We pay landing and parking charges to the airport. Is that rent under 194-I at the higher rate?
No. The charges pay for a bundle of services connected with operating aircraft at the airport — air traffic services, ground safety, aeronautical communication and compliance with safety standards — with use of the tarmac only incidental, so they are not rent under s.194-I and s.194C is the right provision.
Decided by the Supreme Court (Supreme Court of India — A.K. Sikri J. and Rohinton Fali Nariman J.) on 2015-08-04, reported as (2015) 377 ITR 372 (SC); [2015] 60 taxmann.com 71 (SC); (2015) 234 Taxman 175 (SC); (2015) 279 CTR 1 (SC); Civil Appeal Nos. 9875-9881 of 2013. It bears on section 194-I, section 194C of the Income Tax Act 1961, in TDS Defaults matters.
The department's usual move is to read the wide Explanation to s.194-I ('any other agreement or arrangement for the use of land') literally and demand the difference in rate plus interest for several years. This decision says the substance of the transaction governs: where the payment buys a package of services and land use is one incidental element, it is not rent. It reversed the Delhi High Court view and approved the Madras line, and it is the standard citation for any charge on infrastructure where the payer never occupies anything.
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Two foreign airlines, Japan Airlines and Singapore Airlines, paid the Airports Authority of India landing, take-off and parking charges at Indira Gandhi International Airport and deducted tax at 2 per cent under s.194C. For assessment year 1998-99 Japan Airlines paid Rs 61,60,486 and deducted Rs 1,57,082. The Assessing Officer held that s.194-I applied at 20 per cent and treated the airline as an assessee in default for short deduction of Rs 11,59,695. The Commissioner (Appeals) and the Tribunal held for the airline, but the Delhi High Court reversed them, following its earlier decision in United Airlines v. CIT [2006] 287 ITR 281 that use of the land begins when the wheels touch the airfield. On identical facts the Madras High Court had taken the opposite view in the Singapore Airlines case. Japan Airlines appealed against the Delhi judgment and the Revenue against the Madras judgment, and the two conflicting lines came up together.
Japan Airlines' appeal was allowed and the Revenue's appeals against the Madras High Court were dismissed. Landing, take-off and parking charges paid to the Airports Authority of India are not, in substance, payments for the use of land; they are for the facilities and services provided in connection with aircraft operation, and so are not 'rent' within s.194-I. The Delhi High Court judgment under appeal and United Airlines v. CIT [2006] 287 ITR 281 (Delhi) were expressly overruled, and the Madras High Court's decision in CIT v. Singapore Airlines Ltd. [2013] 358 ITR 237 (Mad.) was affirmed. The Court did not decide whether s.194C applies: having held s.194-I inapplicable, it said in terms that it was not necessary to go into the scope of s.194C.
The definition of 'rent' in s.194-I has two independent limbs: payment under a lease, sub-lease or tenancy, which is rent in the traditional sense; and payment under any other agreement or arrangement for the use of any land or building, which is much wider. The Court agreed with the Delhi High Court that the second limb is of very wide connotation — and rejected as 'clearly fallacious' the Madras High Court's additional reasoning that 'any other agreement or arrangement' must be read ejusdem generis with lease, sub-lease and tenancy. What the Delhi High Court got wrong was not the width of the definition but its application: treating the payment as one for use of land ignores what the charges are actually for. The Airports Authority provides air traffic services, ground safety services, aeronautical communication facilities, installation and maintenance of navigational aids and meteorological services, all mandated by international protocols; runways are engineered to precise ICAO specifications for lighting, markings, safety areas and pavement. The charges themselves are fixed by the cost methodology in Chapter 4 of the ICAO Airport Economics Manual and not by reference to land use at all. Looked at in substance, use of the land is a minor and incidental element, and the payment is for the package of facilities.
We are convinced that the charges which are fixed by the AAI for landing and take-off services as well as for parking of aircrafts are not for the 'use of the land'.
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Handle my notice → Ask a CA on WhatsAppNo. The charges pay for a bundle of services connected with operating aircraft at the airport — air traffic services, ground safety, aeronautical communication and compliance with safety standards — with use of the tarmac only incidental, so they are not rent under s.194-I and s.194C is the right provision. This was decided by the Supreme Court (Supreme Court of India — A.K. Sikri J. and Rohinton Fali Nariman J.) and bears on section 194-I, section 194C of the Income Tax Act 1961. It is reported as (2015) 377 ITR 372 (SC); [2015] 60 taxmann.com 71 (SC); (2015) 234 Taxman 175 (SC); (2015) 279 CTR 1 (SC); Civil Appeal Nos. 9875-9881 of 2013. The department's usual move is to read the wide Explanation to s.194-I ('any other agreement or arrangement for the use of land') literally and demand the difference in rate plus interest for several years. This decision says the substance of the transaction governs: where the payment buys a package of services and land use is one incidental element, it is not rent. It reversed the Delhi High Court view and approved the Madras line, and it is the standard citation for any charge on infrastructure where the payer never occupies anything. If it applies to you, the first step is this: Get the breakdown of what the charge actually covers and put it on record — services, safety and communication facilities, not a right to occupy a defined area.
Two foreign airlines, Japan Airlines and Singapore Airlines, paid the Airports Authority of India landing, take-off and parking charges at Indira Gandhi International Airport and deducted tax at 2 per cent under s.194C. For assessment year 1998-99 Japan Airlines paid Rs 61,60,486 and deducted Rs 1,57,082. The Assessing Officer held that s.194-I applied at 20 per cent and treated the airline as an assessee in default for short deduction of Rs 11,59,695. The Commissioner (Appeals) and the Tribunal held for the airline, but the Delhi High Court reversed them, following its earlier decision in United Airlines v. CIT [2006] 287 ITR 281 that use of the land begins when the wheels touch the airfield. On identical facts the Madras High Court had taken the opposite view in the Singapore Airlines case. Japan Airlines appealed against the Delhi judgment and the Revenue against the Madras judgment, and the two conflicting lines came up together. The matter was decided on 2015-08-04 by the Supreme Court (Supreme Court of India — A.K. Sikri J. and Rohinton Fali Nariman J.). On those facts the Supreme Court held as follows. Japan Airlines' appeal was allowed and the Revenue's appeals against the Madras High Court were dismissed. Landing, take-off and parking charges paid to the Airports Authority of India are not, in substance, payments for the use of land; they are for the facilities and services provided in connection with aircraft operation, and so are not 'rent' within s.194-I. The Delhi High Court judgment under appeal and United Airlines v. CIT [2006] 287 ITR 281 (Delhi) were expressly overruled, and the Madras High Court's decision in CIT v. Singapore Airlines Ltd. [2013] 358 ITR 237 (Mad.) was affirmed. The Court did not decide whether s.194C applies: having held s.194-I inapplicable, it said in terms that it was not necessary to go into the scope of s.194C.
The definition of 'rent' in s.194-I has two independent limbs: payment under a lease, sub-lease or tenancy, which is rent in the traditional sense; and payment under any other agreement or arrangement for the use of any land or building, which is much wider. The Court agreed with the Delhi High Court that the second limb is of very wide connotation — and rejected as 'clearly fallacious' the Madras High Court's additional reasoning that 'any other agreement or arrangement' must be read ejusdem generis with lease, sub-lease and tenancy. What the Delhi High Court got wrong was not the width of the definition but its application: treating the payment as one for use of land ignores what the charges are actually for. The Airports Authority provides air traffic services, ground safety services, aeronautical communication facilities, installation and maintenance of navigational aids and meteorological services, all mandated by international protocols; runways are engineered to precise ICAO specifications for lighting, markings, safety areas and pavement. The charges themselves are fixed by the cost methodology in Chapter 4 of the ICAO Airport Economics Manual and not by reference to land use at all. Looked at in substance, use of the land is a minor and incidental element, and the payment is for the package of facilities. In the words reproduced by the source cited on this page: "We are convinced that the charges which are fixed by the AAI for landing and take-off services as well as for parking of aircrafts are not for the 'use of the land'."
It was decided by the Supreme Court on 2015-08-04 and is reported as (2015) 377 ITR 372 (SC); [2015] 60 taxmann.com 71 (SC); (2015) 234 Taxman 175 (SC); (2015) 279 CTR 1 (SC); Civil Appeal Nos. 9875-9881 of 2013. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 194-I, section 194C, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Japan Airlines' appeal was allowed and the Revenue's appeals against the Madras High Court were dismissed. Landing, take-off and parking charges paid to the Airports Authority of India are not, in substance, payments for the use of land; they are for the facilities and services provided in connection with aircraft operation, and so are not 'rent' within s.194-I. The Delhi High Court judgment under appeal and United Airlines v. CIT [2006] 287 ITR 281 (Delhi) were expressly overruled, and the Madras High Court's decision in CIT v. Singapore Airlines Ltd. [2013] 358 ITR 237 (Mad.) was affirmed. The Court did not decide whether s.194C applies: having held s.194-I inapplicable, it said in terms that it was not necessary to go into the scope of s.194C. It arises in TDS Defaults matters, on section 194-I, section 194C of the Income Tax Act 1961, and was decided by Supreme Court of India — A.K. Sikri J. and Rohinton Fali Nariman J.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Argue incidence, not absence: concede that land is involved and show that its use is incidental to the services being paid for. Keep deducting under s.194C on such payments and document why the classification was chosen at the time, so the demand is limited to a rate dispute rather than a failure to deduct. If the officer relies on the width of the Explanation alone, ask him to address the substance test rather than the dictionary.
Still good law. Affirms CIT v. Singapore Airlines Ltd. [2012] 24 taxmann.com 200/[2013] 358 ITR 237 (Mad.) in its result, while rejecting that court's ejusdem generis reasoning. Overrules CIT v. Japan Airlines Co. Ltd. [2009] 180 Taxman 188 (Delhi) and United Airlines v. CIT [2006] 287 ITR 281/152 Taxman 516 (Delhi). Relied on since: the Karnataka High Court in CIT v. Bangalore Metro Rail Corporation Ltd. [2022] 140 taxmann.com 229/[2022] 449 ITR 431 (Karnataka), decided 30 June 2022, set the ratio out in full at para 26 and decided the TDS question before it on the same substance-of-the-payment approach. That is an application of the reasoning rather than a formal following, and no later Supreme Court decision applying it was located. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Two limits to keep in view. The Court decided only that these charges are not 'rent' under s.194-I; it expressly declined to decide the scope of s.194C, so the case is authority for the negative proposition and not for the proposition that landing charges attract s.194C. And the wide reading of 'rent' survives: the Court endorsed the Delhi High Court's view that 'any other agreement or arrangement for the use of any land' is of very wide connotation, and rejected the Madras High Court's attempt to narrow it by ejusdem generis. The case turns on what the charges are in substance for, not on any restriction in the definition. The assessment year was 1998-99 and the Court noted that s.194-I was amended in 2002, 2007 and 2009 without those amendments bearing on the result. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Japan Airlines' appeal was allowed and the Revenue's appeals against the Madras High Court were dismissed. Landing, take-off and parking charges paid to the Airports Authority of India are not, in substance, payments for the use of land; they are for the facilities and services provided in connection with aircraft operation, and so are not 'rent' within s.194-I. The Delhi High Court judgment under appeal and United Airlines v. CIT [2006] 287 ITR 281 (Delhi) were expressly overruled, and the Madras High Court's decision in CIT v. Singapore Airlines Ltd. [2013] 358 ITR 237 (Mad.) was affirmed. The Court did not decide whether s.194C applies: having held s.194-I inapplicable, it said in terms that it was not necessary to go into the scope of s.194C.
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