No denial of nil TDS certificate just because group Co. of assessee involved in tax evasion in similar transaction: HC

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  • Last Updated on 28 January, 2022

Income - Deemed to accrue or arise in India (Shipping/inland waterways transport and air transport - General)

Case Details: Celestial Aviation Trading 64 Ltd. v. ITO - [2022] 134 taxmann.com 114 (Delhi)

Judiciary and Counsel Details

    • Vipin Sanghi and Jasmeet Singh, JJ.
    • Sachit JollyRohit GargMs. Disha Jham and Sohum Dua, Advs. for the Petitioner.
    • Sunil AgarwalTushar Gupta and Samarth Chaudhari, Advs. for the Respondent.

Facts of the Case

Assessee, a foreign company, entered into an Aircraft Specified Lease Agreement with a company named (AIL) for a lease of one aircraft. It made an application under section 197 for ‘Nil’ rate of withholding tax certificate on premise that under article 8 of India-Ireland Double Taxation Avoidance Agreement, it was liable to pay tax only in Ireland.

The Assessing Officer (AO) noticed that there was tax evasion in the case of another group company, which was engaged in a similar transaction. Thus, AO denied the ‘Nil’ rate of tax deduction certificate to the assessee. Aggrieved-assessee filed the writ petition before the Delhi High Court.

High Court Held

The Delhi High Court held that the certificate was denied by AO only because another Group Company was found to have leased out an aircraft to Interglobe Aviation Limitation (‘Interglobe’). Upon a search conducted on Interglobe, it was allegedly found that there was tax evasion.

The assessee had no concern with the transaction between CAT-9 and Interglobe. The lease entered into between the assessee, and Air India Limited is a separate and independent transaction with which CAT-9 has no concern.

The assessee undertook to file his return for the Assessment Year in question and pay the taxes and other liabilities towards interest or penalty according to law, as and when determined. Therefore, AO wasn’t justified in denying nil tax deduction certificate to assessee.

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