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2013 (4) TMI 575 - AT - Income TaxIndia Netherlands DTTA - Charges received by the assessee from various airlines on account of rendering of ground handling services - whether are covered under article 8 of the Indo- Netherlands Treaty as part of operation of aircraft OR under article 7 of the Treaty - whether these services were rendered under any pool or joint business in article 8(3) - Held that - Facts of the year under consideration are identical to the earlier years i.e. AY 2004-05, 2005-06, 2006-07 & 2007-08. In the earlier years, three different Benches of the ITAT, one Bench for AY 2004-05 & 2005-06 and another Bench for AY 2006-07 and third Bench for AY 2007-08, have considered this issue and have arrived at a similar conclusion that the income from ground handling and technical handling services is not chargeable to tax in India. Therefore, no merit in the Revenue s contention that the decision of ITAT for AY 2004-05, 2005-06 and other years requires reconsideration and the matter needs to be referred to the Larger Bench. The issue is squarely covered in favour of the assessee by the above decisions of the ITAT for AY 2004-05 to 2007-08. The Revenue is already in appeal before the Hon ble Jurisdictional High Court in the earlier years. However, so long as the decision of earlier year is not modified or reversed by the Hon ble Jurisdictional High Court, ordinarily, the same should be followed by the subsequent Coordinate Bench. Merely because the Revenue is not satisfied with the decision of the ITAT in earlier year would not be a sufficient ground for referring the matter to the Larger Bench. In view of the above, respectfully following the decision of ITAT the income from ground handling and technical handling services is not taxable in India. Accordingly, the assessee s appeal is allowed.
Issues Involved:
1. Taxability of income from ground handling and technical handling services. 2. Applicability of Article 8 of the Indo-Netherlands Double Taxation Avoidance Agreement (DTAA). 3. Consistency with previous ITAT decisions. 4. Consideration of reciprocity and pooling agreements. 5. Interpretation of "operation of aircraft in international traffic" under DTAA. Detailed Analysis: 1. Taxability of Income from Ground Handling and Technical Handling Services: The primary issue is whether the income of Rs. 15,26,30,882/- earned by the assessee from ground handling and technical handling services is taxable in India. The assessee argued that this income is not taxable under Article 8 of the Indo-Netherlands DTAA, which exempts profits from the operation of aircraft in international traffic. The ITAT had previously ruled in favor of the assessee for AY 2004-05, 2005-06, 2006-07, and 2007-08, stating that such income is not taxable in India. 2. Applicability of Article 8 of the Indo-Netherlands Double Taxation Avoidance Agreement (DTAA): The assessee contended that the income from ground handling services falls under Article 8 of the Indo-Netherlands DTAA, which exempts profits from the operation of aircraft in international traffic from taxation in India. The department, however, argued that such income should be taxed under Article 7 of the DTAA, as it does not constitute profits from the operation of aircraft. The department also sought reconsideration of the ITAT's previous decisions, arguing that the facts were not correctly appreciated in earlier rulings. 3. Consistency with Previous ITAT Decisions: The ITAT had previously ruled in favor of the assessee for AY 2004-05, 2005-06, 2006-07, and 2007-08, holding that the income from ground handling and technical handling services is not taxable in India. The assessee argued that the facts for AY 2008-09 are identical to those of the earlier years, and thus, the previous ITAT decisions should apply. The department, however, argued that the earlier decisions require reconsideration and suggested referring the matter to a Larger Bench if the current Bench is not inclined to take a different view. 4. Consideration of Reciprocity and Pooling Agreements: The department argued that the ITAT's earlier decisions did not correctly interpret the concept of "pooling" under Article 8(3) of the Indo-Netherlands DTAA. They contended that the ITAT's reliance on the International Airlines Technical Pool (IATP) manual was misplaced, and that reciprocity of services, a key element of pooling, was not adequately demonstrated by the assessee. The department also highlighted that in the case of British Airways, the ITAT had held that ground handling services were not protected under Article 8 of the Indo-UK DTAA due to lack of reciprocity and commercial nature of the services. 5. Interpretation of "Operation of Aircraft in International Traffic" under DTAA: The department argued that the term "operation of aircraft in international traffic" should be narrowly interpreted to include only activities directly connected with the transportation of passengers, mail, livestock, or goods. They contended that ground handling services provided to other airlines do not fall within this definition and should be taxed under Article 7. The ITAT, however, had previously held that such services are incidental to the operation of aircraft and thus covered under Article 8. Conclusion: The ITAT dismissed the department's appeal, reiterating that the income from ground handling and technical handling services is not taxable in India under Article 8 of the Indo-Netherlands DTAA. The ITAT emphasized the need for consistency with its previous decisions and found no compelling reason to deviate from its earlier rulings. The department's arguments for reconsideration and referral to a Larger Bench were not accepted, and the assessee's appeal was allowed.
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