(2015) 377 ITR 372 (SC)
TDS on specified payments — rent
They are rent. The definition of rent in the withholding provision is very wide and covers any payment for the use of land, whatever the arrangement is called and whether or not the payee owns the property.
Are landing and parking charges paid by airlines to the airports authority 'rent' attracting withholding at the rate applicable to rent, or fees for a composite package of services?
The appellant airlines paid landing and parking charges to the Airports Authority of India in respect of their aircraft. They deducted tax at the lower rate applicable to payments to contractors, on the footing that the charges were for a bundle of services — provision of runway lighting, navigational aids, ground safety, air traffic services and technical support — rather than for the use of land as such. The Revenue took the view that the charges were rent for the use of the runway and parking areas and that tax ought to have been withheld at the higher rate applicable to rent.
High Courts had reached opposing conclusions, the Delhi High Court treating the charges as rent and the Madras High Court taking the contrary view. The Supreme Court resolved the conflict.
For the assessee
What the airline pays for is a comprehensive package enabling safe landing and take-off, of which the physical use of the tarmac is only one element. The charges are calculated by reference to aircraft weight rather than area or duration of occupation, which shows that the payment is for services and not for occupying land.
For the Revenue
The expression rent is defined in the provision in the widest terms, extending to any payment under any arrangement for the use of land or a building. An aircraft landing on and parking on the runway and apron is using land, and the label attached to the charge is immaterial.
The Court examined the definition of rent in the withholding provision and held it to be markedly wider than the ordinary or general law meaning of the term. The definition extends to any payment, by whatever name called, under any lease, tenancy or any other agreement or arrangement, for the use of land or a building. The Court held that each element of that definition was satisfied: the aircraft physically use the runway to land and take off, and the apron to park, so there is use of land; the payment is made under an arrangement with the authority; and the wide words 'by whatever name called' prevent the characterisation adopted by the parties from governing. It rejected the argument that the services bundled with the facility take the payment outside the definition, holding that the provision of ancillary services alongside the use of land does not convert a payment for that use into something else. The basis on which the charge is computed, whether by weight or by area, was held to be a matter of pricing mechanics and not determinative of character.
Withholding provisions are consolidated in Section 393 of the IT Act 2025 and the wide definition of rent carries forward. The decision governs payments for the use of infrastructure and facilities generally — port and terminal charges, warehousing, shared premises, data centre and co-location fees — wherever a payment for the use of land is presented as a service fee.