IMPORTANT POINT
Charging paid by Airlines to AAI for landing, taking off and parking are in respect of number of facilities which have to be necessarily provided by it in compliance with the various international protocol including requirement of passengers' safety and on safe landing and parking of the aircraft. Use of land is only incidental. These charges therefore are not ‘rent’. TDS has to be deducted u/s 194-C and nit 194-I of the Income Tax Act, 1961.

JUDGMENT

A.K. SIKRI, J.

In these appeals, the issue involved relates to the deduction of tax at source ('TDS'). In both the cases, assessees are foreign Airlines. One is Japan Airlines Company Limited (hereinafter referred to as the 'JAL') and the other is Singapore Airlines Limited (hereinafter referred to as the 'SAL'). As both are international Airlines, they are flying their aircrafts to various destinations across the world. Their services include inward and outbound air traffic to and from New Delhi as well. For landing the aircrafts and parking thereof at New Delhi Airport i.e. Indira Gandhi International Airport ('IGIA'), New Delhi, the Airports Authority of India ('AAI') which manages IGIA levies charges on these two Airlines. For payment of landing and parking charges in respect of its aircrafts, the two Airlines are deducting TDS under Section 194-C of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). The TDS under Section 194-C of the Act is deductible @ 2%. After deducting this TDS while making payment to AAI, the same is deposited with the Income Tax Authorities. The Income Tax Authorities, however, are of the view that the TDS is to be deducted under the provisions of Section 194-I of the Act which calls for deduction @20%. Thus, the dispute is as to whether TDS to be deducted under Section 194-C or under Section 194-I of the Act.

2. We may point out at this stage itself that in the appeal pertaining to JAL, it is the JAL which is the appellant as the High Court of Delhi by the impugned judgment dated 23.10.2008 has taken the view that the TDS is to be deducted under Section 194-I of the Act. In the other appeal which involves SAL, it is the Commissioner of Income Tax/Revenue which has filed the appeals as the High Court of Madras in its judgment dated 13.07.2012 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. The Madras High Court has taken the note of the judgment of the Delhi High Court but has differed with its view. Thus, the two judgments are in conflict with each other and we have to determine as to which judgment should be treated in consonance with the legal position and be allowed to hold the field.

3. For the sake of convenience, we are mentioning the facts of JAL's case, with the reiteration that the operations of the two Airlines on the basis of which the case is to be decided is identical.

4. JAL is a foreign company incorporated in Japan and is engaged in the business of international air traffic. It transports passengers and cargo by air across the globe and provides other related services. The assessement year involved in this appeal is the assessement year 1998-1999, corresponding to the financial year ending on 31.03.1998. The International Civil Aviation Organization ('ICAO') to which India is also a contracting state has framed certain guidelines and rules which are contained in the Airports Economic Manual and ICAO's Policies on Charges for Airports and Air Navigation Services. All member States abide by the guidelines and rules prescribed for various charges to be levied for facilities and services provided including landing/parking charges.

5. The AAI under the provisions of the Airport Authority of India Act, 1994 has been authorized to fix and collect charges for landing, parking of aircrafts and any other services and facilities offered in connection with aircraft operations at the airport and for providing air traffic services such as ground safety services, aeronautical communications and navigational aids, meteorological services and others at the airport.

6. JAL is a member of the International Air Transport Agreement ('IATA') and during the relevant year it serviced inward and oubound air traffic to and from New Delhi, India. The AAI levied certain charges on the JAL for landing and also for parking its aircrafts. The JAL paid the charges after deducting tax at source under Secti