$ * IN HIGH COURT OF DELHI AT NEW DELHI R-73 + ITA 159/2002 DIRECTOR OF INCOME TAX ..... Appellant Through: Mr Rohit Madan, Mr Zoheb Hossain and Mr Akash Vajpai, Advocates. versus ROYAL JORDANIAN AIRLINES ..... Respondent Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. With R- 73A + ITA 278/2006 ROYAL JORDANIAN AIRLINES ..... Appellant Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. versus COMMISSIONER OF INCOME TAX ..... Respondent Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. With ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 1 of 23 R-73B. + ITA 279/2006 ROYAL JORDANIAN AIRLINES ..... Appellant Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. versus COMMISSIONER OF INCOME TAX ..... Respondent Through: Mr Rohit Madan, Mr Zoheb Hossain and Mr Akash Vajpai, Advocates. With R-73C. + ITA 280/2006 & CM 2072/2006 ROYAL JORDANIAN AIRLINES ..... Appellant Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. versus COMMISSIONER OF INCOME TAX ..... Respondent Through: Mr Rohit Madan, Mr Zoheb Hossain and Mr Akash Vajpai, Advocates. With R-73D. + ITA 580/2006 & CM 4482/2006 ROYAL JORDANIAN AIRLINES ..... Appellant ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 2 of 23 Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. versus COMMISSIONER OF INCOME TAX ..... Respondent Through: Mr Rohit Madan, Mr Zoheb Hossain and Mr Akash Vajpai, Advocates. With R-73E. + W.P.(C) 16060/2006 ROYAL JORDANIAN AIRLINES & ANR ..... Appellant Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. versus ASSISTANT DIRECTOR OF INCOME TAX ..... Respondent Through: Mr Rohit Madan, Mr Zoheb Hossain and Mr Akash Vajpai, Advocates. And R-73F. + W.P.(C) 16068/2006 ROYAL JORDANIAN AIRLINES & ANR ..... Appellant Through: Mr. C.S. Aggarwal, Senior Advocate with Mr. Prakash Kumar, Advocate and Mr. Anil K. Makhija, Advocate. versus ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 3 of 23 ASSISTANT DIRECTOR OF INCOME TAX ..... Respondent Through: Mr Rohit Madan, Mr Zoheb Hossain and Mr Akash Vajpai, Advocates. CORAM: JUSTICE S. MURALIDHAR JUSTICE VIBHU BAKHRU ORDER % 24.11.2015 Dr. S. Muralidhar,J. Introduction 1. ITA No. 159 of 2002 is appeal by Revenue against order dated 2nd November 2001 of Income Tax Appellate Tribunal ( ITAT ) in ITA Nos.790-794/Del/96 for Assessment Years ('AYs') 1989-90 to 1993-94. 2. ITA No.278 of 2006 by Assessee, Royal Jordanian Airlines ( RJA ) is directed against order dated 31st August 2005 of ITAT in ITA No. 1786/De/2000 for AY 1996-97, ITA No. 279 of 2006 by RJA is directed against order dated 31st August 2005 of ITAT in ITA No.5252/Del/98 for AY 1995-96, ITA No. 280 of 2006 by RJA is directed against order dated 31st August 2005 of ITAT in ITA No. 4670/Del/03 for AY 2000-01 and ITA No. 580 of 2006 by RJA is against order dated 31st August 2005 of ITAT in ITA No. 3805/Del/99 for AYs 1994-95. 3. Apart from above appeals, two writ petitions have been filed by ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 4 of 23 RJA, i.e., W.P.(C) No.16060 of 2006 and W.P.(C) No. 16068 of 2006, in which notices dated 27th February 2006 issued by Assistant Director of Income Tax ( ADIT ) under Section 148 of Act seeking to reopen assessments for AYs 1989-90 to 1993-94, 1999-2000 and 2001-02 and orders dated 18th September 2006 rejecting RJA's objections to said notices have been challenged. 4. Since appeals and writ petitions arise from common set of facts, they are being disposed of by this common order. Background facts 5. background facts are that RJA came to existence by Ordinance No. 10 of 1969 issued by Hashemite Kingdom of Jordan under Article 31 of Constitution of Jordan. said Ordinance was published in Jordanian official gazette dated 10th April 1969. features of RJA as spelt out in Ordinance were that it was body corporate having financial and administrative independence, it was part of Ministry of Transport of Government of Jordan and it was to undertake all scheduled air transport activities from and to Kingdom of Jordan. initial capital of RJA Corporation was two million and two hundred fifty thousand Jordanian Dinars was to be paid out of State s treasury. Council of Ministers of Jordan would have right to terminate members of Board of Directors of RJA. Government of Jordan guaranteed all obligations of RJA Corporation and it was to be specially exempted from customs and duty fees. certificate dated 10th October 1995 issued by Ministry of ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 5 of 23 Transport of Kingdom of Jordan that RJA would be directly controlled by Council of Ministers. It was stated that for all purposes RJA has status of Department of Government in Kingdom of Jordan. 6. RJA has its principal office in Amman in Jordan. It appointed Jet Air Pvt. Ltd. as its general sales agent in India. RJA commenced its operations in India, carrying passengers and cargo on international flights from and to India from 1989 onwards. Since commencement of operations in India, RJA has been incurring losses. It did not file any return of income in India. Facts concerning AYs 1989-90 to 1993-94 7. In response to notice issued to it under Section 148 of Act in respect of AYs 1989-90 to 1992-93, stating that RJA has not declared its income in terms of Section 44BBA of Act and in response to another notice under Section 142(1) in respect of AY 1993- 94, RJA filed its return for aforementioned AYs 1989-90 to 1993- 94. RJA disclosed its gross receipts as well as its expenses, apart from commission paid to its agents. It pointed out that it had been paying income tax to Government account since September 1993 in order to obtain 'No Objection Certificate' for remittance of sales proceeds calculated on basis of gross receipts less commission under Section 44BBA of Act. Assessing Officer ( AO ), nevertheless, proceeded to pass orders on 28th February 1994, in respect of AYs 1990-91 to 1993-94 holding that in terms of Section 44BBA, 5% of ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 6 of 23 gross receipts were to be deemed to be taxable income on presumptive basis. For AY 1989-90, similar order was passed by AO on 31st March 1994. 8. Aggrieved by above assessment orders, RJA filed appeals before Commissioner of Income Tax (Appeals) [ CIT (A)]. By common order dated 4th December 1995, CIT (A) allowed appeals on short ground that RJA was not liable to tax as its entire income was in fact income of Government of Jordan. It may be mentioned at this stage that RJA has specifically urged other issues before CIT (A), including challenging invocation of Section 148 of Act and that Section 44BBA of Act did not apply to it. 9. CIT(A) also referred to decision of ITAT in Iraqi Airways v. Inspecting Assistant Commissioner 23 ITD 115 and noticed that there was no distinction between case of RJA and that of Iraqi Airways. Reference was also made to Note 11 attached to audited accounts of RJA for year ending 31st December 1993 which stated that Kingdom of Jordan was committed to cover losses incurred by RJA. CIT (A) also considered opinion given by public accountants of Jordan, M/s Saba & Co. CIT (A) held that entire income of RJA was exempt from taxation and that exercise of jurisdiction by ADIT under Section 147/148 was unsustainable in law. However, CIT (A) observed that no refund can be granted with respect to income already admitted on which tax had been paid. effect of this appellate order would only be to reduce additional ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 7 of 23 demand, if any raised in reassessment proceedings which should be refunded to appellant, if already collected . 10. Aggrieved by above order of CIT (A), both Revenue and RJA filed appeals before ITAT. In RJA s five appeals, issue raised was refusal by CIT (A) to grant refund in respect of taxes that had already been paid prior to re-assessment proceedings. solitary ground in Revenue s five appeals was challenge to invalidation by CIT (A) of exercise of jurisdiction under Section 147/148 of Act. Revenue's contention was that assessee company is corporation like any other corporation such as Air India Corporation and is liable to pay tax in India . 11. ITAT in order dated 2nd November 2011, followed its earlier order in case of Iraqi Airways (supra) and, therefore, upheld order of CIT (A) that income of RJA was not liable to be assessed to income tax. It was also noticed that between financial year ending 31st December 1989 to 31st December 1998, RJA has suffered losses and all losses had been borne by State treasury. Revenue's appeals were dismissed. 12. As far as RJA s appeals were concerned, ITAT held that Section 44BBA could not have been applied to Assessee. Therefore, there was no alternative but, to cancel assessment and direct refund of amount of tax paid . As result, RJA s appeals were allowed. ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 8 of 23 13. It is against above order dated 2nd November 2001 of ITAT that Revenue has filed ITA No. 159 of 2002 in this Court. While admitting said appeal on 15th November 2002, following question of law was framed by this Court for consideration: Whether tribunal was correct in law in holding that Royal Jordanian Airlines was not liable to taxed in India under Income Tax Act, 1961, in respect of assessment years 1989-90 to 1993-94. Facts concerning AYs 1994-95 to 1996-97 and 2000-01 14. For AYs 1994-95, 1995-96, 1996-97 and 2000-01 RJA filed its return of income declaring nil income. Nonetheless, AO framed assessment under Section 143(3) of Act on 14 th March 1997, holding that RJA is foreign company and is liable to pay tax in India, in terms of Section 44BBA of Act. AO proceeded to determine income @5% of net sales and assessed income of RJA for AY 1994-95 at Rs.2,09,01,800. For AY 1995-96, similar order was passed on 6th March 1998, determining income at Rs.1,91,63,360. Another order dated 28th December 1998 was passed by AO under Section 143(3) of Act for AY 1996-97, assessing income of RJA at Rs.2,07,08,260. For AY 2000-01, AO passed order dated 30th October 2002 under Section 143(3) of Act, determining income at Rs. 63,13,422. 15. Appeals were filed by RJA against aforementioned assessment order for AY 1994-95. CIT (A) passed order on 4th June 1999 affirming order of AO as far as applicability of Section 44BBA ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 9 of 23 was concerned. However, it felt that AO had incorrectly allowed deduction from gross receipts and accordingly its income was enhanced to that extent. Similar orders were passed by CIT (A) in respect of appeals against assessment orders for AYs 1995-96, 1996-97 and 2000-01. 16. Aggrieved by above orders, appeals were filed by RJA before ITAT. For AY 1994-95 when appeal of RJA being 3085/Del/99 was heard by ITAT, there was difference of opinion amongst its members, where one of them was inclined to follow order of ITAT in Iraqi Airlines (supra) as well as order dated 2nd November 2001 in Assessee s own case for AY 1993-94, whereas other was not. As result, Special Bench of ITAT was constituted. 17. For AY 1995-96, CIT (A) allowed appeal of RJA. Revenue went in appeal before ITAT. Likewise, for AY 1996-97, CIT (A) held against Revenue and therefore appeal for that year was also filed by Revenue before ITAT. However, for AY 2000-01, against decision of CIT (A), RJA again filed appeal before ITAT. 18. Special Bench passed common order dated 31st August 2005 in four appeals pertaining to above AYs. Special Bench held that RJA was liable to be re-assessed to income tax as foreign company. It was held that there was no immunity from tax to sovereigns unless it was specifically granted by Parliament. Special Bench ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 10 of 23 held that it was unable to subscribe to view taken by ITAT in Iraqi Airways case (supra). It held that RJA is company under Jordan company law and was therefore person under Section 2 (17) read with Section 2 (31) of Act. 19. Special Bench then referred to alternative plea of RJA in its appeals for AYs 1994-95 and 2000-01 that Income Tax authority had erred, for purposes of Section 44BBA of Act, in not reducing gross sales by commission paid to its agents and sums refundable to customers. It was held that since there was no discussion in impugned order of CIT(A) in that regard, RJA should be given specific opportunity to put forth its arguments in relation to computation of its income under Section 44BBA. matter was therefore restored to file of AO for that purpose. AO was also asked to examine question of levy of interest under Section 234B of Act. 20. Against above order dated 31st August 2005 of Special Bench of ITAT, RJA filed ITA Nos. 278, 279, 280 and 580 of 2006. While admitting said appeals on 4th July 2006, following question of law was framed by Court: Whether ITAT was correct in law in holding that Royal Jordanian Airlines is liable to be taxed in India under Income Tax Act, 1961 for assessment years1994-95, 1995-96, 1996-97 and 2000-0I?" Facts in two writ petitions ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 11 of 23 21. While aforementioned appeals were pending, notice under Section 148 of Act was served upon RJA on 27 th February 2006 under Section 148 of Act asking RJA to file its return for AYs 1999- 2000. Similar notices were issued for AYs 1994-95 to 1998-99 and 2001-02. copy of reasons for issuance of said notice has been placed on record. It inter alia stated that, in view of decision of Special Bench dated 31st August 2005 (relevant portions of which were quoted in reasons), Section 148 read with Section 147 and Sections 149 and 150 of Act were being invoked. 22. Pursuant to objections filed by RJA to above notices, hearing was afforded to it in light of decision of Supreme Court in GKN Driveshafts (India) Ltd. v. ITO 250 ITR 19. objections were disposed of by Dy. Commissioner of Income Tax by order dated 18th September 2006 in respect of each of seven AYs, upholding notices for reopening of assessments. 23. Aggrieved by notice dated 27th February 2006 and order dated 18th September 2006, RJA filed separate writ petitions in this Court being W.P.(C) No. 16062-63/ 2006, 16064/2006, 16066/2006, 16089-90/2006 and 16091-92/2006 in respect of AYs 1989-90 to 1993- 94. said writ petitions were listed before Court on 24th October 2008 when following order was passed: Mr. Sabharwal states that he has taken instructions with regard to withdrawal of proceedings under Section 147 pursuant to Section 148 notices. He submits that said proceedings have already been dropped. He has produced ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 12 of 23 before us copy of letter dated 20.10.2008 issued by Assistant Director of Income Tax (IT), Circle 2(I), New Delhi issued to assessee indicating that proceedings pursuant to notices under Section 148, which had been issued on 27th February 2006 for assessment years 1989-90 to 1993-94, have been dropped. signed copy of said letter is placed in file of W.P.(C) 16089-90/2006. In view of aforesaid, these writ petitions have become infructuous. They are disposed of as such. All pending applications also stand disposed of. 24. However for some reason, it appears that notices under Section 148 issued in respect of AYs 1999-2000 and 2001-02 were not dropped. present two writ petitions (W.P.(C) 16060 of 2006 and 16068 of 2006 pertaining to notice under Section 148 of Act issued for said two AYs came up for hearing before Court on 16 th November 2010, when following order was passed: In course of hearing, Mr.C.S.Aggarwal, learned senior counsel appearing for petitioner referred to order dated 24 th August, passed in WP(C) No. 16089-90/2006 wherein revenue has recalled notices issued under Section 148 of Income Tax Act, 1961 (for brevity Act ) for span of 5 years. It is submitted by Mr. Aggarwal, learned senior counsel that contents of said letter would reveal that identical reasons have been recorded while issuing notice under Section 148 of Act. Mr. Sabharwal, learned counsel appearing for revenue undertakes to produce said letter. That apart, learned counsel for revenue shall also produce record indicating why proceedings were dropped. Be it noted, direction for production of record or letter that has been referred to hereinabove is without prejudice to contentions to be raised by learned counsel for parties. ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 13 of 23 Matter be listed on 11th February, 2011. Interim orders shall remain in force till date of hearing. On next date of hearing, learned counsel for parties shall formulate proposition of law and come with relevant citations. 25. It is stated that till date, letter by which proceedings under Section 148 of Act in respect of AYs 1989-90 and 1993-94 has not been produced and proceedings in respect of AYs 1999-2000 and 2001-02 has also not been brought. Subsequent orders of ITAT 26. Mr. C.S. Aggarwal, learned Senior counsel for Assessee, has placed before Court compilation of relevant documents. Two of documents in said compilation are significant. first is order dated 29th August 2008 passed by ITAT in ITA No. 407/Del/2008 being appeal filed by RJA for AYs 1995-96, 1997-98 and 2000-2001. 27. said appeal arose from consequential orders passed by AO after order of Special Bench of ITAT dated 31 st August 2005. For each of four AYs forming subject matter of order of ITAT, AO by order dated 27th December 2006 held that despite losses incurred by RJA both in India as well as globally, income had to be computed at 5% of gross receipts in terms of Section 44BBA of Act. ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 14 of 23 28. In appeals filed by RJA against said orders, CIT (A) by order dated 14th January 2008 confirmed computation of income made by AO. It was held, inter alia, that Section 44BBA of Act did not entitle RJA to claim deductions of any other expenditure or lower rate of profit even if it had maintained books of accounts. It was further observed that decision of Supreme Court in CIT v. Hyundai Heavy Industries Ltd. 291 ITR 482 would not apply to facts of case since said decision was not rendered in context of Section 44BBA of Act. 29. order dated 29th August 2008 of ITAT was essentially on interpretation and applicability of Section 44BBA of Act. After discussing decisions of Supreme Court in Union of India v. A. Sanyasi Rao 219 ITR 330 (rendered in context of Section 44AC of Act) and CIT v. Hyundai Heavy Industries Ltd. 291 ITR 482 (supra), it was concluded by ITAT that purpose of presumptive provisions is to provide simple manner of calculation and not to bring to tax income when there is no income . It was further held as under: though there is no specific provision in Act to compute income at lower rate in Section 448BA of Act, yet in case where there are losses to Assessee, firstly, provisions are not applicable, and assuming they are applicable then too, provisions for lower rate of taxation have to be understood within scheme of Act as has been held by apex Court in case of Hyundai Heavy Industries Co. Ltd. (supra), wherein at p. 494, it was observed as under: ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 15 of 23 Thirdly, it is important to note that Chapter IV of Act contains provisions for presumptive taxation of business income in certain cases as prescribed in Sections 44B, 44BB, 44BA and 44BBB of Act. In scheme of presumptive taxation, Assessee is presumed to have earned income at rate of certain percentage of his total turnover or gross receipts. If Assessee agrees to be taxed on presumed income, he is not required to maintain books of account. If, however, he claims that his income is less than presumed figure, he is required to support his claim by producing books of account. 30. After noting that RJA had been consistently reporting losses, ITAT held that income could not have been artificially computed by invoking provisions of Section 44BBA particularly when assessee has shown his book results showing loss. We, therefore, direct AO to compute income on basis of books of accounts maintained by assessee. Section 234B could not be invoked to levy interest to charge interest and that was deleted. ITAT held that RJA would produce its books of accounts to justify its claims that it had incurred losses in business of operation of aircrafts. Accordingly matter was restored to file of AO. On basis of above order, separate order was passed on 22nd March 2009 in same terms in respect of AY 1994-95. 31. Consequent upon above order dated 29th August 2008, AO passed separate orders for each of AYs 1994-95 to 1998-99 and 2000-01 on 16th October 2009 noting that RJA had produced all ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 16 of 23 necessary bills and invoices etc, in support of computation of losses in its profit and loss accounts. Accordingly, AO accepted income to be nil. 32. It is significant that Revenue has accepted order dated 29th August 2008 as well as 29th March 2009 passed by ITAT and not challenged said orders by filing appeals before this Court. As result, consequential order of AO dated 16th October 2009 accepting income of RJA to be nil for AYs 1994-95 to 1998-99 and 2000-01 has also attained finality. 33. Consequently, question framed in these appeals for AYs 1994- 95 to 1996-97 and 2000-01 as regards liability of RJA to tax under Act has been rendered academic. 34. As regards appeal of Revenue for AYs 1989-90 to 1993- 94, with Revenue having accepted interpretation of Section 44BBA qua RJA for AYs 1994-95 to 2000-01, same would apply even as regards AYs 1989-90 to 1993-94. Legal position qua Section 44 BBA 35. In this regard, it is necessary for Court to discuss legal position as regards Section 44BBA of Act, which reads as under: 44BBA. Special provision for computing profits and gains of business of operation of aircraft in case of non-residents.- ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 17 of 23 (1) Notwithstanding anything to contrary contained in sections 28 to 43A, in case of assessee, being non-resident, engaged in business of operation of aircraft, sum equal to five per cent of aggregate of amounts specified in sub-section (2) shall be deemed to be profits and gains of such business chargeable to tax under head Profits and gains of business or profession. (2) amounts referred to in sub-section (1) shall be following, namely: (a) amount paid or payable (whether in or out of India) to assessee or to any person on his behalf on account of carriage of passengers, livestock, mail or goods from any place in India; and (b) amount received or deemed to be received in India by or on behalf of assessee on account of carriage of passengers, livestock, mail or goods from any place outside India. 36. In Sanyasi Rao (supra), Supreme Court was interpreting Section 44AC which provides for taxation of presumptive income based on gross receipts. Supreme Court in said case held that even where Section 44AC is sought to be applied to trader, it was only machinery provision and could not deny normal relief afforded to all Assessees. It was accordingly held in such instance option would be available to Assessee to produce books of accounts to show that assessable income is in fact less than presumptive income. 37. In Hyundai Heavy Industries (supra) question that was addressed was what are profits reasonably attributable to ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 18 of 23 assessee s permanent establishment in India? In that context, Court observed as under: Thirdly, it is important to note that Chapter IV of Act contains provisions for presumptive taxation of business income in certain cases as prescribed in Sections 44B, 44BB, 44BA and 44BBB of Act. In scheme of presumptive taxation, Assessee is presumed to have earned income at rate of certain percentage of his total turnover or gross receipts. If Assessee agrees to be taxed on presumed income, he is not required to maintain books of account. If, however, he claims that his income is less than presumed figure, he is required to support his claim by producing books of account. 38. In as much as Section 44BBA is not charging provision, but only machinery provision, it cannot preclude Assessee from producing books of accounts to show that in any particular AY there is no taxable income. Court, therefore, concurs with view expressed in this regard by ITAT in its order dated 29 th August 2008, which in any event has not been challenged by Revenue and has attained finality. In other words, Court concurs with view that where there is no income, Section 44BBA cannot be applied to bring to tax presumptive income constituting 5% of gross receipts in terms of Section 44BBA(2) of Act. No doubt, for that purpose Assessee has to produce books of accounts to substantiate that it has incurred losses or that its assessable income is less than its presumptive income, as case may be. ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 19 of 23 39. It was then submitted by Mr.Madan that as far as AYs 1989-90 to 1993-94 are concerned, RJA is yet to produce books of accounts to show that it has been incurring losses and these are yet to be verified by AO. In response Mr. Aggarwal pointed out that RJA had ceased its operations from India and working sheets for aforementioned AYs 1989-90 to 1993-94, copies of which were placed before this Court in compilation filed by RJA, show that it had consistently been suffering losses for all these AYs. 40. While it is correct that for aforementioned AYs 1989-90 to 1993-94, RJA s accounts showing losses do not appear to have been verified by AO, Court finds that ITAT has in para 14 of its order dated 2nd November 2001 referred to this fact as under: 14. We have heard both parties at length and have also carefully perused orders of both lower income-tax authorities. We have also gone through voluminous paper book filed by assessee and we find facts of instant case appear to almost identical to facts of Iraqi Airways on which heavy reliance was placed by assessee's learned counsel and which is reported in 23 lTD 115. In ours considered opinion, it cannot be denied that assessee is part of Ministry of Transport of Government of Jordan as has duly been certified both by Government of Jordan and Ambassador of Jordan in Their certificates filed. In our opinion once Government of Jordan has duly certified that Royal Jordanian Airlines is part of Ministry of Transport and its income belongs to sovereign state of Jordan, we do not find any justification to hold that it is separate corporation. assessee has specifically brought to our notice that between financial year's ending 31. 12. 1989 to 31.12.1998 it has suffered losses and all these losses have been borne by State Treasury. aforesaid ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 20 of 23 figures are given on pages No. 241-242 of paper Book and are as under:- S. No. Date (Dinar Jordan) 1. 31st December, 1989 84383645 2. 31st December, 1990 94792193 3. 31st December, 1991 133137074 4. 31st December, 1992 144788000 5. 31st December, 1993 143876783 6. 31st December, 1994 203579000 7. 31st December, 1995 220493000 8. 31st December, 1996 288172000 9. 31st December, 1997 315742000 10. 31st December, 1998 348557000 In our opinion therefore, there is no merit in contention of revenue that assessee was liable to be assessed as it is not income of sovereign state. In arriving at aforesaid conclusion we find ourselves in agreement with order of ITAT in case of Iraqi Airways (supra). In instant case we also find that there is certificate of Government of Jordan and also that of Ambassador of Jordan in India. In view of these material submissions we dismiss appeals of department and uphold order of CIT(A) who is correct in holding that purported income is not liable for assessment. 41. ITAT has thus noted factual position regarding losses incurred by RJA for above years. This has not been disputed by Revenue in its appeal against aforesaid order. Consequently, question of RJA being asked to pay tax on presumptive basis under Section 44BBA for said year, or matters being sent to AO for verifying said facts does not arise. ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 21 of 23 42. offshoot of above discussion is that only question framed in Revenue s appeal, ITA No. 159 of 2002, and in Assessee s appeals, ITA No. 278, 279 and 280 of 2006, has been rendered academic. On application of Section 44BBA of Act, there is no taxable income of RJA for AYs covered by said appeals. writ petitions 43. Now turning to W.P.(C) Nos. 16060 of 2006 and 16068 of 2006, it is seen that apart from fact that no particular reason has been shown by Revenue for not dropping notice under Section 148 of Act for AYs 1999-2000 and 2001-02, Revenue also appears to have overlooked fact that effective from 1st April 1999, there is Double Taxation Avoidance Agreement ( DTAA ) between Jordan and India. financial position as regards relevant financial year 2001-02 is also one where RJA has suffered losses. Therefore, in any event, question of RJA having any taxable income for AY 2001-02 or being amenable to income tax does not arise. 44. As regards notice under Section 148 for AY 1999-2000, Court finds that it was issued even while proceedings which commenced with notice under Section 143(2) of Act issued on 26th December 2000 were not yet closed. In other words, even without passing further consequential order under Section 143(3) of Act, notice under Section 148 of Act was issued to RJA on 23rd February 2006 asking it to file return for AY 1999-2000. This was impermissible in law and there are at least two decisions of this Court ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 22 of 23 that support Assessee. These are KLM Royal Dutch Airlines v. Additional Director of Income Tax (2007) 292 ITR 49 (Del) and Commissioner of Income Tax v. Ved & Co. (2008) 302 ITR 328(Del). This is, therefore, another reason why notice under Section 148 of Act for AY 1999-2000 is unsustainable in law. Conclusion 45. Consequently, notices dated 23rd February 2006 issued to RJA under Section 148 of Act and rejection of objections of RJA to said notices by order dated 18 th September 2006 for AYs 1999-2000 and 2001-02, are held unsustainable in law and are hereby quashed. 46. appeals are disposed of and writ petitions are allowed in above terms, but in circumstances, with no orders as to costs. S.MURALIDHAR, J VIBHU BAKHRU, J NOVEMBER 24, 2015 mg ITA Nos. 159/2002, 278, 279,280, 580/2006 & W.P(C) 16060, 16068/2006 Page 23 of 23 Director of Income Tax v. Royal Jordanian Airline