Landing and parking charges payable by airlines to Airport Authority of India (AAI) in respect of aircraft are subject to section 194C but not subject to section 194-I, as per the decision of the Hon’ble Supreme Court.
In this article, I’m going to discuss whether landing and parking charges payable by airlines to AAI are subject to 194C or not?
For this issue, first of all, we should understand section 194C and section 194I.
Section 194C :- Payments to contractors.
Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor 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 an amount equal to—
(i) one percent where the payment is being made or credit is being given to an individual or a Hindu undivided family;
(ii) two percent where the payment is being made or credit is being given to a person other than an individual or a Hindu undivided family,
of such sum as income-tax on income comprised therein.”
In light of the above provision, it is clear to us assessee is required to deduct TDS @2% for carrying out any work in pursuance of a contract between the contractor and the assessee.
Now understand the meaning of work for this purpose. It is defined as under the explanation (iv) of this section.
“work” shall include—
(a) advertising;
(b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting;
(c) carriage of goods or passengers by any mode of transport other than by railways;
(d) catering;
(e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer or its associate, being a person placed similarly in relation to such customer as is the person placed in relation to the assessee under the provisions contained in clause (b) of sub-section (2) of section 40A,
but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer or associate of such customer.
Section 194C :- Rent
Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income 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 income-tax thereon at the rate of—
(a) two percent for the use of any machinery or plant or equipment; and
(b) ten percent for the use of any land or building (including factory building) or land appurtenant to a building (including 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 aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the aforesaid person to the account of, or to, the payee, does not exceed two hundred and forty thousand rupees.
Now understand the meaning of rent for this purpose. It is defined as under the explanation (i) of this section.
Explanation.—For the purposes of this section,—
(i) “rent” means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement 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 factory 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;
Let us understand the income tax department’s view on this issue.
Assessing Officer stand that the present case fell within the purview of Section 194-I of the said Act and that the deduction of tax at source should have been at the rate of 10%. Department understands that the payments made for landing and parking charges to be deemed to be ‘rent’ under section 194-I of the said Act.
On the above-mentioned issue, I’m quoting two judgments i.e CIT v. Asiana Airlines [2008] (Delhi) and CIT v. Singapore Airlines Ltd. [2012] (Madras).
In the case of CIT v. Asiana Airlines, the Delhi high court held that the payment made by an airline for landing charges and parking charges to the Airport Authority of India is in the nature of rent, and, hence, assessee-airline would be liable to deduct tax at source under section 194-I and not under section 194C.
But in another case ofCIT v. Singapore Airlines Ltd., the Madras high court held the contrary ruling i.e “landing and parking charges payable by Airlines would attract TDS under section 194C not under section 194-I.”
On the above-specified ruling, it is not clear to us whether the landing and parking charges payable by the Airlines to the Airport Authority of India are subject to section 194C or section 194-I?
But we have another case of Japan Airlines Co. Ltd. v. CIT [2015] [Supreme Court]. In this case, the Hon’ble Supreme Court verdict is the Landing and Parking charges payable by Airlines in respect of aircraft are not for the ‘use of land’ but the charges are in the respect of the number of facilities provided by the Airport Authority of India. These services include providing air traffic services, found safety services, aeronautical communication facilities, installation and maintenance of navigational aids, and meteorological services at the airport Thus, landing and parking charges payable by Airlines would attract TDS under section 194C not under section 194-I.
After this decision of the Supreme Court, the debate now closed as to whether the landing and parking charges payable by the airlines came under the purview of section 194C or section 194i? And the correct answer is section 194C.
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