Landing and parking charges for Aircrafts are not for ‘use of land’; attracts section 194C

Japan Airlines Co. Ltd. v. CIT [2015] 60 taxmann.com 71 (Supreme Court)

Landing and parking charges payable by Airlines in respect of aircrafts are not for the ‘use of land’ per se but the charges are in respect of number of facilities provided by the Airport Authority of India. Thus, landing and parking charges payable by Airlines would attract TDS under Section 194C and not under Section 194-I.

Facts:

• The issue disputed in the instant case was as to whether landing and parking charges paid by Airlines would attract TDS under Section 194-I or under Section 194C of the income-tax Act (‘the Act’)?
• The High Court of Delhi in case of CIT v. Japan Airlines Co. Ltd. [2009] 180 Taxman 188 (Delhi) has held that landing and parking charges would attract TDS under Section 194-I of the Act.
• However, the Madras High Court in case of CIT v. Singapore Airlines Ltd. [2012] 24 taxmann.com 200 (Madras) has taken a contrary view that landing and parking charges would attract TDS under Section 194C. The two judgments are in conflict with each other.It has to be determined as to which judgment should be allowed to hold the field?

The Supreme Court held as under:

• In the instant case, the Airlines are allowed to land and take-off their Aircrafts at Indira Gandhi International Airport (‘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 the Airport Authority of India (‘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 ‘use of land’.
• In the opinion of the Delhi High Court (Supra) “when the wheels of an aircraft coming into an airport touch the surface of the airfield, use of the land of the airport immediately begins”. Similarly, for parking the aircraft in that airport, there is use of the land. This is the basic, rather, the only reason given by the Delhi High Court in support of its conclusion that landing and parking charges would attract TDS under Section 194-I.
• The Madras High Court (Supra) examined the issue keeping wider perspective in mind thereby encompassing the utilization of the airport providing the facility of landing and take-off of the airplanes and also parking facility. After taken into consideration these aspects, the Madras High Court came to the conclusion that the facility was not of ‘use of land’ per se but the charges for landing and taking-off these airlines were in respect of number of facilities provided by the AAI which were to be necessarily provided in compliance with the various international protocol. The charges, therefore, were not for land usage or area allotted simpliciter. These were the charges for various services provided.
• We are convinced that the charges fixed by the AAI for landing and taking-off services as well as for parking of aircrafts were not for the ‘use of land’. That would be too simplistic an approach, ignoring other relevant details which would amply demonstrate that these charges were for services and facilities offered in connection with the aircraft operation at the airport. These services included providing of air traffic services, safety services, aeronautical communication facilities, installation and maintenance of navigational aids and meteorological services at the airport.
• Thus, payments for landing and parking charges were liable for TDS under Section 194C and not under Section 194-I of the Act.The view taken by the Madras High Court (Supra) was correct view and the judgment of the Delhi High Court (Supra)was to be over-ruled.

Proviso to Section 68 requiring closely held company to explain source of share capital is retrospective

SUBHLAKSHMIVANIJYA (P.) LTD. V. CIT - [2015] 60 taxmann.com 60 (Kolkata - Tribunal)

Proviso to Section 68 casting onus on closely held company to explain source of share capital is applicable with retrospective effect

Issue:

Whether the amendment to section 68 by way of insertion of proviso is retrospective or prospective?

Held:

• Proviso to Section 68 inserted by Finance Act, 2012 w.e.f. April 1, 2013 read as under:

“Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless-

• the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
• such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory….”
• Ordinarily the courts are required to gather the intention of the legislature from the overt language of the provision as to whether it has been made prospective or retrospective, and if retrospective, then from which date. However, some times what happens is that the substantive provision, as originally enacted or later amended, fails to clarify the intention of the legislature. In such a situation if subsequently some amendment is carried out to clarify the real intent, such amendment has to be considered as retrospective from the date when the earlier provision was made effective.
• Any amendment to the substantive provision which is aimed at clarifying the existing position or removing unintended consequences to make the provision workable has to be treated as retrospective notwithstanding the fact that the amendment has been given effect prospectively.
• A careful perusal of the first para of the Memorandum brings out that the onus of satisfactorily explaining issue of share capital with premium etc. by a closely held company is on the company. In the next para, it has been clarified that : `Certain judicial pronouncements have created doubts about the onus of proof and the requirements of this section, particularly, in cases where the sum which is credited as share capital, share premium, etc…’. Next para recognizes that judicial pronouncements, while considering that the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company needs to be prevented, have advised a balance to be maintained regarding onus of proof to be placed on the company.
• Thus, the amendment makes it manifest that the intention of the legislature was always to cast obligation on the closely held companies to prove receipt of share capital etc. to the satisfaction of the AO and it was only with the aim of setting to naught certain contrary judgments which `created doubts’ about the onus of proof by holding no addition could be made in the hands of company even if shareholders are bogus.
• As the amendment aims at clarifying the position of law which always existed, but was not properly construed in certain judgments, there can be no doubt about the same being retrospective in operation. Therefore, the amendment to section 68 by insertion of proviso is clarificatory and hence retrospective.

Violations of Principles of Natural Justice

Andaman Timber Industries – CCE [2015] 62 taxmann.com 3 (Supreme Court)

Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.

Proviso to Section 68 casting onus on closely held company to explain source of share capital is applicable with retrospective effect

SUBHLAKSHMIVANIJYA (P.) LTD. V. CIT - [2015] 60 taxmann.com 60 (Kolkata - Tribunal)

Issue: 

Whether the amendment to section 68 by way of insertion of proviso is retrospective or prospective? 

Held: 

• Proviso to Section 68 inserted by Finance Act, 2012 w.e.f. April 1, 2013 read as under: 

“Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless-

• the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
• such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory….” 
• Ordinarily the courts are required to gather the intention of the legislature from the overt language of the provision as to whether it has been made prospective or retrospective, and if retrospective, then from which date. However, some times what happens is that the substantive provision, as originally enacted or later amended, fails to clarify the intention of the legislature. In such a situation if subsequently some amendment is carried out to clarify the real intent, such amendment has to be considered as retrospective from the date when the earlier provision was made effective.
• Any amendment to the substantive provision which is aimed at clarifying the existing position or removing unintended consequences to make the provision workable has to be treated as retrospective notwithstanding the fact that the amendment has been given effect prospectively.
• A careful perusal of the first para of the Memorandum brings out that the onus of satisfactorily explaining issue of share capital with premium etc. by a closely held company is on the company. In the next para, it has been clarified that : `Certain judicial pronouncements have created doubts about the onus of proof and the requirements of this section, particularly, in cases where the sum which is credited as share capital, share premium, etc…’. Next para recognizes that judicial pronouncements, while considering that the pernicious practice of conversion of unaccounted money through masquerade of investment in the share capital of a company needs to be prevented, have advised a balance to be maintained regarding onus of proof to be placed on the company.
• Thus, the amendment makes it manifest that the intention of the legislature was always to cast obligation on the closely held companies to prove receipt of share capital etc. to the satisfaction of the AO and it was only with the aim of setting to naught certain contrary judgments which `created doubts’ about the onus of proof by holding no addition could be made in the hands of company even if shareholders are bogus.
• As the amendment aims at clarifying the position of law which always existed, but was not properly construed in certain judgments, there can be no doubt about the same being retrospective in operation. Therefore, the amendment to section 68 by insertion of proviso is clarificatory and hence retrospective. 

Government decides to provide further Indirect Tax Incentives to Domestic Shipbuilding Industry

The Government has decided to provide further indirect tax incentives for domestic shipbuilding industry. Accordingly, the Central Government has issued Notification Nos. 44/2015-Central Excise, 45/2015-Central Excise, 54/2015-Customs and 55/2015-Customs all dated 24.11.2015 so as to provide the following indirect tax incentives to the aforesaid industry: 

1. Exemption from customs and central excise duties on all raw material and parts for use in the manufacture of ships/vessels/tugs and pusher crafts etc.
2. Presently, certain specified ships/vessels are exempt from basic customs duty and Central Excise duty (CVD). Consequently, for such ships/vessels manufactured in Export Oriented Units (EOUs) and cleared to domestic tariff area (DTA), the EOUs are not eligible for exemption on raw materials/parts of such ships/vessels etc. Suitable amendment is being made to the relevant notifications so as to provide that EOUs will be eligible for duty exemption on raw materials/parts consumed in manufacture of such ships/vessels etc which are cleared to DTA, even if such ships/vessels are exempt from basic customs duty and Central Excise/CV duty.
3. Simultaneously, the requirement of manufacturing of ships/vessels/ tugs and pusher craft etc in a custom bounded warehouse under the provisions of Section 65 of the Customs Act, 1962, for availing the customs and excise duty exemptions has also been done away with. Instead, these exemptions will now be subject to actual user conditions. 

At present, the following indirect tax incentives are available to the shipbuilding industry. 

a) Exemption from basic customs duty and additional duty of customs (CVD) on all raw material and parts for manufacturing of ships/vessels/tugs and pusher craft etc, subject to the condition that such manufacturing takes place in a custom bounded warehouse under the provisions of Section 65 of the Customs Act, 1962. 

b) Exemption from central excise duty on steel procured domestically for manufacturing of ships/vessels/tugs and pusher craft etc in a custom bounded warehouse under the provisions of Section 65 of the Customs Act, 1962.

Central Board of Direct Taxes (CBDT) Signs 11 more Unilateral Advance Pricing Agreements (APAS)

It has been the endeavor of the Government to foster an environment of co-operation in matters of taxation through predictability of laws and reduced litigation. In a major push towards providing certainty to foreign investors in the arena of transfer pricing, the Central Board of Direct Taxes (CBDT) has entered into 11 more unilateral Advance Pricing Agreements (APAs). These APAs were signed with Indian subsidiaries of foreign companies operating in various segments of the economy like investment advisory services, engineering design services, marine products, contract R&D, software development services, IT enabled services, cargo handling support services, etc. 

While seven (7) of these APAs have rollback provisions contained in them, the other four (4) are Agreements for future five years. APAs with rollback provisions can cover a maximum period of 9 years in total. With this round of signing, CBDT has so far entered into 31 APAs (30 unilateral and one bilateral). 

The APA Programme was introduced in the Income-tax Act, 1961 in 2012 vide the Finance Act, 2012. Five (5) APAs were concluded in the first year and four (4) APAs got signed in the second year. The pace of negotiations has picked-up in the current year. This year has already witnessed the conclusion of 22 APAs. It is the aim of the CBDT to finalise another 30 to 40 APAs before the end of this fiscal to provide stability and confidence to foreign enterprises operating in India. 

Service Tax Refund Under Service Tax

Where an assessee has paid service tax to the Central Government in respect of taxable service not provided by him, for any reason, the assessee may adjust the excess service tax so paid by him calculated on a pro rata basis against the service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. (up to 1.4.2011)

W.e.f. 1.4.2011. it has also been provided that when an invoice has been issued or a payment received for a service which is not subsequently provided, the assessee may take the credit of the service tax earlier paid when the amount has been refunded by him to the recipient or by the issue of credit note, as the case may be.

In CCE, Jaipur v. Vinayak Agrotech Ltd. 2012 (5) TMI 524 - CESTAT, NEW DELHI, where assessee was liable to pay duty and same was collected from customers and realization of that duty was not required to be paid due to eligibility of SSI exemption and assessee returned the duty so collected to customers by way of credit notes, it was held that assessee in such a case did not collect any duty from customers representing it as excess duty. Therefore, that amount was not liable to be recovered under Section 11Bof Central Excise Act, 1944. Hence, it was held that unjust enrichment was not applicable.

In CCE, Vadodara v. Apollo Tyres Ltd. 2012 (12) TMI 798 - CESTAT AHMEDABAD, where by mistake, duty was discharged in excess and seller has issued credit note to buyer for such excess duty, it was held that it could be said that burden of duty was not passed to any other person. Hence, seller could claim refund of such excess duty.

Rule 6(4A)

Where an assessee has paid excess service tax for a month or quarter, the assessee may adjust such excess in the subsequent month or quarter subject to the following conditions:

1. It is not due to interpretation of law, classification (omitted w.e.f. 1-7-2012), valuation and applicability of exemption notification.
2. An assessee registered under rule 4(2) on account of delayed receipt may adjust without monetary limit.
3. Other than the above, maximum of Rs. one lakh can be adjusted in a month or quarter and intimated to jurisdictional central excise officer. (w.e.f. 1.4.2011, Rs. Two lakh) w.e.f. 1-4-2012, unlimited amounts of permissible adjustments shall be allowed subject to Rule 6(4B).

Rule 6(1)

Service tax is payable on value of taxable services received. If no payments are received, there is no need to pay service tax. However, with Point of Taxation Rules, 2011 w.e.f. 1-4-2011, Service Tax shall be payable on accrual basis.