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2016 (1) TMI 1075 - ITAT DELHI

2016 (1) TMI 1075 - ITAT DELHI - TMI - Reopening of assessment - applicability of Article 8(1) of DTAA between India and Netherlands - Held that:- Assuming of jurisdiction by the Assessing Officer in this case, is bad in law for the reasons inter alia that when the assessee has specifically claimed exemption of its entire income for taxation U/S 90 of the 1. T. Act read with Article 8 of DTAA between India and Netherlands by giving a note on the original income tax return, there was no tangible .....

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er has proceeded for reassessment of the case without issuing a notice U/S 143(2) of the Act and Ld. CIT(A) has also lost sight of this fact while passing the impugned order. In the light of factual matrix discussed in the preceding paragraphs, it is proved on record that the Assessing Officer does not have jurisdiction to reopen the assessment - Decided in favour of the assessee.

Services rendered in the nature of technical and professional - whether the same are covered under Articl .....

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d circumstances of the present case. Ld. D.R. has failed to bring on record any reason to deviate from the order passed by the Tribunal in assessee's own case in the subsequent year. - I.T.A. No. 1259/Del/2009, I.T.A. No. 1392/De1/2009 - Dated:- 4-1-2016 - SHRI J.S.REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For The Appellant by : Shri R. S. Negi, Sr. DR Respondent by : Shri Salil Agarwal, Shri Shailesh Gupta, CA ORDER PER KULDIP SINGH, JM: To avoid repetition of discussion, .....

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2000-2001 on the ground that: "In the facts and circumstances of the case and in law the Ld CIT(A) has erred in directing the Assessing Officer to tax fess for technical services (FTS) as per the DT AA ignoring the fact that the FTS is effectively connected to the P E of the assessee in India and therefore taxable under the Act. " 3. On the other hand appellant M/s. KLM Royal Dutch Airlines, New Delhi (hereinafter to be referred as 'the assessee') by filing cross appeal, I.T.A. .....

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48 which could not have been done as the there existed no reasons by virtue of which the Ld. Assessing off leer could have formed an opinion that there had been Income Escaping assessment. 3. That the Ld. Commissioner of Income Tax (Appeal) has failed to appreciate that Ld Assessing had grossly erred in assuming jurisdiction U/S 148 as all facts had been declared in the original return of Income and no fresh facts had emerged so as to allow the assessing officer to assume jurisdiction U/S 148. 4 .....

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(2) to the assessee and merely because the counsels for the assessee had participated in the assessment proceeding it could not have been said that the requirement of section 143(2) had been complied with and had been satisfied. 6. That the Ld. Commissioner of Income Tax (Appeal) has failed to appreciate that Ld. Assessing had grossly erred in not appreciating that the services rendered by the assessee were directly connected with the operation of aircraft in International Traffic covered under .....

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charging of interest UIS 234 and merely directing re-computation thereof although the same could not have been charged at all. 9. That the Ld. Commissioner of Income Tax (Appeal) grossly erred in upholding the initiation of penalty proceeding us 271 (1)(c). " 4. Briefly stated, the facts of this case are: during the processing of return of income filed by the assessee qua the assessment year 200-01 declaring 'nil' income and claiming refund of ₹ 7,21,0001-, escapement of incom .....

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providing technical & professional services in the area of ground handling in-flight services, airport procedure system to improve over all services in the flight operation at the fee of Rs.US$50,0001- per annum and received US$ l,00,000/- for two years during the relevant financial year 1999-2000. The assessee was called to explain as to why the sum received form Jet Airways be not taxable. Assessee filed comprehensive reply by taking shelter under Article 8(1) of Double Taxation Avoidance .....

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ppeal respectively. 7. We have heard Ld. Authorized Representatives of both the parties, gone through material placed on record in the light of facts and circumstances of the case and orders of tax authorities below. 8. Grounds No.1, 2,3 & 5 ofI.T.A. No. 13921De1l2009: To decide the moot point, the first question arises for determination in this case is, "as to whether the Assessing Officer has no reason/tangible material to assume jurisdiction u/s 148 of the Act". Undisputedly, re .....

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Article 8 of DTAA between India and Netherlands" has been given on relevant return of income . 9. Ld. D .R. challenging the impugned order, contended inter alia that Ld. CIT(A) has erred in directing the Assessing Officer to tax Fee for Technical Services (FTS) as per DT AA by ignoring the fact that FTS is effectively connected to the Permanent Establishments (PE) of the assessee in India and as such taxable under the Act. 10. On the other hand, Ld. A.R. repelled the arguments addressed by .....

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ITR 693 passed by Hon'ble Jurisdictional High Court and CIT Vs Tupperware India Pvt. Ltd., I.T.A. No. 415/2015 (Del.) order dated 10.08.2015. 11. Now, adverting to the case at hand, a bare perusal of assessment order under challenge goes to show that the assessment has been reopened to review the applicability of Article 8(1) of DTAA between India and Netherlands. Hon'ble Jurisdictional High Court in the case cited as Atul Kumar Swami (supra), relied upon by the assessee, decided the ide .....

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at there is escapement of income. Held accordingly, dismissing the appeal, that the note forming part of the return filed for the assessment year 1999-2000 clearly mentioned and described the nature of the receipt under a non- compete agreement. The reasons for the notice under section 147 of the Income-tax Act, 1961, nowhere mentioned that the Revenue came up with any other fresh material warranting reopening of assessment. Therefore, mere conclusion of the proceedings under section 143(1) ipso .....

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upon certain observations of the Supreme Court in Rajesh Jhaveri (supra) would also appear to be self-defeating, because if an "intimation" is not an "assessment" then it can never be subjected to Section 147 proceedings, for, that section covers only an "assessment" and we wonder if the revenue would be prepared to concede that position. It is nobody's case that an "intimation" cannot be subjected to Section 147 proceedings; all that is contended by .....

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hat the argument of "change of opinion" is not available to him, it would still be open to him to contest the reopening on the ground that there was either no reason to believe or that the alleged reason to believe is not relevant for the formation of the belief that income chargeable to tax has escaped assessment. In doing so, it is further open to the assessee to challenge the reasons recorded under Section 148(2) on the ground that they do not meet the standards set in the various j .....

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ax return, there was no tangible material with the Assessing Officer to reopen the assessment. Apart from note given on the original return of income by the assessee, no tangible material has been brought on record by the Assessing Officer to reopen the assessment; that Ld. CIT(A) has lost sight of the fact that the Assessing Officer has no jurisdiction to reopen the assessment without bringing on record any tangible material and as such, findings of Ld. CIT(A) are not sustainable in the eyes of .....

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nd grounds No.6 & 7 Of I.T.A. No. 13921DeI/2009: To decide the issue in controversy, the Assessing Officer during the reassessment proceedings, came to the conclusion as under: " ... the services rendered are in the nature of technical and professional and the same are covered under Article 12 of DT AA between India and Netherlands. The service rendered is also covered u/s 9(J)(vii) of the Income tax Act, 1961. During the relevant F. Y. the assessee company has Permanent Establishment i .....

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bunal Delhi Bench 'D', New Delhi in the case entitled as CIT Vs KLM Royal Dutch Airlines in I.T.A. NosA03 and 404IDe1l2010 and contended that the issue in controversy is duly covered under the same. To repel this argument, Ld. D.R. has failed to bring on record any decision contrary to it. The sole issue required to be determined in this case is, "as to whether the revenue earned by the assessee was to be treated as FTS as per DTAA". 16. Ld. CIT(A) by overturning the findings r .....

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provisions of the Indo-Netherland DT AA. The Assessing Officer is, therefore required to tax the fee for technical services at the rate provided under the DTAA". Identical issue has come up before Coordinate Bench of Income tax Appellate Tribunal in the judgement supra in assesee's own case pertaining to I.T.A. No. 403 & 403/Del/2010 for Assessment Year 2004-05 and 2005-06, which is decided as under: "5. Dissatisfied with the action of the Assessing Officer, assessee carried t .....

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ed as a part of operation of air-craft in international traffic. These are separate activities and they have nothing to do with operation of air-craft in international traffic. He pointed out that GECD in its latest update of the commentary on Article 8 has observed such services as ancillary for operation of air-craft in international traffic but concluded out that these are to be construed as a part of operation of air-craft in international traffic: He emphasized that India is not a party to .....

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