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TMI Blog2012 (4) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... India under sub Article 1 of Article 8- The Indo-Netherlands treaty is similar to that of Indo-German and not in parity with Indo UK Treaty - appeal of revenue dismissed. - IT Appeal Nos. 1392 and 1394 (Delhi) of 2011 - - - Dated:- 20-1-2012 - Rajpal Yadav, K.D. Ranjan, JJ. Smt. Reena S. Puri for the Appellant. Salil Aggrawal for the Respondent. ORDER Rajpal Yadav, Judicial Member The present two appeals are directed at the instance of revenue against the orders of Ld. CIT(A) dated 17.1.2011 14.12.2010 passed in asstt. years 2006-07 on the respective appeals of the respondents. The grounds of appeal taken by the revenue in both the appeals read as under :- "ITA No. 1394/Del/2011 M/s. K L M Royal Dutch Airlines 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that assessee's income from ground handling and technical handling services is not taxable in India as the same is held to be covered by Article 8 of DTAA India and Netherlands. 2. The appellant craves to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal. ITA No. 1392/Del/2011 M/s. Lufthansa German A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the treaty with Germany and Article 3(h) of the treaty with Netherlands provides the definition of expression "international traffic". Accordingly "international traffic" means, transport by aircraft operated by an enterprises which has its place of effective management in a contracting state except when the aircraft is operated solely between places in the other contracting state. According to the Ld. DR, the expression "operation of aircraft" has not been definition in the DTAA. She referred to article 3.2 which suggest that the applicability of the DTAA and point out that any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that state concerning the taxes to which this agreement applies. On the strength of article 3.2, she pointed out that when a term is not defined in the treaty then reference is to be made to the domestic law and the meaning assigned in the domestic law is to be applied. In the domestic law the term operation of aircraft finds specific reference in section 44BBA that deals with special provision for computing profits and gains of the business of operation of air craft in the cases of non res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. The sole issue for our adjudication is whether ground handling services and technical handling services rendered by the assessee to other airlines in India are to be considered part of business of assessee from operation of aircraft in international traffic or they are separate distinct activities. In order to appreciate this issue, the Article 8 available in the three treaties referred above has a direct bearing, therefore, it is salutary upon us to take note of this article in all the three treaties in a tabular form for comparative study which reads as under: Indo Germany DTAA Indo-Netherland DTAA Indo-UK.DTAA ARTICLE-B Shipping and air transport 1. Profit from the operation of ships or aircraft in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated. 2. If the place of effective management of a shipping enterprise is abroad a ship, then it shall be deemed to be situated in the Contracting State in which the home harbour of the ship is situated, or, if there is no such home harbour, in the Contracting State of which the operator of the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The expression "profit from the operation of ship or air-craft in international traffic" has not been defined in Indo-Netherlands DTAA. Similarly, it has not been defined in the Indo-German DTAA. However, in sub-article-3 of Article 8 in the treaty between Indo UK, it has been explained. Thus, there is a distinction between these three sets of DTAA. The position in Indo-German DTAA and Indo-Netherlands DTAA are similar on the one hand whereas the position in the Indo-UK DTAA, it is slightly different. This question arose before the ITAT in the case of Lufthansa German Airlines also. The ITAT while explaining the meaning of profit from the operation of ships or air-craft in international traffic has took into consideration the bye-laws of international airlines technical pool (IATP) because this organization authorized its members to share air-crafts, air-crafts pooling, ground handling equipment and manpower all over the world. The ITAT has considered the relevant clauses of IATP manual and thereafter concluded that any receipt received by the assessee due to participation in the pool as provided in IATP manual and also explained in sub-article 4 of Indo-German DTAA will not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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