Tax notice slapped on British Airways

UK-based British Airways has been slapped a service tax notice by the Revenue Department asking it to pay the balance of Rs 143.5 crore (Rs 1.44 billion) liability on sale of tickets in India between May 2006 and November 2007.

"We have issued a notice to the British Airways on July 25 intimating the company of its service tax liability," a senior Excise and Customs Department official said. He, however, clarified that the company has already paid Rs 117 crore (Rs 1.17 billion) tax although after a delay.

British Airways officials did not comment immediately when approached.

The official said the company has been issued notice asking it to explain why action should not be taken against it for delay in payment of service tax, while asking it to pay immediately the balance amount of Rs 26.5 crore (Rs 265 million).

Sources said since the airline has already paid Rs 117.17 crore, including interest, which the department says will be adjusted in the total demand made by the tax authorities.

The Service Tax Department, under the Central Board of Excise and Customs, demanded payment of Rs 143.5 crore on account of due service tax for selling air tickets during May 2006 to November 2007 period. In addition, tax was also sought on sale of tickets which were issued before May 2006, but were used later.

Sources said the tax evasion was found following a dispute between the Income Tax Department and the airline over payment of tax on engineering and ground services.

In this regard, the Commissioner Income Tax Appeal has already upheld the department's decision to impose a penalty of about Rs 4 crore (Rs 40 million) on the company. British Airways has filed an appeal in Income Tax Tribunal against this order, the sources said.