British Airways Plc., Gurgaon V. ADIT, New Delhi

ITA 1283/DEL/2011

• Counselvise Citation: 128320114 RSA 2011
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D K GUPTA
• Keywords: Double taxation relief; Competent authority
• Section: 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.1283/DEL/2011 ASSESSMENT YEAR : 2006-07 BRITISH AIRWAYS PLC., DLF PLAZA TOWERS, DLF QUTAB ENCLAVE, PHASE I, GURGAON. PAN : AABCB7987R VS. ADIT, CIRCLE 1 (1), INTERNATIONAL TAXATION, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARANDEEP SINGH, CA REVENUE BY : SHRI D.K. GUPTA, CIT, DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE DEPARTMENT FOR ASSESSMENT YEAR 2006-07 AGAINST THE ORDER DATED 04.01.2011 PASSED BY T HE LD. CIT (A)- XI, NEW DELHI. THE FOLLOWING GROUNDS HAVE BEEN TAKE N:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS)- XI, NEW DELHI HAS ERRED ON FACTS AND IN LAW IN UPHOL DING THE ACTION OF THE LEARNED ASSISTANT DIRECTOR OF INCOME TAX, CIRCLE 1 (1), INTERNATIONAL TAXATION, NEW DELHI (ASSESSING OF FICER) IN TREATING THE SURPLUS ARISING TO THE APPELLANT FROM RENDE RING ENGINEERING AND GROUND HANDLING SERVICES TO THIRD PAR TY AIRLINES AS NOT DERIVED FROM OPERATION OF AIRCRAFT IN INTERNATION AL TRAFFIC AND HENCE TAXABLE IN INDIA. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XI, NEW DELHI HAS ERRED ON FACTS AND IN LAW IN REJECTING THE CONTENTIONS OF THE APPELLANT THAT THE SURPLUS DERIVED BY IT FROM RENDERING ENGINEERING AND GROUND HANDLING SERVICES TO THIRD PARTY AIRLINES IS COVERED UNDER ARTICLE 8 OF THE DOUBL E TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND UK AND IS THEREFORE, TAXABLE ONLY IN THE COUNTRY OF RESIDENCE FO THE APPELLANT AND NOT IN INDIA. ITA NO.1283/DEL/2011 2 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)- XI, NEW DELHI HAS ERRED ON FACTS AND IN LAW IN REJEC TING THE CONTENTIONS OF THE APPELLANT THAT ENGINEERING AND GROUND HANDLING SERVICES ARE ACTIVITIES DIRECTLY CONNECTED TO OPERATION OF AIRCRAFTS IN INTERNATIONAL TRAFFIC AS ENVISAGED IN PARAGRAPH 3 OF ARTICLE 8 OF INDIA-UK DTAA AND ACCORDINGLY, THE SU RPLUS ARISING, IF ANY, FROM SUCH ACTIVITIES IS NOT TAXABLE I N INDIA IN TERMS OF ARTICLE 8(1) READ WITH ARTICLE 8(3) OF THE IND IA-UK DTAA. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XI, NEW DELHI HAS ERRED ON FACTS AND IN LAW IN REJECTING THE CONTENTIONS OF THE APPELLANT THAT THE ACTIVITY OF RENDERING ENGINEERING AND GROUND HANDLING SERVICES TO OTHER IA TP MEMBER AIRLINES IN INDIA RESULTS FROM COMMERCIALLY EXPEDIEN T ACTIVITY OF PARTICIPATION IN A UNIVERSAL POOL OF AIRLINE COMPANIE S FOR SERVICING OF AIRCRAFT OF VARIOUS AIRLINE COMPANIES I N ANY PART OF THE WORLD ON A MUTUAL BASIS, AND THEREFORE THE PROFITS ARISING THEREFROM ARE EXEMPT UNDER PARAGRAPH 2 OF ARTICLE 8 OF INDIA-UK DTAA. 5. THE VIEW TAKEN AND REASONING RELIED UPON BY THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS)-XI, NEW DELHI, IN NOT ACCEPTING THAT INCOME FROM ENGINEERING AND GROUND HAND LING SERVICES IS COVERED UNDER ARTICLE 8 OF DTAA ARE VITI ATED AND BAD IN LAW, AND ARE BASED ON FAILURE TO CONSIDER AND APP RECIATE THAT THE DECISION OF HONBLE TRIBUNAL IN CASE OF LUFTHANSA GERMAN AIRLINES (90 ITD 310) (2004) IS SQUARELY APPLICABL E IN THE PRESENT CASE. 6. WITHOUT PREJUDICE TO THE AFORESAID GROUNDS, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XI, NEW DELHI, HAS ALSO ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWAN CE OF FOLLOWING EXPENDITURE IN COMPUTING THE TAXABLE INCOME F ROM ENGINEERING AND GROUND HANDLING SERVICES TO THIRD PAR TY AIRLINES EVEN THOUGH THE SAME HAD ALSO BEEN INCURRED BY THE APP ELLANT FOR THE PURPOSE OF RENDERING ENGINEERING AND GROUND HANDLING SERVICES TO THIRD PARTY AIRLINES. ACCOMMODATION COSTS RS.4,383,485 GROUND EQUIPMENT COSTS RS.2,527,725 IT COSTS RS.427,042 MISCELLANEOUS COSTS RS.11,916,140 OTHER COSTS RS.329,764 POOL LABOUR COSTS RS.7,284,520 POOL SUPPORT COSTS RS.21,383,692 ENGINEERING DEPARTMENT SUPPORT COSTS RS.3,656,371 LEGAL COSTS RS.1,920,398 2. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED A PAPER BOOK AND IT IS POINTED OUT THAT AT PAGES 4-5 THEREOF IS ITA NO.1283/DEL/2011 3 A COPY OF RESOLUTION PASSED U/S 90 OF THE IT AT READ WI TH ARTICLE 27 OF INDO-UK DTAC IN THE CASE OF BRITISH AIRWAYS PLC FOR ASSE SSMENT YEARS 1996-97 TO 2008-09. THE LD. COUNSEL FOR THE ASSESSEE HA S SUBMITTED THAT AS PER THE SAID RESOLUTION ISSUED BY THE JOINT SEC RETARY (FT & TR- 1), COMPETENT AUTHORITY OF INDIA IN THE MINISTRY OF FINANCE, DEPARTMENT OF REVENUE, UNDER THE MUTUAL AGREEMENT PROCEDURE OF INDO-UK DTAC, THE COMPETENT AUTHORITIES OF INDIA AS WELL AS THE UK H AVE ARRIVED AT THE FOLLOWING RESOLUTION WITH RESPECT TO ASSESSMENT OF IN COME OF THE ASSESSEE IN TERMS OF SECTION 90 OF THE IT ACT READ WITH ARTICLE 27 OF THE INDO-UK DTAC AND RULE 44H OF THE INCOME-TAX RULES, 1 962:- INCOME FROM GROUND HANDLING AND ENGINEERING SERVIC ES IS NOT ENTITLED TO ARTICLE 8 BENEFIT AND, HENCE, IS TAXABLE I N INDIA. EXPENSES WOULD BE ALLOWED AT 60% OF GROSS REVENUE (E XCEPT FOR A.Y. 2003-04, FOR WHICH IT WILL BE 79.47% AS ALLOWED BY THE A.O.) ACCORDINGLY, THE TAX LIABILITY OF THE TAXPAYER HAS BEEN AGREED AS UNDER:- A.Y.S 1996-97 TO 2008-09 DETAILS OF MAP RESOLUTION AND TAX LIABILITY A.Y. GROSS REVENUE EXPENS ES ALLOWE D (%) EXPENSES ALLOWED (RS.) TAXABLE INCOME TAX RATE (%) TAX LIABILITY . .. 2006-07 99725641 60 59835385 39890256 41.82 1668210 5 . .. TAXABLE INCOME FOR A.Y. 2003-04 INCLUDES LONG TERM CAPITAL GAINS OF INR 798,832,163 TAXED @ 20% LEVY OF INTEREST AND PENALTY IS NOT PART OF THIS RESOLUTI ON. HENCE, THE TAXPAYER WOULD BE ABLE TO ACCEPT THE MAP AGREEMENT BY WITHDRAWING THE APPEAL ON ALL THE ISSUES EXCEPT ON THE ISSUE OF LEVY OF INTEREST AND PENALTY. ANY ISSU E UNDER ARTICLE 8 WILL NOT BE AVAILABLE FOR LITIGATION AND TAX PAYER HAS TO WITHDRAW ALL THE APPEALS PERTAINING TO ISSUES UNDER ART ICLE 8 OF DTAA. 3. THE ASSESSING OFFICER WILL GIVE EFFECT TO THIS RESOLUTI ON IN TERMS OF SUB-RULES 4 & 5 OF RULE 44H OF THE INCOME-TAX RULES, 1962. ITA NO.1283/DEL/2011 4 3. THE LD. COUNSEL FOR THE ASSESSEE POINTS OUT THAT THUS, EXCEPT ON THE ISSUE OF LEVY OF INTEREST AND PENALTY, THE ASSESSEE IS TO ACCEPT THE MAP AGREEMENT BY WITHDRAWING THE APPEAL ON ALL ISSUES; THAT APB 1-3 IS A COPY OF THE ORDER DATED 14.03.2012 PASSED BY THE ADIT, CIRCLE 1 (1), INTERNATIONAL TAXATION, NEW DELHI UNDER SUB-RUL ES 4 & 5 OF RULE 44H OF IT RULES, 1962, GIVING EFFECT TO THE AFORESAID ORDER OF THE COMPETENT AUTHORITY OF INDIA UNDER THE MUTUAL AGREE MENT PROCEDURE OF INDIA-UK DTAC. THE LD. COUNSEL OF THE ASSESSEE, THUS, SEEKS THE WITHDRAWAL OF THE ASSESSEES APPEAL. 4. THE LD. DR WOULD HAVE NO OBJECTION TO SUCH WITHDR AWAL OF THE ASSESSEES APPEAL. 5. FROM THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAD FIL ED AN PETITION BEFORE THE COMPETENT AUTHORITY OF INDIA UNDER THE M UTUAL AGREEMENT PROCEDURE OF INDIA-UK DOUBLE TAXATION AVOIDANCE CON VENTION. THE COMPETENT AUTHORITY DISPOSED OF THE PETITION FILED BY THE ASSESSEE VIDE THE AFORESAID ORDER DATED 13.12.2011, DIRECTING THE RE-COMPUTATION OF THE TAXABLE INCOME OF THE ASSESSEE AFTER ALLOWING EXPEN SES AT 60% OF GROSS REVENUE. THE DCIT, VIDE HIS AFORESAID ORDER DATE D 14.03.2012, HAS RECOMPUTED THE INCOME OF THE ASSESSEE. 6. AS SUCH, THE REQUEST OF THE ASSESSEE TO WITHDRAW ITS AP PEAL IS ACCEPTED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED A S WITHDRAWN. THE ORDER PRONOUNCED IN THE OPEN COURT ON 10.10.20 12. SD/- SD/- [T.S. KAPOOR] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 10.10.2012. ITA NO.1283/DEL/2011 5 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES