National Aviation Co. of India Vs. Dy. Commissioner of Income Tax ITAT Mumbai)- When the assessee is prevented from deducting tax u/s 195, the question of his not performing the obligation under law does not arise and thus he cannot be held a defaulter. The assessee cannot be held to be an assessee in default in terms of section 201 and 201(1A) of the Act. This is a case of impossibility of performance and the assessee is released from the obligation and hence the assessee is not an assessee in default.
INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH “L”, MUMBAI
Before Shri R.V. Easwar, Hon’ble President and Shri J. Sudhakar Reddy, Accountant Member
I.T.A. No. 6698/Mum/2002.
Assessment Year: 2001- 02.
| National Aviation Co. of India (Formerly known as Air India) Air India Building, Nariman Point, Mumbai -400 021. PAN AAACA9213E |
Vs. |
Dy. Commissioner of Income-tax, TDS, Circle-I, Mumbai |
|
Appellant |
Respondent |
Appellant by : Shri Arvind Sonde and Shri Jitendra Sanghvi.
Respondent by : Shri Narender Singh.
Date of Judgment: 3rd Nov, 2010.
O R D E R
Per J. Sudhakar Reddy, A.M.
This is an appeal filed by the assessee directed against the order of the CIT(Appeals)-XXXI, Mumbai dated 30th Sept., 2002 for the assessment year 2001-02.
2. The first appellate authority had dismissed the appeal filed by the assessee, against the order u/s 201 and 201(1A) of the Income-tax Act, 1961 dated 14-02-2001 passed by the DCIT (TDS), Circle-I, Mumbai.
3. The facts of the case are brought out in the order of the CIT(Appeals) which are extracted below for ready reference :
“2.1 the Air India has taken in December, 1995, three aircrafts on Wetlease from M/s Caribjet Inc. in accordance with Wetlease Agreement dated 22nd October, 1995. Because of certain non-compliance/defect, etc. Air India terminated the Wetlease on 4th September 1996. According to Caribjet the termination of the Wetlease Agreement was not correct and demanded on 7th January, 1997 reference of the dispute to arbitration in accordance with the lease agreement.
2.2 The agreement provides for arbitration to be governed by the English laws and accordingly, London Court of International Arbitration was agreed as the venue as the venue for arbitration. An Arbitral Tribunal after hearing at length oral as well as written submissions of both the parties ruled in the Award dated 19-1-1999 that Air India has wrongfully terminated Wetlease Agreement with Caribjet.
2.3 Air India filed an appeal in London Commercial Court against the said award. After hearing the appeal, court rejected Air India’s application for leave to appeal as the judge was not satisfied that the Tribunal was “obviously wrong” in its conclusion on the liabilities. Thereafter, Arbitral Tribunal heard the matter of determination of quantum in June 1999. The Arbitral Tribunal determined that Caribjet will receive a total amount of US$ 24.6 millon (termination cost US $ 2.2 million and termination losses US $ 22.4 million) and after setting up the amounts payable to Air India the Tribunal has awarded damage to Caribjet of US $ 23.6million (approximately Rs.102.6 crore). Soon after this award, M/s Caribjet moved the court in England on December 6, 1999 to enforce the award on Air India as a decree of the English Court since the Wetlease Agreement was governed by the English Law and the arbitration was conducted under the Uncitral Rules in England. The Air India put forth the evidence/argument that it was unable to release the money under the award until and unless the Government formalities including in RBI approval to remit the money and the clearance from the I.T. authorities in the form of NOC is obtained.
2.4 An application was made to RBI on December 16, 1999 for their approval for payment of the US $ 23.6 million to M/s Caribjet. The RBI vide their letter December 21, 1999 gave their approval subject to an NOC from the I.T. Department under the Income Tax Act, 1961. An application was, therefore, made to the Dy.CIT, Spl. Range-1 on December 21, 1999 for issuance of NOC for remittance of the award amount. After making an enquiry, on December 30, 1999, AO passed an order u/s 195(2) asking him to remit the whole amount into the Govt. Treasury as the TDS liability is more than the amount of the Award. The details of the working of the TDS is as below :
