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Deputy Director of Income Tax, (International Taxation) – 1 (1) , Mumbai Versus Air India Limited- as an agent of Carbijet Inc

2016 (5) TMI 543 - ITAT MUMBAI

Assessment of income on the non-resident in the name of the agent - whether the same income can be taxed in the hands of the assessee, in his own name, as also in the hands of his agent under section 163 in the representative capacity? - Held that:- In the present case, the assessment is on two different dates, and the date of assessment on the Air India in a representative capacity is a day earlier than the assessment on the Carbijet Inc directly. Therefore, the assessment in the hands of Air I .....

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e impugned income has been rightly assessed to tax in the hands of Air India Limited, as an agent under section 163 of the Act. - Decided in favour of revenue - ITA No.6630/Mum/06 - Dated:- 5-4-2016 - Pramod Kumar AM and Pawan Singh JM For The Appellant : Jasbir Chauhan For The Respondent : Jitendra Sanghvi ORDER Per Pramod Kumar, AM: 1. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 17th August 2006 passed by the learned CIT(A) in the matter of assess .....

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d in law, the learned CIT(A) erred in holding that income of ₹ 97,35,04,000 is not required to be assessed, and, therefore, deleted. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition made of ₹ 97,35,04,000 3. When this appeal was called out for hearing, learned counsel for the assessee fairly accepted that so far as the core issue, on merits, is covered, against the assessee, by decision of a coordinate bench of this Tr .....

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t had entered into a wet lease agreement, with an company by the name of Carbijet Inc. based in Antigua and Barbuda- a twin island country in West Indies, on 16th November, 1994. This agreement was initially valid upto 30th June 1995, but it was later extended upto 31st December 1995. In the meantime, on 22nd October 1995, the assessee entered into a fresh agreement ,for wet lease of 3 aircrafts, with the same company, and this agreement was to remain in force upto 31st December, 1997. However, .....

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ally, on 22nd May 2000, the amount was transferred to the account of Carbijet Inc. Finally, on 31st March 2002, the IATL has also awarded legal costs against the assessee. The assessee before us, vide order dated 6th March 2003, was treated as a representative assessee, and its in this capacity that the present assessment was framed on 27th March 2003.In the course of the assessment proceedings, the Assessing Officer came to the conclusion that the sum of US $ 22.4 million awarded to Carbijet, u .....

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er also noted that the appeal against the arbitral award was rejected by the Court of Appeal. It was noted the business of Carbijet Inc was to provide aircraft on lease, and, therefore, receipt in question was a receipt in the course of its normal business. Converted into INRs, under rule 115A, the amount was quantified at ₹ 97,35,04,000. This amount was brought to tax in the hands of the assessee, as a representative assessee of Carbijet Inc, aggrieved by which assessee carried the matter .....

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neously in the hands of the Carbijet Inc as also Air India as representative assessee of Carbijet Inc. Learned CIT(A) also called for, vide letter 12th July 2006, report of the Assessing Officer on comments and justification for making assessment of the same income twice- first in the hands of the Carbijet Inc and then in the hands of the Air India as a representative assessee of the Carbijet Inc . In response, vide detailed report dated 19th July 2006, the Assessing Officer narrated the sequenc .....

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n the case of CIT Vs Fertilizers & Chemicals (Travancore) Ltd [(1987) 166 ITR 823 (Ker)] and Barium Chemicals Ltd Vs ITO [(1975) 100 ITR 637 (AP)] supports the case of the assesse inasmuch as once income has been assessed in the hands of the non resident, same cannot thereafter be assessed in the hands of his representative . It was also noted that in the light of Hon ble Calcutta High Court s decision in the case of CIT Vs Alfred Hubert (India) Pvt Ltd [(1986) 159 ITR 583 (Cal)] double asse .....

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lini Khatau [(1999) 209 ITR 101 (SC)], CIT vs Fertilizers & Chemicals (Travancore) Ltd (supra), Barium Chemicals Ltd (supra), Alfred Hubert (India) Pvt Ltd (supra), and Claggett Brachi & Co Ltd (supra), Jyoti Prasad Agarwal & Ors Vs ITO [(1959) 37 ITR 107 (All)] and ITO Vs Bachu Lal Kapur [(1966) 60 ITR 74 (SC)] and finally concluded as follows: 2.20 After considering the various provisions of the Act and the decisions of Hon ble Supreme Court and other High Court as discussed above, .....

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eedings gave raised to compensation. Since the Arbitration proceedings were conducted outside and the Quantum Award was issued outside India, amount payable by AI to CI did not accrue to CI in India. The CI accordingly claimed that the Quantum Award as per Order of IAT dated 15.11.99 did not accrue or arise in India. Case was selected for scrutiny and the notice u/s.143(2) was issued on 28.11.2001 and the proceedings were carried on by issue of notices subsequently leading to completion of asses .....

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7 & 163. Perusal of the assessment order of CI and that of AI passed on 28.03.2003 and 27.03.2003 respectively for A.Y.2000-01 reveals that both the orders are same. These have been passed simultaneously. Income assessed by both orders is same i.e. ₹ 97,35,04,000/-. Reasons given for the assessment of this income are also same. It is therefore a clear case of double assessment of same income first in the hands of non-resident and secondly in the hands of agent. Appeal against the asses .....

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ly in the case of CI and in the hands of AI as agent of CI reveals that both orders has been passed creating substantive demand and the assessment in the hands of agent is not protective. Regarding justification for completing the assessment in the hands of AI, the AO has mentioned in his report dated 19.07.2006 (quoted above) that the simultaneous assessment has been made mainly to safeguard the interest of revenue. The AO has further mentioned that holding the AI as agent u/s. 163 is needed fo .....

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wer of AO to recover the tax relating to income of CI, u/s.226(3), if AI is found to hold any money payable to CI either in present or anytime future is not affected by assessment in the hands of agent. It is therefore clear that the interest of revenue is not jeopardised in anyway in respect of recovery of tax. 2.23 In view of this it is held that income of ₹ 97,35,04,000/- is not required to be assessed and the same is therefore deleted 6. The Assessing Officer is aggrieved and is in app .....

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ips have, inter alia, observed as follows: 6. The second point urged before us is that when the ITO had taken the assessment proceedings against the Indian agent of the assessee, it was not open to him to take assessment proceeding against the assessee. It is open to an ITO to assess either a non-resident assessee or to assess the agent of such non-resident assessee. It cannot be disputed also that if an assessment is made on one, there can be no assessment on the other, and therefore, in this c .....

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The assessment proceedings taken by him against the agent have to be ignored and cannot operate as a bar to assessment proceedings directly against the assessee. On this point also, the High Court has taken the correct view when it answered the question in favour of the Revenue. [Emphasis, by underlining, supplied by us] 9. The legal position, as in our humble understanding and as a result of the law so laid down by Their Lordships, is that the Assessing Officer can only assessee one of the per .....

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ime ceases to be valid in the eyes of law. The words of Hon ble Supreme Court are unambiguous and, in our considered view, do not lead to any other conclusion. In the present case, the assessment has been framed on the representative assessee, i.e. Air India, on 27th March 2003, whereas the assessment is done directly on the principal, i.e Carbijet Inc, on 28th March 2003. On these facts, therefore, when the Assessing Officer exercised his option to bring the income to tax in the hands of Air In .....

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hands of this income in the hands of Air India, in representative capacity, ceases to hold good in law because he has also taxed, though subsequently, the same income in the hands of the assessee directly. As a matter of fact, learned CIT(A) has frequently used the expression simultaneous to describe this dual assessment, and it is there that he apparently fell in error. While the process of assessment may be simultaneous and somewhat parallel in approach, the assessment is not simultaneous. As .....

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e assessment on the Carbijet Inc directly. Therefore, the assessment in the hands of Air India, in the representative capacity, cannot be said to be legally unsustainable. It is only the assessment in the hands of Carbijet Inc which may not be sustainable in law but that aspect of the matter is wholly academic since, in view of the provisions of Section 165 of the Act, even though the assessment may be in the hands of a representative assessee under section 163(3), there is no bar on direct reco .....

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