The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the impugned income is not taxable in India as it is covered under Article 8(2) r.w. Article 8(1) of India-France Double Tax Avoidance Agreement (DTAA), interest income will be covered under Article 8(3) of the India-France DTAA and hence not taxable. And penalty proceedings under section 271(1)(c)/271A & 271B being pre-mature does not require adjudication.
The assessee Air France filed an appeal against the order of Commissioner of Income Tax (Appeals)[CIT(A)] on grounds of taxability of income from technical handling services received from IATP members, interest income, initiation of penalty proceedings under section 271(1)(c)/271A & 271B of the Income Tax Act, 1961 and levy of interest under Section 254 of the Act.
On the issue relating to the taxability of income from technical handling services received from IATP members the Tribunal in its decision held that the impugned income is not taxable in India as it is covered under Article 8(2) read with Article 8(1) of India-France DTAA. Accordingly, the addition(s) were deleted by recording the findings.
On the issue of taxability of interest income the two bench member consisting of G.S Pannu (President) and Astha Chandra (Judicial member) in its decision held that the fixed deposits made by the assessee are out of funds connected with the operation of aircraft in international traffic covered under Article 8(1) of India-France DTAA as the assessee has no other business. Therefore, the interest income will be covered under Article 8(3) of the India-France DTAA and hence not taxable.
On the issue regarding Initiation of penalty proceedings under section 271(1)(c)/271A & 271B of Income Tax Act being pre-mature does not require adjudication at this stage. Levy of interest under section 234 of the Act is only consequential. Thus, the appeal was allowed.
Subscribe Taxscan Premium to view the Judgment
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
