2023 (7) TMI 1151 - AT - Income Tax

Income taxable in India - taxability of income from technical handling services received from IATP members - India-France DTAA - HELD THAT - As respectfully following the decision of the Coordinate Bench in assessee s own case 2023 (2) TMI 1165 - ITAT DELHI we hold that the income from technical handling services is not taxable in India as it is covered under Article 8(2) read with Article 8(1) of India France DTAA. Accordingly, the additions made in all theses assessment years are directed to be deleted. Taxability of interest income - Tribunal in its decision 2023 (2) TMI 1165 - ITAT DELHI held that the fixed deposits made by the assessee are out of funds connected with the operation of aircraft in international traffic covered under Article 8(1) of India-France DTAA as the assessee has no other business. Therefore, the interest income will be covered under Article 8(3) of the India-France DTAA and hence not taxable. AO is directed to delete the impugned addition. Appeal of the assessee is allowed.

Issues Involved:
1. Taxability of income from technical handling services received from IATP members.
2. Taxability of interest income.
3. Initiation of penalty proceedings under section 271(1)(c)/271A & 271B of the Income Tax Act, 1961.
4. Levy of interest under section 234 of the Act.

Summary:

1. Taxability of Income from Technical Handling Services:
The Tribunal addressed grounds No. 1 to 17 concerning the taxability of income from technical handling services received from IATP members. The Tribunal referred to its earlier decision in the assessee's own case for multiple assessment years, holding that the impugned income is not taxable in India as it is covered under Article 8(2) read with Article 8(1) of the India-France DTAA. The Tribunal emphasized that the technical handling services involve verification of airworthiness of aircrafts and are provided to other IATP members, thus qualifying for exemption under the DTAA. The Tribunal reiterated that the income from such services is not taxable in India and directed the deletion of the additions made by the Assessing Officer.

2. Taxability of Interest Income:
Regarding ground No. 18, the Tribunal considered the taxability of interest income earned on fixed deposits. The Tribunal held that the fixed deposits were made out of funds connected with the operation of aircraft in international traffic, covered under Article 8(1) of the India-France DTAA. Consequently, the interest income falls under Article 8(3) of the DTAA and is not taxable in India. The Tribunal directed the Assessing Officer to delete the additions related to interest income.

3. Initiation of Penalty Proceedings:
Ground No. 19 concerning the initiation of penalty proceedings under section 271(1)(c)/271A & 271B was deemed pre-mature and did not require adjudication at this stage.

4. Levy of Interest:
Ground No. 20 regarding the levy of interest under section 234 of the Act was considered only consequential.

Conclusion:
The appeal of the assessee was allowed, with the Tribunal directing the deletion of the impugned additions and holding that the income from technical handling services and interest income is not taxable in India as per the India-France DTAA. The initiation of penalty proceedings was deemed pre-mature, and the levy of interest was considered consequential.

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