2011 (1) TMI 1457 - AT - Income Tax

Tribunal emphasizes consistency in decisions & significance of treaty provisions in cross-border tax matters

KLM Royal Dutch Airlines, New Delhi Versus Director of Income-Tax, Intl. Taxation, Circle 3 (1), New Delhi

KLM Royal Dutch Airlines, New Delhi Versus Director of Income-Tax, Intl. Taxation, Circle 3 (1), New Delhi - TMI Issues involved: Assessment of income from technical handling services provided by a company incorporated in Netherlands, taxability of such receipts in India under Double Tax Avoidance Agreement, appeal against assessment order.Assessment of Income:The assessee, a company incorporated in Netherlands, filed a return declaring nil income which was subsequently processed u/s 143(1). The case was selected for scrutiny, and the AO concluded that income from operating aircraft internationally is not taxable in India under the Double Tax Avoidance Agreement. However, receipts from providing technical services to airlines in India were deemed taxable. After adjustments, the total income was computed and the assessee was assessed accordingly.Grounds of Appeal:The assessee appealed the assessment order, primarily contending that the AO failed to consider previous judgments in favor of the assessee. Only one ground was pressed before the Tribunal, emphasizing that the issue was already decided in favor of the assessee in previous assessment years.Tribunal's Decision:The Tribunal considered submissions from both parties. The counsel for the assessee argued that the issue was settled in the assessee's favor in previous Tribunal orders. The DR, however, disputed this position citing OECD commentary and differences in treaty provisions. The Tribunal referred to a previous order where it was held that such receipts are not taxable in India, citing specific treaty provisions and case law. The Tribunal upheld the assessee's appeal based on the binding precedent set by the earlier order.Conclusion:The Tribunal allowed the appeal, stating that the issue was already settled in favor of the assessee in a previous order. The Tribunal emphasized the importance of consistency in decisions and the lack of new material to warrant a different interpretation. The appeal was allowed in favor of the assessee.This judgment highlights the importance of consistency in legal decisions and the significance of treaty provisions in determining the taxability of income in cross-border transactions.