2018 (5) TMI 1726 - AT - Income Tax

Business income - Receipt for rendering services like technical handling - Whether the ground handling and the technical handling services are part of the business of the assessee? - India and Netherlands DTAA - Held that - By following the decisions rendered by Hon ble High Court in assessee s own case 2017 (2) TMI 157 - DELHI HIGH COURT held that Article 8 of DTAA between India and Netherlands is categoric enough in its meaning of expression profit from the operation of ship or aircraft in international traffic which includes the activities carried out by the assessee company by rendering technical handling services to the other airlines in India and has certainly connected with its activity of transportation by way of operating the aircraft - Decided in favor of assessee.

Summary

Issues:
Interpretation of Double Taxation Avoidance Agreement (DTAA) between India and Netherlands regarding technical handling services provided by an airline company to other airlines in India.

Analysis:
The case involved the appellant, Deputy Commissioner of Income Tax, challenging the orders passed by the Ld. CIT(A) regarding the tax treatment of technical handling services provided by an airline company. The appellant contended that the services rendered were not covered under Article 8 of the DTAA between India and Netherlands. The appellant assessed the technical handling charges as taxable income under the Income Tax Act, resulting in substantial additions to the total income of the assessee for the relevant assessment years.

The Ld. CIT(A) allowed the appeals filed by the assessee, deleting the additions made by the appellant. The Tribunal heard arguments from both parties and considered the decisions rendered in previous assessment years to reach a conclusion. The Tribunal noted that the income from technical handling services provided by the assessee was covered by Article 8 of the DTAA between India and Netherlands, following the principle of reciprocity in the rendering and availing of services.

The Tribunal referenced a judgment by the Hon'ble High Court in a similar case involving the assessee company, where it was held that profits from providing technical services to other airlines were not taxable in India under the relevant DTAA provisions. The High Court emphasized the interpretation of the term "operation of aircraft in international traffic" and how it encompassed activities like technical handling services. The Court rejected the Revenue's contentions and affirmed the decisions of the Tribunal.

Based on the precedents set by the Hon'ble High Court and the interpretation of Article 8 of the DTAA between India and Netherlands, the Tribunal dismissed the appeals filed by the Revenue. The Tribunal found no illegality or perversity in the decisions of the Ld. CIT(A) and upheld the treatment of technical handling services as exempt income under the DTAA provisions.

In conclusion, the Tribunal's judgment clarified the tax treatment of technical handling services provided by the airline company, emphasizing the significance of DTAA provisions and the interpretation of relevant terms in determining the tax liability. The decision aligned with previous rulings and upheld the assessee's position regarding the exemption of income from such services under the DTAA between India and Netherlands.