RIL's charter flights: Rental or passenger service?

Tax dept argues RCDL is effectively renting aircraft to RIL, which should attract higher taxes

- Krishna Yadav

The Supreme Court on Tuesday agreed to hear a plea by the tax department seeking to impose a higher service tax on charter flight services used by Reliance Industries Ltd (RIL) executives through its subsidiary, Reliance Commercial Dealers Ltd (RCDL).

RCDL operates charter flights for RIL's nominees, transporting passengers on demand based on the company's requirements.

A bench of justices Manoj Misra and Ujjal Bhuyan issued notices to the Reliance subsidiary and observed that it will decide the larger legal issue of classification of such services.

The court directed both parties to file written submissions within two weeks.

"This is an important issue to consider and decide as it involves a pure question of law regarding interpretations and classification. Issue notice. After considering the above, we deem it appropriate to require the learned counsel for the parties to submit written submissions along with the relevant provisions of the statute, and also the agreements under which the service supply was rendered," Misra said.

The tax department argued that RCDL is effectively renting aircraft to Reliance, which should attract higher taxes like equipment rentals.

RCDL contends it is simply flying passengers on charter flights, which should be taxed like normal air transport services at lower rates.