FEDERAL EXPRESS CORPORATION, MUMBAI V. ADIT (IT) 3(2), MUMBAI

ITA 7813/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4097 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 25-07-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH KANTU
• Assessee Lawyers: NARENDER KUMAR
• Keywords: Double taxation relief; Assessment record
• Section: 194C

Judgement Text

, IN THE IN IN THE IN IN THE IN IN THE INCOME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL L LL L BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI . , !' !' !' !' , . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI B. R B. R B. R B. RAMAKOTAIAH AMAKOTAIAH AMAKOTAIAH AMAKOTAIAH, AM , AM , AM , AM & && & SHRI SHRI SHRI SHRI VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, ,, , JM JMJM JM ./ I.T.A. N I.T.A. N I.T.A. N I.T.A. NO. O.O. O.7813 7813 7813 7813/MUM/2010 /MUM/2010 /MUM/2010 /MUM/2010 ( #$ #$ #$ #$ % % % % / ASSESSMENT YEAR: 2005-06) M/S FEDERAL EXPRESS CORPORATION, CHEMTEX HOUSE, MAIN STREET, HIRANANDANI GARDENS, POWAI MUMBAI-400076 $ $ $ $ / VS. DDIT (IT)-3(2), SCINDIA HOUSE, R. NO.132, 1 ST FLOOR, N. M. ROAD, MUMBAI-400038 ( &' / APPELLANT APPELLANT APPELLANT APPELLANT) ( ()&' / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.7880/MUM/2010 7880/MUM/2010 7880/MUM/2010 7880/MUM/2010 ( #$ #$ #$ #$ % % % % / ASSESSMENT YEAR: 2005-06) DDIT (IT)-3(2), SCINDIA HOUSE, R. NO.132, 1 ST FLOOR, N. M. ROAD, MUMBAI-400038 $ $ $ $ / VS. M/S FEDERAL EXPRESS CORPORATION, CHEMTEX HOUSE, MAIN STREET, HIRANANDANI GARDENS, POWAI MUMBAI-400076 & ./ '* ./ PAN/GIR NO. : AAACF4135E ( &' / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( ()&' / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) &' &' &' &' + + + + / APPELLANT BY : MR. NARENDER KUMAR ()&' ()&' ()&' ()&' , ,, , + + + + /RESPONDENT BY : MR. PORUS KAKA & MR. MANISH KANTU $ $ $ $ , ,, , - - - - / DATE OF HEARING : 25 TH JULY 2013 .% .% .% .% , ,, ,- - - - /DATE OF PRONOUNCEMENT: 31 ST JULY 2013 / / O R D E R PER : !' , . . / VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 31.8.2010 OF THE COMMISSIONER OF INCOME TAX(APPEALS) FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 2 A. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE APPELLANT RESPECTFULLY SUBMITS THAT THE LEARNED COM MISSIONER OF INCOME-TAX (APPEALS) 10 HAS IN HIS ORDER UNDER SE CTION 250 OF THE INCOME-TAX ACT, 1961 (THE ACT) ERRED: 1. IN DENYING THE EXEMPTION UNDER ARTICLE 8 OF THE INDIA-US DOUBLE TAXATION AVOIDANCE AGREEMENT (TREATY) ON R EVENUE ATTRIBUTABLE TO TRANSPORTATION OF CARGO IN THE INTE RNATIONAL TRAFFIC THROUGH AIRCRAFTS OWNED BY THIRD PARTY AIRL INES (INCLUDING ANY GROUND TRANSPORTATION ASSOCIATED THE RETO), THEREBY TAXING THE SAME AS PER THE PROVISIONS OF AR TICLE 7 OF THE TREATY. 2. IN ARBITRARILY ENHANCING THE RATIO OF COMMERCIAL LINEHAUL CHARGES (CLC) TO TOTAL LINEHAUL CHARGES (TLC), USED FOR COMPUTING THE REVENUE AND CONSEQUENTLY THE INCOME ASSOCIATED WITH TRANSPORTATION THROUGH THIRD PARTY AIRLINES, FROM 6.4 PERCENT (PROVIDED BY THE APPELLANT WHICH W AS SUPPORTED BY AN CHARTERED ACCOUNTANTS REPORT) TO 1 0 PERCENT; WHICH IS CONTRARY TO THE PROVISIONS OF RUL E 10 OF THE INCOME-TAX RULES, 1962 (RULES). 3. IN ENHANCING THE PROFIT RATE, USED TO DETERMINE THE INCOME ATTRIBUTABLE TO TRANSPORTATION OF CARGO IN THE INTE RNATIONAL TRAFFIC THROUGH AIRCRAFTS OWNED BY THIRD PARTY AIRL INES, FROM 6.14 PERCENT [DETERMINED ON A PRO-RATA BASIS AND UN DER SUPPORT OF THE PROVISIONS OF RULE 10 OF THE RULES] TO 6.74 PERCENT. 4. IN UPHOLDING THE DISALLOWANCE OF RS 147,716,213 MADE BY THE ASSISTANT DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) RANGE 3(2) (ASSESSING OFFICER) ON ACCOUNT OF NO N DEDUCTION OF TAX UNDER SECTION 40(A)(IA) OF THE ACT IN RELATION TO PAYMENTS MADE TO FOLLOWING PARTIES: PARTICULARS AMOUNT (RS) PRAKASH AIR FREIGHT PRIVATE LIMITED (PAFEX) 100,858,696 JET AIRWAYS AND INDIAN AIRLINES 46,857,517 5. IN DISALLOWING THE ENTIRE AMOUNT OF PAYMENTS MAD E TO PAFEX, JET AIRWAYS AND INDIAN AIRLINES UNDER SECTIO N 40(A)(IA) OF THE ACT INSTEAD OF A PROPORTIONATE DISALLOWANCE IN RESPECT OF TRANSPORTATION OF CARGO USING THIRD PARTY AIRCRA FTS ON WHICH BENEFIT OF ARTICLE 8 OF THE TREATY HAS BEEN DENIED. B. BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE APPELLANT RESPECTFULLY SUBMITS THAT THE LEARNED ASSESSING OFF ICER HAS ERRED IN DISREGARDING THE PROVISIONS OF SECTION 208 OF TH E ACT AND ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 3 CONSEQUENTLY, LEVYING INTEREST UNDER SECTION 2348 O F THE ACT. 3. GROUND NO. 1 TO 3: AT THE TIME OF HEARING THE LD . SENIOR COUNSEL FOR THE ASSESSEE HAS SUBMITTED FOR THE ISSUE REGARDING BENEFIT OF ARTICLE 8 OF THE INDO-US DTAA IN RESPECT OF THE REVENUE ATTRIBUT ABLE TO TRANSPORT OF CARGO THROUGH THE SPACE BOOKED WITH OTHER AIRLINES HAS BEEN SETTLED UNDER MUTUAL AGREEMENT PROCEDURE (MAP) WHEREBY IT WAS AGR EED BETWEEN THE PARTIES/STATES THAT THE REVENUE ATTRIBUTABLE TO TRA NSPORTATION BY THIRD PARTY PLANE/AIRCRAFT IS TAXABLE. THE LD. COUNSEL HA S FILED THE LETTER DATED 12.4.2012 OF ASSISTANT DIT (INTERNATIONAL TAXATION) ALONG WITH THE MUTUAL AGREEMENT BY THE COMPETENT AUTHORITIES AND SUBMITTE D THAT IN VIEW OF THE SETTLEMENT UNDER MAP, THE GROUND NO. 1 TO 3 BECOME INFRACTIOUS AND ACCORDINGLY THE ASSESSEE DOES NOT PRESS THE SAME. T HE LD. DR HAS NOT DISPUTED THE FACT THAT THE ISSUE RAISED IN GROUND N O. 1 TO 3 HAS BEEN SETTLED UNDER MAP. ACCORDINGLY, GROUND NO. 1 TO 3 A RE DISMISSED AS NOT PRESSED IN VIEW OF THE SETTLEMENT UNDER MAP. 4. GROUND NO. 4 AND 5 REGARDING DISALLOWANCE U/S 40 (A)(IA) OF THE INCOME TAX ACT IN RELATION TO THE PAYMENT MADE TO P RAKASH AIR FREIGHT PVT. LTD., JET AIRWAYS AND INDIAN AIRLINES. THE ASS ESSEE IS A TAX RESIDENT OF USA AND ENGAGED IN THE BUSINESS ACTIVITY TO UNDERTA KE SCHEDULED AIR CARGO OPERATIONS IN INDIA AS PER THE APPROVAL GRANT ED BY DGCA AND RBI. THE BUSINESS OF THE ASSESSEE COMPRISES OF A COMBINA TION OF DOOR TO DOOR AND AIRPORT TO AIRPORT TRANSPORTATION OF GOODS/PACK AGES. ALL DOMESTIC HANDLING OPERATIONS HAVE BEEN CONTRACTED TO AN INDE PENDENT ENTITY M/S ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 4 PRAKASH AIR FREIGHT PVT. LTD. THE ASSESSEE HAS ENTE RED INTO A CONTRACT IN THIS RESPECT. THE ASSESSEE ALSO BOOKED SPACE IN THE AIRCRAFTS OF JET AIRWAYS AND INDIAN AIRLINES FOR TRANSPORTATION OF G OODS/PACKAGES. THE AO HAS DISALLOWED INTER ALIA THE PAYMENT MADE TO M/S PRAKASH AIR FREIGHT PVT. LTD. (SUPRA) OF ` 1,08,58,696/- AND THE PAYMENT TO JET AIRWAYS AND INDIAN AIRLINES OF ` 4,68,57,517/- U/S 40(A)(IA) FOR NON-D EDUCTION OF TAX BECAUSE THE ASSESSEE FAILED TO PRODUCE THE RELEVANT EVIDENC E TO SHOW THAT THE TAX HAS BEEN DEDUCTED AT SOURCES ON THE PAYMENTS MADE T O THEM. ON APPEAL, BEFORE CIT(A) THE ASSESSEE CONTENDED THAT THE TDS W AS DEDUCTED IN RESPECTS THE PAYMENT MADE TO PRAKASH AIR FREIGHT PV T. LTD., HOWEVER, DUE TO THE RELEVANT RECORD DESTROYED IN FLOOD THE COPY OF TDS RETURN COULD NOT SUBMITTED. THE ASSESSEE FILED A COPY OF PANCHNAMA L ODGED WITH THE POLICE AUTHORITIES IN THIS RESPECT THAT THE RELEVANT RECOR D WAS DESTROYED IN FLOOD. THE ASSESSEE HAS ALSO FILED A LETTER FROM PRAKASH A IR FREIGHT PVT. LTD. TO CONFIRM THAT TDS WAS DONE ON PAYMENT MADE BY THE AS SESSEE. HOWEVER, THE CIT(A) DID NOT ENTERTAIN THE ADDITIONAL EVIDENC E AND CONFIRM THE DISALLOWANCE MADE BY THE AO ON THE GROUND THAT THE ASSESSEE HAS FAILED TO SUBMIT THE REQUIRED INFORMATION, SUPPORTING DOCU MENTARY EVIDENCE SUCH AS COPIES OF TDS DEDUCTION FROM PRAKASH AIR FR EIGHT PVT. LTD. AS REGARDS THE PAYMENT MADE TO JET AIRWAYS AND INDIAN AIRLINES, THE CIT(A) CONFIRM THE DISALLOWANCE BY HOLDING THAT THE PAYMEN TS ARE IN THE NATURE OF CONTRACTUAL PAYMENT LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE INCOME TAX ACT. ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 5 5. BEFORE US THE LD. SENIOR COUNSEL HAS SUBMITTED T HAT AS REGARD THE PAYMENT MADE TO THE PRAKASH AIR FREIGHT PVT. LTD., THE ASSESSEE HAS DULY DEDUCTED THE TAX AT SOURCE BUT DUE TO THE RELEVANT RECORD WAS DAMAGED IN THE FLOOD, THE ASSESSEE COULD NOT PRODUCE THE SAME BEFORE THE AUTHORITIES. HOWEVER, THE PANCHNAMA LODGED WITH POLICE AUTHORITI ES DATED 3.8.2005 AND CONFIRMATION LETTER FROM PRAKASH AIR FREIGHT PV T. LTD. WERE PRODUCED BEFORE THE CIT(A) TO SHOW THAT THE PAYMENTS WERE MA DE AFTER DEDUCTION OF TAX. HE HAS ALSO FILED A COPY OF RETURN OF INCOM E, DEMAND U/S 156 AND COMMUNICATION OF ACCEPTANCE OF RETURN U/S 143(1) IN CASE OF M/S PRAKASH AIR FREIGHT PVT. LTD. FOR THE ASSESSMENT YEAR 2005- 06 AND SUBMITTED THAT A CREDIT OF TDS TO ` 100,37,910/- WAS GIVEN TO THE PR AKASH AIR FREIGHT PVT. LTD. WHICH SHOWS THAT THE PAYMENTS RECEIVED BY M/S PRAKASH AIR FREIGHT PVT. LTD. WERE AFTER DEDUCTION OF TAX. HE HAS FURTH ER SUBMITTED THAT WHEN THE ASSESSEE HAD PRODUCED EVIDENCE TO SHOW THAT THE RELEVANT RECORD OF THE ASSESSEE WAS DAMAGED IN FLOOD THEN THE AO SHOUL D HAVE VERIFIED THE DEDUCTION OF TAX BY THE ASSESSEE FROM THE DEPARTMEN TS RECORD AS WELL AS FROM THE ASSESSMENT RECORD OF PRAKASH AIR FREIGHT P VT. LTD. THUS, THE LD. SENIOR COUNSEL HAS SUBMITTED THAT THE ADDITIONAL EV IDENCE FILED BY THE ASSESSEE BEFORE THE CIT(A) SHOULD HAVE BEEN CONSIDE RED BY THE AUTHORITIES BELOW AND ACCORDINGLY THE FACT OF DEDUC TION OF TAX BY THE ASSESSEE IN RESPECT OF THE PAYMENT OF PRAKASH AIR FREIGHT PVT. LTD. SHOULD HAVE BEEN VERIFIED FROM THE RELEVANT RECORD WITH TH E DEPARTMENT. THE LD. SENIOR COUNSEL HAS PLEADED THAT THE NECESSARY DIREC TIONS TO BE ISSUED TO THE AO TO VERIFY THE CLAIM OF THE ASSESSEE THAT THE TDS WAS DEDUCTED ON PAYMENT TO M/S PRAKASH AIR FREIGHT PVT. LTD. ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 6 6. AS REGARDS THE PAYMENT TO JET AIRWAYS AND INDIAN AIRLINES THE LD. SENIOR COUNSEL HAS SUBMITTED THAT FOR THE ASSESSMEN T YEARS 1998-99, 1999-2000 AND 2001-02 THIS TRIBUNAL VIDE ORDER DATE D 29.1.2009 HELD THAT THE TRANSPORTATION OF CARGO IN THE INTERNATIONAL TR AFFIC THROUGH AIRCRAFTS WHICH WERE NOT OWNED/CHARTERED/LEASED BY THE ASSESS EE WOULD BE OUTSIDE THE SCOPE OF ARTICLE 8(2) AND CONSEQUENTLY THE REVE NUE FROM THE TRANSPORTATION OF SUCH CARGO WOULD NOT BE EXEMPT FR OM TAX UNDER ARTICLE 8(1). ACCORDINGLY, THE CLAIM OF THE ASSESSEE WAS DI RECTED TO EXAMINE BY THE AO. THUS, THE ISSUE WAS REMANDED TO THE AO ON T HE QUESTION WHETHER THE TRANSPORTATION THROUGH A SPACE BOOKED WITH OTHE R AIRLINES CAN BE SAID AS TRANSPORTATION BY THE AIRCRAFT CHARTERED BY THE ASSESSEE. IN THE MAP PROCEEDING IT HAS BEEN AGREED THAT THE SAID REVENUE FOR TRANSPORTATION OF CARGO BY BOOKING THE SPACE IN OTHER AIRLINES IS TAX ABLE BECAUSE THE TRANSPORTATION WAS NOT BY THE AIRCRAFT CHARTERED BY THE ASSESSEE. THE LD. SENIOR COUNSEL HAS SUBMITTED THAT WHEN BOTH THE PAR TIES HAVE AGREED ON THIS FACT THE PROVISIONS OF SECTION 194C ARE NOT AP PLICABLE IN RESPECT OF SUCH PAYMENT IN VIEW OF THE CBDT CIRCULAR NO. 713 D ATED 2.8.1995 WHEREBY THE BOARD HAS CLARIFIED THAT THE PROVISIONS OF SECTION 194C DO NOT APPLY TO THE PAYMENTS MADE TO THE AIRLINES OR TRAVE L AGENTS FOR PURCHASE OF TICKETS FOR AIR TRAVEL OF PASSENGERS OF INDIVIDU ALS. IT HAS BEEN FURTHER CLARIFIED THAT THE PROVISION SHALL APPLY ONLY WHEN THE PAYMENTS ARE MADE FOR CHARTERING AN AIRCRAFT FOR CARRIAGE OF PASSENGE RS OR GOODS. WHEN THE ASSESSEE HAS NOT CHARTERED THE AIRCRAFT THEN SECTIO N 194C WOULD NOT APPLY. THUS, THE LD. SENIOR COUNSEL HAS SUBMITTED T HAT WHEN THE ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 7 EXEMPTION UNDER ARTICLE 8(2) OF THE DTAA IS DENIED BY HOLDING THAT THE ARRANGEMENTS OF THE ASSESSEE WITH THIRD PARTY CARRI ERS DO NOT AMOUNT TO CHARTERING THEN THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE AND CONSEQUENTLY THERE IS NO IN QUESTION OF DISALLOWANC E U/S 40(A)(IA). 7. ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THAT DESPITE THE SPECIFIC QUERIES BY THE AO THE ASSESSEE DID NOT FUR NISH THE RELEVANT RECORD TO SHOW THAT THE TAX WAS DEDUCTED AT SOURCE IN RESP ECT OF THE PAYMENT MADE TO PRAKASH AIR FREIGHT PVT. LTD. HE HAS FURTHE R SUBMITTED THAT THE ASSESSEE COULD HAVE OBTAINED THE COPIES OF THE TDS FROM THE PRAKASH AIR FREIGHT PVT. LTD. TO SUBSTANTIATE ITS CLAIM THAT TH E TDS WAS DEDUCTED. THE LD. DR HAS FURTHER CONTENDED THAT FROM THE RETURN O F INCOME AND COMMUNICATION OF ACCEPTANCE OF RETURN U/S 143(1), I T IS NOT CLEAR THAT THE TDS CREDIT GIVEN RELATES TO THE PAYMENTS MADE BY TH E ASSESSEE. THEREFORE, THE SAID RECORD CANNOT BE RELIED UPON. A S REGARDS THE PAYMENT TO JET AIRWAYS AND INDIAN AIRLINES THE SAME WERE NO T FOR BOOKING THE SPACE ONLY FOR A SINGLE OCCASION OR SOME OCCASIONS BUT IT WAS A REGULAR ONGOING ARRANGEMENTS BY THE ASSESSEE WITH THESE AIRLINES AN D THEREFORE THE NATURE OF ARRANGEMENTS WITH THIRD PARTY IS NOTHING BUT A CONTRACT AND PAYMENTS MADE ON ACCOUNT OF CONTRACTUAL OBLIGATION ARE LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 194C OF THE INCOME T AX ACT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL PRODUCED BEFORE US WE FIND THAT THE PAYMENT MADE TO PRAKASH AIR FREIGHT ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 8 PVT. LTD. IS UNDISPUTEDLY UNDER AN AGREEMENT AND TH EREFORE, SUBJECT TO DEDUCTION OF TAX U/S 194C. THE ASSESSEE DID NOT FIL E ANY RECORD BEFORE THE AO TO SHOW THAT TDS WAS DEDUCTED IN RESPECT OF THE PAYMENT MADE TO PRAKASH AIR FREIGHT PVT. LTD. HOWEVER, BEFORE THE C IT(A) THE ASSESSEE FILED A COPY OF COMPLAINT LODGE WITH THE POLICE AUTHORITI ES REGARDING DESTROY OF RECORD IN FLOOD AS WELL AS A LETTER FROM PRAKASH AI R FREIGHT PVT. LTD. CONFIRMING DEDUCTION OF TDS. THE CIT(A) DID NOT ADM IT THE SAID EVIDENCE FILED BY THE ASSESSEE. BEFORE US THE ASSESSEE HAS A LSO FILED A COPY OF RETURN OF INCOME AND COMMUNICATION OF INCOME TAX CO MPUTATION WHEREIN CREDIT OF TDS OF ` 100,37,910/- AS PER 143(1) WAS S HOWN TO BE GIVEN. HOWEVER, IT IS NOT POSSIBLE TO ASCERTAIN FROM THE S AID FIGURE OF TDS WHETHER ANY PART OF THE SAID AMOUNT PERTAINS TO THE PAYMENTS MADE BY THE ASSESSEE TO M/S PRAKASH AIR FREIGHT PVT. LTD. T HUS, FROM THE RECORD PRODUCED BEFORE US IT CANNOT BE ASCERTAIN CONCLUSIV ELY THAT THE ASSESSEE HAS ACTUALLY DEDUCTED THE TDS ON THE PAYMENT MADE T O THE PRAKASH AIR FREIGHT PVT. LTD. FURTHER THE AMOUNT OF TDS ON THE PAYMENT IN QUESTION IS ALSO NOT KNOWN. IN THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN THE INTEREST OF JUSTICE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER TO VERIFY THE RELEVANT RECORD INCLUDING THE ASSESSMENT RECORD OF PRAKASH AIR FREIGHT PVT. LTD. AS WELL AS RELEVANT R ECORD OF THE DEPARTMENT. THE ASSESSEE IS ALSO DIRECTED TO FILE THE LEDGER AC COUNT OF THE RESPECTIVE PARTIES IN THE BOOKS OF ACCOUNT OF EACH OTHER SHOWI NG THE PAYMENT AND RECEIPTS OF THE AMOUNT AFTER TDS. AFTER EXAMINING T HE RELEVANT RECORD THE AO SHALL DECIDE THIS ISSUE AS PER LAW. ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 9 9. AS REGARDS THE PAYMENT TO JET AIRWAYS AND INDIAN AIRLINES ARE CONCERNED UNDISPUTEDLY THE ARRANGEMENT OF THE ASSES SEE WITH THESE AIRLINES/CARRIERS ARE NOT FOR TRANSPORTATION OF GOO DS BY AIRCRAFT CHARTERED BY THE ASSESSEE AS IT IS CLEAR FROM THE ORDER OF TH IS TRIBUNAL DATED 29.1.2009 FOR THE ASSESSMENT YEAR 1998-99, 1999-200 0 AND 2001-02 AND SUBSEQUENT SETTLEMENT UNDER MUTUAL AGREEMENT PROCED URE (MAP). THUS ON THE POINT OF APPLICABILITY OF SECTION 194C THE C IRCULAR NO. 713 DATED 2.8.1995 IS RELEVANT WHICH READS AS UNDER: 1258. CLARIFICATION REGARDING APPLICABILITY OF SECT ION 194C IN 1258. CLARIFICATION REGARDING APPLICABILITY OF SECT ION 194C IN 1258. CLARIFICATION REGARDING APPLICABILITY OF SECT ION 194C IN 1258. CLARIFICATION REGARDING APPLICABILITY OF SECT ION 194C IN CASE OF TICKETS SOLD BY AIR CASE OF TICKETS SOLD BY AIR CASE OF TICKETS SOLD BY AIR CASE OF TICKETS SOLD BY AIRLINES AND TRAVEL AGENTS TO LINES AND TRAVEL AGENTS TO LINES AND TRAVEL AGENTS TO LINES AND TRAVEL AGENTS TO CUSTOMERS CUSTOMERS CUSTOMERS CUSTOMERS 1. THE FINANCE ACT, 1995 HAS AMENDED THE PROVISION S REGARDING TAX DEDUCTION AT SOURCE CONTAINED IN SECTION 194C O F THE INCOME- TAX ACT. AS PER THE AMENDED PROVISIONS, DEDUCTION O F TAX AT SOURCE IS TO BE MADE, INTER ALIA, FROM PAYMENTS MADE IN RE SPECT OF CONTRACTS FOR CARRIAGE OF GOODS AND PASSENGERS BY A NY MODE OF TRANSPORT OTHER THAN RAILWAYS. 2. A NUMBER OF QUERIES HAVE BEEN RECEIVED AS TO WHE THER TAX HAS TO BE DEDUCTED AT SOURCE FROM PAYMENTS TO TRAVEL AG ENTS OR THE AIRLINES FOR PURCHASE OF TICKETS FOR TRAVEL BY AIR. 3. THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS CLARIFIED THAT THE PROVISIONS OF SECTION 194C DO NOT APPLY TO THE PAYMENTS MADE TO THE AIRLINES OR THE TRAVEL AGENTS FOR PURCHASE O F TICKETS FOR AIR TRAVEL OF INDIVIDUALS. THE PROVISIONS SHALL, HOWEVE R, APPLY WHEN PAYMENTS ARE MADE FOR OF GOODS. 4. THE CLARIFICATION IN PARA 3 (ABOVE) SHALL APPLY MUTATIS MUTANDIS TO THE TICKETS FOR TRAVEL OF INDIVIDUAL BY ANY OTHE R MODE OF TRANSPORT ALSO. 10. AS IT HAS BEEN CLARIFIED BY THE BOARD THAT THE PROVISIONS OF SECTION 194C DO NOT APPLY TO THE PAYMENT MADE TO THE AIRLIN ES OR THE AGENTS FOR PURCHASE OF TICKETS FOR AIR TRAVEL OF INDIVIDUALS E XCEPT THE PAYMENTS ARE MADE FOR CHARTERING AN AIRCRAFT FOR CARRIAGE OF PAS SENGERS OR GOODS. WHEN ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 10 THE PAYMENTS IN QUESTION ARE NOT FOR TRANSPORTATION OF GOODS BY CHARTERING THE AIRCRAFT AND FURTHER NOTHING HAS BEEN BROUGHT O N RECORD TO SHOW THAT THE ASSESSEE HAS MADE THIS PAYMENT UNDER A CONTRACT THEN THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE ON THESE PAYMENT S. ACCORDINGLY, THE ASSESSEE WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAX AT SOURCE AS PER SECTION 194C IN RESPECT OF PAYMENTS MADE TO JET AIR WAYS AND INDIAN AIRLINES AND CONSEQUENTLY THE DISALLOWANCE U/S 40(A )(IA) IS NOT CALLED FOR. HENCE, WE DELETE THE ADDITION MADE BY THE AO BY INV OKING THE PROVISIONS OF SECTION 40(A)(IA) IN RESPECT THE PAYMENT MADE TO JET AIRWAYS AND INDIAN AIRLINES. ITA NO. 7880/M/2010 ITA NO. 7880/M/2010 ITA NO. 7880/M/2010 ITA NO. 7880/M/2010 11. THE REVENUE HAS RAISED THE ONLY GROUND AS UNDE R: ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS IGNORED THE DETAILED REASONING OF THE A. O. AND ERRED IN DIRECTING THE A.O. TO ESTIMATE THE RATIO OF COMMERC IAL LINE HAUL CHARGES 2 10% INSTEAD OF @ 25% AS ESTIMATED BY THE A.O. IGNORING THE PROVISIONS OF RULE 10. 12. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. BOTH THE PARTIES HAVE ADMITTED THIS FACT THAT THE ISSUE INVOLVED IN THE REVENUES APPEAL HAS BEEN SETTLED UNDER MAP AND THEREFORE THE APPEAL OF THE REVENUE BECOMES INFRUCT UOUS. IN VIEW OF THE FACT THAT THE ISSUE RAISE IN THE REVENUES APPEAL HA S ALREADY BEEN SETTLED BETWEEN PARTIES AS PER THE MAP THE APPEAL OF THE RE VENUE DOES NOT SURVIVE BEING INFRUCTUOUS AND ACCORDINGLY DISMISSED . ITA NO. 7813 & 7880/M/2010 FEDERAL EXPRESS CORPORATION 11 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF JULY 2013 / , .% 1 2$3 31 ST ' , 4 SD/- SD/- ( . ) (B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( !' ) # (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 31 ST JULY 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR ` /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI