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2016 (1) TMI 1075 - AT - Income TaxReopening of assessment - applicability of Article 8(1) of DTAA between India and Netherlands - Held that - Assuming of jurisdiction by the Assessing Officer in this case, is bad in law for the reasons inter alia that when the assessee has specifically claimed exemption of its entire income for taxation U/S 90 of the 1. T. Act read with Article 8 of DTAA between India and Netherlands by giving a note on the original income tax return, there was no tangible material with the Assessing Officer to reopen the assessment. Apart from note given on the original return of income by the assessee, no tangible material has been brought on record by the Assessing Officer to reopen the assessment; that Ld. CIT(A) has lost sight of the fact that the Assessing Officer has no jurisdiction to reopen the assessment without bringing on record any tangible material and as such, findings of Ld. CIT(A) are not sustainable in the eyes of law. Further the Assessing Officer has proceeded for reassessment of the case without issuing a notice U/S 143(2) of the Act and Ld. CIT(A) has also lost sight of this fact while passing the impugned order. In the light of factual matrix discussed in the preceding paragraphs, it is proved on record that the Assessing Officer does not have jurisdiction to reopen the assessment - Decided in favour of the assessee. Services rendered in the nature of technical and professional - whether the same are covered under Article 12 of DTAA between India and Netherlands - whether the service rendered is also covered u/s 9(J)(vii)? - Held that - The Coordinate Bench in assessee s own case, in the light of the provisions contained under DTAA came to the conclusion that ground handling services and technical services rendered by another airline at Indian airport, would be considered a part of operation of aircraft in the international traffic. The aforesaid decision of the coordinate bench squarely applies to the facts and circumstances of the present case. Ld. D.R. has failed to bring on record any reason to deviate from the order passed by the Tribunal in assessee s own case in the subsequent year.
Issues Involved:
1. Jurisdiction under Section 148 of the Income Tax Act. 2. Taxation of Fee for Technical Services (FTS) under DTAA. 3. Applicability of Section 234 for charging interest. 4. Premature initiation of penalty proceedings under Section 271(1)(c). Detailed Analysis: 1. Jurisdiction under Section 148 of the Income Tax Act: The core issue was whether the Assessing Officer (AO) had valid reasons or tangible material to assume jurisdiction under Section 148. The Tribunal observed that the reopening of the assessment for the assessment year 2000-01 was based on the original return filed on 25.02.2004, where the assessee had declared its entire income as exempt under Article 8 of the DTAA between India and the Netherlands. The Tribunal cited the judgments of CIT Vs Atul Kumar Swami and CIT Vs Tupperware India Pvt. Ltd., which emphasized that reassessment must be based on tangible material. The Tribunal concluded that there was no new tangible material to justify reopening the assessment, rendering the AO's assumption of jurisdiction invalid. Additionally, the AO failed to issue a notice under Section 143(2), which further invalidated the reassessment. Hence, the grounds challenging the jurisdiction under Section 148 were decided in favor of the assessee. 2. Taxation of Fee for Technical Services (FTS) under DTAA: The AO had taxed the fee received by the assessee from Jet Airways for technical and professional services under Section 44D read with Section 115A, considering it as FTS under Article 12 of the DTAA. However, the CIT(A) overturned this, directing the AO to tax the FTS as per the DTAA, considering the services were not connected to the Permanent Establishment (PE) in India. The Tribunal referred to its earlier decision in the assessee's own case, where it was held that ground handling and technical services were part of the operation of aircraft in international traffic and thus covered under Article 8 of the DTAA. The Tribunal upheld the CIT(A)'s decision, affirming that the income from services should be taxed under Article 8 and not Article 12 of the DTAA. 3. Applicability of Section 234 for Charging Interest: The AO had assessed the total income at Rs. 36,05,000 and taxed it at 30%, along with interest under Section 234. The CIT(A) affirmed this, directing recomputation of interest under Sections 234A, 234B, and 234D. Given that the Tribunal quashed the reopening of the assessment, the issue of charging interest became consequential and was decided in favor of the assessee. 4. Premature Initiation of Penalty Proceedings under Section 271(1)(c): The Tribunal noted that the ground related to the initiation of penalty proceedings under Section 271(1)(c) was premature and did not require adjudication at this stage. Conclusion: The Tribunal dismissed the appeal filed by the Revenue and allowed the appeal filed by the assessee. The order pronounced on 04 Jan., 2016, upheld the assessee's contentions regarding the invalid assumption of jurisdiction under Section 148, proper taxation under Article 8 of the DTAA, and the consequential issue of interest under Section 234.
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