TaxTMI 
TaxTMI 
2017 (7) TMI 429
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....) 1994-95 to 2001-2002. While admitting these appeals on 24th November, 2005, this Court framed the following questions of law for consideration: i. Whether the ITAT was correct in law in holding that the amount paid by the Assessee to the Airport Authority of India for use of lounge premises by way of royalty was not tantamount to rent within the meaning of Section 194-I of the Income Tax Act? ii. Whether the ITAT was correct in law in holding that the interest under Section 201(1A) of the Act cannot be charged once the payee had paid the tax? 2. As far as the penalty appeals are concerned, these are ITA Nos. 79, 80, 81, 100, 200, 561, 633 and 688 of 2005 which are directed against the common order dated 24th June, 2004 passed by the ITAT in ITA Nos. 548 to 555/Del/2004 for the Assessment Years ('AYs') 1994-95 to 2001-2002. While admitting these appeals the following question of law was framed by this Court: Whether the ITAT was correct in law in deleting the penalty under Section 271C of the Income Tax Act, 1961? 3. The facts in brief are that the Respondent/Assessee was awarded the contract for running an Executive Lounge at the Indira Gandhi International Airport, New Delh....
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....sessee to deduct tax at source from the rent payments made to the AAI under the above LA. Accordingly, it was held that the Assessee was deemed to be an Assessee in default to the extent of non-deduction or short deduction of tax under Section 201(1) of the Act. The total short deduction for the aforesaid FYs worked out to Rs. 1,17,39,448. The interest thereon under Section 201(1A) of the Act worked out to Rs. 61,80,971. Thus, the total demand worked out to Rs. 1,79,20,419. It was held that the mere fact that one part of the payment under Clause 2(a) of the LA was termed as royalty "cannot take away the character of payments being rent for the use of land and premises at the Indira Gandhi International Airport in respect of International Terminal." 8. Aggrieved by the above order, the Assessee went in appeal before the Commissioner of Income Tax (Appeals) ['CIT(A)']. The CIT(A) concurred with the Assessing Officer ('AO') as regards the payment made to the AAI being rent under Section 194-I of the Act. As far as the question of payment of interest under Section 201(1A) of the Act was concerned, the CIT(A) was of the view that it required to be verified from the AO who exercised jur....
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.... while the payment of licence fee commences immediately on such handing over." 12. This Court has heard the submissions of Mr. Zoheb Hossain, learned Senior Standing Counsel for the Revenue in the quantum appeals, Mr. Asheesh Jain, learned Senior Standing Counsel in the penalty appeals and Mr. Ajay Vohra, learned Senior Advocate for the Assessee. 13. The contention of the Revenue as regards question (i) in the quantum appeals is that it stands covered in favour of the Revenue by the judgement of this Court in Apeejay Surrendera Park Hotels Limited v. Union of India (2016) 383 ITR 697 (Del) where, the Court emphasized the expanded definition of the word 'rent' under Section 194-I of the Act. It is submitted that in the present case when the LA is read as a whole, it is plain that the payment made, although in two parts, is for operating an executive lounge. The non-payment of even one component, as either of royalty or of the fee for the space, would entail the Assessee losing the right to operate the executive lounge. The payment therefore, fell within the ambit of 'rent' under Section 194-I of the Act. 14. As regards Question (ii) in the quantum appeals, Mr. Hossain pointed out....
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....rts viz., , royalty and the fees for the space, it is in effect a payment for the use of the lounge for the purposes of operating it. If there is a default in payment either of the components of the licence fee the inevitable consequence is that the Assessee loses the right to operate the executive lounge. This position is not even disputed by the Assessee. 18. Clause (i) (b) of the Explanation to Section 194 I of the Act states that the word "rent" for the purposes of that provisions means "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 building". In Apeejay Surrendera Park Hotels Limited v. Union of India (supra), while interpreting the word 'rent' in Section 194-I of the Act, this Court summarized the legal position as under: "(i) The word 'rent' in Section 194-I of the Act has to be interpreted widely and not confined to payments received towards a 'lease, sub-lease or tenancy' or transactions of such like nature. (ii) given the context of the said provision which is intended to cover a wide range of transactions as is evident from the words "any other agreemen....
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....;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. 15. In the present case, we find that these Airlines are allowed to land and take-off their Aircrafts at IGIA for which landing fee is charged. Likewise, they are allowed to park their Aircrafts at IGIA for which parking fee is charged. It is done under an agreement and/or arrangement with AAI. The moot question is as to whether landing and take-off facilities on the one hand and parking facility on the other hand, would mean to 'use of the land'." 19.2 Thereafter in para 18, the Supreme Court observed as under: "18. 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'. That would be too simplistic an approach, ignoring other relevant details which would amply demonstrate that these charges are for services and facilities offered in connection with the aircraft operation at the airport. To point out at the outset, these services includ....
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....t 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, High Court of Delhi appears to be correct that the scope of definition of rent under this definition is very wide and not limited to what is understood as rent in common parlance. It is a different matter that the High Court of Delhi did not apply this definition correctly to the present case as it failed to notice that in substance the charges paid by these airlines are not for 'use of land' but for other facilities and services wherein use of the land was only minor and insignificant aspect. Thus it did not correctly appreciate the nature of charges that are paid by the airlines for landing and parking charges which is not, in substance, for use of land but for various other facilities extended by the AAI to the airlines. Use of land, in the process, become incidental. Once it is held that these charges are not covered by Section 194-I of the Act, it is not necessary to go into the scope of Section 194-C of the Ac....
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....is decision is , therefore, also not helpful to the Assessee here. 23. The Court is satisfied that in the present case, the payment made by the Assessee to AAI under the LA is 'rent' within the meaning of Section 194-I of the Act. Question (i) in the quantum appeals is, therefore, answered in the negative, i.e., in favour of the Revenue and against the Assessee. 24. Turning to the question (ii) both the parties have placed reliance on the decision of the Supreme Court in Hindustan Coca Cola Beverage (P) Limited v. Commissioner of Income Tax (supra). The Supreme Court in that case referred to Circular dated 29th January 1997 issued by the CBDT which declared as under: "no demand visualised under Section 102 (1) of the Income Tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee assessee. However, this will not alter the liability to charge interest under Section 201 (1-A) of the Act till the date of payment of taxes by the deductee assessee or the liability for penalty under Section 271-C of the Income Tax Act." 25. The matter stands already remanded to the AO to apply the aforementioned circul....