Income Tax Appellate Tribunal - Delhi
Japan Airlines Ltd, vs Cit Delhi Xvii, on 12 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G' NEW DLEHI
BEFORE SHRI G.D. AGRAWAL, PRESIDENT
AND
SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER
I.T.A. No. 2861/Del/2007
Assessment Year: 2003-04
M/s Japan Airlines International Co. Ltd. vs Commissioner of Income-tax
Chandralok Building, 36 Janpath, Delhi-XVII, New Delhi.
New Delhi.
(Appellant) (Respondent)
Appellant by: Smt. Rajni Mahajan, Advocate
Respondent by: Shri S.S. Rana, CIT DR
Date of hearing: 27.02.2018
Date of Pronouncement: 12.03.2018
ORDER
PER K. NARASIMHA CHARY, JM
Aggrieved by the order dated 6.12.2006 u/s 263 of the Income-tax Act, 1961 ("the Act") passed by the Commissioner of Income-tax, Delhi-XVII, New Delhi ("CIT"), assessee preferred this appeal.
2. Brief facts of the case are that the assessee is a non resident foreign company incorporated in Japan and is engaged in the business of carrying passengers and cargo by air. Under the Double Taxation Avoidance Agreement 2 between the Government of India and Government of Japan, the income derived by its operations is taxable in Japan.
3. Pursuant to the survey conducted on 24.2.2005 at the premises of the assessee's regional office in New Delhi, learned AO required the assessee to furnish the details as to the total salary and perquisites paid to the expatriate employees resident in India during the Financial Years 2001-02, 2002-03 and 2003-04. On examination of the details, learned AO by order dated 3.5.2005 u/s 201(1)/201(1A) of the Act raised a demand of Rs.29,30,847/- in respect of two employees, namely, Mr. Masao Koga and Mr. Kiyonori Yanai. The matter was carried in appeal and the learned CIT(A) vide order dated 29.8.2005 upheld the view of the learned AO and dismissed the appeal against which the assessee further appealed to the Tribunal in ITA No.4172/Del/2005.
4. In the meanwhile, a proposal u/s 263 was submitted by the AO seeking revision of the order passed u/s 201/201(1A) of the Act on the ground that in case of two employees in respect of whom the order u/s 201(1)/201(1A) was passed, the learned AO considered the case only u/s 6 of the Act, without making any reference to Section 9(1)(ii) of the Act but in view of the judgment of the Tribunal in the case of Pride Foramer, SA vs ACIT (2005) 97 ITD 86 (Del), the payment to expatriate technicians in India, irrespective of their stay in India, is liable to tax in India, as such, order passed by the learned AO is erroneous in so far as it is pre judicial to the interest of revenue vis-à-vis the provisions under section 9(1)(ii) of the Act and the DTAA between India and Japan.
5. After affording an opportunity to the assessee, learned CIT passed the impugned order holding that the assessee was required to deduct tax on the 3 payments made to all the four employees mentioned in the proposal u/s 263 submitted by the AO, but in view of the plea taken by the assessee that the order in so far as two employees is concerned has merged with the orders of the learned CIT(A), learned CIT held that the assessment order was required to be modified in respect of the two other employees, namely, Mr. Takashi Suzuki and Mr.Tetsuo Mitera. The assessee is, therefore, challenging this order u/s 263 in this appeal, but with a delay of 120 days.
6. It is submitted on behalf of the assessee that in view of the fact that one Mr. Neeraj Sharma, Administrative Manager, who was handling all the administrative matters was transferred to Japan and was not available to the assessee during the period between the passing of the order u/s 263 and April, 2007, as such, the successor who is not well conversant with the Indian laws of taxation, could not promptly filed the appeal within time. Learned DR opposed the condonation to delay.
7. Though the learned DR opposed the condonation of delay, we are unable to accept the same because there is no reason for us not to accept the explanation of facts offered by the assessee for the delay. According to the assessee, the man who is conversant with the Indian laws is transferred and persons, who succeeded were not familiar with the taxation laws of India, as such, due to time consumed for consultation, the delay occurred. Normally, no assessee would stand to gain by allowing the appeals to be barred by time. When the technicalities are pitted against the delivery of substantial justice, the former must give way to the latter and the highest that would happen by condoning the delay is that a cause could have been decided on merits. Unless the rights of the 4 parties are crystallized under the law of limitation, all our endeavour is to see that the just tax liability of the assessee is determined as per law. With this view of the matter, we are inclined to condone the delay. We, therefore, proceed to decide the matter on merits.
8. Main argument of the learned AR is that pursuant to the summons issued u/s 131 of the Act, the assessee submitted all the details to the learned AO, upon examination of which and due consideration thereof, the learned AO held that the assessee is in default only in respect of two employees and such view taken by the learned AO was proper. According to her the revenue is now taking recourse to Section 263 of the Act, which is only a change in its earlier adopted view and line of thought of application and is in no manner a consequence to discovery of any error in the order of the learned AO. It is further submitted by the learned AR that this Tribunal passed order dated 27.2.2017 in ITA No.4172/Del/2005 in respect of the two employees, viz., Mr. Masao Koga and Mr. Kiyonori Yana. Basing on the binding precedent of the Hon'ble Supreme Court in the case of Pradeep J. Mehta vs CIT (2008) 4 TMI 6 (SC), the Tribunal reached the conclusion that the correct status of the assessee based on the decision of the Hon'ble Supreme Court has to be worked out at the end of the learned AO, and for such purpose, the matter was remanded to the file of the AO. She also brought to our notice that pursuant to the impugned order, the AO passed the assessment order u/s 201(1)/201(1A)/263 of the Act on 15.12.2006 bringing an amount of Rs.40,31,188/- to tax.
9. Per contra, it is the argument of the learned DR that in this matter, the residential status of the assessee as per Section 6 is not relevant for the income 5 under the head "salaries", if it is earned in India in view of the decision of the Tribunal in the case of Pride Foramer, SA vs ACIT (supra) and the relevant provisions to be considered were Section 9(1)(ii) and the provisions of the DTAA between the Govt. of India and Govt. of Japan but inasmuch as the learned AO had not made any enquiries in this direction and considered these provisions. In view of the decision in the case of Malabar Industrial Co. Ltd. (2000) 243 ITR 83 (SC), the exercise of jurisdiction by the CIT u/s 263(1) of the Act was justified. Further reliance is placed on the decisions reported in Rajmandir Estates (P) Ltd. vs PCIT (2016) 386 ITR 162 and 245 Taxman 127 (SC). He, therefore, submitted that the impugned order passed by the learned CIT is proper and legal and cannot be interfered with.
10. We have gone through the record in the light of the submissions on either side. Out of the four employees, learned AO passed order u/s 201(1) and 201(1A) of the Act in respect of two employees considering the residential status u/s 6 of the Act whereas in the revision proceedings, learned CIT(A) reached a conclusion that in view of the decision of the Tribunal in the case of Pride Foramer vs ACIT (supra), the applicability of the provisions u/s 9(1)(ii) of the Act and also the provisions of the DTAA between India and Japan are relevant inasmuch as in view of the law declared in the Pride Foramer vs ACIT (supra), payment made to expatriate technicians in India is taxable in India irrespective of their stay in India. It is not in dispute that in the original assessment order dated 3.5.2005, learned AO did not advert to the applicability of the provisions u/s 9(1)(ii) of the Act or the provisions of the DTAA between India and Japan but considered the case only u/s 6 of the Act in respect of the residential status of the employee. In view of the later decision of the Tribunal dated 21st October 2005 to 6 the effect that the payment made to the expatriate technicians in India is taxable in India irrespective of their stay, learned CIT held that the original assessment order passed by the AO is erroneous in so far as the provisions of Section 9(1)(ii) of the Act and the DTAA between India and Japan have not been taken into account is pre judicial to the interest of the revenue. In view of this fact that the learned AO did not consider the applicability of the provisions u/s 9(1)(ii) of the Act and the DTAA to the facts of this case, while respectfully following the decision of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs CIT (supra) and also the decision of the High Court of Calcutta in Raj Mandir Estates (P) Ltd. (supra), we are of the considered opinion that the learned CIT is justified in exercising jurisdiction u/s 263(1) of the Act and it is not open for the assessee to challenge the same on the ground that such an exercise amounts only to change of opinion.
11. Now coming to the merits of the case, as rightly held by the learned CIT in his order, the deduction of tax on the payments made to all the four employees requires consideration and for that purpose all the employees stand on the same footing. Since the case of two employees, namely, Mr. Masao Koga and Mr. Kiyonori Yana has already been decided by this Tribunal as being covered by the decision of the Hon'ble Apex Court in the case of Pradeep J. Mehta vs CIT (supra), we do not think it necessary to take a different view in respect of these two employees, viz. Mr. Takashi Suzuki and Mr.Tetsuo Mitera. Admittedly, the matter relating to the employees covered by the original assessment order is set aside to the file of the learned AO, we, therefore, set aside this matter also to the file of the AO for considering the case afresh in the light of the established principles after affording an opportunity to the assessee.
710. In the result, appeal is allowed for statistical purposes.
Order pronounced in the open court on this the 12th day of March, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (K. NARASIMHA CHARY)
PRESIDENT JUDICIAL MEMBER
Dated: 12th March, 2018
'VJ'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT By order
Asstt. Registrar, ITAT