M/s. AIRLINE ROTABLES LTD., MUMBAI V. JT. DIT (I.T), OSD Rg.-1, MUMBAI

ITA 278/MUM/2007

• Counselvise Citation: 27819914 RSA 2007
• Duration Of Justice: 4 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 13-09-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 10-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MALATHI SRIDHARAN
• Assessee Lawyers: FARRUKH IRANI
• Keywords: Rectification of order; Double taxation relief; Permanent establishment
• Section: 143(3); 244A; 234B; 147; 263; 12; 144; 154; 15

Judgement Text

1 ITA 278/ M/2007. AIRLINE ROTABLES LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L BEFORE SHRI D.K. AGARWAL, J.M. AND SHRI R.K. PANDA, A.M. ITA NO. 278/MUM/2007 ASSESSMENT YEAR 2003-04 M/S AIRLINE ROTABLES LIMITED, C/O BSR & CO. CHARTERED ACCOUNTANTS, KPMG HOUSE, MAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI - 13. PAN AADCA 8054G VS. JOINT DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, OSD RANGE -1, MUMBAI [NOW ASSESSED WITH DEPUTY DIRECTOR OF INCOME TAX (INTNL TAX), RG. 1(2), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI.400 001. APPELLANT RESPONDENT APPELLANT BY SHRI FARRUKH IRANI RESPONDENT BY SMT. MALATHI SRIDHARAN DATE OF HEARING 13.9.2011 DATE OF PRONOUNCEMENT 21.9.2011 ORDER PER R.K. PANDA A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DT. 13.10.2006 OF THE CIT(A)- XXXI, MUMBAI RELATING TO A.Y. 2003-04. 2. THE GROUNDS OF APPEAL NO. 1 & 2 READ AS UNDER:- 1. PERMANENT ESTABLISHMENT (PE) IN INDIA. THE CIT(A) ERRED IN HOLDING THAT YOUR APPELLANT HAD A PERMANENT ESTABLISHMENT IN INDIA. YOUR APPELLANT PRAYS THAT THE AO BE DIRECTED TO HOL D THAT THE APPELLANT DOES NOT HAVE A PE IN INDIA AND HENCE IS NOT SUBJECT TO TAX IN INDIA. 2 ITA 278/ M/2007. AIRLINE ROTABLES LTD. WITHOUT PREJUDICE GROUNDS: 2. QUANTIFICATION OF INCOME BY APPLYING 10CENT AS R ATE OF PROFIT THE CIT(A) ERRED IN APPLYING AN ADHOC RATE FOR DETE RMINING THE PROFITS ATTRIBUTABLE TO THE ALLEGED PE IN INDIA. THE CIT(A) ERRED IN HOLDING THAT THE ENTIRE PROFITS FROM INDIAN SALES WERE ATTRIBUTABLE TO THE ALLEGED PE IN INDIA DESPITE THE FACT THAT THE OPERATIONS WERE CARRIED OUT OUTSIDE I NDIA. YOUR APPELLANT PRAYS THAT THE AO BE DIRECTED TO COM PUTE THE TOTAL INCOME FOR YOUR APPELLANT BY APPLYING THE ACT UAL PROFIT RATES. 2. FACTS OF THE CASE IN BRIEF ARE THAT AIRLINE ROTA BLES LIMITED (ARL) IS A COMPANY INCORPORATED IN UNITED KINGDOM AND ITS MAIN BUSINESS IS THAT OF PROVIDING SPARES AND COMPONENT SUPPORT FOR AIRCRAFT TO AIRCRAFT OPERATORS. PURSUANT TO THE AGREEMENT WITH JET AIRWAYS (JA), ARL PROVIDES ROTABLES (AIRCRAFT COMPONENTS) TO JA. THIS PROCESS INVOLVES OBTAINING FAULTY COMPONENTS FROM JA IN EXCHANGE OF COMPONENTS IN GOOD CONDITION AND REPAIR OR OVERHAUL OF THE FAULTY COMPONENTS. THE ARL PROVIDES CONSIGNMENT STOCK OF COMPONENTS TO JA AT THEIR OPERATING BASE. JA IS ENTITLED TO OBTAI N COMPONENTS FROM THIS STOCK ON NEED BASIS. THE JA HAD MADE A REQUEST U/S 195 T O THE DCIT (TDS) FOR NON- DEDUCTION OF TAX FROM THE PAYMENT MADE TO ARL WHO R EJECTED THE SAME VIDE HIS ORDER U/S.195 DT. 11.12.1998. IT WAS HELD BY HIM TH AT THE ARL HAS PERMANENT ESTABLISHMENT (PE) WITHIN THE MEANING OF ARTICLE 5 OF THE INDO UK DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THE DCIT (T DS) ACCORDINGLY HELD THAT THE TAX IS REQUIRED TO BE DEDUCTED AT SOURCE. HE E STIMATED THE INCOME OF THE ARL AT 10% OF THE BILLING (PAYMENTS) AND ACCORDINGL Y DIRECTED FOR DEDUCTION OF TAX AT THE RATE OF 4.8% OF THE TOTAL BILLING. JA F ILED APPEAL AGAINST THIS ORDER BEFORE THE CIT(A)-XXV, MUMBAI U/S 195 OF THE I.T. A CT, 1951 WHO UPHELD THE FINDING OF THE DCIT AND HELD THAT THE ARL HAS A PE IN INDIA AND TAX IS REQUIRED TO BE DEDUCTED AT SOURCE AS PER SEC. 195. HE ALSO UPHELD THE FINDING OF THE DCIT TO ESTIMATE THE INCOME AT 10% OF THE TOTAL BIL LING AND TO DEDUCT TAX AT SOURCE AT 48% OF SUCH INCOME. 3 ITA 278/ M/2007. AIRLINE ROTABLES LTD. 2.1 THE ASSESSEE FILED THE RETURN OF INCOME ON 27.1 1.03 DECLARING TOTAL INCOME AT ` 16,30,720/-. THE AO FOLLOWING THE FINDINGS OF THE DCIT, AND THOSE OF THE LD. CIT(A)-XXV, MUMBAI HELD THAT THE ASSESSE E HAS A PE IN INDIA WITHIN THE MEANING OF ARTICLES 5 OF THE DTAA. THE A.O. HE LD THAT THE INCOME OF THE ASSESSEE HAS TO BE ESTIMATED AT 15% OF THE TOTAL BI LLING. 2.2 IN APPEAL, THE LD. CIT(A) FOLLOWING HIS ORDER F OR THE A.Y. 1998-99 IN ASSESSEES OWN CASE HELD THAT THE ASSESSEE HAS A PE RMANENT ESTABLISHMENT IN INDIA WITHIN THE MEANING OF ARTICLE -5 OF THE DTAA. THE INCOME ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT IN INDIA IS TAXABLE IN INDIA AS PER ARTICLE 7. FOLLOWING HIS ORDER FOR A.Y. 2001-02 HE HELD THAT T HE PROFIT @ 10% OF THE GROSS RECEIPT WOULD BE APPROPRIATE. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO. 3254/M/06 FOR A.Y. 1998-99 ORDER DTD. 21.5.2010 READ WITH M.A. NO. 471/M/2010 ORDER DTD. 20.2.2011. REFERRING TO THE ABOVE ORDER OF THE TRIBUNAL, HE SUBMITTED THAT THE TRIBUNAL AT PARA NO. 17 OF THE ORDER HAS HELD THAT THE ASSESSEE COMPANY DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA AND ACCORDINGLY THE ENTIRE I NCOME ATTRIBUTABLE TO THE INDIA OPERATIONS COULD NOT HAVE BEEN TAXED IN INDIA . THE TRIBUNAL, HOWEVER, HAS RESTORED THE MATTER TO THE FILE OF THE LD. CIT( A) FOR ADJUDICATION ON THE QUESTION OF TAXABILITY, IF ANY, OF CONSIDERATION F OR USE, OR RIGHT TO USE, OF INDUSTRIAL, SCIENTIFIC OR COMMERCIAL EQUIPMENT CONT AINED IN THE PAYMENTS MADE BY THE AIR LINES TO THE ASSESSEE COMPANY. REFERRIN G TO THE ORDER OF THE TRIBUNAL FOR A.Y. 1999-2000 TO 2001-02 IN ITA NO. 3255 TO 32 57/MUM/06 ORDER DTD. 21 ST DAY OF MAY, 2010, HE SUBMITTED THAT THE TRIBUNAL H AS FOLLOWED THE ORDER FOR A.Y. 1998-99. HE ACCORDINGLY SUBMITTED THAT THE ABOVE GROUNDS ARE COVERED BY THE DECISION OF THE TRIBUNAL. 4 ITA 278/ M/2007. AIRLINE ROTABLES LTD. 4. THE LD. D.R., ON THE OTHER HAND, FAIRLY CONCEDED THAT THE TRIBUNAL HAS DECIDED THE ISSUE IN THE PRECEDING ASSESSMENT YEARS IN ASSESSEES OWN CASE. 5. AFTER HEARING BOTH THE SIDES, WE FIND THE TRIBUN AL IN ASSESSEES OWN CASE FOR 1998-99 AT PARA NO. 17 OF THE ORDER HAS HELD AS UNDER:- 17. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE COMPANY DID NOT HAVE ANY PE IN IN DIA, AND, ACCORDINGLY, THE ENTIRE INCOME ATTRIBUTABLE TO THE INDIA OPERATI ONS COULD NOT HAVE BEEN TAXED IN INDIA. THE GRIEVANCES RAISED AGAINST QUANTIFICATION OF INCOME ATTRIBUTABLE TO THE PE , UNDER ARTICLE 7(1), ARE THUS RENDERED INFRUCTUOUS. TO THAT EXTENT, WE UPHOLD THE GRIEVANC E OF THE ASSESSEE AND VACATE THE ORDERS OF THE AUTHORITIES BELOW. FURTHER, THE TRIBUNAL AT PARA NO. 20 OF THE ORDER H AS HELD AS UNDER:- 20. FOR THE REASONS SET OUT ABOVE, WE ARE NOT INCLI NED TO UPHOLD THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE OF EXISTENCE OF THE PERMANENT ESTABLISHMENT AND FOR QUANTIFICATION OF T AXABLE INCOME. THE MATTER IS, HOWEVER, REMITTED TO THE FILE OF THE CIT (A) FOR ADJUDICATION ON THE QUESTION OF TAXABILITY, IF ANY, OF CONSIDERA TION FOR USE, OR RIGHT TO USE, OF INDUSTRIAL, SCIENTIFIC OR COMMERCIAL EQUIPM ENT CONTAINED IN THE PAYMENTS MADE BY THE AIRLINES TO THE ASSESSEE COMPA NY. WE MAKE IT CLEAR THAT OUR ABOVE OBSERVATIONS SHOULD NOT INFLUE NCE THE DECISION OF THE CIT(A) ON MERITS OF THIS ISSUE, AND THAT THE CI T(A) WILL DECIDE THE MATTER IN ACCORDANCE WITH THE LAW, BY WAY OF A SPEA KING ORDER AND AFTER GIVING DUE AND FAIR OPPORTUNITY OF HEARING TO THE P ARTIES. WE DIRECT SO. 5.1 THE GRIEVANCE OF THE ASSESSEE NOT TO RESTORE TH E MATTER TO THE FILE OF THE LD. CIT(A) HAS BEEN REJECTED BY THE TRIBUNAL IN ASS ESSEES M.A. NO. 471/MUM/10. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECEDING YEARS, WE HOLD THAT THE A SSSESSEE COMPANY DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. HOWEVER , WE REMIT THE MATTER TO THE FILE OF THE LD. CIT(A) FOR ADJUDICATION ON THE QUESTION OF TAXABILITY, IF ANY, OF CONSIDERATION FOR USE, OR RIGHT TO USE, OF INDUSTRI AL, SCIENTIFIC OR COMMERCIAL EQUIPMENT CONTAINED IN THE PAYMENTS MADE BY THE AIR LINES TO THE ASSESSEE COMPANY IN THE LIGHT OF THE DIRECTION OF THE TRIBUN AL FOR A.Y. 1998-99, WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL AGAIN IN A.Y. 199 9-2000 TO 2001-02. 5 ITA 278/ M/2007. AIRLINE ROTABLES LTD. ACCORDINGLY GROUND OF APPEAL NO. 1 BY THE ASSESSEE IS ALLOWED WHEREAS GROUND OF APPEAL NO. 2 BY THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSE. 6. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO. 3 BY THE ASSESSEE FOR WHICH THE LD. D.R. HAS NO OBJECTION. ACCORDINGLY GROUND OF APPEAL NO. 3 IS DISMISSED AS NOT PRESSED. 7. GROUND OF APPEAL NO. 4 BY THE ASSESSEE READS AS UNDER:- INTEREST UNDER SECTION 244A OF THE ACT. THE CIT(A) ERRED IN UPHOLDING THE TAXATION OF INTE REST GRANTED UNDER SECTION 244A OF THE ACT EVEN AFTER THE SAME W AS WITHDRAWN. WITHOUT PREJUDICE TO THE ABOVE, THE CIT(A) ERRED I N NOT GRANTING DEDUCTION OF THE INTEREST UNDER SECTION 24 4A OF THE ACT EVEN AFTER THE SAME WAS WITHDRAWN IN REGULAR ASSESSMENT. 8. FACTS OF THE CASE IN BRIEF ARE THAT THE A.O. IN THE ASSESSMENT ORDER PASSED FOR THE IMPUGNED ASSESSMENT YEAR ADDED THE I NTEREST U/S 244A OF ` 11,45,632/- FOR A.Y. 2000-01 GRANTED ON 10.3.2003. THE ASSESSEE CLAIMED THAT IT HAD PAID INTEREST FOR A.Y. 1998-99 AND 1999-2000 OF ` 10,42,524/- AND ` 17,33,827/- ON THE TAX DEMAND. IT HAD ACCORDINGLY CLAIMED THAT THE INTEREST PAYMENT OF ` 27,76,351/- BEING MORE THAN THE INTEREST INCOME, T HEREFORE, INTEREST RECEIVED WAS NOT TAXABLE AND RATHER DEDUCT ION SHOULD BE ALLOWED FOR EXCESS PAYMENT. THE A.O. HELD THAT THE INTEREST PA ID FOR A.Y. 1998-99 AND 1999-2000 WAS U/S 220(2) AND THEREFORE IS NOT AN AL LOWABLE DEDUCTION U/S 58(1A) READ WITH EXPLANATION (II) AND (IIA) OF SECT ION 40. THE A.O. FURTHER HELD THAT THE INTEREST EARNED U/S 244A OF ` 11,45,632/- WAS TAXABLE AS INCOME OF THE INDIAN PE. THE ADDITION WAS MADE ACCORDINGLY. 6 ITA 278/ M/2007. AIRLINE ROTABLES LTD. 8.1 BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT TH E INTEREST OF ` 11,45,632/- GRANTED BY ORDER DTD. 10.3.2003 WAS SUBSEQUENTLY WI THDRAWN BY ANOTHER ORDER DTD. 4 TH OCTOBER, 2004 AND AS SUCH NO INTEREST INCOME HAS A CCRUED AND THEREFORE NO ADDITION IS CALLED FOR. SO FAR AS THE ISSUE OF CLAIM OF INTEREST PAID ON TAX DEMAND U/S 220(2), NO ARGUMENTS WERE ADVANCE D BY THE ASSESSEE. 8.2 THE LD. CIT(A) FOLLOWING THE DECISION OF THE TR IBUNAL IN THE CASE OF AVADA TRADING COMPANY PVT. LTD. VS. ACIT REPORTED IN 284 ITR (AT) 073 (MUM) AND THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SYNDICATE BANK REPORTED IN 159 ITR 464 (KAR) HELD T HAT THE A.O. WAS JUSTIFIED IN TAXING THE INTEREST OF ` 11,45,632/- IN A.Y. 2003-04. A SUBSEQUENT WITHDRAWAL OF INTEREST BY ORDER DTD. 4.10. 2004 WIL L NOT DEFEAT THE ACCRUAL OF INTEREST INCOME. HOWEVER, HE HELD THAT THE ASSESSE E WOULD BE ENTITLED TO CLAIM DEDUCTION OF THE AMOUNT OF INTEREST WITHDRAWN IN A. Y. 2005-06. 8.2 AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE IS IN APPEAL BEFORE US. 9. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PA GE 37 & 38 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE INCOME- TAX COMPUTATION OF THE A.O. FOR A.Y. 2000-01 ACCORDING TO WHICH INTEREST U /S 244A WAS GRANTED TO THE ASSESSEE AT ` 11,45,632/-. REFERRING TO THE ORDER PASSED U/S 154 ON 4.10.2004, HE DREW THE ATTENTION OF THE BENCH WHEREIN THE TOTA L INCOME ASSESSED AT ` 2.75,28,991/- WAS REVISED TO ` 5,38,37,663/-. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO APPEAL AGAINST THE 154 ORDER HAS BEEN FILED. HE SUBMITTED THAT SINCE INCOME DETERMINED IN THE ORDER PASSED U/ S 143(3) ON 10.3.2003 FOR THE A.Y. 2000-01 STANDS REVISED DUE TO DETERMINATIO N OF HIGHER INCOME, THE INTEREST GRANTED U/S 244A STANDS WITHDRAWN. THEREF ORE, THIS INTEREST OF ` 11,45,632/- COULD NOT HAVE BEEN TAXED IN THE A.Y. 2 003-04. HE SUBMITTED THAT THE DECISION OF THE LD. CIT(A) THAT THE SAME SHOULD BE ALLOWED AS DEDUCTION IN 7 ITA 278/ M/2007. AIRLINE ROTABLES LTD. THE A.Y. 2005-06 I.E. IN THE YEAR OF WITHDRAWAL IS NOT JUSTIFIED SINCE THE ASSESSEE HAS CLOSED DOWN ITS BUSINESS AND IT CANNOT CLAIM THE SAME AS DEDUCTION. REFERRING TO THE COPY OF THE ORDER OF S PECIAL BENCH OF THE TRIBUNAL IN THE CASE OF AVADA TRADING CO. P. LTD. (SUPRA), H E SUBMITTED THAT THE SPECIAL BENCH IN THE SAID DECISION HAS HELD THAT IF INTERES T IS REDUCED BY VIRTUE OF SUB- SECTION (3) OF SECTION 244A ON ACCOUNT OF ASSESSMEN T UNDER SECTION 143(3), THE INTEREST GRANTED IN EARLIER YEAR GETS SUBSTITUTED A ND IT IS THE REDUCED AMOUNT OF INTEREST THAT WOULD FORM PART OF INCOME OF THAT YEA R. HE SUBMITTED THAT THE SPECIAL BENCH IN THAT DECISION HAS HELD THAT IF THE INTEREST GRANTED UNDER SECTION 244A(1) IS VARIED UNDER SUB-SECTION (3) OF SUCH SECTION, THEN THE INTEREST ORIGINALLY GRANTED WOULD BE SUBSTITUTED BY THE REDUCED/INCREASED AMOUNT AS THE CASE MAY BE. REFERRING TO THE PROVIS IONS OF SECTION 244A(3) HE SUBMITTED THAT WHERE AS A RESULT OF AN ORDER UNDER SUB-SECTION (3) OF SECTION 143, THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER SUB-SECTION (1) OF SECTION 244A HAS BEEN INCREASED OR REDUCED, AS THE CASE MAY BE, THE INTEREST SHALL BE INCREASED OR REDUCED ACCORDINGLY. HE ACCO RDINGLY SUBMITTED THAT SINCE THE INTEREST GRANTED U/S 244A(1)STANDS WITHDRAWN, T HE ASSESSEE IS NOT LIABLE TO PAY TAX ON THIS AMOUNT IN THE IMPUGNED A.Y. 10. THE LD. D.R., ON THE OTHER HAND, SUPPORTED THE ORDER OF THE LD. CIT(A). 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PURSUED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT IN THE TAX COMPUTATION SHEET, THE A.O. GRANTED INTEREST OF ` 11,45,632/- U/S 244A FOR A.Y. 2000-01WHILE GRANTIN G THE REFUND OF ` 55,02,981/-. IN THE SAME COMPUTATION STATEMENT, TH E TOTAL INCOME WAS DETERMINED AT ` 2,75,28,991/-. SUBSEQUENTLY VIDE ORDER PASSED U/S 154 DT. 4.10.2004, THE INCOME WAS ENHANCED TO ` 5,38,37,663/-. IN THE COMPUTATION STATEMENT, THERE WAS NO INTEREST U/S 24 4A. RATHER THERE WAS DEMAND OF INTEREST U/S 234B AND 234D FROM THE ASSES SEE. IN THE ASSESSMENT 8 ITA 278/ M/2007. AIRLINE ROTABLES LTD. ORDER FOR A.Y. 2003-04, THE A.O. HAD TREATED THE IN TEREST OF ` 11,45,632/- AS INCOME FROM OTHER SOURCES. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE INTEREST HAS SUBSEQUENTLY B EEN WITHDRAWN BY THE A.O. IN VIEW OF THE RECTIFICATION ORDER PASSED U/S 154 B Y ENHANCING THE TAXABLE INCOME AND SINCE THERE IS NO APPEAL AGAINST THE 154 ORDER, THEREFORE, THE DEPARTMENT CANNOT TAX THE ASSESSEE ON THIS AMOUNT. IT IS THE CASE OF THE REVENUE THAT THIS INTEREST INCOME IS TO BE TAXED IN THE A.Y. 2003-04 I.E. DURING WHICH PERIOD THE INTEREST WAS ORIGINALLY GRANTED BY THE A.O. AND THE ASSESSEE CAN CLAIM THE SAME AS DEDUCTION ONLY IN A.Y. 2005-0 6 WHEN THE SAME WAS WITHDRAWN. 11.1 WE FIND THE PROVISIONS OF SECTION 244A READS A S UNDER:- INTEREST ON REFUNDS. 6 244A. (1) 7 [WHERE REFUND OF ANY AMOUNT BECOMES DUE TO THE ASSE SSEE UNDER THIS ACT], HE SHALL, SUBJECT TO THE PROVISION S OF THIS SECTION, BE ENTITLED TO RECEIVE, IN ADDITION TO THE SAID AMOUNT, SIMPLE INTEREST THEREON CALCULATED IN THE FOLLOWING MANNER, NAMELY : ( A ) WHERE THE REFUND IS OUT OF ANY TAX 8 [PAID UNDER SECTION 115WJ OR] 9 [COLLECTED AT SOURCE UNDER SECTION 206C OR] PAID BY WAY OF ADVANCE TAX OR TREATED AS PAID UNDER SECTION 199 , DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING T HE ASSESSMENT YEAR, SUCH INTEREST SHALL BE CALCULATED AT THE RATE OF 10 [ONE-HALF PER CENT] FOR EVERY MONTH OR PART OF A MONTH COMPRI SED IN THE PERIOD FROM THE 1ST DAY OF APRIL OF THE ASSESSMENT YEAR TO THE DATE ON WHICH THE REFUND IS GRANTED: PROVIDED THAT NO INTEREST SHALL BE PAYABLE IF THE AMOUNT OF REFUND IS LESS THAN TEN PER CENT OF THE TAX AS DETERMINED 11 [UNDER 12 [SUB-SECTION (1) OF SECTION 115WE OR] SUB-SECTION (1) OF SECTION 143 OR] ON REGULAR ASSESSMENT; ( B ) IN ANY OTHER CASE, SUCH INTEREST SHALL BE CALCULA TED AT THE RATE OF 13 [ONE-HALF PER CENT] FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD OR PERIODS FROM THE DATE OR, AS THE CASE MAY BE, DATES OF PAYM ENT OF THE TAX OR PENALTY TO THE DATE ON WHICH THE REFUND IS GRANTED. EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, DATE OF PAYMENT OF TAX OR PENALTY MEANS THE DATE ON AND FROM WHICH TH E AMOUNT OF TAX OR PENALTY SPECIFIED IN THE NOTICE OF DEMAND ISSUED UN DER SECTION 156 IS PAID IN EXCESS OF SUCH DEMAND. (2) IF THE PROCEEDINGS RESULTING IN THE REFUND ARE DELAYED FOR REASONS ATTRIBUTABLE TO THE ASSESSEE, WHETHER WHOLLY OR IN PART, THE PERIOD OF THE 9 ITA 278/ M/2007. AIRLINE ROTABLES LTD. DELAY SO ATTRIBUTABLE TO HIM SHALL BE EXCLUDED FROM THE PERIOD FOR WHICH INTEREST IS PAYABLE, AND WHERE ANY QUESTION ARISES AS TO THE PERIOD TO BE EXCLUDED, IT SHALL BE DECIDED BY THE CHIEF COMMISSI ONER OR COMMISSIONER WHOSE DECISION THEREON SHALL BE FINAL. (3) WHERE, AS A RESULT OF AN ORDER UNDER 14 [SUB-SECTION (3) OF SECTION 115WE OR SECTION 115WF OR SECTION 115WG OR] 15 [SUB-SECTION (3) OF SECTION 143 OR SECTION 144 OR] SECTION 147 OR SECTION 154 OR SECTION 155 OR SECTION 250 OR SECTION 254 OR SECTION 260 OR SECTION 262 OR SECTION 263 OR SECTION 264 OR AN ORDER OF THE SETTLEMENT COMMISSION UNDER SUB-SECTIO N (4) OF SECTION 245D , THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER SUB- SECTION (1) HAS BEEN INCREASED OR REDUCED, AS THE CASE MAY BE, THE INTER EST SHALL BE INCREASED OR REDUCED ACCORDINGLY, AND IN A CASE WHERE THE INTERE ST IS REDUCED, THE ASSESSING OFFICER SHALL SERVE ON THE ASSESSEE A NOT ICE OF DEMAND IN THE PRESCRIBED FORM SPECIFYING THE AMOUNT OF THE EXCESS INTEREST PAID AND REQUIRING HIM TO PAY SUCH AMOUNT; AND SUCH NOTICE O F DEMAND SHALL BE DEEMED TO BE A NOTICE UNDER SECTION 156 AND THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY. (4) THE PROVISIONS OF THIS SECTION SHALL APPLY IN R ESPECT OF ASSESSMENTS FOR THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF AP RIL, 1989, AND SUBSEQUENT ASSESSMENT YEARS :] 16 [ PROVIDED THAT IN RESPECT OF ASSESSMENT OF FRINGE BENEFITS, THE PROVISIONS OF THIS SUB-SECTION SHALL HAVE EFFECT AS IF FOR THE FIGURES 1989, THE FIGURES 2006 HAD BEEN SUBSTITUTED.] 11.2 WE FIND THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF AVADA TRADING CO. (P.) LTD. (SUPRA) HAS HELD THAT IF INTEREST IS REDUCED BY VIRTUE OF SUB-SECTION (3) OF SECTION 244A ON ACCOUNT OF ASSESSMENT UNDER SECTION 143(3), THE INTEREST GRANTED IN EARLIER YEAR GETS SUBSTITUTED AND IT IS THE REDUCED AMOUNT OF INTEREST THAT WOULD FORM PART OF INCOME OF THAT YEAR. IT HAS BEEN FURTHER HELD THAT IF THE INTEREST GRANTED UNDER SECTION 244A(1) IS VARIED UN DER SUB-SECTION (3) OF SUCH SECTION, THEN THE INTEREST ORIGINALLY GRANTED WOULD BE SUBSTITUTED BY THE REDUCED/INCREASED AMOUNT AS THE CASE MAY BE. SINCE IN THE INSTANT CASE, THE INTEREST OF ` 11,45,632/- EARLIER GRANTED U/S 244A FOR A.Y. 2000 -01 STANDS WITHDRAWN, THEREFORE, THE AMOUNT OF ` 11,45,632/- SHALL BE SUBSTITUTED BY NIL INTEREST INCOME. CONSEQUENTLY, THIS AMOUNT CANNOT BE TAXED DURING THE A.Y. 2003-04. THE GROUND RAISED BY THE ASSESSEE IS ACCOR DINGLY ALLOWED. 10 ITA 278/ M/2007. AIRLINE ROTABLES LTD. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 21.9.2011. SD/- SD/- (D.K. AGARWAL) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 21.9.2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXI, MUMBAI 4. THE DIT INTERNATIONAL TAXATION, MUMBAI 5. THE DR BENCH, L 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 11 ITA 278/ M/2007. AIRLINE ROTABLES LTD. DATE INITIALS 1 DRAFT DICTATED ON 13.9.11, 16.9.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 14.9.11, 16.9.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER