St Engineering Aerospace Engines Pte Ltd Vs ACIT & Anr (Delhi High Court)
The Delhi High Court has quashed a notice issued under Section 148 of the Income Tax Act, 1961, against ST Engineering Aerospace Engines Pte Ltd, a company based in Singapore, for the Assessment Year 2019-20. The petition filed by the company challenged the notice dated May 3, 2023, along with the preceding order under Section 148A(d) of the same date and the initial notice under Section 148A(b) dated March 31, 2023. The core contention of the petitioner was that these crucial communications were never properly served at its registered office in Singapore. The Income Tax Department (Revenue) alleged that information suggested income chargeable to tax had escaped assessment, specifically a sum received from Spicejet Ltd. for Fees for Technical Services/Fees for Included Services (FTS/FIS) on which Tax Deducted at Source (TDS) was purportedly not deducted. The Revenue argued that despite the issuance of these notices, the assessee failed to provide any response or file an income tax return for the relevant assessment year.
The court, after hearing both parties, found that the Revenue could not adequately demonstrate that the initial notice under Section 148A(b), the subsequent order under Section 148A(d), and the notice under Section 148 were indeed served upon ST Engineering Aerospace Engines in Singapore. The fact that the company lacked a Permanent Account Number (PAN) and credentials on the Indian Income Tax portal further supported the petitioner’s claim of non-receipt. While the Revenue argued that the assessee should have responded and availed appellate remedies post the final assessment order, the court emphasized the fundamental importance of proper service, especially on a foreign entity covered under the Indo-Singapore Double Taxation Avoidance Agreement (DTAA). The court refrained from delving into the merits of whether the Maintenance, Repair, and Overhaul (MRO) services rendered outside India constituted taxable FTS/FIS under the DTAA, as the foundational issue of proper service remained unresolved.
