Air France, v. DCIT, Cir 49(1),,

TDS 77/DEL/2003 | 2002-2003
Pronouncement Date: 23-07-2010 | Result: Allowed

Appeal Details

RSA Number 7720121 RSA 2003
Bench Delhi
Appeal Number TDS 77/DEL/2003
Duration Of Justice 7 year(s) 4 month(s) 6 day(s)
Appellant Air France,
Respondent DCIT, Cir 49(1),,
Appeal Type TDS Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 23-07-2010
Assessment Year 2002-2003
Appeal Filed On 17-03-2003
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A NO. 85/DEL/03 FINANCIAL. YEAR 2001-02 DCIT TDS CIRCLE 49(1) NEW DELHI. VS. M/S. AIR FRANCE 7 ATMA RAM MANSION (SCINDIA HOUSE) K.G. MARG CONNAUGHT CIRCUS NEW DELHI. I.T.A NO. 77/DEL/03 FINANCIAL. YEAR 2001-02 M/S. AIR FRANCE 7 ATMA RAM MANSION (SCINDIA HOUSE) K.G. MARG CONNAUGHT CIRCUS NEW DELHI. VS. DCIT TDS CIRCLE 49 (1) NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHOK PANDEY CIT(DR) RESPONDENT BY: SHRI SANDEEP SAPRA/ SHRI O.P. SAPRA ADVOCATE ITA NOS. 85 77/DEL/03 FINANCIAL YEAR 2001-02 2 ORDER PER RAJPAL YADAV JM: THE ASSESSEE AND REVENUE ARE IN CROSS APPEALS BEFO RE US AGAINST THE ORDER OF LD. CIT(A) DATED 31 ST JANUARY 2003 FOR FINANCIAL YEAR 2001- 02. THE ASSESSEE IS A COMPANY OPERATING PASSENGER A IR CRAFT AND IS HANDLING CARGO MOVEMENT FROM INDIA TO FRANCE AND BE YOND. IT IS A MEMBER OF INTERNATIONAL AIR TRANSPORT ASSOCIATION ( IATA). ITS GLOBAL INCOME WAS ASSESSED TO TAX IN ITS PARENT COUNTRY I. E. FRANCE AS PER DTAA BETWEEN INDIA AND FRANCE. THE AO FOUND THAT CO MMISSION TO THE TICKET SELLING AGENT IS APPROVED BY IATA CALLED AS IATA COMMISSION. THE ASSESSEE WAS PAYING TO THE AGENTS SUPPLEMENTARY COMMISSION ALSO I.E. ADDITION TO IATA COMMISSION AND NO TDS HAS BEE N DEDUCTED ON THE SUPPLEMENTARY COMMISSION. THE AO THEREFORE HELD T HE ASSESSEE UNDER DEFAULT U/S 201 (1) AND ALSO CHARGED INTEREST U/S 2 01 (IA) OF THE INCOME TAX ACT. HE P[ASSED THE ORDER ON 30 TH SEPTEMBER 2002. 2. DISSATISFIED WITH THIS ORDER ASSESSEE CARRIED TH E MATTER IN APPEAL BEFORE THE LD. CIT(A) . IT CONTENDED THAT SUPPLEMEN TARY COMMISSION PAID TO THE AGENT WAS NOT A COMMISSION WITHIN THE MEANING OF SECTION 194H AND THEREFORE ASSESSEE CAN NOT BE HELD IN DEFA ULT U/S 201 (1) AND NOT LIABLE FOR INTEREST U/S 201 (1A). THE LD. CIT( A) HAS REJECTED THE ITA NOS. 85 77/DEL/03 FINANCIAL YEAR 2001-02 3 CONTENTION OF THE ASSESSEE AND UPHELD THE VERSION O F AO THAT ASSESSEE IS IN DEFAULT. THE ASSESSEE TOOK UP ONE ISSUE BEFOR E LD. CIT(A) THAT SOME OF THE AGENTS HAD OBTAINED CERTIFICATE FROM TH EIR RESPECTIVE AOS FOR DEDUCTION OF TAX AT LOWER RATES OR FOR NO DEDUCTION OF TAX AT ALL. THE LD. CIT(A) AFTER ANALYSING THE SUBMISSION OF THE AIRLIN E OBSERVED THAT AO WILL OBTAIN FROM THE AIRLINES LIST OF ALL SUCH AGENTS WH O SUBMITTED CERTIFICATES U/S 197 TO THEM ALONGWITH DETAILS OF PAYMENT MADE T O THEM DURING THE PERIOD UNDER CONSIDERATION RATE OF TAX TO BE APPLI ED ON SUCH PAYMENT AS PER CERTIFICATE AND TAX DEDUCTABLE ON THAT. THE GEN UINENESS OF THAT CERTIFICATE WOULD BE VERIFIED BY THE AO AND THEN TH E CREDIT WOULD BE GIVEN AFTER WHICH THE TOTAL TAX REQUIRED TO BE DEDU CTED ON PAYMENT/ REDUCTION OF SUPPLEMENTARY COMMISSION WOULD BE DETE RMINED. THE LD. CIT(A) IN A WAY HAS UPHELD THAT WHILE CALCULATING SHORT DEDUCTION OF TAX IN RESPECT OF SUPPLEMENTARY COMMISSION CREDIT FOR SUCH CERTIFICATE WOULD HAVE TO BE GIVEN BY THE AO. THE LD. CIT(A) THOUGH PASSED THE SEPARATE ORDERS IN THE CASES OF EACH AIR LINE BUT IT APPEARS THAT HE HAS DISCUSSED THE GENERAL PRINCIPLE IN RESPECT OF 12 AIR LINES I NCLUDING UNITED AIRLINES SINGAPORE AIRLINES AND ASSESSEE ETC. THE REVENUE HA S CHALLENGED THE ORDER OF LD. CIT (A) ON THE GROUND THAT LD. CIT(A) HAS ERRED IN GIVING THE CREDIT OF CERTIFICATE ALLEGED TO HAVE BEEN OBTAINED BY THE AGENTS U/S 197 ITA NOS. 85 77/DEL/03 FINANCIAL YEAR 2001-02 4 WHILE CALCULATING THE SHORT DEDUCTION OF TAX IN RES PECT OF SUPPLEMENTARY COMMISSION PAID BY THE AIRLINES. THE ASSESSEE HAS C HALLENGED THE ORDER OF THE LD. CIT(A) ON THE GROUND THAT LD. CIT(A) HAS ERRED IN TREATING THE SUPPLEMENTARY COMMISSION AS COMMISSION WITHIN THE M EANING OF SECTION 194 (H) AND HOLDING THE ASSESSES IN DEFAULT U/S 201 (1) AND LIABLE FOR PAYMENT OF INTEREST U/S 201 (1A). THE TRIBUNAL HAS DECIDED BOTH THE APPEALS BY A COMMON ORDER DATED 24 TH MAY 2005. THE TRIBUNAL HAS ALLOWED THE APPEAL OF ASSESSEE ON THE BASIS OF ITS ORDER PASSED IN THE CASE OF CIT VS. SINGAPORE AIRLINES LTD. I.E. IN IT A NO. 58 OF 2003. CONCLUSION MADE BY THE TRIBUNAL READ AS UNDER :- WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MAT ER CAREFULLY. WE FIND THAT BOTH THE ASSESSEE AND THE SINGAPORE A IRLINES ARE MEMBER OF IATA AND ARE FOLLOWING THE SAME BILLING S ETTLEMENT PLAN APPROVED BY IATA. IN CASE OF SINGAPORE AIRLINES LD . ITAT AFTER DETAILED AND CAREFUL EXAMINATION HELD THAT THE AMOU NT REALIZED BY THE TRAVEL AGENT IN EXCESS OF NET FARE COULDNT BE CONSIDERED AS COMMISSION AND THE ASSESSEE COULD NOT BE HELD RESPO NSIBLE FOR PAYING THE COMMISSION TO THE AGENT. ACCORDINGLY IT WAS HELD THAT THE ASSESSEE COULDNT BE TREATED IN DEFAULT U/S 201 (1) AND LIABLE FOR INTEREST U/S 201 (1A). THE LD. DEPARTMENTAL REP RESENTATIVE DID NOT BRING ANY MATERIAL TO OUR NOTICE TO SHOW THAT T HE CASE OF THE ASSESSEE IS NOT IDENTICAL TO THAT OF THE SINGAPORE AIRLINES. RESPECTFULLY FOLLOWING THE TWO-MEMBER DECISION OF LD. ITAT IN CASE OF SINGAPORE AIRLINES (SUPRA) WE ALLOW THE A PPEAL BY THE ASSESSEE. AS THE APPEAL BY THE ASSESSEE HAS BEEN AL LOWED THE CROSS APPEAL BY THE REVENUE HAS BECOME INFRUCTUOUS AND IS ACCORDINGLY DISMISSED. 3. AGGRIEVED WITH THIS ORDER REVENUE HAS FILED AN A PPEAL BEARING ITA NOS. 85 77/DEL/03 FINANCIAL YEAR 2001-02 5 NUMBER 260 OF 2006 IN THE HONBLE DELHI HIGH COURT. HONBLE DELHI HIGH COURT HAS SET ASIDE THE ORDER OF THE TRIBUNAL BY FO LLOWING ITS DECISION RENDERED IN THE CASE OF CIT VS. SINGAPORE AIRLINES LTD. THE OBSERVATION OF THE HONBLE HIGH COURT IN ITS ORDER DATED 19 TH MAY 2009 READ AS UNDER :- ITA NOS. 54/2006 1313/2006 56/2006 260/2006 MATTERS ARE COVERED BY THE DECISION OF THIS COURT IN COMMISSIONER OF INCOME TAX NEW DELHI VS SINGAPORE AIRLINES LTD: ITA NOS. 306/2005 & 123/2006 DECIDED ON 13.04.2009. THE APPEALS ARE A LLOWED. MATTERS ARE REMANDED TO THE ITAT IN TERMS OF PARAGRAPH 28 O F THE AFORE- MENTIONED JUDGMENT. THE APPEALS ARE DISPOSED OF ACC ORDINGLY. 4. LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET CONTENDED THAT ISSUE ON MERIT HAS BEEN DECIDED AGAINST THE AS SESSEE. IT HAS BEEN HELD THAT SUPPLEMENTARY COMMISSION RETAINED BY THE AGENT IS A COMMISSION WITHIN THE MEANING OF SECTION 194H REA D WITH EXPLANATION I TO THE SAID SECTION AND THE ASSESSEE WAS THUS OBLIGED TO DEDUCT TAX AT SOURCE AT THE PRESCRIBED RATES DUR ING THE RELEVANT PERIOD. HE POINTED OUT THAT HONBLE HIGH COURT HAS REMANDED THE ISSUE WITH REGARD TO THE QUANTIFICATION OF THE COMM ISSION AMOUNT FOR DEDUCTING THE TAX. THE COMPLETE DETAILS IN RESPECT OF THE QUANTIFICATION OF THE COMMISSION ARE NOT AVAILABLE ON THE RECORD. LD. ITA NOS. 85 77/DEL/03 FINANCIAL YEAR 2001-02 6 CIT(A) HAS ALSO OBSERVED THAT AO SHOULD VERIFY THE CLAIM IN RESPECT OF CERTIFICATES OBTAINED BY THE AGENTS U/S 197 FOR DEDUCTION OF TAX AT LOW RATE OR NO DEDUCTION OF TAX IN THEIR CASES BY T HE AIRLINES BY MAKING PAYMENT OF COMMISSION TO THEM. ALL THESE MAT ERIALS WOULD BE RELEVANT MATERIALS FOR QUANTIFYING THE COMMISSIO N ALLEGED TO HAVE BEEN PAID BY THE ASSESSEE ON WHICH TAX AT SOUR CE WAS NOT DEDUCTED. HE FURTHER ON THE STRENGTH OF HONBLE DE LHI HIGH COURT DECISION IN THE CASE OF CIT VS. ADIDAS INDIA MARKE TING PVT. LTD. REPORTED IN 288 ITR 379 CONTENDED THAT IF DEDUCTEE HAS PAID THE TAX THE DEDUCTOR CANNOT BE HELD TO AN ASSESSEE IN DEFAU LT AND INTEREST U/S 201 CANNOT BE LEVIED. ACCORDING TO HIM THIS ASP ECT HAS TO BE GONE INTO WHILE QUANTIFYING THE COMMISSION ALLEGED TO HAVE BEEN PAID BY THE ASSESSEE WITHOUT DEDUCTION OF TAX AT SO URCE. HE PRAYED THAT THIS ISSUE BE SET ASIDE TO THE FILE OF AO FOR READJUDICATION IN THE LIGHT OF HONBLE HIGH COURT DECISION. LD. DR ON THE OTHER HAND WAS UNABLE TO CONTROVERT THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE. 5. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GO NE THROUGH THE RECORD CAREFULLY. ADMITTEDLY HONBLE HONBLE HI GH COURT HAS SILENCED THE CONTROVERSY BETWEEN THE PARTIES AND HELD THAT S UPPLEMENTARY ITA NOS. 85 77/DEL/03 FINANCIAL YEAR 2001-02 7 COMMISSION RETAINED BY THE AGENT IS A COMMISSION WI THIN THE MEANING OF 194H READ WITH EXPLANATION 1 TO THE SAID SECTION. T HE ASSESSEE AIRLINES WAS THUS OBLIGED TO DEDUCT AT SOURCE AT THE RATE PR ESCRIBED DURING THE RELEVANT PERIOD ON SUCH COMMISSION. FINDING OF THE HONBLE HIGH COURT RECORDED IN PARAGRAPH 28 ARE WORTH TO NOTE HERE :- IN VIEW OF THE ABOVE WE HOLD THAT THE SUPPLEMENTA RY COMMISSION WHICH IS THE AMOUNT RETAINED BY THE TRAV EL AGENT IS COMMISSION WITHIN THE MEANING OF SECTION 194H READ WITH EXPLANATION (I) TO THE SAID SECTION. THE ASSESSEE-A IRLINES WERE THUS OBLIGED TO DEDUCT TAX AT SOURCE AT THE RATE PRESCRI BED DURING THE RELEVANT PERIOD. THE ASSESSEE-AIRLINES HAVING NOT D EDUCTED THE TAX AT SOURCE THEY ARE LIABLE TO BE HELD WITHIN THE T ERMS OF SECTION 201(1) AS ASSESSEE(S)-IN-DEFAULT AND ALSO LIABLE F OR PAYMENT OF INTEREST IN TERMS OF SECTION 201 (1A) OF THE ACT. IN VIEW OF THE FACT THAT THE TRIBUNAL HAVING COMING TO THE CONCLUSION T HAT SECTION 194H OF THE ACT WAS NOT APPLICABLE AND HENCE DID NO T EXAMINE ANY OTHER CONTENTION OF THE ASSESSEE-AIRLINES AS ALSO THE QUANTUM AND THE PERIOD FOR WHICH THE ASSESSEE-AIRLINES WOUL D BE ENTITLED TO PAY INTEREST OR TO WHAT EXTENT THE BENEFIT OF THE C ERTIFICATE ISSUED TO THEM IF ANY UNDER SECTION 197 OF THE ACT WOULD BE AVAILABLE WE ALLOW THE FOLLOWING APPEALS AND SET ASIDE THE IMPUG ED JUDGMENTS PASSED BY THE TRIBUNAL IN EACH OF THESE APPEALS AND REMAND THE MATTER TO THE TRIBUNAL FOR EXAMINING ALL OTHER ASPE CTS OF THE MATTER AS ALSO THE CONSEQUENCES WHICH WOULD FLOW THEREFROM . IN ORDER TO COMPLY WITH THE DIRECTION OF THE HONBL E COURT WE HAVE VERIFIED THE RECORD BUT THE COMPLETE DETAILS FOR CO MPUTATION OF ALLEGED COMMISSION ARE NOT AVAILABLE ON THE RECORD. EVEN TH E LD. CIT (A) HAS LEFT THE ISSUE OF ALLEGED CERTIFICATES OBTAINED BY THE AGENTS U/S 197 FOR VERIFICATION OF THE AO IN PARAGRAPH NO. 12.4 OF THE IMPUGNED ORDER. ITA NOS. 85 77/DEL/03 FINANCIAL YEAR 2001-02 8 THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT OF H ONBLE HIGH COURT AND CONSIDERING THE ABSENCE OF COMPLETE DETAILS ON THE RECORD WE DEEM IT FIT TO SET ASIDE THE ISSUE OF QUANTIFICATION OF THE COM MISSION ON WHICH ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE TO TH E FILE OF AO FOR READJUDCATION. THE LD. AO SHALL DETERMINE THE ALLEG ED COMMISSION ON WHICH NO TDS WAS DEDUCTED IN THE LIGHT OF HONBLE H IGH COURTS DECISION IN THE CASE OF CIT VS. SINGAPORE AIRLIENS LTD. REPO RTED IN 319 ITR 28. IN VIEW OF THE ABOVE BOTH THE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COU RT ON 23.7.2010. SD/- [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23.7.2010 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT