TMI Blog2015 (11) TMI 1454X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006 - - - Dated:- 24-11-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr Rohit Madan, Mr Zoheb Hossain and Mr Akash Vajpai, Advocates For the Respondent : Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate ORDER Dr. S. Muralidhar,J. Introduction 1. ITA No. 159 of 2002 is an appeal by the Revenue against the order dated 2nd November 2001 of the Income Tax Appellate Tribunal ( ITAT ) in ITA Nos.790-794/Del/96 for Assessment Years ('AYs') 1989-90 to 1993-94. 2. ITA No.278 of 2006 by the Assessee, Royal Jordanian Airlines ( RJA ) is directed against the order dated 31st August 2005 of the ITAT in ITA No. 1786/De/2000 for the AY 1996-97, ITA No. 279 of 2006 by RJA is directed against the order dated 31st August 2005 of the ITAT in ITA No.5252/Del/98 for the AY 1995-96, ITA No. 280 of 2006 by RJA is directed against the order dated 31st August 2005 of the ITAT in ITA No. 4670/Del/03 for the AY 2000-01 and ITA No. 580 of 2006 by RJA is against the order dated 31st August 2005 of the ITAT in ITA No. 3805/Del/99 for the AYs 1994-95. 3. Apart from the above appeals, two writ petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of Section 44BBA of the Act and in response to another notice under Section 142(1) in respect of AY 1993-94, RJA filed its return for the aforementioned AYs 1989-90 to 1993-94. RJA disclosed its gross receipts as well as its expenses, apart from the commission paid to its agents. It pointed out that it had been paying income tax to the Government account since September 1993 in order to obtain a 'No Objection Certificate' for remittance of sales proceeds calculated on the basis of gross receipts less commission under Section 44BBA of the Act. The Assessing Officer ( AO ), nevertheless, proceeded to pass orders on 28th February 1994, in respect of AYs 1990-91 to 1993-94 holding that in terms of Section 44BBA, 5% of the gross receipts were to be deemed to be taxable income on a presumptive basis. For the AY 1989-90, a similar order was passed by the AO on 31st March 1994. 8. Aggrieved by the above assessment orders, RJA filed appeals before the Commissioner of Income Tax (Appeals) [ CIT (A)]. By a common order dated 4th December 1995, the CIT (A) allowed the appeals on the short ground that RJA was not liable to tax as its entire income was in fact the income of the Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 44BBA could not have been applied to Assessee. Therefore, there was no alternative but, to cancel the assessment and direct the refund of amount of tax paid . As a result, RJA s appeals were allowed. 13. It is against the above order dated 2nd November 2001 of the ITAT that the Revenue has filed ITA No. 159 of 2002 in this Court. While admitting the said appeal on 15th November 2002, the following question of law was framed by this Court for consideration: Whether the tribunal was correct in law in holding that Royal Jordanian Airlines was not liable to taxed in India under the Income Tax Act, 1961, in respect of the assessment years 1989-90 to 1993-94. Facts concerning AYs 1994-95 to 1996-97 and 2000-01 14. For the AYs 1994-95, 1995-96, 1996-97 and 2000-01 RJA filed its return of income declaring nil income. Nonetheless, the AO framed assessment under Section 143(3) of the Act on 14th March 1997, holding that RJA is a foreign company and is liable to pay tax in India, in terms of Section 44BBA of the Act. The AO proceeded to determine income @5% of the net sales and assessed the income of RJA for AY 1994-95 at ₹ 2,09,01,800. For AY 1995-96, a simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals for AYs 1994-95 and 2000-01 that the Income Tax authority had erred, for the purposes of Section 44BBA of the Act, in not reducing the gross sales by the commission paid to its agents and the sums refundable to the customers. It was held that since there was no discussion in the impugned order of the CIT(A) in that regard, RJA should be given a specific opportunity to put forth its arguments in relation to the computation of its income under Section 44BBA. The matter was therefore restored to the file of the AO for that purpose. The AO was also asked to examine the question of levy of interest under Section 234B of the Act. 20. Against the above order dated 31st August 2005 of the Special Bench of the ITAT, RJA filed ITA Nos. 278, 279, 280 and 580 of 2006. While admitting the said appeals on 4th July 2006, the following question of law was framed by the Court: 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? Facts in the two writ petitions 21. While the aforementioned appeals were pending, a notice under Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo AYs came up for hearing before the Court on 16th November 2010, when the following order was passed: In the course of hearing, Mr.C.S.Aggarwal, learned senior counsel appearing for the petitioner referred to the order dated 24th August, passed in WP(C) No. 16089-90/2006 wherein the revenue has recalled notices issued under Section 148 of the Income Tax Act, 1961 (for brevity the Act ) for a span of 5 years. It is submitted by Mr. Aggarwal, learned senior counsel that the contents of said letter would reveal that identical reasons have been recorded while issuing notice under Section 148 of the Act. Mr. Sabharwal, learned counsel appearing for the revenue undertakes to produce the said letter. That apart, learned counsel for the revenue shall also produce the record indicating why the proceedings were dropped. Be it noted, direction for production of record or the letter that has been referred to hereinabove is without prejudice to the contentions to be raised by the learned counsel for the parties. Matter be listed on 11th February, 2011. Interim orders shall remain in force till the date of hearing. On the next date of hearing, learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te in Section 448BA of the Act, yet in a case where there are losses to an Assessee, firstly, the provisions are not applicable, and assuming they are applicable then too, the provisions for lower rate of taxation have to be understood within the scheme of the Act as has been held by the apex Court in the case of Hyundai Heavy Industries Co. Ltd. (supra), wherein at p. 494, it was observed as under: Thirdly, it is important to note that Chapter IV of the Act contains provisions for presumptive taxation of business income in certain cases as prescribed in Sections 44B, 44BB, 44BA and 44BBB of the Act. In the scheme of presumptive taxation, the Assessee is presumed to have earned income at the rate of a certain percentage of his total turnover or gross receipts. If the Assessee agrees to be taxed on presumed income, he is not required to maintain books of account. If, however, he claims that his income is less than the presumed figure, he is required to support his claim by producing books of account. 30. After noting that RJA had been consistently reporting losses, the ITAT held that the income could not have been artificially computed by invoking provisions of Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains of such business chargeable to tax under the head Profits and gains of business or profession. (2) The amounts referred to in sub-section (1) shall be the following, namely: (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods from any place in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods from any place outside India. 36. In Sanyasi Rao (supra), the Supreme Court was interpreting Section 44AC which provides for taxation of presumptive income based on the gross receipts. The Supreme Court in the said case held that even where Section 44AC is sought to be applied to a trader, it was only a machinery provision and could not deny the normal relief afforded to all Assessees. It was accordingly held in such instance an option would be available to the Assessee to produce the books of accounts to show that the assessable income is in fact less than the presumptive income. 37. In Hyundai Heavy Industries (supra) the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2001 referred to this fact as under: 14. We have heard both the parties at length and have also carefully perused the orders of both the lower income-tax authorities. We have also gone through the voluminous paper book filed by the assessee and we find the facts of the instant case appear to almost identical to the facts of the Iraqi Airways on which a heavy reliance was placed by the assessee's learned counsel and which is reported in 23 lTD 115. In ours considered opinion, it cannot be denied that assessee is a part of Ministry of Transport of Government of Jordan as has duly been certified both by the Government of Jordan and Ambassador of Jordan in Their certificates filed. In our opinion once the Government of Jordan has duly certified that Royal Jordanian Airlines is part of Ministry of Transport and its income belongs to sovereign state of Jordan, we do not find any justification to hold that it is a separate corporation. The assessee has specifically brought to our notice that between financial year's ending 31. 12. 1989 to 31.12.1998 it has suffered the losses and all these losses have been borne by the State Treasury. The aforesaid figures are given on pages ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of RJA for the AYs covered by the said appeals. The writ petitions 43. Now turning to W.P.(C) Nos. 16060 of 2006 and 16068 of 2006, it is seen 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. 44. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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