Case Law Details
Qantas Airways Ltd. Vs ACIT (ITAT Mumbai)
Section 194C TDS deductible on Payment for use of lounge facilities by passengers
A payment for the use of lounge facilities by the passengers, in our considered view, is clearly in the nature of payment for the use of certain facilities for the passengers. What passenger gets by access to the lounge is the privilege of relaxing in a comfortable place with good ambience, reading material, computer and internet access, and being allowed to consume food and drinks etc. Viewed thus, the tax required to be withheld from these payments, for rendition of services under a contract, is 2% as per the requirements of section 194C. The authorities below are, however, not content by this tax withholding. Their view is that the assessee ought to have treated these payments as rental payments and, accordingly, deducted the tax at source @ 10% under section 194 I. However, the payment of lounge facilities cannot, by any stretch of logic, be characterized as payment “under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,²(a) land; or (b) building (including factory building); or (c) land appurtenant to a building (including factory building); or (d) machinery; or (e) plant; or (f) equipment; or (g) furniture; or (h)fittings” as is the condition precedent for invoking section 194 I. The payments in question have been rightly treated as payments for services rendered under a contract, which are covered under section 194C, and, accordingly, we see no infirmity in the deduction of tax at source @ 2% from the payments in question.
ITAT criticises CIT(A) for lack of judicious approach
As regards the decision of Hon’ble Delhi High Court in the case of Japan Airlines (supra), relied upon by the Assessing Officer, we find that the said decision is overruled by Hon’ble Supreme Court in the case of Japan Airlines Ltd vs CIT[(2015) 377 ITR 372 (SC)]. Learned CIT(A), however, does not give up. He finds certain observations in the said decision to mean that “full and larger picture prevails over a naïve and simplistic approach and that substance of the arrangement is much more important than its form”, and uses these observations to justify his conclusions. The lack of a judicious approach by the CIT(A) is glaring. A plain reading of the order of the CIT(A) also shows that admittedly this issue is covered by earlier decisions of the coordinate benches, and yet the authorities below have proceeded to disregard those decisions by distinguishing these binding precedents on some frivolous grounds and their better reasoning. Such an approach cannot meet our judicial approval.
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