE WIDEST IMPORT. LIKEWISE, PAYMENT MADE FOR THE USE OF ANY LAND OR ANY BUILDING WIDENS THE SCOPE OF THE PROVISO. A BARE READING OF THE DEFINITION OF RENT CONTAINE D IN THE 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, IS TO BE TREAT ED AS RENT. THAT IS RENT IN TRADITIONAL SENSE. HOWEVER, THE SECOND PART IS INDE PENDENT OF THE FIRST PART WHICH GIVES MUCH WIDER SCOPE TO THE TERM RENT. ACCORDIN G TO THIS WHENEVER PAYMENT IS MADE FOR USE OF ANY LAND OR ANY BUILDING BY ANY OTH ER AGREEMENT OR ARRANGEMENT, THAT IS ALSO TO BE TREATED AS RENT. ONCE SUCH A PAYMEN T IS MADE FOR USE OF LAND OR BUILDING UNDER ANY OTHER AGREEMENT OR ARRANGEMENT, SUCH AGREEMENT OR ARRANGEMENT GIVES THE DEFINITION OF RENT OF VERY WIDE CONNOTATI ON. TO THAT EXTENT, THE SCOPE OF THE DEFINITION OF RENT IS WIDE AND NOT LIMITED TO WHA T IS UNDERSTOOD AS RENT IN COMMON PARLANCE. THE FACTS OF THE CASE WERE THAT THE ASSESSEES WERE FOREIGN AIRLINE COMPANIES WHICH WERE MEMBERS OF THE INTERNATIONAL AIR TRANSPORT AGREEMEN T AND DURING THE RELEVANT YEAR SERVICED INWARD AND OUTBOUND AIR TRAFFIC TO AND FROM INDIA. THE AIRPORTS AUTHORITY OF INDIA LEVIED CERTAIN CHARGES ON THEM FOR LANDING AND PARKING THE IR AIRCRAFT.FOR PAYMENT OF LANDING AND PARKING CHARGES OF THEIR AIRCRAFT,THE APPELLANTS DE DUCTED TAX AT SOURCE U/S. 194C OF THE ACT,@ 2% AND DEPOSITED IT WITH THE DEPARTMENT. THE DEPART MENT, HOWEVER, TOOK THE VIEW THAT THE TAX WAS TO BE DEDUCTED U/S. 194-I OF THE ACT WHICH CALLS FOR DEDUCTION AT 20%. DECIDING THE ISSUE AS TO WHETHER THE LANDING AND PARKING CHARGES PAID BY THE AIRLINE COMPANIES TO THE AIRPORTS AUTHORITY OF INDIA WERE PAYMENTS FOR A CON TRACT OF WORK U/S. 194C AND NOT IN THE NATURE OF RENT AS DEFINED IN SECTION 194-I,THE HO NBLE APEX COURT HELD AS FOLLOW: .THE CHARGES FIXED BY THE AIRPORTS AUTHORITY OF INDIA FOR LANDING AND TAKE-OFF SERVICES AS WELL AS FOR PARKING OF AIRCRAFT WERE NO T FOR THE USE OF THE LAND. THESE CHARGES WERE FOR SERVICES AND FACILITIES OFFERED IN CONNECTION WITH THE AIRCRAFT OPERATION AT THE AIRPORT, WHICH INCLUDED PROVIDING OF AIR TRAFFIC SERVICES, GROUND SAFETY SERVICES, AERONAUTICAL COMMUNICATION FACILITIES, IN STALLATION AND MAINTENANCE OF 6397-EMI RATES,2011-12 3 NAVIGATIONAL AIDS AND METEOROLOGICAL SERVICES AT TH E AIRPORT. THE AIRPORT ECONOMICS MANUAL AND THE INTERNATIONAL AIRPORTS TRANSPORT AGR EEMENT AMONG CONTRACTING STATES ON CHARGES FOR AIRPORT AND AIR NAVIGATION SERVICES SHOWED THAT THERE WERE VARIOUS INTERNATIONAL PROTOCOLS WHICH MANDATED THAT ALL AUT HORITIES MANNING AND MANAGING THESE AIRPORTS CONSTRUCT AIRPORTS OF DESIRED STANDA RDS WHICH WERE STIPULATED IN THE PROTOCOLS. THE SERVICES REQUIRED TO BE PROVIDED BY AUTHORITIES LIKE THE AIRPORTS AUTHORITY OF INDIA WERE AIMED AT PASSENGERS SAFETY AS WELL AS SAFE LANDING AND PARKING OF THE AIRCRAFT. THEREFORE, IT WAS NOT MERE USE OF THE LAND. ON THE CONTRARY, IT WAS THE FACILITIES, THAT WERE TO BE COMPULSORILY OFFERED BY THE AIRPORTS AUTHORITY OF INDIA IN TUNE WITH THE REQUIREMENTS OF THE PROTOCOL , WHICH WAS THE PRIMARY FOCUS. FOR EXAMPLE, SPECIAL TECHNOLOGY WAS REQUIRED FOR THE CO NSTRUCTION OF RUNWAYS FOR SMOOTH LANDING AND TAKE-OFF OF THE AIRCRAFTS. TECHNICAL SP ECIFICATIONS FOR LIGHTING, SAFETY AREA AND MARKINGS WERE STIPULATED. DESIGNS AND QUALITY O F PAVEMENT ON THESE RUNWAYS WERE ALSO TO BE TAKEN COMPLIANT. THE AIRPORTS AUTHO RITY OF INDIA PROVIDED ALL THESE FACILITIES FOR LANDING AND TAKE-OFF OF AN AIRCRAFT AND IN THIS WHOLE PROCESS, USE OF THE LAND WAS INCIDENTAL. ON THE CONTRARY, THE PROTOCOL PRESCRIBED A DETAILED METHODOLOGY FOR FIXING THESE CHARGES. THUS, THE CHARGES WERE NO T FOR USE OF LAND PER SE AND, THEREFORE, COULD NOT BE TREATED AS RENT WITHIN TH E MEANING OF SECTION 194-I OF THE ACT. RESPECTFULLY,FOLLOWING THE ABOVE JUDGMENT WE HOLD T HAT PAYMENT MADE BY THE ASSESSEE TO MIAL CANNOT BE TREATED RENT,AS PER THE PROVISIONS O F SECTION 194-I OF THE ACT.THERE WAS NO USE OF LAND BY THE ASSESSEE FOR BOTH THE CHARGES CO LLECTED BY IT. THUS,THE BASIC INGREDIENT I.E. USE OF LAND,PLANT,MACHINERY ETC.IS MISSING AND HENC E IT CAN SAFELY BE HELD THAT THE ASSESSEE HAD RIGHTLY DEDUCTED THE TAX AT THE RATE OF 2%, AS PER THE PROVISIONS OF SECTION 194- C OF THE ACT. AS FAR AS PSF CHARGES ARE CONCERNED,WE WANT TO MENTION THAT IN THE CASE OF JET AIRWAYS (SUPRA) THE TRIBUNAL HAS HELD AS UNDER: THE FACTS UNDER CONSIDERATION SHOW THAT THE PSF IS A STATUTORY LIABILITY WITHOUT DEMARCATING/ EARMARKING THE AREA TAKEN ON THE RENT, NOR IT IS A CASE OF SYSTEMATIC USE OF LAND SPECIFIED FOR CONSIDERATION UNDER AN AGREEM ENT, WHICH CARRIES THE CHARACTERISTICS OF LEASE OR TENANCY. A MERE USE OF LAND AND PAYMENT CHARGED, WHICH IS NOT FOR THE USE OF THE LAND BUT FOR MAINTENANCE OF VARIOUS SERVICES INCLUDING TECHNICAL SERVICES WOULD NOT TECHNICALLY BRING THE TRANSACTIO N AND THE CHARGES WITHIN THE MEANING OF EITHER LEASE OR SUBLEASE OR TENANCY OR A NY OTHER AGREEMENT OR ARRANGEMENT OR ANY NATURE OF LEASE OR TENANCY OR RENT. IT WOULD NOT BE OUT OF PLACE TO CONSIDER THE CBDT CIRCULAR NO.1/2008, DATED 10 TH , JANUARY, 2008 RELATING TO THE CLARIFICATION REGARDING THE APPLICABILITY OF PROVISIONS OF SECTIO N 194 I TO PAYMENTS MADE BY THE CUSTOMERS ON ACCOUNT OF COOLING CHARGES TO THE COLD STORAGE OWNERS, WHEREIN THE 6397-EMI RATES,2011-12 4 CBD HAD THE OCCASION TO CONSIDER THE REPRESENTATION S IN RESPECT OF THE ISSUE, WHETHER THE CUSTOMER FIVE THE BUILDING, PLANT AND MACHINERY ETC.,WITHOUT PACKAGES FOR RESERVATION FOR A REQUIRED PERIOD CAPTAIN THE COLD STORAGE AFTER PAYING COOLING CHARGES. THE CB DT, THUS, CLARIFIED THAT THE CUSTOM ER IS ALSO NOT GIVEN ANY RIGHT TO USE ANY DEMARCATED SPACE LESS PLACE FOR THE MACHINE RY OF THE COLD STORAGE AND THUS DOES NOT BECOME A TENANT. THEREFORE, THE PROVISIONS OF SECTION 194 I IS NOT APPLICABLE TO THE COOLING CHARGES PAID BY THE CUSTO MERS OF THE COLD STORAGE. APPLYING THE SAME TECHNOLOGY, THE PSF CHARGES PAID BY THE AS SESSEE ON BEHALF OF ITS CUSTOMER, DID NOT ATTRACT THE PROVISIONS OF SECTION 194 I. AFTER CONSIDERING THE ABOVE,WE ARE OF THE OPINION T HAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.THEREFORE, UPHO LDING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. FOLLOWING THE ABOVE ORDER,EFFECTIVE GROUND OF APPEA L IS DECIDED AGAINST THE AO. 4. THE AUTHORISED REPRESENTATIVE(AR) STATED THAT THE C O FILED BY THE ASSESSEE WOULD BE INFRUCTUOUS,IF THE APPEAL FILED BY THE AO WAS DISMI SSED.WE HAVE DECIDED THE ISSUE AGAINST THE AO AND THEREFORE THE CO,FILED BY THE ASSESSEE,I S TREATED INFRUCTUOUS. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED AND THE CO.S.OF THE ASSESSEE IS TREATED INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY,2017. 3 , 2017 SD/ -SD/- ( / PAWANSINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 03.01.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.