2016 (10) TMI 314

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.... made to Mumbai International Airports Ltd. (MIAL) and Airports Authority of India, that it was deducting TDS @of 2% on exercises and Passenger Service Fees(PSF). The assessee was asked to explain as to why the TDS was deducted at 2% instead of 10%. Accordingly, a show cause notice, dated 24/ 01/ 2011, was issued calling for various details and to explain as to why the assessee should not be treated as an assessee in default for short deduction of TDS u/s. 201 of the Act on expenses on X-Ray and PSF. In response to the show cause notice, the assessee stated TDS on X-Ray charges and PSF were correctly being deducted @2%, as per the certificate u/s. 197 of the Act, issued by the DC/ACIT TDS for the consolidated figure provided by them to cover those deduction as well as their earlier certificate issued to the assessee, that it could not be treated in assessee in default. The assessee also furnished month wise payments made on account of PSF and X-Ray charges. After considering submission of the assessee and the details filed by it, the AO held that it had obtained only one TAN for expenses all over India, that only one e-TDS return was filed for the expenses incurred by it, that it h....

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.... it had a separate License Agreement for using part of the premises of MIAL, that it was paying licence fee for the same to MIAL separately, that other services and facilities provided by MIAL had no connection with the use of premises, that same were distinct and separately identifiable services and facilities, that the AO had erred in not appreciating the true nature of the PSF charges in the X-Ray charges, that PSF charges were charged by MIAL for the services provided to the persons by them such as Security guards, checking and other facilities, that those payments were different from the use of the premises, that X-Ray charges were paid for screening of the luggage of the passengers, that both those charges were not even remotely connected to the nature of rent, that same could not be clubbed, that the services and facilities provided by MIAL did not fall within the purview of any specific section, that same had been treated in the residual category falling within the purview of section 194-C of the Act, that the rate of TDS applicable u/s. 194-C should be applied, that section 194-I was not applicable, that the action of the AO taxing the payments of PSF/X-Ray charges as rent....

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.... per embarking passengers at international/domestic airports and US $ 5 per passenger in respect of tickets issued in foreign currency, that the compo -nents of PSF were the security component (65% of total PSF collected) and the passenger facilitation component (35% of the PSF), that the amount was collected by MIAL and was kept on an escrow account, that MIAL would make payment to Central Industrial Security Force, that both the charges were not linked to rent payments for uses of premises alleged by the AO, that it had leased premises at the Mumbai International Airport from MIAL under a license agreement, that it had duly deducted tax u/s. 194-I of the Act on payment for lease of office premises, that the payment of X-Ray charges and PSF charges was a separate obligation of the assessee, that those payments did not arise at all from the license agreement for office premises with MIAL, that those payments were independent of lease of the premises, that remittance of PSF charges collected from the passengers represented only a collection activity performed by it with respect to a contractual and legal obligation, that in order to hold the payment within the ambit of the definitio....

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....F charges were collected by it in fiduciary capacity and were handed over to airport operators, that the PSF was basically a consideration paid by the passengers to airport operators for various services provided to them including security, handling of baggage's and other facilities, that same could not be termed as Rent by any chance-as had been wrongly held by the AO, that the PSF payments could not be categorised as Rent because it was a composite fee for many services and that passengers were paying the fees on behalf of airport authority to the assessee, that it did not deny the tax ability of PSF in the hands of airport operators. Finally, he held that PSF payments could not be categorised as rent u/s. 194-I of the Act. With regard to X-Ray charges, the FAA held that it was in the nature of contractual liability of the assessee for a routine service, that it had entered into an agreement with MIAL to avail skin services to X-Ray the cargo carried by it to/from Mumbai airport, that the assessee would pay the screening fee at the pre-agreed rates based on the total control of cargo, that there was no hiring of any specific machine by the assessee, that the airport operator woul....

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....s owned by the payee is not relevant. The expressions "any payment", by whatever name called and "any other agreement or arrangement" have the widest import. Likewise, payment made for the "use of any land or any building" widens the scope of the proviso. A bare reading of the definition of "rent" contained in the Explanation to section 194-I would make it clear that in the first place, the payment, by whatever name called, under any lease, sub-lease, tenancy, is to be treated as "rent". That is rent in traditional sense. However, the second part is independent of the first part which gives much wider scope to the term "rent". According to this whenever payment is made for use of any land or any building by any other agreement or arrangement, that is also to be treated as "rent". Once such a payment is made for use of land or building under any other agreement or arrangement, such agreement or arrangement gives the definition of rent of very wide connotation. To that extent, the scope of the definition of "rent" is wide and not limited to what is understood as rent in common parlance. " The facts of the case were that the assessees were foreign airline companies which w....

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....y of India provided all these facilities for landing and take-off of an aircraft and in this whole process, "use of the land" was incidental. On the contrary, the protocol prescribed a detailed methodology for fixing these charges. Thus, the charges were not for use of land per se and, therefore, could not be treated as "rent" within the meaning of section 194-I of the Act. " Respectfully, following the above judgment we hold that payment made by the assessee to MIAL cannot be treated rent, as per the provisions of section 194-I of the Act. There was no use of land by the assessee for both the charges collected by it. Thus, the basic ingredient i. e. use of land, plant, machinery etc. is missing and hence it can safely be held that the assessee had rightly deducted the tax at the rate of 2%, as per the provisions of section 194- C of the Act. As far as PSF charges are concerned, we want to mention that in the case of Jet Airways (supra) the Tribunal has held as under: "The facts under consideration show that the PSF is a statutory liability without demarcating/ earmarking the area taken on the rent, nor it is a case of systematic use of land specified for consideration ....