June 2019

Section 194C, r.w.s. 194-I Deduction of tax at source Contractors payment to Payment was made to agencies towards lounging and catering services provided to customers of airlines as a part of single arrangement Same would fall under generalised contractual category u/s. 194C

AJAY R. SINGH
Advocate

9

CIT (ITD)-1 vs. Jet Airways (India) Ltd. [Income-tax Appeal No. 628 of 2018; (Bombay High Court) Dated 23rd April, 2019]

 

[ACIT vs. Jet Airways (India) Ltd.; Mum ITAT]

 

Section 194C, r.w.s. 194-I Deduction of tax at source Contractors payment to Payment was made to agencies towards lounging and catering services provided to customers of airlines as a part of single arrangement Same would fall under generalised contractual category u/s. 194C

 

The assessee is an airlines company. As part of its business, the assessee would provide lounge services to select customers at various airports. In a typical case, a lounge would be rented out by an agency, in the nature of an intermediary from the airport authority. The assessee airlines company and other airlines as well as, in some cases, credit card companies, would provide the lounge facility to premier class customers. As is well known, a lounge is an exclusive secluded hall or a place at the airport where a comfortable sitting arrangement and washrooms are provided to the flying customers. Most of these lounges would have basic refreshments for which no separate charge would be levied. According to the assessee, the assessee would pay the agency for use of such lounge space by its customers as per pre-agreed terms. While making such payment, the assessee used to deduct tax at source in terms of section 194C of the Act, treating it as a payment to a contractor for performance of a work.

 

The Revenue contends that the assessee had paid rent to the agency and, therefore, while paying such rental charges, tax at source u/s. 194-I of the Act should have been deducted.

 

The Tribunal by the impugned judgement referred to and relied upon a decision of the coordinate Bench in the case of ACIT vs. Qantas Airways Ltd., reported in (2015) 152 ITD 434 and held that the department was not right in insisting on deduction of tax at source u/s. 194-I of the Act.

 

Being aggrieved with the ITAT order, the Revenue filed an appeal to the High Court. The Court held that the A.O. in the present case

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