By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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New Page 2
21. (2010) 126 ITD 289
(Delhi)
Royal Jordanian Airlines v.
DDIT
(Intl. taxation)
A.Ys. : 1995-96 to 1998-99
and 2000-01
Dated : 29-8-2008
S. 44BBA — provisions of
presumptive taxation cannot bring to tax notional income when actually there is
loss incurred by the assessee.
Facts :
The assessee is a
corporation established in Jordan and is engaged in the business of operation of
aircraft in international traffic. It filed nil returns for the relevant
assessment years. It was claimed that for these assessment years the assessee
had incurred losses both in its Indian and global operations and so no tax was
chargeable while computing income under the provisions of S. 44BBA.
The Assessing Officer on the
other hand contended that the assessee is governed by the provisions of S. 44BBA
and so 5% of the gross receipts should be chargeable to tax. The Revenue further
contended that S. 44BBA does not provide for computation at lower rate of profit
as provided in S. 44AD, S. 44AF, S. 44BB, etc.
Held :
1. Time and again
various courts have held that ‘income tax’ is a tax on income. S. 4 and S. 5
are the charging Sections and the pre-requisite of these Sections is
existence of income. Chapter IV is attracted for the purpose of computation
of income. Hence, unless and until there is income u/s.4 and u/s.5 there
cannot be computation of income. Chapter IV-D is a machinery provision and
S. 28 or Chapter IV-D itself does not create a charge.
2. Even though there is
no specific mention in S. 44BBA for computing tax at lower rate, in case of
losses, the provisions should be understood to have an inbuilt option for
the assessee to compute income at a lower sum.
3. The deeming provision
of S. 44BBA only deems 5% of certain receipts as income, however it does not
deem that every person is deemed to have earned income.
4. When there are
losses, the presumptive section cannot bring to charge what is otherwise not
chargeable to tax.
