Japan Airlines Ltd, V. CIT Delhi XVII,

ITA 2861/DEL/2007

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2927 (ITAT-DELHI)
• Duration Of Justice: 10 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 08-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 07-06-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: RAJNI MAHAJAN
• Keywords: Residential status; Double taxation relief; Difference of opinion; Change of opinion
• Section: 201(1); 131; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DLEHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 2861/DEL/2007 ASSESSMENT YEAR: 2003-04 M/S JAPAN AIRLINES INTERNATIONAL CO. LTD. VS C OMMISSIONER OF INCOME-TAX CHANDRALOK BUILDING, 36 JANPATH, DELHI-XVII, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. RAJNI MAHAJAN, ADVOCATE RESPONDENT BY: SHRI S.S. RANA, CIT DR DATE OF HEARING: 27.02.2018 DATE OF PRONOUNCEMENT: 12.03.2018 ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 6.12.2006 U/S 263 OF TH E INCOME-TAX ACT, 1961 (THE ACT) PASSED BY THE COMMISSIONER OF INCOM E-TAX, DELHI-XVII, NEW DELHI (CIT), ASSESSEE PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NON RESIDENT FOREIGN COMPANY INCORPORATED IN JAPAN AND IS ENGAGED IN THE BUSINESS OF CARRYING PASSENGERS AND CARGO BY AIR. UNDER THE DOUBLE TAXAT ION AVOIDANCE AGREEMENT 2 BETWEEN THE GOVERNMENT OF INDIA AND GOVERNMENT OF J APAN, THE INCOME DERIVED BY ITS OPERATIONS IS TAXABLE IN JAPAN. 3. PURSUANT TO THE SURVEY CONDUCTED ON 24.2.2005 AT THE PREMISES OF THE ASSESSEES REGIONAL OFFICE IN NEW DELHI, LEARNED AO REQUIRED THE ASSESSEE TO FURNISH THE DETAILS AS TO THE TOTAL SALARY AND PERQ UISITES PAID TO THE EXPATRIATE EMPLOYEES RESIDENT IN INDIA DURING THE FINANCIAL YEA RS 2001-02, 2002-03 AND 2003-04. ON EXAMINATION OF THE DETAILS, LEARNED AO BY ORDER DATED 3.5.2005 U/S 201(1)/201(1A) OF THE ACT RAISED A DEMAND OF RS.29, 30,847/- IN RESPECT OF TWO EMPLOYEES, NAMELY, MR. MASAO KOGA AND MR. KIYONORI YAN AI. THE MATTER WAS CARRIED IN APPEAL AND THE LEARNED CIT(A) VIDE ORDER DATED 29.8.2005 UPHELD THE VIEW OF THE LEARNED AO AND DISMISSED THE APPEAL AGA INST WHICH THE ASSESSEE FURTHER APPEALED TO THE TRIBUNAL IN ITA NO.4172/DEL /2005. 4. IN THE MEANWHILE, A PROPOSAL U/S 263 WAS SUBMITT ED BY THE AO SEEKING REVISION OF THE ORDER PASSED U/S 201/201(1A) OF THE ACT ON THE GROUND THAT IN CASE OF TWO EMPLOYEES IN RESPECT OF WHOM THE ORDER U/S 20 1(1)/201(1A) WAS PASSED, THE LEARNED AO CONSIDERED THE CASE ONLY U/S 6 OF THE ACT, WITHOUT MAKING ANY REFERENCE TO SECTION 9(1)(II) OF THE ACT BUT IN VIE W OF THE JUDGMENT OF THE TRIBUNAL IN THE CASE OF PRIDE FORAMER, SA VS ACIT (2005) 97 ITD 86 (DEL), THE PAYMENT TO EXPATRIATE TECHNICIANS IN INDIA, IRRESPECTIVE OF TH EIR STAY IN INDIA, IS LIABLE TO TAX IN INDIA, AS SUCH, ORDER PASSED BY THE LEARNED AO IS E RRONEOUS IN SO FAR AS IT IS PRE JUDICIAL TO THE INTEREST OF REVENUE VIS--VIS THE P ROVISIONS UNDER SECTION 9(1)(II) OF THE ACT AND THE DTAA BETWEEN INDIA AND JAPAN. 5. AFTER AFFORDING AN OPPORTUNITY TO THE ASSESSEE, L EARNED CIT PASSED THE IMPUGNED ORDER HOLDING THAT THE ASSESSEE WAS REQUIR ED TO DEDUCT TAX ON THE 3 PAYMENTS MADE TO ALL THE FOUR EMPLOYEES MENTIONED IN THE PROPOSAL U/S 263 SUBMITTED BY THE AO, BUT IN VIEW OF THE PLEA TAKEN BY THE ASSESSEE THAT THE ORDER IN SO FAR AS TWO EMPLOYEES IS CONCERNED HAS MERGED W ITH THE ORDERS OF THE LEARNED CIT(A), LEARNED CIT HELD THAT THE ASSESSMEN T ORDER WAS REQUIRED TO BE MODIFIED IN RESPECT OF THE TWO OTHER EMPLOYEES, NAME LY, MR. TAKASHI SUZUKI AND MR.TETSUO MITERA. THE ASSESSEE IS, THEREFORE, CHAL LENGING THIS ORDER U/S 263 IN THIS APPEAL, BUT WITH A DELAY OF 120 DAYS. 6. IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT I N VIEW OF THE FACT THAT ONE MR. NEERAJ SHARMA, ADMINISTRATIVE MANAGER, WHO WAS HANDLING ALL THE ADMINISTRATIVE MATTERS WAS TRANSFERRED TO JAPAN AND WAS NOT AVAILABLE TO THE ASSESSEE DURING THE PERIOD BETWEEN THE PASSING OF T HE ORDER U/S 263 AND APRIL, 2007, AS SUCH, THE SUCCESSOR WHO IS NOT WELL CONVE RSANT WITH THE INDIAN LAWS OF TAXATION, COULD NOT PROMPTLY FILED THE APPEAL WITHIN TIME. LEARNED DR OPPOSED THE CONDONATION TO DELAY. 7. THOUGH THE LEARNED DR OPPOSED THE CONDONATION OF DELAY, WE ARE UNABLE TO ACCEPT THE SAME BECAUSE THERE IS NO REASON FOR U S NOT TO ACCEPT THE EXPLANATION OF FACTS OFFERED BY THE ASSESSEE FOR THE DELAY. ACCORDING TO THE ASSESSEE, THE MAN WHO IS CONVERSANT WITH THE INDIAN LAWS IS TRANSFERRED AND PERSONS, WHO SUCCEEDED WERE NOT FAMILIAR WITH THE T AXATION LAWS OF INDIA, AS SUCH, DUE TO TIME CONSUMED FOR CONSULTATION, THE DELAY OCC URRED. NORMALLY, NO ASSESSEE WOULD STAND TO GAIN BY ALLOWING THE APPEALS TO BE BARRED BY TIME. WHEN THE TECHNICALITIES ARE PITTED AGAINST THE DELIVERY O F SUBSTANTIAL JUSTICE, THE FORMER MUST GIVE WAY TO THE LATTER AND THE HIGHEST THAT WOU LD HAPPEN BY CONDONING THE DELAY IS THAT A CAUSE COULD HAVE BEEN DECIDED ON MER ITS. UNLESS THE RIGHTS OF THE 4 PARTIES ARE CRYSTALLIZED UNDER THE LAW OF LIMITATION , ALL OUR ENDEAVOUR IS TO SEE THAT THE JUST TAX LIABILITY OF THE ASSESSEE IS DETERMINE D AS PER LAW. WITH THIS VIEW OF THE MATTER, WE ARE INCLINED TO CONDONE THE DELAY. WE , THEREFORE, PROCEED TO DECIDE THE MATTER ON MERITS. 8. MAIN ARGUMENT OF THE LEARNED AR IS THAT PURSUANT TO THE SUMMONS ISSUED U/S 131 OF THE ACT, THE ASSESSEE SUBMITTED ALL THE DETAILS TO THE LEARNED AO, UPON EXAMINATION OF WHICH AND DUE CONSIDERATION THEREOF, THE LEARNED AO HELD THAT THE ASSESSEE IS IN DEFAULT ONLY IN RESPECT OF TWO E MPLOYEES AND SUCH VIEW TAKEN BY THE LEARNED AO WAS PROPER. ACCORDING TO HER THE R EVENUE IS NOW TAKING RECOURSE TO SECTION 263 OF THE ACT, WHICH IS ONLY A CHANGE IN ITS EARLIER ADOPTED VIEW AND LINE OF THOUGHT OF APPLICATION AND IS IN N O MANNER A CONSEQUENCE TO DISCOVERY OF ANY ERROR IN THE ORDER OF THE LEARNED A O. IT IS FURTHER SUBMITTED BY THE LEARNED AR THAT THIS TRIBUNAL PASSED ORDER DATE D 27.2.2017 IN ITA NO.4172/DEL/2005 IN RESPECT OF THE TWO EMPLOYEES, VI Z., MR. MASAO KOGA AND MR. KIYONORI YANA. BASING ON THE BINDING PRECEDENT OF THE HONBLE SUPREME COURT IN THE CASE OF PRADEEP J. MEHTA VS CIT (2008) 4 TMI 6 (SC), THE TRIBUNAL REACHED THE CONCLUSION THAT THE CORRECT STATUS OF T HE ASSESSEE BASED ON THE DECISION OF THE HONBLE SUPREME COURT HAS TO BE WOR KED OUT AT THE END OF THE LEARNED AO, AND FOR SUCH PURPOSE, THE MATTER WAS RE MANDED TO THE FILE OF THE AO. SHE ALSO BROUGHT TO OUR NOTICE THAT PURSUANT TO THE IMPUGNED ORDER, THE AO PASSED THE ASSESSMENT ORDER U/S 201(1)/201(1A)/263 OF THE ACT ON 15.12.2006 BRINGING AN AMOUNT OF RS.40,31,188/- TO TAX. 9. PER CONTRA, IT IS THE ARGUMENT OF THE LEARNED DR THAT IN THIS MATTER, THE RESIDENTIAL STATUS OF THE ASSESSEE AS PER SECTION 6 IS NOT RELEVANT FOR THE INCOME 5 UNDER THE HEAD SALARIES, IF IT IS EARNED IN INDIA IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF PRIDE FORAMER, SA VS ACIT ( SUPRA) AND THE RELEVANT PROVISIONS TO BE CONSIDERED WERE SECTION 9(1)(II) AND THE PROVISIONS OF THE DTAA BETWEEN THE GOVT. OF INDIA AND GOVT. OF JAPAN BUT I NASMUCH AS THE LEARNED AO HAD NOT MADE ANY ENQUIRIES IN THIS DIRECTION AND CON SIDERED THESE PROVISIONS. IN VIEW OF THE DECISION IN THE CASE OF MALABAR INDUSTR IAL CO. LTD. (2000) 243 ITR 83 (SC), THE EXERCISE OF JURISDICTION BY THE CIT U/S 2 63(1) OF THE ACT WAS JUSTIFIED. FURTHER RELIANCE IS PLACED ON THE DECISIONS REPORTE D IN RAJMANDIR ESTATES (P) LTD. VS PCIT (2016) 386 ITR 162 AND 245 TAXMAN 127 (SC). HE, THEREFORE, SUBMITTED THAT THE IMPUGNED ORDER PASSED BY THE LEARNED CIT IS PROPER AND LEGAL AND CANNOT BE INTERFERED WITH. 10. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS ON EITHER SIDE. OUT OF THE FOUR EMPLOYEES, LEARNED AO PASSED ORDER U/S 201(1) AND 201(1A) OF THE ACT IN RESPECT OF TWO EMPLOYEES CONSI DERING THE RESIDENTIAL STATUS U/S 6 OF THE ACT WHEREAS IN THE REVISION PROCEEDING S, LEARNED CIT(A) REACHED A CONCLUSION THAT IN VIEW OF THE DECISION OF THE TRIB UNAL IN THE CASE OF PRIDE FORAMER VS ACIT (SUPRA), THE APPLICABILITY OF THE PR OVISIONS U/S 9(1)(II) OF THE ACT AND ALSO THE PROVISIONS OF THE DTAA BETWEEN INDIA A ND JAPAN ARE RELEVANT INASMUCH AS IN VIEW OF THE LAW DECLARED IN THE PRID E FORAMER VS ACIT (SUPRA), PAYMENT MADE TO EXPATRIATE TECHNICIANS IN INDIA IS T AXABLE IN INDIA IRRESPECTIVE OF THEIR STAY IN INDIA. IT IS NOT IN DISPUTE THAT IN T HE ORIGINAL ASSESSMENT ORDER DATED 3.5.2005, LEARNED AO DID NOT ADVERT TO THE APPLICAB ILITY OF THE PROVISIONS U/S 9(1)(II) OF THE ACT OR THE PROVISIONS OF THE DTAA B ETWEEN INDIA AND JAPAN BUT CONSIDERED THE CASE ONLY U/S 6 OF THE ACT IN RESPECT OF THE RESIDENTIAL STATUS OF THE EMPLOYEE. IN VIEW OF THE LATER DECISION OF THE TRIB UNAL DATED 21 ST OCTOBER 2005 TO 6 THE EFFECT THAT THE PAYMENT MADE TO THE EXPATRIATE T ECHNICIANS IN INDIA IS TAXABLE IN INDIA IRRESPECTIVE OF THEIR STAY, LEARNED CIT HEL D THAT THE ORIGINAL ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS IN SO FAR AS THE PROVISIONS OF SECTION 9(1)(II) OF THE ACT AND THE DTAA BETWEEN INDIA AND JAPAN HAV E NOT BEEN TAKEN INTO ACCOUNT IS PRE JUDICIAL TO THE INTEREST OF THE REVE NUE. IN VIEW OF THIS FACT THAT THE LEARNED AO DID NOT CONSIDER THE APPLICABILITY OF THE PROVISIONS U/S 9(1)(II) OF THE ACT AND THE DTAA TO THE FACTS OF THIS CASE, WHILE R ESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF M ALABAR INDUSTRIAL CO. LTD. VS CIT (SUPRA) AND ALSO THE DECISION OF THE HIGH COURT OF CALCUTTA IN RAJ MANDIR ESTATES (P) LTD. (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT IS JUSTIFIED IN EXERCISING JURISDICTION U/S 263(1) OF THE ACT AN D IT IS NOT OPEN FOR THE ASSESSEE TO CHALLENGE THE SAME ON THE GROUND THAT SUCH AN EX ERCISE AMOUNTS ONLY TO CHANGE OF OPINION. 11. NOW COMING TO THE MERITS OF THE CASE, AS RIGHTL Y HELD BY THE LEARNED CIT IN HIS ORDER, THE DEDUCTION OF TAX ON THE PAYMENTS MADE TO ALL THE FOUR EMPLOYEES REQUIRES CONSIDERATION AND FOR THAT PURPOSE ALL THE EMPLOYEES STAND ON THE SAME FOOTING. SINCE THE CASE OF TWO EMPLOYEES, NAMELY, M R. MASAO KOGA AND MR. KIYONORI YANA HAS ALREADY BEEN DECIDED BY THIS TRIBUNA L AS BEING COVERED BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF P RADEEP J. MEHTA VS CIT (SUPRA), WE DO NOT THINK IT NECESSARY TO TAKE A DIFFERENT VIE W IN RESPECT OF THESE TWO EMPLOYEES, VIZ. MR. TAKASHI SUZUKI AND MR.TETSUO MIT ERA. ADMITTEDLY, THE MATTER RELATING TO THE EMPLOYEES COVERED BY THE ORIGI NAL ASSESSMENT ORDER IS SET ASIDE TO THE FILE OF THE LEARNED AO, WE, THEREFORE, SET ASIDE THIS MATTER ALSO TO THE FILE OF THE AO FOR CONSIDERING THE CASE AFRESH IN T HE LIGHT OF THE ESTABLISHED PRINCIPLES AFTER AFFORDING AN OPPORTUNITY TO THE ASS ESSEE. 7 10. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 12 TH DAY OF MARCH, 2018. SD/- SD/- (G.D. AGRAWAL) (K. NARASIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 12 TH MARCH, 2018 VJ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR, ITAT