British Airways, V. DDIT circle 2 (1),

ITA 4435/DEL/2007

• Counselvise Citation: 443520114 RSA 2007
• Duration Of Justice: 4 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 29-02-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K GUPTA
• Assessee Lawyers: MANEESH UPNEJA CAS
• Keywords: Double taxation relief; Competent authority
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI. BEFORE SHRI A.D. JAIN AND SHRI K.G. BANSAL I.T.A. NO.1763, 1764 & 1765(DEL)/2005 ASSESSMENT YEARS: 1996-97, 1997-98 & 1998-99 I.T.A. NO.1766, 1767, 1768 & 4274(DEL)/2005 ASSESSMENT YEARS: 1999-00, 2000-01, 2001-02 & 2002 -03 ITA NOS. 4434 & 4435(DEL)/2007 ASSESSMENT YEARS: 2003-04 & 2004-05 ITA NO. 3198(DEL)/2009 ASSESSMENT YEAR: 2005-06 BRITISH AIRWAYS PLC., DY. DIRECTOR OF INCOME-TAX/ DLF PLAZA TOWERS, VS. ASST T. DIRECTOR OF INCOME-TAX, DLF QUTAB ENCLAVE, CI RCLE 1(1), INTERNATIONAL TAX, PH.-I, GURGAON. NEW DELHI. PAN: AABCB7987R ITA NO. 3306(DEL)/2009 ASSESSMENT YEAR: 2005-06 ASSISTANT DIRECTOR OF INCOME BRI TISH AIRWAYS PLC., TAX, CIRCLE 1(1), VS. DLF PLAZA TOWERS, INTERNATIONAL TAX, NEW DELHI. DLF QUTAB ENCLAVE, PH.-I, GURGAON. (APPLICANT) (RESPONDENT) ASSESSEE BY : SHRI M.S. SYALI, SENIOR ADV OCATE, SHRI TARANDEEP SINGH & SHRI MANEESH UPNEJA, C.AS DEPARTMENT BY : SHRI D.K. GUPTA, CIT, DR DATE OF HEARIN G: 23.02.2012 DATE OF PRONOUN CEMENT: 16.03.2012. ORDER PER BENCH APPEAL NUMBERS 1763-1765(DEL)/2005 INVOLVE TWO CO MMON GROUNDS REGARDING DEDUCTION OF EXPENSES ENUMERATED UNDER EIGHT HE ADS IN COMPUTING THE INCOME AND ITA NOS. 1763 TO 1768 & 4274(DEL)/2005, ITA4434, 4435/07 & 3198 & 3306/2009 2 CHARGEABILITY OF INTEREST U/S 234B OF THE INCOME- TAX ACT, 1961. THESE AND OTHER APPEALS WERE ARGUED IN A CONSOLIDATED MANNER BY THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. CIT, DR. THEREFORE, THESE APPEALS ARE DI SPOSED OFF BY WAY OF A COMMON ORDER. 2. THE LD. COUNSEL DEALT WITH APPEALS FOR ASSES SMENT YEARS 1996-97 TO 1998-99 BEARING ITA NOS. 1763, 1764 & 1765(DEL)/2005 AT THE OUTSET. WE HAVE ALREADY MENTIONED THE SUBSTANTIVE ISSUES RAISED IN THESE APPEALS, I.E., DEDUCTION OF EXPENSES IN COMPUTING THE INCOME AND CHARGEABILITY OF INTEREST U/S 234B OF THE ACT. IT IS SUBMITTED THAT THE ASSESSEE IS A TAX-RESIDENT OF THE UNITE D KINGDOM. IT IS ENGAGED IN THE BUSINESS OF CARRIAGE OF PASSENGERS, GOODS ETC. IN THE IN TERNATIONAL TRAFFIC. IT HAS ALSO BEEN RENDERING GROUND HANDLING AND ENGINEERING SERVIC ES TO THE AIRCRAFT OF OTHER AIRLINES. ITS INCOME IS LIABLE TO BE TAXED IN THE U.K. IN V IEW OF THE PROVISION CONTAINED IN ARTICLE 8 OF THE DOUBLE TAX AVOIDANCE AGREEMENT (D TAA) BETWEEN U.K. AND INDIA. HOWEVER, THE LOWER AUTHORITIES, WHILE ACCEPTING THE AFORESAID POSITION BY AND LARGE, CAME TO THE CONCLUSION THAT GROUND HANDLING AND ENGINEERING SERVICES RENDERED TO AIRCRAFT OF OTHER AIRLINES IN INDIA ARE NOT COVER ED UNDER ARTICLE 8 OF THE DTAA. THE QUESTION REMAINING TO BE DECIDED IS REGARDING TH E DEDUCTION OF EXPENSES AGAINST THE AFORESAID INCOME SOURCED FROM INDIA. IN VIEW OF THE DISPUTE, THE ASSESSEE INVOKED MUTUAL AGREEMENT PROCEDURE PROVIDED UNDER THE D TAA. THE COMPETENT AUTHORITY UNDER THE DTAA HAS PASSED AN ORDER DATED 18.12 .2011, BEARING NO. F 430/08/2011 FTD.I. IN THIS ORDER, EXPENSES HAVE BEEN ALLOWED @ 60% OF THE GROSS REVENUE. IN VIEW THEREOF, THE INCOME FOR THESE YEARS HAS BEEN COMPUTED AT RS. 2,19,42,648/-, RS. ITA NOS. 1763 TO 1768 & 4274(DEL)/2005, ITA4434, 4435/07 & 3198 & 3306/2009 3 2,65,55,128/-, AND RS. 2,89,91,876/- RESPECTIVELY . THE COMPETENT AUTHORITY HAS ALSO DETERMINED THE TAX PAYABLE FOR THESE YEARS AT R S. 1,20,68,456/-, RS. 1,46,05,320/- AND RS. 1,39,16,100/- RESPECTIVELY. A COPY OF THIS OR DER HAS BEEN PLACED ON RECORD. 2.1 IN REGARD TO THE CHARGEABILITY OF INTEREST U /S 234B, IT IS SUBMITTED THAT THE ASSESSEE IS A NON-RESIDENT PERSON. ALL ITS INCOM E SOURCED FROM INDIA IS SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. THEREFORE, ADVANCE-TAX PAYABLE BY THE ASSESSEE IS NIL. CONSEQUENTLY, THERE IS NO SHORTF ALL IN PAYMENT OF TAX ON WHICH INTEREST COULD BE CHARGED U/S 234B NOTWITHSTANDING THE FA CT THAT THIS PROVISION, FOR THE PURPOSE OF COMPUTING THE BASE AMOUNT ON WHICH INTEREST IS CHARGED, GRANTS CREDIT FROM THE TAX OF ONLY THAT AMOUNT WHICH HAS BEEN ACTUALLY D EDUCTED AT SOURCE. THIS VIEW FINDS SUPPORT FROM THE DECISION IN THE CASE OF DIRECT OR OF INCOME-TAX VS. JACABS CIVIL INCORPORATED AND MITSUBISHI CORPORATION, (2011) 330 ITR 578 (DEL). WE ALSO FIND THAT THE COMPETENT AUTHORITY HAS NOT CHARGED INTER EST WHILE DETERMINING THE TAX LIABILITY OF THE ASSESSEE FOR THESE YEARS. THE C OMPUTATION MADE BY HIM IN THE AFORESAID ORDER IS REPRODUCED BELOW:- A.Y GROSS REVENUE EXPENSES ALLOWED (%) EXPENSES ALLOWED (RS.) TAXABLE INCOME TAX RATE (%) TAX LIABILITY 96-97 54856620 60 32913972 21942648 55 12068456 97-98 66387820 60 39832692 26555128 55 14605320 98-99 72479690 60 43487814 28991876 48 13916100 ITA NOS. 1763 TO 1768 & 4274(DEL)/2005, ITA4434, 4435/07 & 3198 & 3306/2009 4 2.2 THE LD. CIT, DR HAS NO OBJECTION TO QUANTIFYING THE INCOME AS PER THE ORDER OF THE COMPETENT AUTHORITY. HOWEVER, HE SUBMITS THA T THE ISSUE REGARDING CHARGE OF INTEREST IS SUBJECT MATTER OF FURTHER APPEAL BEFO RE HONBLE SUPREME COURT, THEREFORE, HE OPPOSES THE DELETION OF INTEREST U/S 234B. 3. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IN SO FAR AS COMPUTATION OF INCOME IS CONCERNED, THER E IS NO DISPUTE BETWEEN THE ASSESSEE AND THE LD. CIT, DR THAT THEY HAVE TO BE TAKEN AS PER THE ORDER OF THE COMPETENT AUTHORITY DATED 18.12.2011. WE HAVE ALREADY MEN TIONED ABOUT THESE INCOMES WHILE REPRODUCING A PART OF THE ORDER OF THE LD. COMPE TENT AUTHORITY. THE AO IS DIRECTED TO TAKE THE INCOME OF THESE YEARS AS PER HIS ORDER. 3.1 THE ISSUE REGARDING CHARGEABILITY OF INTEREST U/S 234B STANDS COVERED BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CAS E OF JACABS CIVIL INCORPORATED AND MITSUBISHI CORPORATION (SUPRA). RESPECTFULLY FOLLO WING THIS DECISION , IT IS HELD THAT THE ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S 234B. THE SAME IS DELETED. ITA NOS. 1766, 1767, 1968, 4274(DEL)/2005 & ITA NO S. 4434 & 4435(DEL)/2007 4. APART FROM DEDUCTION OF EXPENSES UNDER EIGH T HEADS AND CHARGING OF INTEREST U/S 234B, THESE APPEALS INVOLVE ONE MO RE GROUND REGARDING NON-ASSESSABILITY ITA NOS. 1763 TO 1768 & 4274(DEL)/2005, ITA4434, 4435/07 & 3198 & 3306/2009 5 OF THE ASSESSEE IN RESPECT OF INCOME FROM GROUND H ANDLING AND ENGINEERING SERVICES IN VIEW OF THE PROVISION CONTAINED IN ARTICLE 8 OF T HE DTAA. 4.1 AS MENTIONED EARLIER, THE FINDING OF THE COMPE TENT AUTHORITY IS THAT THE INCOME FROM GROUND HANDLING AND ENGINEERING SERVICES IS NOT ENTITLED TO THE BENEFIT OF ARTICLE 8 OF THE DDTA AND, THEREFORE, SUCH INCOME IS TAXAB LE IN INDIA. THE LD. COUNSEL HAS REQUESTED THAT THIS PART OF THE AGREED DECISION MAY ALSO BE IMPLEMENTED. IN VIEW THEREOF, GROUND NO. 1 TAKEN IN THIS BEHALF IS DI SMISSED. 4.2 IN RESPECT OF DEDUCTION OF EXPENSES, IT IS S EEN THAT APART FROM EXPENDITURE UNDER THE EIGHT HEADS, THE ASSESSEE HAS INCLUDE D LEGAL CERTIFICATION CHARGES, POOL SUPPORT COST AND ENGINEERING DEPARTMENT SUPPOR T COST IN SOME APPEALS. THE LD. COMPETENT AUTHORITY HAS GRANTED AD-HOC DEDUCTION @ 79.47% OF THE RECEIPTS IN ASSESSMENT YEAR 2003-04, AND 60% IN ALL OTHER Y EARS. THE HIGHER DEDUCTION IS ALLOWED IN ASSESSMENT YEAR 2003-04 AS IT HAD ALR EADY BEEN ALLOWED BY THE AO. THE LD. COUNSEL HAS FAIRLY SUBMITTED THAT THE INCOME OF T HESE YEARS MAY BE DETERMINED AS PER THE ORDER OF THE LD. COMPETENT AUTHORITY, TO WHICH THE LD. CIT, DR HAD NO OBJECTION. THEREFORE, THE INCOME FOR THESE YEARS IS DETERMI NED AS PER THE AGREED AMOUNT AS PER THE ORDER OF THE LD. COMPETENT AUTHORITY. THE AO IS DIRECTED TO ADOPT SUCH INCOMES FOR THE RESPECTIVE YEARS, THE DETAILS OF WHICH ARE REPRODUCED BELOW:- A.Y GROSS REVENUE EXPENSES ALLOWED EXPENSES ALLOWED TAXABLE INCOME TAX RATE TAX LIABILITY ITA NOS. 1763 TO 1768 & 4274(DEL)/2005, ITA4434, 4435/07 & 3198 & 3306/2009 6 (%) (RS.) (%) 99-00 96223970 60 57734382 38489588 48 18475002 2000- 01 124617280 60 74770368 49846912 48 23926518 2001- 02 140762270 60 84457362 56304908 48 27026356 2002- 03 140983890 60 84590334 56393556 48 27068907 2003- 04 104768079 79.47 83259192 820341050 42 176788487 2004- 05 178525189 60 107115113 71410076 41 29278131 4.3 AS IN EARLIER YEARS, IT IS HELD THAT THE ASS ESSEE IS NOT LIABLE TO PAY INTEREST U/S 234B. ITA NOS. 3138 & 3306(DEL)/2009 5. THESE ARE THE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE. THE ASSESSEE HAS TAKEN UP GROUNDS REGARDING ITS ASSESSABILITY IN INDIA AND DEDUCTION OF EXPENDITURE BY WAY OF POOL SUPPORT COST AND ENGINEERING DEPAR TMENT SUPPORT COST. THESE MATTERS STAND COVERED BY THE ORDER OF THE COMPETENT AUTH ORITY. IT HAS BEEN HELD THAT THE INCOME FROM GROUND HANDLING AND ENGINEERING SERVIC ES SOURCED IN INDIA IS OUTSIDE THE ITA NOS. 1763 TO 1768 & 4274(DEL)/2005, ITA4434, 4435/07 & 3198 & 3306/2009 7 PURVIEW OF ARTICLE 8 OF THE DTAA, AND THE ASSES SEE IS ENTITLED TO DEDUCT 60% OF SUCH RECEIPTS BY WAY OF EXPENDITURE IN COMPUTING THE TO TAL INCOME. THE AO IS DIRECTED TO COMPUTE THE INCOME ACCORDINGLY. 5.1 THE REVENUE HAS ALSO TAKEN A GROUND THAT TH E LD. CIT(APPEALS) ERRED IN ALLOWING VARIOUS EXPENSES IGNORING THE FACT TH AT SUCH EXPENSES DID NOT HAVE ANY DIRECT NEXUS WITH THE INCOME TAXABLE IN INDIA. AS MENTIONED EARLIER, THE LD. COMPETENT AUTHORITY HAS ALLOWED AD-HOC DEDUCTION O F 60% IN RESPECT OF THE EXPENSES. THEREFORE, THIS APPEAL IS ALSO DISPOSED OFF ACC ORDINGLY. FOR THE SAKE OF READY REFERENCE, THE RELEVANT PORTION OF THE ORDER OF TH E COMPETENT AUTHORITY DETERMINING THE INCOME AND TAX IS REPRODUCED BELOW:- A.Y GROSS REVENUE EXPENSES ALLOWED (%) EXPENSES ALLOWED (RS.) TAXABLE INCOME TAX RATE (%) TAX LIABILITY 2005- 06 138435718 60 83061431 55374287 41.82 23157527 6. IN THE RESULT, ALL THE APPEALS ARE PARTLY AL LOWED. SD/- SD/- (A.D. JAIN) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA ITA NOS. 1763 TO 1768 & 4274(DEL)/2005, ITA4434, 4435/07 & 3198 & 3306/2009 8 COPY OF THE ORDER FORWARDED TO:- BRITISH AIRWAYS PLC., GURGAON.. ADIT/ DY. DIT, CIRCLE 1(1), INTL. TAXATION, NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.