Income Tax Appellate Tribunal - Delhi
Deputy Commissioner Of Income Tax vs Japan Airlines on 25 October, 2004
Equivalent citations: [2005]93ITD163(DELHI), (2005)92TTJ(DELHI)687
ORDER
P.N. Parashar, J.M.
1. This appeal has been filed by the Revenue against the order of learned. CIT(A), dt. 31st Jan., 2001, for asst. yr. 1998-99.
2. Shri Prahlad Singh, senior Departmental Representative, appeared on behalf of the Revenue whereas Shri O.P. Sapra, advocate, represented the assessee.
3. The only ground taken by the Revenue in this appeal runs as under :
"On the facts and circumstances of the case, the learned CIT(A) has erred in treating the whole payments of Rs. 78,54,062 as made for technical services Under Section 194J, against the order of AO treating the payment of Rs. 61,60,486 as made Under Section 194(I) and Rs. 16,93,577 Under Section 194J of IT Act and thereby raising a demand of short deduction of tax Under Section 201(I) of IT Act amounting to Rs. 11,08,888 and Rs. 50,807, respectively."
3.1 At this stage itself, it may be pointed out that the Revenue has not correctly understood the order of learned CIT(A) who has accepted the contention of the assessee that payments were made to the contractor as per Section 194C of the Act and not that payments were made Under Section 194J. This position will be clear by succeeding paras. On this basis, the ground itself as taken by the Revenue does not appear to be happily worked. However, we proceed to adjudicate the entire issue by making reference to the relevant material.
4. The assessee, i.e., Japanese Air Lines ("JAL" in short), a foreign company, incorporated in Japan, is involved in business of air traffic/flights and carries passengers and cargo by its air crafts. The nature of this business requires that there be certain facilities for international air flights. The international community, i.e., UNO constituted International Civil Aviation Organization (ICAO in short), which framed certain guidelines and rules enlisted certain facilities to be given to the international flights. The International Air Transport Agreement ("IATA" in short) also laid down certain stipulations which were to be followed by the member States; India being a signatory, has to comply with such rules, principles, policy guidelines and conventions formed by the ICAO or under IATA.
4.1 The Airport Authority of India, hereinafter called the "Authority", created under Airport Authority Act provides various facilities to the aircrafts. So far as the assessee, i.e., JAL is concerned, the Authority, while providing various facilities to it, also charged fee/charges/rent for such services including fee/charges for landing, parking route navigation and terminal navigation, etc. 4.2 In the financial year 1997-98, the assessee made a payment of Rs. 61,60,486 on account of landing and parking fee and deducted tax at source (TDS) of Rs. 1,57,082 (which was 2 per cent of the said payment), the reason and basis for this payment, as stated by the assessee, was that landing and parking should be treated as facilities and services under the work contract and thus TDS was deductible as per provisions of Section 194C of the IT Act.
4.3 So far as this item is concerned, the AO, on examination, held that landing and parking facilities provided by the Authority fell within the purview of Section 194-I and the charges for landing and parking were taken by way of rent and, therefore, the tax should be deducted at the rate of 20 per cent on the charges of Rs. 61,60,486. He, thus, worked out the short deduction at Rs. 11,59,695.
4.4 There was another payment of Rs. 16,93,575, which was made by the assessee for services relating to RNFC and TNLC during this financial year. As per the AO they were in the nature of technical services which attracted a flat rate of 5 per cent and thus on the payment of Rs. 16,93,575 a sum of Rs. 84,680 should have been deducted in terms of Section 194J. As the assessee had already paid the amount of Rs. 84,680, no short deduction could be worked out under this Act by the AO. Thus, there is no dispute regarding this item of payment.
4.5 The assessee preferred appeal against the order of AO passed Under Section 201(1) of the IT Act and challenged the findings of AO. It was submitted on behalf of assessee that assessee-company as well as the Government of India were the members of ICAO and as per code of conduct the Authority provided certain facilities, which were necessary for safe navigation and operation of aircrafts. It was pleaded that the Authority under the Airport Authority of India Act of 1994 was given power to take payments for landing, housing and parking the aircrafts of the assessee. It was further contended that India being a member and signatory to ICAO, agreed to levy charges for various facilities provided by it. It was pointed out that charges for landing and parking of aircrafts were based on weight formula and maximum permissible take-off weight and these charges included landing and take-off facilities, taxiways with necessary draining, fencing of airport, air traffic control for approach and landing of aircrafts and the parking charges which were based on the length of stay of aircraft beyond a permissible period of time at the airport also included certain other facilities.
4.6 On behalf of the assessee, the submissions, therefore, were that the payments made for facilities to landing and parking cannot be treated as rent as the same were not for any fixed or enclosed area of land and were correctly treated by the assessee as payments made to the contractor as per Section 194C of the Act.
4.7 The learned CIT(A) accepted the arguments submitted by the assessee and deleted the addition made by the AO on account of short deduction of tax at Rs. 11,59,695.
4.8 So far as the alleged short deductions in relation to RNFC and TNLC are concerned, the learned CIT(A) agreed with AO and held that services relating to route navigation and terminal navigation were well within the purview of technical services as contemplated Under Section 194J of the Act and the AO was justified in applying the rate of 5 per cent for such services. However, as the assessee pointed out that the amount due as TDS has already been paid, no additional demand of tax on the same as TDS Under Section 201(1) of the Act remains due. Hence, the learned CIT(A) only directed the AO to verify this aspect.
4.9 The Revenue has effectively challenged the deletion of Rs. 11,59,695 under the first head, that is, short deduction of TDS on account of landing and parking charges by taking the ground as referred to above.
5. Before us, it was argued by the learned Departmental Representative that the learned CIT(A) was not justified in holding that landing and parking charges were not on account of rent because the facilities of parking on the land of the Authority amounted to lease of" the premises. He placed reliance on the order of AO.
6. On the other hand, the learned counsel for the assessee placed reliance on the order of CIT(A). He also submitted that in the preceding and subsequent assessment years the TDS paid Under Section 194C for these services, has been accepted by the Department and, therefore, on the principles of consistency also, the order of learned CIT(A) deserves to be upheld. In this regard, he placed reliance on the following decisions :
(i) Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC);
(ii) CIT v. ARJ Security Printers, (2003) 264 ITR 276 (Del);
(iii) Dhansiram Agarwalla v. CIT, (1996) 217 ITR 4 (Gau);
(iv) Taraben Ramanbhai Patel and Anr. v. ITO (1995) 215 ITR 323 (Guj);
(v) Sardar Kehar Singh v. CIT, (1992) 195 ITR 769 (Raj);
(vi) CIT v. Hindusthan Motors Ltd., (1991) 192 ITR 619 (Cal);
(vii) CIT v. Sridev Enterprises, (1991) 192 ITR 165 (Kar); and
(viii) CIT v. Godavari Corpn. Ltd., (1985) 156 ITR 835 (MP).
6.1 He also made reference to Airport Economic Manual, the ICAO's policies on charges for airport and air navigation services and, in particular, pointed out that the services for landing and parking included clear approach, taxiways, light, communication facilities, aerodrome control, air traffic control, meteorological information, fire and ambulance services, use of light and special radio aids for landing, etc. According to him the landing and parking charges were based on the weight formulae and not on area of parking and hence the parking charges were for the work done under the contract and were covered within the provisions of Section 194C of the IT Act.
7. We have considered the entire material on record and the rival submissions. For proper appreciation of the approach of Departmental authorities and for correct adjudication of the core issue, i.e., what is the basis for payment of landing and parking charges involved in this appeal, we have to analyse the facts and relevant legal position in relation to the following issues :
A. Whether such payments are as fee for professional and technical services as provided Under Section 194J.
B. Whether the charges made by the assessee to the Authority on account of landing and parking facilities provided by the said Authority (Airport Authority of India), amount to payment of rent Under Section 194-I of the Act.
C. Whether such payments are payments to contractors and sub-contractors and thus are covered within the ambit of Section 194C of this Act.
7.1 Before dealing with the aforesaid issues, we want to clarify that neither the Department nor the assessee has produced before us any written document in the shape of lease deed or license deed directly governing the conditions of such payments nor have they provided any other material in the shape of direct authority or any decision of Tribunal or Hon'ble High Court or Hon'ble Supreme Court of India. Thus, we are left with no option but to seek guidance and assistance from certain guiding principles governing the transactions as made available to us by the assessee in the shape of Airport Economic Manual, statement by the Council to the Contracting States on charges for airport and air navigation services. We have also to closely examine the relevant statutory provisions of Airport Authority of India Act, 1994, and Sections 194C, 194-1 and 194J of the IT Act.
8. Issue No. A : Fees for professional or technical services is to be ascertained and determined as per provisions of Section 194J. The relevant provision is as under:
"194J(1): Any person, not being an individual or an HUF, who is responsible for paying to a resident any sum by way of-
(a) fees for professional services, or
(b) fees for technical services, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to five per cent of such sum as income-tax on income comprised therein."
8.1 For the purpose of Section 194J, professional services have been defined as under:
"professional services" mean services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising or such other profession as is notified by the Board for the purposes of Section 44AA or of this section;"
8.2 Fees for technical services, as per Sub-clause (b) of Section 194J(3), shall have the same meaning as given in Expln. 2 to Clause (vii) of Sub-section (1) of Section 9, which is as under:
"Explanation 2 : For the purposes of this clause, 'fees for technical services1 means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of. the recipient chargeable under the head 'Salaries'."
8.3 The AO as well as the learned CIT(A) have already treated certain services relating to route navigation and terminal navigation including flight information services, alerting services, as technical services as per Section 194J and there is no dispute regarding the same and the assessee has also deducted required TDS on such professional or technical services which are covered Under Section 194J.
8.4 So far as the landing and parking facility is concerned, it is not the case of the Department that such services are to be provided by professional or by technical persons. Nothing has been brought on record to demonstrate that facilities relating to landing, parking, taxiways, etc., etc. are technical services. Although the composite services relating to landing and parking may involve component of technical services but it cannot be said that all these services are provided by professionals and technical personnel. Therefore, in view of the facts on record, it is not possible to record a positive finding that the provisions of Section 194J are attracted in the present case. This issue is decided in negative.
9. Issue No. B : In the order dt. 4th June, 1999, passed Under Section 201(1), the AO has made only following observations :
"The landing/parking charges paid by the company for Rs. 61,60,486 to Airport Authority of India come within the ambit of Section 194-I of IT Act."
9.1 As rightly observed by the learned CIT(A), the AO has not assigned any reasons to support further his finding. Before us also, the learned Departmental Representative, who supported the order of AO, could not further elaborate his finding.
9.2 The learned CIT(A) has incorporated the arguments of the assessee in his order, which are as under :
"The Authorised Representative explained that the assessee-company is a member of IATA and its aircrafts are regularly coming to India carrying passengers and cargo. As per the international code of conduct, as prescribed by the ICAO to which India is also a Contracting State, every Airport Authority charges a specified amount as landing and parking charges for various services provided by the airport authority. The services/facilities provided by the Airport Authority of India include installation and maintenance of the navigational aids, communication facilities, which are necessary for safe navigational and operation of aircraft, air safety services, postal, money exchange, insurance and telephone facilities for passengers at the airport, arrangements for watch and ward and transport facility for the passengers travelling by air, etc. The Airport Authority of India (AAI), under the provisions of the Airport Authority of India Act, 1994, has been given powers to charge rent, etc. for landing, housing and parking of aircrafts and any other services or facilities offered in connection with the aircraft operations at the airport and also for providing air traffic services, ground safety services, aeronautical communication and navigational aids and metrological services at the airport.
The Authorised Representative further explained that the Contracting States through the International Civil Aviation Organization to which India is also a member and signatory have agreed to various charges levied for the facilities provided by the authority. The airport authority charges for landing, parking of the aircraft which are based on weight formulae using the maximum permissible take-off weight of the aircraft. The landing charges include the landing, take-off facilities, taxiways with necessary drainage, fencing, air traffic control for approach and landing, etc, The parking charges are based on length of stay of the aircraft beyond the permissible period at the airport. The Authorised Representative pleaded that the payments for landing and parking charges cannot be treated as a rent as the same are not for any enclosed area/land and are correctly treated to be payments made to the contractor as per Section 194C of the Act. The aircraft fly in and out and are allowed to land for a short while and are parked on the runways/hangers for boarding and dislodging of passengers and cargo. Further, the facilities charged by the airport authority is for a number of other facilities as already mentioned earlier which cannot be by any stretch of imagination be considered as rent as contemplated in Section 194-I of the Act. It was also explained that appellant is already deducting TDS on rent paid to AAI for the office space provided by them, as per Section 194-I of the Act."
9.3 The learned CIT(A) thereafter has recorded his findings, which are as under:
"I have considered the submissions of the appellant which are well founded. The learned AO has unfortunately not given any reasons as to on what basis he considered the landing and parking charges as rent Under Section 194-I instead of payment as a contractor Under Section 194C of the Act. The landing and parking charges are inclusive of a number of facilities and services provided by the AAI in compliance to the international protocol by ICAO amongst the Contracting States. India is a Contracting State and is bound by the protocol to provide the necessary facilities at its airport. The aircrafts land and are parked at times for a temporary periods and the AAI has been charging the airline for the services extended. These services are not in the nature of rent as no specified area or land is allocated but it is only a facility extended for a short period at the airport. Considering these facts, I am of the view that the action of the learned AO in treating the landing and parking charges as rent as per Section 194-I was not justified and the amount of short deduction of tax on this account raised by the AO is deleted."
9.4 We find force in the findings of the learned first appellate authority that the services provided by the Authority to the assessee for landing and parking of its aircrafts do not amount to lease of the property and, therefore, the payments are not in the nature of rent as envisaged Under Section 194-I of the Act. We support his findings by advancing following additional reasons :
9.5 The term 'rent' has been attempted to be defined in Section 194 itself and by way of Explanation super added to Section 194-I. The definition is as under:
"Section 194-I-
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 any land or any building (including factory building), together with furniture, fittings and the land appurtenant thereto, whether or not such building is owned by the payee."
9.6 In view of this definition, there has to be either lease, sub-lease, tenancy agreement or arrangement for governing the use of any land. Such land has to be specific portion of land and lease, etc. of such land and has to regulate the manner of use of such land or building and its tenure as well as manner of payment in lieu thereof. After taking into consideration the definition of rent, it apparently appears to be a composite concept. In Black's Law Dictionary, the term 'rent' means - "consideration paid for use or occupation of property". In a broader sense, it is the compensation or fee paid, usually periodically for the use of any rented property, land, building, equipment, etc. 9.7 So far as the landing and parking facilities provided by Authority to the assessee on its airport land is concerned, the same is regulated on the formulae of weight and maximum permissible take-off weight and not with regard to any specified area of land and its exclusive use by the assessee.
9.8 The statement by the Council to the Contracting States on charges for airports, etc. and in particular on landing and parking charges lays down following guiding principles :
"17. The Council recommends that the following principles be taken into account when landing charges are established :
(i) Landing charges should be based on the weight formula, using the maximum permissible take-off weight and indicated in the certificate of airworthiness or other prescribed document) as the basis for assessment. However, allowance should be made for the use of a fixed charge per aircraft or a combination of a fixed charge with a weight-related element, in certain circumstances such as at congested airports and during peak periods.
(ii) The landing charge scale should be based on a constant rate per 1,000 kilograms or pounds in weight, but the rate may be varied at a certain level or levels of weight, if considered necessary.
(iii) Where charges for approach and aerodrome control are levied as part of the landing charge or separately, they could take aircraft weight into account but less than in direct proportion. (Principles applicable to such charges are addressed more fully in the Statement on Charges for Air Navigation Services.)
(iv) No differentiation in rates should be applied for international flights because of the stage length flown.
(v) A single charge should be applied for costs of as many as possible of airport-provided facilities and services for normal landing and take-off of aircraft (generally excluding hangers and certain terminal building and other facilities as are normally handled by leases or other usual commercial practices).
(vi) Where restrictions on aircraft payload are imposed by airport limitations, consideration should be given locally to adjusting the landing charge indicated by the weight scale in cases where the restrictions are of a severe and long-lasting nature.
(vii) The ordinary landing charge should cover the use of lights and special radio aids for landing where these are required. Since it is in the interest of safety that aircraft operators should not be discouraged from utilizing aids by imposition of separate charges for their use, if separate charges are made for facilities of this kind, they should not be levied on the basis of optional use but should be uniformly imposed on all landings occurring during periods established by the airport operators.
Parking and hangar charges
18. It is recommended that the following principles be applied in establishing parking and hanger charges :
(i) For the determination of charges associated with use of parking, hanger and long-term storage of aircraft, maximum permissible take-off weight and/or aircraft dimensions (area occupied) and length of stay should be used so far as possible as the basis.
(ii) The period of free parking time for aircraft immediately following landing should be determined locally by considering aircraft scheduling, space availability and other pertinent factors."
9.9 In view of the above policy guidelines and principles laid down by the Council of ICAO, it is clear that the charges to landing and parking are not governed in terms of exclusive use of land or building but are governed by various other considerations and facilities, which meet the requirement of safe landing and parking of the aircraft.
9.10 The Airport Economics Manual, First Edition-1991, in paras 5.11 to 5.15 and 5.19 also provides the same guidelines and these provisions are in consonance with the Statement of the Council referred to above.
9.11 For example, the landing charges are to be governed in accordance with the following :
"5.11. The Council Statements recommend in para 14(i) that 'Landing charges should be based on the weight formula, using the maximum permissible takeoff weight as indicated in the certificate of airworthiness (or other prescribed document) as the basis for assessment.' This is the practice followed by States with very few exceptions, since it has been found a particularly useful and accepted parameter to reflect how wear and tear, and use of airport provided facilities tend to increase as the weight of aircraft increases. It should be noted that while the charges are called landing charges they are based on maximum permissible take-off weight, usually measured in kilogrammes (kg) or pounds (1b). The rate usually per metric tonne (1,000 kg) or short ton (2,000 lb), is determined by dividing the estimated cost basis for landing charges for the coming year by the accumulated maximum permissible take-off from the airport in that year. Separate divisions could be made for international traffic and domestic traffic if the costs so warrant."
"5.19. The guidance provided in the Council Statements on parking and hanger charges is 'For the determination of charges associated with use of parking, hangar and long-term storage of aircraft, maximum permissible take-off weight and/or aircraft dimensions (area occupied) should be used so far as possible as 'the basis'. [Doc 9082, para 14 (viii) refers.] The area occupied is usually arrived at by multiplying aircraft length by wingspan (rotor span in the case of helicopters unless the rotors are folded). However, the large majority of airports base the charge only on aircraft weight and the period the aircraft remains parked, usually measured in periods of 12 or 24 hours. Weekly, monthly or even annual rates are also frequently offered, particularly to small general aviation aircraft."
9.12 The manual also provides for setting of rental charges, which are distinguishable from charges for services. Relevant provision is as under:
"6.36 The approach to setting rental charges is broadly similar to that outlined for concession fees. An assessment of the market value of the building space and land involved could be arrived at by taking into account the level of rental charges for similar building space or land in the vicinity of the airport or in other comparable areas, 6.37. Since the market value of a rental property is strongly influenced by its location, an airport would normally divide building space and land into different zones, setting a range of charges per unit of floor space (particularly within terminal buildings) and lot of land with much lower charges applying to space in more remote areas of the airport. In this context airports may wish to consider making a distinction between spaces required by airlines that is essential for their operations at the airport, as opposed to space required by them for other purposes. Apart from airlines, airports may also choose to charge certain categories of tenants less than others, for example, other aviation enterprises, flying clubs, certain Government departments and non-profit organizations. Moreover, some airports charge below what could be termed as an adequate return for airport locations where they wish to encourage the establishment of certain activities."
9.13 From the above, it is clear that market value of the building space and land involved is the primary consideration for deciding rent. These considerations are different from the considerations which govern the landing, and parking charges as referred to above in the case of the assessee.
9.14 We may also observe that in order to decide the nature of transactions or covenant or agreement, intention of the parties is to be seen behind such event. So far as the present matter is concerned, the Authority has itself not charged any rent from the assessee for providing the facilities of land and parking. This is also clear from the letter of the Authority dt. 2nd Aug., 1996, available at p. 5 of the paper book.
9.15 For deciding the true nature of a transaction, certain tests have been laid down in some cases. In Shall Mex & B.P. Ltd. v. Manchester Garages Ltd. (1971) 1 All ER 841, Lord Denning M.R., observed that though the test of exclusive possession may be outdated but the other test, i.e., intention of parties and whether the document creates any interest in the property or not, are very important considerations. The test was laid down more clearly in the case of Wood v. Lead Bitter 153 ER 351, Baron Anderson, J. emphasized the element of transfer of interest in following words :
"A dispensation of license properly pass no interest, nor alters or transfers property in anything, but only makes an action lawful which without it had been unlawful."
9.16 In Glenwood Lumber Co. v. Phillips, 1904 AC 405 (at p. 408), the distinction between lease and license was pointed out thus :
"If the effect of the instrument is to give the holder an exclusive right of occupation of the land, though subject to certain reservations of the purposes for which it may be used, it is in law a demise of the land itself."
9.17 The nature and terms of agreement are, therefore, to be ascertained by examining the relevant document for knowing the intention of the parties and by seeing the interest created in property alleged to be let out. The Hon'ble Supreme Court of India has laid down the following tests in various decisions for knowing the nature of lease and for distinguishing the same from license :
Associated Hotels of India Ltd. v. R.N. Kapoor AIR 1059 SC 1262 :
(i) To ascertain whether a document creates a license or lease, the substance of the document must be preferred to the form;
(ii) The real test is the intention of the parties whether they intended to create a lease or a license;
(iii) If the document creates an interest in the property, it is a lease, but, if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a license; and
(iv) If under the document a party gets exclusive possession of the property, prima facie, he is considered to be a tenant, but circumstances which negative the intention to create a lease."
Capt. B.V.D'souza v. Antonio Fausto Fernandes 1989(3) SCC 574 :
"(i) Nomenclature is not conclusive though it may be one of the guiding factors.
(ii) The intention of the parties will have to be ascertained notwithstanding the various terms of the deed. However, that does not mean that the terms of the deed are to be ignored altogether."
9.18 These decisions were followed in the case of Om Prakash v. Dr. Ravinder Kumar Sharma 1994 SOL Case No. 426 in which case it was held that intention of the parties will have to be ascertained notwithstanding the various terms of the deed.
9.19 In the case of Smt. Rajbir Kaur v. S. Chokesiri & Co. 1988 SOL Case No. 111, the Hon'ble Supreme Court observed that a tenancy is created if tenant is granted the right to enjoyment of the property. It was further held that it is sufficient if the nature of the act done by the grantor shows that it was intended to have the right to exclusive possession. In the present case such intention is not found. The grantor, i.e., the Authority never intended to give out the exclusive possession to the assessee in relation to landing and parking area.
9.20 In view of the aforesaid discussion, we hold that the assessee was not a lessee of the premises nor there was any agreement to that effect between the said parties. The Authority simply granted permission to landing and parking. It did not grant any exclusive right or interest to JAL in any specific portion of land or building. It granted a license and also provided certain other facilities not necessarily for use of land but for safe landing and parking in pursuance of the guidelines referred to above. Hence, the payments made by the assessee cannot be termed as payment of rent so as to be covered within the purview of Section 194-I of the Act. We, therefore, do not find much force in the arguments of the learned Departmental Representative and uphold the findings of learned CIT(A) on this issue, and decide the issue in negative, i.e., against the Revenue.
Issue No. C:
10. The payments made to contractors and sub-contractors are regulated by Section 194C of the IT Act. The section is as under:
"194C. Payments to contractors and sub-contractors.-(1) 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) ....
(b) ....
(c) ....
(d) any company; or
(e) to (j)....
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 issue of a cheque or draft or by any other mode, whichever is earlier, deduct any amount equal to --"
10.1 There are, mainly, following two requirements for satisfying the ingredients of the provisions of this section ;
(a) Parties to the contract
(b) The nature of the work contracts.
10.2. So far as parties to the contract for being covered by Section 194C are concerned, the classes or categories of such parties are given in the provisions itself. The contractee has to be from any of the class covered by Sub-clauses (a) to (j) of Section 194(c)(i) of IT Act. The assessee, i.e., JAL, is a company falling under Sub-clause (d). The definition of company is given in Section 2(17) of the IT Act which includes within Sub-clause (ii), "Any body corporate incorporated by or under the laws of a country outside India." As the assessee is a company incorporated in Japan, it is covered within the definition of 'company', as given Under Section 2(17)(ii) of the IT Act and, therefore, if Authority and Japan Airlines are parties to contract, they are covered Under Section 194C of the Act. It may be clarified that ICAO is a specialized agency of United Nations created as a result of Chicago Conference in 1944, and India as one of the Contracting States to it, is bound by the conventions and guidelines laid down by it for operation of aircrafts in adopting international standards. As the Contracting States have committed themselves to implement into their national legislation, Government of India enacted Airport Authority of India Act, under which Airport Authority has been created and the said Authority is to carry out the commitments by providing required facilities to the outside international aircrafts and JAL is one such airlines.
10.3 Coming to the nature of work contract, we have to see as to whether the work done by the Authority in providing the facility of landing and parking, etc., is covered within the meaning of "carrying out any work in pursuance of a contract". The contention of the Authorized Representative of the assessee before the learned CIT(A) was that in pursuance of the policies and guidelines by ICAO of the Contracting States including India which was also a member and signatory to such policies and guidelines provided various facilities and services including landing and parking facilities for the aircrafts, take off, facilities, taxiways, traffic control for approach and landing, etc. According to the learned counsel, Airport authority is bound to carry out the directions of ICAO as a contracting party as these directions or guidelines are like stipulations or undertakings under a contract and have force of a legal covenant. We find force in this submission. As Government of India was signatory to the policy guidelines of ICAO and IATA, the conditions laid down therein are binding on Airport Authority in the same way as terms of any contract are binding upon any person.
10.4 So far as the definition of work for the purpose of Section 194 is concerned, the issue was considered by the Hon'ble Supreme Court in the case of Associated Cement Co. Ltd. v. CIT and Anr. (1993) 201 ITR 435 (SC). In that case, the Hon'ble Supreme Court has held as under :
"Held, dismissing the appeal, (i) that Section 194C(1) had a 'wide import and covered 'any work' which could be got carried out through a contractor under a contract including the obtaining of supply of labour under a contract with a contractor for carrying out any work. The section was not confined or restricted in its application to 'works contracts.' 10.5 The Hon'ble Court has also laid down following formulations as main requisites for the applications of Section 194C :
"(1) A contract may be entered into between the contractor and any of the organizations specified in the Sub-section.
(2) Contract in Formulation 1 could not only be carrying out any work but also for supply of labour for carrying out any work.
(3) Any person responsible for paying any sum to a contractor in pursuance of the contract in Formulations 1 and 2 could credit that sum to this account or make its payment to him in any other manner.
(4) But, when the person referred to in Formulation 3 either credits the sum referred to therein to the account of or pays it to the contractor, he shall deduct out of that sum an amount equal to two per cent, as income-tax on income comprised therein."
10.6 In the case of Birla Cement Works v. CBDT and Ors. (2001) 248 ITR 216 (SC), the Hon'ble Supreme Court has held that the word "work" means engagement in the performance of a task, duty or the like. In this case also, the Hon'ble Court has held as under:
"To attract the provisions of Section 194C, the following conditions have to be satisfied, namely, (i) there must be a contract between the person responsible for making payment and the contractor; (ii) the contract must be for carrying out 'any work'; (iii) the work is being carried out through the contractor; (iv) consideration for the contract should exceed Rs. 10,000, i.e., the amount fixed by Section 194C, and (v) the payment is made to the contractor for the work carried out by him."
10.7 In view of the above, it is clear that one of the conditions is that there must be a contract between the person responsible for making the payment and the contractor, and, secondly, the contract must be for carrying out any work and work must be carried out through such contractor. In the present case, these conditions are fully satisfied as there was a legally enforceable covenant or contract between the contractor, i.e., Authority and the contractee, i.e., JAL and the services and facilities were provided in pursuance of such a contract. Hence, in our opinion, the requisite conditions for Section 194C are satisfied in the case of the assessee on the facts on record in this case.
11. From the discussion made above, the legal position in relation to the applicability of provisions contained Under Sections 194C, 194-I and 194J of IT Act may be summarized by culling out the following postulations :
(I) For ascertaining the applicability of Section 194C, the nature of the work contract is to be seen by applying the following tests :
(i) There must be a contract between the person responsible for making the payment and the contractor;
(ii) Any work or works should be carried out through a contractor including obtaining a supply of labour under a contract with the contractor and any of the organizations specified in Sub-section (1) of Section 194C. [Associated Cement Co. Ltd. v. CIT and Anr. (supra)]
(iii) The contract must be for carrying out any work and work must have been carried out through such contractor. [Birla Cement Works v. CBDT and Anr. (supra)].
(II) For deciding the application of Section 194-I and for knowing the nature of the transaction, i.e., whether it is lease or not, following tests may be applied :
(i) In order to ascertain as to whether a document creates a license or lease, the substance of the document must be preferred to the form. The real test is the intention of parties, i.e.; whether parties intend to create a lease or license.
(ii) If the document creates interest in the property it is lease but if it only permits another to make use of the property of which the legal possession continues with the owner, it is license only.
(iii) If under the document a party gets exclusive possession of the property, prima facie, he is considered to be tenant. [Associated Hotels of India Ltd. v. R.N. Kapoor (supra)] (III) For covering the transaction under professional and technical services Under Section 194J, following criterion should be satisfied :
(i) Fee for technical services does not include the fee received for services that are ancillary and subsidiary as well as inextricably and essentially linked to the sale of property.
(ii) Fee for technical services means-payment of any kind to any person other than payments to an employee of the person making the payment and to an individual for independent technical services provided.
(iii) Fee for technical services means payment of any kind to any person in consideration for the rendering of any technical or consultancy services (including provision of services of technical or other personnel);
(iv) Fee for making available technical knowledge, experience, skill, know-how or process or consists of development and transfer of technical plan or technical design. [Dy. CIT v. ITC Ltd. (2002) 76 TTJ (Cal) 323).
11.1 These are only broad propositions and they cannot be taken to be exhaustive formulations, as for deciding the true nature of any transaction, the relevant agreement, the related facts and all other attending circumstances are to be examined for proper application of a provision.
12. In the present case, the conditions laid down in proposition No. (I) are satisfied and those of Nos. (II) and (HI) are not satisfied, hence we hold that the assessee had rightly deposited TDS Under Section 194C in relation to charges paid for landing and parking. The view taken by the learned CIT(A), wherein he accepted the contention of the assessee, is upheld.
13. There is another aspect of the matter. Vide letter dt. 25th July, 1996, the assessee made inquiry from the Authority regarding the manner and mode for tax deduction at source on payments which were made by the assessee to it. In response and vide letter dt. 2nd Aug., 1996, the following reply/advice was given by the Authority :
"2nd August, 1996 Mr Toru Ono Regional Manager - India Japan Airlines 36, Janpath New Delhi-110001 Subject: Tax deductions at source.
Dear Sir, We are in receipt of your letter No. JAL:ADM : 960236 dt. 25th July, 1996.
It is hereby clarified that though we have sought exemptions from IT authorities regarding tax deductions, the clearance is still awaited. We shall keep you apprised of any development in the matter. Meanwhile, till such time the exemptions are granted, you are requested to make deductions as per the provisions of the IT Act applicable on the different payments to be made by you.
In brief, we give herein below the TDS rates as applicable to the various payments made to AAI(IAD) :
Item TDS Rates 1. Landing and Parking charges : @ 2.3 % Under Section 194C of IT Act i.e., 2 % + 15 % surcharge on 2 % 2. Rent : (A) Counter Charges 23 % Under Section 194-I of IT Act, i.e., 20 % + 15 % surcharge on 20 % Applicable only if counter charges exceed Rs. 1,20,000 per annum. Thanking you, Yours faithfully, Sd/- (Ravindra Nath) Sr. Accounts Manager"
13.1 From the above letter, it is clear that against landing and parking charges, TDS was to be deducted at 2 per cent Under Section 194C of the IT Act. Thus, there was no fault on the part of the assessee who acted as per the advice of the Authority.
14. Vide written submissions dt. 2nd June, 2004, it was pleaded on behalf of the assessee that in the preceding and subsequent assessment years, the TDS made Under Section 194C for these services by the assessee-company have been accepted by the Revenue and, therefore, on the principles of consistency also, the order of learned CIT(A) deserves to be upheld. This plea of the assessee has not been controverted by the Department. If in the earlier and subsequent assessment years, the Department has adopted a particular approach, then there appears to be no justification for deviating in this assessment year. The Hon'ble Gauhati High Court in the case of Dhansiram Agarwalla (supra) has observed as under:
"Neither the principle of res judicata nor the rule of estoppel is applicable to assessment proceedings, yet the rule of consistency does apply to such proceedings."
14.1 In a recent decision in the case of CIT v. ARJ Security Printers (supra), the Hon'ble Delhi High Court has observed as under :
"Where a fundamental aspect permeating through the different assessment years has been found as a fact, one way or the other, and the parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
Although each assessment year being independent of the other, the principle of res judicata or estoppel by record which applies to civil Courts, does not apply to income-tax proceedings, yet for the sake of consistency and for the purpose of finality in all litigations, including litigation arising out of fiscal statutes, earlier decisions on the same question should not be reopened unless some fresh facts are found in the subsequent year."
15. On the basis of above discussion, it is found that in the case of the present assessee, the ingredients of Section 194C are fully satisfied inasmuch as the assessee has been provided landing and parking facilities in compliance to the commitment made by the Authority on behalf of the Government of India in compliance to the policy guidelines of ICAO and in pursuance of the agreements of IATA. To reiterate, the charging of fee, etc., for these facilities was in accordance with the settled conditions which were applicable as per the policy protocol laid down for air traffic services. Further, the rule of consistency also requires that the Department should have adopted a consistent approach in all the years when the facts remain unchanged. In any case, no fault can be found against the assessee in depositing the TDS Under Section 194C as even the Authority had advised it accordingly. The AO, therefore, was not justified in invoking the provisions of Section 201(1) of the IT Act in working out the short deduction of Rs. 11,59,695. In our considered opinion, therefore, the learned CIT(A) was justified in deleting the same. Accordingly, we do not find any reason to interfere in the order of learned CIT(A) and as such the ground taken by the Revenue in this appeal stands rejected.
16. In the result, Revenue's appeal stands dismissed.