If payment is for variety of services & use of land is minor, Payment cannot be treated as rent –SC

In deciding whether a payment is for “use of land”, the substance of the transaction has to be seen. If the payment is for a variety of services and the use of land is minor, the payment cannot be treated as “rent” – Section 194-I

Brief Facts of the Case and Question of Law

Brief Facts:

There are two foreign companies involved namely Japan Airlines Company Limited (“JAL”) and Singapore Airlines Limited (“SAL”). The issue involved relates to the deduction of tax at source (“TDS”) in both the cases. TDS is deducted at 2% under section 194C of the Income Tax Act (“Act”) on payment of landing and parking charges in respect of its aircrafts. In the case of JAL, the Delhi High Court has taken a view that the TDS is to be deducted under Section 194-I of the Act. Whereas, in the case of SAL, Madras High Court has taken contrary view holding that the case is covered under Section 194-C of the Act and not under Section 194-I of the Act thereof.

As the issue involved in both the cases is identical, the facts of JAL’s case are considered as under to arrive at a conclusion.

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