Circular No. 21/2017

Non applicability of the provisions of section 194 1 of the i.t. act 1961 on remittance of passenger service fees psf by an airline to an airport operator

What this is

Circular No. 21/2017 was issued by the Central Board of Direct Taxes on 12 June 2017. Its subject is Non applicability of the provisions of section 194 1 of the i.t. act 1961 on remittance of passenger service fees psf by an airline to an airport operator.

What it does

Settles that section 194-I does not apply to passenger service fees remitted by an airline to an airport operator. The Board accepts the view of the Bombay High Court in CIT v. Jet Airways (India) Ltd., which declined to admit the ground on the footing that no substantial question of law arose, relying on the Supreme Court's decision of 4 August 2015 in the Japan Airlines and Singapore Airlines cases that although the Explanation to section 194-I expands the ordinary meaning of rent, the payment must still be for the use of land and building, and a merely incidental or insignificant use while providing other facilities and services does not attract the section. Departmental appeals on the point are not to be filed henceforth and those already filed are to be withdrawn or not pressed.

Why it was issued

A dispute had arisen on whether section 194-I applied to passenger service fees, the High Court decided against the Department, and the Board accepted that view as settling the position.

Who it reaches

Airlines remitting passenger service fees to airport operators
Airport operators receiving such fees
Airlines carrying a section 201 demand or a disallowance on this ground
Departmental representatives with pending appeals on the issue

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.194	s.2, s.393, s.397, s.400, s.402

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

F.No. 279/Misc./140/2015/ITJ
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Circular No. 21/2017
New Delhi, Dated 12th June, 2017
SUBJECT: Non-Applicability of the provisions of section 194-1 of the I.T.
Act, 1961 on remittance of Passenger Service Fees (PSF) by an
Airline to an Airport Operator - reg. -
Under the existing provisions contained in section 194-1 of the Income
Tax Act, 1961 ('the Act'), tax is required to be deducted at source on payment of
rent. The term "rent" is defined in the Explanation to the said section to mean
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 (fJ equipment; or (g) furniture; or (h) fittings, whether or not any
or all of the above are owned by the payee.
2. A dispute arose on applicability of the provisions of section 194-1 of the
Act, on payment of Passenger Service Fees (PSF) by an Airline to an Airport
Operator. The Hon'ble High Court of Bombay in CIT vs. Jet Airways (India) Ltd. 1
declined to admit the ground relating to applicability of provisions of section
194-1 of the Act on PSF charges holding that no substantial question of law
arises. While doing so it relied on the judgement of the Hon'ble Supreme Court
dated 4.8.2015 in the case of Japan Airlines and Singapore Airlines2 where the
Apex Court held that in view of Explanation to section 194-1 of the Act, though,
the normal meaning of the word 'rent' stood expanded, however, the primary
requirement is that the payment must be for the use of land and building and
mere incidental/minor /insignificant use of the same while providing other
facilities and service would not make it a payment for use of land and buildings
so as to attract section 194-1 of the Act.
llTA No.1181 of 2014 dated 04.01.2017- NJRS-2017-LL-0104-100
2CA No. 9875/2013& CA NO.9876-9881 of 2013 (SC), NJRS 2015-LL-0804-5
3. The Board has accepted the above view of the High Court of Bombay.
Accordingly, it is now a settled position that section 194-1 of the Act, will not
- apply on PSF.
4. In view of the above, henceforth, appeals may not be filed by the
Department on the above settled issue, and those already filed may be
withdrawn/ not pressed upon.
5. The above may be brought to the notice of all concerned.
6. Hindi version of the same will follow.
(Neet 17 Deputy Secretary to Government of India
Copy to:
1. The Chairperson, Members and officers of the CBDT of the rank of Under
Secretary and above.
2. OSD to Revenue Secretary.
3. All Pro Chief Commissioners of Income-Tax & All Directors General of
Income-Tax with a request to bring to the attention of all officers.
4. The Comptroller and Auditor General of India.
5. The Pro Director General of Income-Tax, NADT, Nagpur.
6. The Pro DGIT (Systems), ARA Centre, Jhandewalan Extension, New Delhi.
7. The Pro DGIT (Vigilance), New Delhi.
8. The ADG (PR. PP & OL) for circulation as per usual mailing list.
9. ADG-4 (Systems) for uploading on lTD website.
10. Database Cell for uploading on irsofficersonline.
11. njrs_support@nsdl.co.in for uploading on NJRS.
12. Hindi section for Hindi translation of the Circular
13. Guard File

What to watch

The relief is specific to passenger service fees — other payments between an airline and an airport operator stand on their own facts.
The test the Board accepts is the substance of the payment: it must be for the use of land and building, and incidental use while services are provided is not enough.
The direction is about filing and withdrawing departmental appeals; it does not by itself vacate a demand already raised, which still has to be taken up in the pending proceeding.
Section 194-I not applying does not decide whether some other deduction provision reaches the payment.

Where you meet it

On a short-deduction demand under section 201 or a disallowance in the airline's assessment for not deducting under section 194-I on passenger service fees, or when seeking withdrawal of a departmental appeal on the point.

What it names

It mentions. Circular No. 21/2017

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 52/2023 [F.No. 275/17/2023-IT(B)] / SO 3254(E) — Ministry of Finance 20 July 2023
Circular No. 10/2022 — Circular regarding use of functionality under section 206AB and 206CCA of the income tax act 1961 17 May 2022
Circular No. 20/2021 — Guidelines under sub section 4 of section 194 o sub section 3 of section 194Q and sub section 1 i of section 206C of the 25 November 2021
Notification No. 106/2021 [F. No. 370149/158/2021-TPL] / SO 3679(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 10 September 2021
Notification No. 48/2017/F. No. 370 142/16/2017-TPL / GSR 561(E) — Ministry of Finance 8 June 2017
Circular No. 35/2016 — Circular No. 35 /2016 13 October 2016

← Circular No. 20/2017 · Circular No. 18/2017 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.