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2015 (11) TMI 1454 - HC - Income TaxApplicability of section 44BBA - AO held that in terms of Section 44BBA, 5% of the gross receipts were to be deemed to be taxable income on a presumptive basis - Whether ITAT was correct in law in holding that Royal Jordanian Airlines is liable to be taxed in India under the Income Tax Act, 1961 for the assessment years1994-95, 1995-96, 1996-97 and 2000-0I? - Held that:- Consequent upon the above order dated 29th August 2008, the AO passed separate orders for each of the AYs 1994-95 to 1998-99 and 2000-01 on 16th October 2009 noting that RJA had produced all the necessary bills and invoices etc, in support of the computation of losses in its profit and loss accounts. Accordingly, the AO accepted the income to be nil. It is significant that the Revenue has accepted the order dated 29th August 2008 as well as 29th March 2009 passed by the ITAT and not challenged the said orders by filing appeals before this Court. As a result, the consequential order of the AO dated 16th October 2009 accepting the income of RJA to be nil for AYs 1994-95 to 1998-99 and 2000-01 has also attained finality. Consequently, the question framed in these appeals for AYs 1994-95 to 1996-97 and 2000-01 as regards the liability of RJA to tax under the Act has been rendered academic. As regards the appeal of the Revenue for the AYs 1989-90 to 1993-94, with the Revenue having accepted the interpretation of Section 44BBA qua RJA for the AYs 1994-95 to 2000-01, the same would apply even as regards AYs 1989-90 to 1993-94. In as much as Section 44BBA is not charging provision, but only a machinery provision, it cannot preclude an Assessee from producing books of accounts to show that in any particular AY there is no taxable income. The Court, therefore, concurs with the view expressed in this regard by the ITAT in its order dated 29th August 2008, which in any event has not been challenged by the Revenue and has attained finality. In other words, the Court concurs with a view that where there is no income, Section 44BBA cannot be applied to bring to tax the presumptive income constituting 5% of the gross receipts in terms of Section 44BBA(2) of the Act. No doubt, for that purpose the Assessee has to produce books of accounts to substantiate that it has incurred losses or that its assessable income is less than its presumptive income, as the case may be. The ITAT has noted the factual position regarding the losses incurred by RJA for the mentioned years. This has not been disputed by the Revenue in its appeal against the aforesaid order. Consequently, the question of RJA being asked to pay tax on presumptive basis under Section 44BBA for the said year, or the matters being sent to the AO for verifying the said facts does not arise. On application of Section 44BBA of the Act, there is no taxable income of RJA for the AYs covered by the said appeals. - Decided against revenue. Reopening of assessment - Held that:- Apart from the fact that no particular reason has been shown by the Revenue for not dropping the notice under Section 148 of the Act for AYs 1999-2000 and 2001-02, the Revenue also appears to have overlooked the fact that effective from 1st April 1999, there is a Double Taxation Avoidance Agreement (‘DTAA’) between Jordan and India. The financial position as regards the relevant financial year 2001-02 is also one where RJA has suffered losses. Therefore, in any event, the question of RJA having any taxable income for AY 2001-02 or being amenable to income tax does not arise. As regards the notice under Section 148 for AY 1999-2000, the Court finds that it was issued even while the proceedings which commenced with the notice under Section 143(2) of the Act issued on 26th December 2000 were not yet closed. In other words, even without passing the further consequential order under Section 143(3) of the Act, a notice under Section 148 of the Act was issued to RJA on 23rd February 2006 asking it to file a return for AY 1999-2000. This was impermissible in law and there are at least two decisions of this Court that support the Assessee. These are KLM Royal Dutch Airlines v. Additional Director of Income Tax (2007 (1) TMI 138 - DELHI High Court ) and Commissioner of Income Tax v. Ved & Co. (2007 (2) TMI 212 - DELHI HIGH COURT ). This is, therefore, another reason why the notice under Section 148 of the Act for AY 1999-2000 is unsustainable in law. - Decided in favour of assessee
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