DCIT, New Delhi V. M/s Indian Airlines Ltd., New Delhi

ITA 1632/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3752 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: RAJNISH AGRAWAL

Judgement Text

ITA NO. 1632/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1632/DEL/2011 A.Y. : 2007-08 DCIT, CIRCLE - 11(1), NEW DELHI ROOM NO. 312, CR BUILDING, NEW DELHI VS. M/S INDIAN AIRLINES LTD., (NOW NATIONAL AVIATION COMPANY OF INDIA LTD.), AIRLINES HOUSE, 113, GURUDWARA RAKAB GANJ ROAD, NEW DELHI (PAN/GIR NO. : AAAC10613E) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. RAJNISH AGRAWAL DEPARTMENT BY : MS. MONA MOHANTY, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 31.1.2 011 PERTAINING TO ASSESSMENT YEAR 2007-08. 2. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INC OME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF ` 2 1,10,81,157/- ON ACCOUNT OF COMPUTERIZED RESERVATION SYSTEM (CRS) PAY MENT MADE TO FOREIGN COMPANY. 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE AIR TRAV EL AND TRANSPORT SERVICES. DURING THE COURSE OF ASSESSMENT, ASSESSING OFFICER FOUND THAT ASSESSEE HAS CLAIMED COMPUTERIZED RESERV ATION SYSTEM ITA NO. 1632/DEL/2011 2 (CRS) EXPENSES OF ` 21,10,81,157/- ON WHICH TAX HAS NOT BEEN DEDUCTED AT SOURCE AS REQUIRED U/S. 40(A)(I) OF TH E IT ACT. ASSESSING OFFICER FURTHER OBSERVED THAT IN THE TAX AUDIT RE PORT IT IS MENTIONED THAT IT IS OBSERVED THAT OUT OF THE CRS EXPENSES O F ` 85,77,51,445/- TDS OF ` 4,64,46,289/- HAS BEEN DEDUCTED DURING THE YEAR ONLY ON THE SUM OF ` 64,66,70,288/- AND DEPOSITED ON 03.8.2007. ON THE BALANCE AMOUNT OF ` 21,10,81,157/- TDS HAS NOT BEEN DEDUCTED FOR WHICH IT WAS EXPLAINED BY THE MANAGEMENT THAT CRS COMPANIES HA VE CONFIRMED THAT THESE AMOUNTS OF ` 21,10,81,157/- ARE ON ACCOUNT OF BOOKING OUTSIDE INDIA AND THEREFORE NOT LIABLE FOR DEDUCTION OF TAX. 3.1 ASSESSING OFFICER FURTHER OBSERVED THAT IN THI S REGARD, THE COMPUTATION OF INCOME AS SUBMITTED BY THE ASSESSEE, S TATES THAT :- NO ADDITION HAVE BEEN MADE IN RESPECT OF PAYMENT MAD E TO CRS COMPANIES ON WHICH NO TAX HAS BEEN DEDUCTED AT SOURCE IN VIEW OF THE FACT THAT CRS COMPANIES ARE RENDERING SE RVICES OUTSIDE INDIA AND THE PROVISIONS OF WITHHOLDING TAX ARE NOT APPLICABLE ON SUCH PAYMENTS. THE ITAT IN THE CASE S OF (I) AMEDUS GLOBAL TRAVEL VS. DCIT (2008 113 TTJ 767) AND (II) GALIELEO INTERNATIONAL INC. VS. C.I.T. (2008 19 SOT 257) HAS HELD THAT NO PART OF THE INCOME OF CRS COMPANIES IS TAXABL E IN INDIA THEREFORE NO TDS IS TO BE DEDUCTED AT SOURCE AND NO DISALLOWANCE U/S 40(A) IS CALLED FOR. 3.2 ASSESSING OFFICER DID NOT ACCEPT THE CONTENTIO N OF THE ASSESSEE. ACCORDING TO HIM, THE RATIO OF THEESE DECISIONS WER E NOT APPLICABLE IN THIS CASE. HE HELD THAT THE AMOUNT OF ` 21,10,81,15 7/- MADE TO CRS COMPANIES WITHOUT DEDUCTING TAX SOURCE, IS AGAINST T HE PROVISIONS OF ITA NO. 1632/DEL/2011 3 SECTION 40(A)(I) OF THE IT ACT AND THUS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 4. AGAINST THIS ORDER THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISS IONER OF INCOME TAX (APPEALS) ELABORATELY CONSIDERED THE ASS ESSEES SUBMISSIONS AND HELD AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. IT IS SEEN THAT IN THE A.Y.S 1993-94 AND 1994-95, MY PREDECESS OR HAD UPHELD THAT 60% OF CRS EXPENSES BEING ATTRIBUTABLE TO OUTSIDE INDIA OPERATIONS AND THEREFORE NOT LIABLE TO DEDUCT ION OF TAX U/S 195. AGAINST THIS ORDER, DEPARTMENT FILED APPEAL I N ITAT. DEPARTMENTS REQUEST FOR APPROVAL OF COD FOR PURSUING THE APPEAL BEFORE ITAT WAS TURNED DOWN BY THE COMMITTEE FOR THE REASONS CLEARLY SPELT OUT IN ITS MINUTES AS QUOTED ABOVE. THUS THE ORDER OF MY PREDECESSOR ATTRIBUTING 60% OF CRS E XPENSES TO OUTSIDE INDIA OPERATIONS ON WHICH NO TAX WAS DEDUC TIBLE HAD ATTAINED FINALITY. THE APPELLANT HAS STATED THAT INSTEAD OF THE 60% ESTIMATE TAKEN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IT HAS MAINTAINED PROPER DOCUMENTS TO SHO W HOW MUCH PAYMENT RELATES TO INDIAN OPERATIONS ON WHICH T AX IS DEDUCTIBLE AND THE PORTION RELATING TO OUTSIDE INDI A OPERATIONS ON WHICH NO TAX IS DEDUCTIBLE. THAT BEING SO THERE WA S NO JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE A D ISALLOWANCE OF ` 21,10,81,157/- BEING PAYMENT TO CRS EXPENSES, WHI CH RELATED TO OUTSIDE INDIA OPERATIONS, U/S 40(A) IN THE YEAR UNDER CONSIDERATION, WHICH ACCORDING TO THE APPELLANT IS THE AMOUNT ON WHICH ON TAX IS DEDUCTIBLE AS PER THE PROVISIONS OF SECTION 195(1) ITA NO. 1632/DEL/2011 4 OF THE ACT. IT IS ALSO SEEN THAT FOLLOWING THE AB OVE BASIS, IN THE PRECEDING TWO A.Y.S I.E. A.Y. 2005-06 AND 2006-07, THE DEPARTMENT HAD ACCEPTED THE METHOD ADOPTED BY THE AP PELLANT AND NO DISALLOWANCE HAS BEEN MADE IN THESE TWO YE ARS. IN THIS VIEW OF THE MATTER, THE DISALLOWANCE OF ` 21,10,81,1 57/- MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT IS DELETED. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS)S ORDER FOR 1993-94 AND 199 4-95 HAS BECOME FINAL AS APPEAL AGAINST IT WAS NOT PERMITTED BY COD. IN THESE YEARS THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD UPHELD T HAT 60% OF CRS EXPENSES BEING ATTRIBUTABLE TO OUTSIDE INDIA OPERAT IONS AND THEREFORE NOT LIABLE TO DEDUCTION OF TAX U/S 195. IN THE CUR RENT ASSESSMENT YEARS LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ACCEPTE D THE ASSESSEES CLAIM THAT INSTEAD OF THE 60% ESTIMATE TA KEN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IT HAS MAINTAI NED PROPER DOCUMENTS TO SHOW HOW MUCH PAYMENT RELATES TO INDIAN OPERATIONS ON WHICH TAX IS DEDUCTIBLE AND THE PORTION RELATING TO OUTSIDE INDIA OPERATIONS ON WHICH NO TAX IS DEDUCTIBLE. WE FURT HER FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FIND ING THAT ASSESSEES METHOD OF DEDUCTION AT SOURCE HAS BEEN C ONSISTENT AND NO INTERFERENCE IN THE SAME WAS MADE IN THE PRECEDING ASSESSMENT YEARS I.E. ASSESSMENT YEARS 2005-06 AND 2006-07. L D. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT TH ERE WAS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE DIS ALLOWANCE OF ` 21,10,81,57/- BEING THE PAYMENT TO CRS EXPENSES WHI CH RELATED TO ITA NO. 1632/DEL/2011 5 OUTSIDE INDIA OPERATIONS AND AS PER THE PROVISION O F SECTION 195(1) OF THE IT ACT, NO TAX IS DEDUCTIBLE ON THE SAME. 6.1 LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THIS FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 7. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND ACCORDINGLY, WE UPHOLD THE SAME. 8. IN THE RESULT, THIS APPEAL BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/6/2011 UPO N CONCLUSION OF HEARING. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 08/6/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES