Malaysian Airline System Berhad Vs DCIT (ITAT Delhi)
The case of Malaysian Airline System Berhad Vs DCIT (ITAT Delhi) revolves around the taxability of services provided by the Malaysian airline to Indian airlines in Malaysia. The dispute arises from the treatment of income derived from ground handling and other services provided by the head office of the assessee company to Jet Airways and JetLite.
Detailed Analysis: The appellant, Malaysian Airline System Berhad, contested the final assessment order passed by the Assessing Officer (AO) under section 143(3) r.w.s. 144C(1) of the Income Tax Act. Grounds of appeal included arguments against the taxation of proceeds from services provided in Malaysia to Indian airlines, asserting that they do not constitute taxable income in India.
The dispute resolution panel (DRP) upheld the AO’s decision to tax the receipts on account of services provided in Malaysia. The panel deemed the receipts as “Fees for Technical Services” taxable in India, citing contracts between the parties, including the nature of services and relevant provisions of the Double Taxation Avoidance Agreement (DTAA) between India and Malaysia.
Despite the appellant’s objections and contentions regarding the jurisdiction of Indian tax authorities over income derived from services provided outside India, both the DRP and the AO maintained their stance. The AO, guided by the DRP’s directions, passed a final assessment order bringing the receipts under the tax purview.
The appellant’s arguments, including the absence of income received in India and the nature of services provided abroad, were dismissed. The appellate authority sustained the order, resulting in the dismissal of the appellant’s appeal.
Conclusion: The case underscores the complexities involved in cross-border taxation and the interpretation of DTAA provisions. Despite the appellant’s assertions, the tax authorities upheld the taxability of receipts from services provided in Malaysia to Indian airlines. This decision emphasizes the importance of thorough contractual analysis and compliance with international tax treaties in such transactions.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the assessee against the final assessment order dated 17.12.2015 passed by the Assessing Officer (for short “AO”) u/s 143(3) r.w.s. 144C(1) of the Act pursuant to the directions of DRP dated 06.11.2015 passed u/s 144C(5) of the Act. The assessee raised the following grounds:
1. “The proceeds of ground handling and other services provided in Malaysia by the Head Office of the appellant to Jet Airways and JetLite are not taxable in India. managerial/technical services in terms of Explanation 2 to section 9(1)(vii) of Income Tax Act or Article 13 of DTAA between India and Malaysia.
2. The proceeds of ground handling and other services provided by the appellant’s Head Office in Malaysia to Jet Airways and JetLite are not managerial/technical services in terms of Explanation 2 to section 9(1)(vii) of Income Tax Act or Article 13 of DTAA between India and
3. The Dispute Resolution Panel has not given the appellant an opportunity of being heard, in terms of section 144C(1) on the direction u/s 144C(5) to the Assessing Officer, while departing from the treatment of income of the Head Office in the draft assessment
4. The Dispute Resolution Panel is not correct in holding that the profit from services provided by the head office of the appellant in Malaysia is not from operation of aircraft as referred to in section 44BBA of the Income Tax Act or Article 8 of the DTAA between India and Malaysia.
5. The Assessing Officer is not justified in proposing to initiate penalty proceedings u/s 271(1)(c) as the appellant has acted bonafide.”
2. In spite of several opportunities, the Counsel appeared sought time on one ground or the other. When the matter called for hearing on 08.08.2023 the Ld. Counsel sought adjournment and the Bench observed that it is an old appeal and multiple adjournments were sought by the assessee in past and Ld. Counsel stated that in the absence of requisite information from the assessee the matter could not be presented and sought an opportunity to file the required information from the assessee company based in Malaysia. Accordingly, the matter was adjourned to 13.09.2023 at the request of the assessee’s counsel. When the matter called for hearing on 13.09.2023 none appeared on behalf of the assessee. Therefore, we proceed to dispose of this appeal on hearing the Ld. DR on merits.
3. We have heard the Ld. DR. In ground nos. 1 to 4 of grounds of appeal the assessee challenged the order of the AO/DRP in holding that ground handling and other services provided in Malaysia by the Head Office of the assessee company to Jet Airways and JetLite are taxable in India. In the draft assessment order the AO proposed to treat receipts from Jet Airways India Ltd. and JetLite India Ltd. as taxable in India in the hands of the assessee as the payees namely Jet Airways India Ltd. and JetLite India Ltd. have deducted TDS on the payments made to the assessee observing as under:
“3. During the course of assessment, based on the assessment order for the assessment year 2011-12 and the transactions appearing in F.No. 26 AS, it has been found that the assessee has not offered the following incomes to tax in India in the return of income filed by it: –
