Kingfisher’s licence to fly under threat

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Kingfisher’s licence to fly under threat

This article was posted on Mar 20, 2012 and is filed under Market News

Service tax dept plans to drag airline to court over non-payment of dues

It was a mixed day for Kingfisher Airlines: It faced the prospects of its flying licence being cancelled; its chairman, Vijay Mallya, was asked by the Directorate General of Civil Aviation (DGCA) to present a clear picture of the cash-strapped carrier; the service tax department threatened to drag it to the court over non-payment of dues; and the Income Tax Appellate Tribunal stayed the recovery of dues from the airline.

Mallya will meet DGCA chief E K Bharat Bhushan tomorrow to explain his plans to revive the airline. The beleaguered airline was served a show-cause notice towards the end of February, asking why its licence should not be suspended, as it had made unannounced cancellations. DGCA had issued the notice in the wake of a series of flight cancellations and the airline’s inability to pay salaries on time.

As of on Monday, DGCA had not made any recommendation to the government to suspend the operating permit. However, PTI reported the government was mulling cancellation of permit after the airline gave its summer schedule with 15 to 16 planes, against 28 planes last month.

“The airline not only lacks aircraft, it also lacks funds for day-to-day operations. It is failing to meet its flight schedule, causing inconvenience to passengers and it also failed to give salaries to employees for the past four-five months,” sources said.

They said Kingfisher might be planning a quiet shutdown and Mallya, being an “accountable” person, had been asked to meet the DGCA to present a clear picture. The picture was likely to become clear in a few days, the officials said.

Meanwhile, the Income Tax Appellate Tribunal (ITAT) stayed the recovery of income tax dues from the airline. In its interim order on Friday, ITAT stayed the recovery on the condition that Kingfisher would pay Rs 44 crore by March 27 and Rs 9 crore every week after that, till the dues of over Rs 300 crore are cleared.

Kingfisher will have to give a bank guarantee to the income tax (I-T) department. A senior I-T official confirmed the development. The official said the department would take action in accordance with the order and if the payment was not made by March 27, accounts would be frozen again.

The airline owes over Rs 300 crore of tax deducted at source to the I-T department. The action was initiated after the airline failed to make payments on time. Kingfisher had challenged the action before the commissioner (appeal) of the I-T department. It moved ITAT after its case was dismissed by the commissioner.

After the I-T department, the service tax department is planning to drag Kingfisher to the court over non-payment of dues. S K Goel, chairman of the Central Board of Excise and Customs (CBEC), said the airline had evaded service tax collected from travellers for which there was a criminal liability. He said legal proceedings could be initiated even after it made the payment because the tax evasion had already happened.

“Jet Airways has cleared its service tax dues of Rs 69 crore, but Kingfisher has still not cleared its dues of Rs 76 crore. We have frozen their 40 bank accounts, as well as the IATA account,” Goel said.

Kingfisher was to pay Rs 1 crore every day to clear its indirect tax dues with the department. Last month, the department issued a letter to its banks to freeze accounts. The airline had informed CBEC that it would pay the dues by March 31.

Source: Business Standard

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