TaxTMI 
TaxTMI 
2015 (11) TMI 1454
X X X X Extracts X X X X
X X X X Extracts X X X X
.... August 2005 of the ITAT in ITA No.5252/Del/98 for the AY 1995-96, ITA No. 280 of 2006 by RJA is directed against the order dated 31st August 2005 of the ITAT in ITA No. 4670/Del/03 for the AY 2000-01 and ITA No. 580 of 2006 by RJA is against the order dated 31st August 2005 of the ITAT in ITA No. 3805/Del/99 for the AYs 1994-95. 3. Apart from the above appeals, two writ petitions have been filed by RJA, i.e., W.P.(C) No.16060 of 2006 and W.P.(C) No. 16068 of 2006, in which notices dated 27th February 2006 issued by the Assistant Director of Income Tax ('ADIT') under Section 148 of the Act seeking to reopen the assessments for AYs 1989-90 to 1993-94, 1999-2000 and 2001-02 and the orders dated 18th September 2006 rejecting RJA's objections to the said notices have been challenged. 4. Since the appeals and the writ petitions arise from a common set of facts, they are being disposed of by this common order. Background facts 5. The background facts are that RJA came to existence by Ordinance No. 10 of 1969 issued by the Hashemite Kingdom of Jordan under Article 31 of the Constitution of Jordan. The said Ordinance was published in the Jordanian official gazette dated 10th April ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1989-90, a similar order was passed by the AO on 31st March 1994. 8. Aggrieved by the above assessment orders, RJA filed appeals before the Commissioner of Income Tax (Appeals) ['CIT (A)]. By a common order dated 4th December 1995, the CIT (A) allowed the appeals on the short ground that RJA was not liable to tax as its entire income was in fact the income of the Government of Jordan. It may be mentioned at this stage that RJA has specifically urged other issues before the CIT (A), including challenging the invocation of Section 148 of the Act and that Section 44BBA of the Act did not apply to it. 9. The CIT(A) also referred to the decision of the ITAT in Iraqi Airways v. Inspecting Assistant Commissioner 23 ITD 115 and noticed that there was no distinction between the case of RJA and that of Iraqi Airways. Reference was also made to Note 11 attached to the audited accounts of RJA for the year ending 31st December 1993 which stated that the Kingdom of Jordan was committed to cover the losses incurred by RJA. The CIT (A) also considered the opinion given by the public accountants of Jordan, M/s Saba & Co. The CIT (A) held that the entire income of RJA was exempt from taxation and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....onetheless, the AO framed assessment under Section 143(3) of the Act on 14th March 1997, holding that RJA is a foreign company and is liable to pay tax in India, in terms of Section 44BBA of the Act. The AO proceeded to determine income @5% of the net sales and assessed the income of RJA for AY 1994-95 at Rs. 2,09,01,800. For AY 1995-96, a similar order was passed on 6th March 1998, determining the income at Rs. 1,91,63,360. Another order dated 28th December 1998 was passed by the AO under Section 143(3) of the Act for AY 1996-97, assessing the income of RJA at Rs. 2,07,08,260. For AY 2000-01, the AO passed an order dated 30th October 2002 under Section 143(3) of the Act, determining the income at Rs. 63,13,422. 15. Appeals were filed by RJA against the aforementioned assessment order for AY 1994-95. The CIT (A) passed an order on 4th June 1999 affirming the order of the AO as far as applicability of Section 44BBA was concerned. However, it felt that the AO had incorrectly allowed deduction from the gross receipts and accordingly its income was enhanced to that extent. Similar orders were passed by the CIT (A) in respect of the appeals against the assessment orders for AYs 1995-96....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt: "Whether ITAT was correct in law in holding that Royal Jordanian Airlines is liable to be taxed in India under the Income Tax Act, 1961 for the assessment years1994-95, 1995-96, 1996-97 and 2000-0I?" Facts in the two writ petitions 21. While the aforementioned appeals were pending, a notice under Section 148 of the Act was served upon RJA on 27th February 2006 under Section 148 of the Act asking RJA to file its return for AYs 1999-2000. Similar notices were issued for AYs 1994-95 to 1998-99 and 2001-02. A copy of the reasons for issuance of the said notice has been placed on record. It inter alia stated that, in view of the decision of the Special Bench dated 31st August 2005 (relevant portions of which were quoted in the reasons), Section 148 read with Section 147 and Sections 149 and 150 of the Act were being invoked. 22. Pursuant to the objections filed by RJA to the above notices, a hearing was afforded to it in light of the decision of the Supreme Court in GKN Driveshafts (India) Ltd. v. ITO 250 ITR 19. The objections were disposed of by the Dy. Commissioner of Income Tax by an order dated 18th September 2006 in respect of each of the seven AYs, upholding the notices....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat has been referred to hereinabove is without prejudice to the contentions to be raised by the learned counsel for the parties. Matter be listed on 11th February, 2011. Interim orders shall remain in force till the date of hearing. On the next date of hearing, learned counsel for the parties shall formulate the proposition of law and come with relevant citations." 25. It is stated that till date, a letter by which the proceedings under Section 148 of the Act in respect of AYs 1989-90 and 1993-94 has not been produced and the proceedings in respect of the AYs 1999-2000 and 2001-02 has also not been brought. Subsequent orders of the ITAT 26. Mr. C.S. Aggarwal, learned Senior counsel for the Assessee, has placed before the Court a compilation of the relevant documents. Two of the documents in the said compilation are significant. The first is the order dated 29th August 2008 passed by the ITAT in ITA No. 407/Del/2008 being the appeal filed by RJA for AYs 1995-96, 1997-98 and 2000-2001. 27. The said appeal arose from the consequential orders passed by the AO after order of the Special Bench of the ITAT dated 31st August 2005. For each of the four AYs forming subject matter o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....han the presumed figure, he is required to support his claim by producing books of account." 30. After noting that RJA had been consistently reporting losses, the ITAT held that the "income could not have been artificially computed by invoking provisions of Section 44BBA particularly when the assessee has shown his book results showing loss. We, therefore, direct the AO to compute income on the basis of books of accounts maintained by the assessee." Section 234B could not be invoked to levy interest to charge interest and that was deleted. The ITAT held that RJA would produce its books of accounts to justify its claims that it had incurred losses in the business of operation of aircrafts. Accordingly the matter was restored to the file of the AO. On the basis of the above order, a separate order was passed on 22nd March 2009 in the same terms in respect of AY 1994-95. 31. Consequent upon the above order dated 29th August 2008, the AO passed separate orders for each of the AYs 1994-95 to 1998-99 and 2000-01 on 16th October 2009 noting that RJA had produced all the necessary bills and invoices etc, in support of the computation of losses in its profit and loss accounts. Accordingly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccordingly held in such instance an option would be available to the Assessee to produce the books of accounts to show that the assessable income is in fact less than the presumptive income. 37. In Hyundai Heavy Industries (supra) the question that was addressed was "what are the profits reasonably attributable to the assessee's permanent establishment in India?" In that context, the Court observed as under: "Thirdly, it is important to note that Chapter IV of the Act contains provisions for presumptive taxation of business income in certain cases as prescribed in Sections 44B, 44BB, 44BA and 44BBB of the Act. In the scheme of presumptive taxation, the Assessee is presumed to have earned income at the rate of a certain percentage of his total turnover or gross receipts. If the Assessee agrees to be taxed on presumed income, he is not required to maintain books of account. If, however, he claims that his income is less than the presumed figure, he is required to support his claim by producing books of account." 38. In as much as Section 44BBA is not charging provision, but only a machinery provision, it cannot preclude an Assessee from producing books of accounts to show that in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecifically brought to our notice that between financial year's ending 31. 12. 1989 to 31.12.1998 it has suffered the losses and all these losses have been borne by the State Treasury. The aforesaid figures are given on pages No. 241-242 of the paper Book and are as under:- S. No. Date (Dinar Jordan) 1. 31st December, 1989 84383645 2. 31st December, 1990 94792193 3. 31st December, 1991 133137074 4. 31st December, 1992 144788000 5. 31st December, 1993 143876783 6. 31st December, 1994 203579000 7. 31st December, 1995 220493000 8. 31st December, 1996 288172000 9. 31st December, 1997 315742000 10. 31st December, 1998 348557000 In our opinion therefore, there is no merit in the contention of the revenue that assessee was liable to be assessed as it is not an income of sovereign state. In arriving at the aforesaid conclusion we find ourselves in agreement with the order of ITAT in the case of Iraqi Airways (supra). In the instant case we also find that there is a certificate of Government of Jordan and also that of the Ambassador of Jordan in India. In view of these material submissions we dismiss the appeals of the department a....