9911796707
TMI Blog2020 (10) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 - Applicability of provisions of Section 195 of the Income Tax Act. 1961 ('Act') on payments towards Instrument Flight Rules ('IFR') paper charts to Jeppessen GmBH, Germany - Rs 1,93,335 1.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned Income Tax officer (IT & TP), Bhopal, (hereinafter referred to as learned TDS officer) by holding that services provided by Jeppessen GmBH in form of IFR paper charts are in the nature of technical services and hence, taxable under section 9(1 )(vii) of the Act as well as under the India-Germany Double Taxation Avoidance Agreement (,India-Germany DTAA'). 1.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the Decore Exxoils P. Ltd. /ITANos.196 & 197/Ind/2018 learned TDS officer by holding that the IFR paper charts, which covers standardized information on route navigation is a service which required human intervention. 1.3 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned TDS officer by holding that Jeppess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case and in law, the learned CIT(A) has erred in holding that alerts provided by the Camp USA's system in respect of scheduled/nonscheduled maintenance of the aircraft's parts are considered as "making technology available", even as per the Memorandum of Understanding ('MOU') signed between India- USA pursuant to the India- USA DTAA. Ground No 4 - Applicability of provisions of Section 195 of the Act on payments made to Rockwell Collins, USA ('Rockwell USA') for providing services in respect of route navigation - 3,82,186 4.1. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned TDS officer by holding that services provided by Rockwell USA qualify as Fees for Included Services ('FIS') under the India- USA Double Taxation Avoidance Agreement ('India-USA DTAA') and hence, taxable under Article 12 of the India-USA DTAA. 4.2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned TDS officer by holding that services provided by in the form of updates on routes, by Rockwell Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-deductor is engaged in operation of Lear Jet Aircraft. It is responsible for deducting tax at source. Therefore, a notice was issued regarding various payment made to non-residents for technical service during F.Y. 2014-15 for not deducting tax at source. In response to the notices the authorized representative of the assessee attended the proceedings. However, assessing officer vide order dated 5th July 2016 held the assessee as in default and framed the impugned assessment order. Thereby, he made addition on account of non-deduction of tax of Rs.15,03,387/- and interest thereon u/s 201(1A) @ 1% of Rs.3,13,171/-. 4. Aggrieved against this order assessee preferred an appeal before the Ld. CIT(A) who after considering the submissions partly allowed the appeal. Thereby the Ld. CIT(A) treated the amount related to purchase of spare parts as non-taxable and rest of the additions were sustained. 5. Now the assessee is in appeal before this Tribunal. Ground No.1(1.1 to 1.3) is against applicability of provisions of section 195 of the income Tax Act, 1961 (herein after referred as the Act) in respect of payments towards instrument flight Rules (IFR) paper charts to Jeppessen GmBH Ger ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de to Jeppessen GmBH, Germany towards annual subscription for obtaining standard IFR paper charts does not fall within the term 'fees for technical services' under the provisions of the Act. 7. Following decisions fortifies the submissions of the appellant - a. Elsevier Information Systems GmbH [2019] 106 taxmann.com 401 (Mum) - Section 9 of the Income-tax Act, 1961 read with Article 12 of India-Germany Tax Treaty - Income - Deemed to accrue or arise in India (Royalties/Fees for technical services - Subscription fee) - Whether for providing technical/managerial service human intervention is a sine qua non - Held, yes - Assessee company had received subscription fee from customers for access to on-line database pertaining to chemical information - Assessing Officer was of view that subscription fees received by assessee was in nature of fees for technical services - It was noted that assessee had neither employed any technical/skilled person to provide any managerial or technical service nor was there any direct interaction between customer/user of database and employees of assessee - Thus, there was no material on record to demonstrate that while providing access to databa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct." [emphasis supplied] c. Siemens Ltd [2013] 30 taxmann.com 200 (Mum) - Para 15 - "The Hon'ble Judge in the case of Skycells Communications Ltd (supra) while interpreting the word 'fees for technical services' as defined in Explanation 2 to section 9(1)(vii) has made a very important observation:........................................................................ ...... Thus if a standard facility is provided through a usage of machine or technology, it cannot be termed as rendering of technical services." [emphasis supplied] Decision of Hon'ble Delhi High Court in the case of Bharti Cellular Ltd [2009] 319 ITR 139 was relied upon while arriving at the finding that the word 'technical' has to be construed in the same sense involving direct human involvement without that, technical services cannot be held to be made available. Where simply an equipment or sophisticated machine or standard facility is provided albeit developed or manufactured with the usage of technology, such a user cannot be characterized as providing technical services. [Para 13] Hon'ble Supreme Court in its decision of Bharti Cellular Ltd [2010] 193 Taxman 97 (SC) stated in respect of human invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GmBH has developed navigational information for several routes in the world and upon requisition it provided the same to the Appellant. Sample chart has also been submitted by the Appellant along with the submission. On review of the said chart, it is seen that the same contains complex navigational routes which are used by the pilots in air travel. However, apart from invoices and sample chart the Appellant has not provided any proof to justify that chart is prepared without any human intervention. From the perusal of invoices and chart it is not possible to judge whether it is prepared with human intervention or not. On the contrary there are certain observations (discussed in the below paragraphs), which indicate human intervention. 7.2 Further, in the chart provided it is mentioned that "These charts are designed for flights at and above 1"L200 and cover primarily the enroute infonnation for flights from the areas Eastern Mediterranean Sea up to Far East. Routes for domestic flights intentionally omitted". 7.3 The IFR paper chart further shows various modifications made in the chart under the heading 'CHANGES'. ME (HI) 1 Hamad VORDME ATAR commissioned. ATS s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... personnel. The Hon'ble Tribunal held that although use of equipment formed substantial part of the contract, both the equipment as well as technical personnel together rendered services and hence, services were in the nature of technical services. Similarly, the Honble Delhi High Court in Rio Tinto Technical Services case (17 taxmann.com 70)held that payment made to acquire technical information would qualify as fees for technical services. Since, it was treated as fees for technical services under the narrow definition (with make available clause) in India - Australia tax treaty which was under consideration before Hon'bie Delhi High Court, it will definitely qualify as fees for technical services under broader definition under the Act and India _ Germany tax treaty where there is not condition of make available. it is the nature and character of the information furnished and for which the consideration is paid which is the relevant criteria [or deciding whether the payment is for technical services or not. 7.10 It is noted that the AO in his order has observed as under: "The assesse made payment amounting to Rs. 1,93,335/ - to Jappesen GMBH Germany for procuring ele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court .The assesse has failed to provide the copy of agreement 'with Jappcsen GMBH Germany before the AO or during Appellate stage in spite of specifically been asked for to determine the nature of services rendered by the nonresident nor has the assesse submitted any certificate or technical data or any other supporting documents to establish the absence of human intervention in rendering the service. The primary onus is on the appellant to establish the claim made by him. Software assembly and the other services detailed supra belie the contention of the Appellant that there is no human intervention. 7.13 In view of the above reasons, the payment made to Jappesen GMBH Germany is treated as Fees for Technical Services under Section 9(1)(vii) of the Act as well as relevant Article of the tax treaty and hence the payments made to JeppesenGmBH are liable for deduction of tax at source under Section 195 of the Act. For the reasons discussed above, this ground of the Appellant is rejected. 9. We have given our thoughtfully consideration to the finding of Ld. CIT(A), we are of the considered view in the light of decision of Co-ordinate Bench rendered in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily required to be complied by an operator are listed for reference [PB 114 - 139] - a. Clause 4.3 - All flight crew members hold an applicable and valid license acceptable to DGCA and are suitably qualified and competent to conduct duties assigned to them. [PB 116] b. Clause 6.1.6 - Each flight crew member undergoes the checks required by Para 9.2 (PPC) and the training and checks required by Para 9.5 (SEP) before commencing supervised line flying (SLF). [PB 117] c. Clause 8.1.2 - For multi-crew operations, the pilot completes an appropriate command course. [PB 118] d. Clause 8.2.3 - Undergo minimum training and checks as stipulated in Appendix 2 (Para 5) to this CAR [PB 119] e. Clause 9.2 - Pilot's proficiency check (PPC): [PB 120] f. Clause 9.2.3 - The period of validity of a PPC shall be six months......[PB 120] g. Clause 9.3 - Instrument rating (IR) check: [PB 120] h. Clause 9.3.3 - The period of validity of an instrument rating check shall be 12 months from the date of issue. [PB 120] i. Clause 9.4 - Line Route Check: ......................The period of validity of a line route check shall be 12 months. [PB 120-121] j. Clause 9.5 - Safety and eme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause 12.5 of the CAR. The training availed by a pilot does not go for perpetuity and recurrent training is compulsory for flight operations. [PB 123] 7. Instant issue is directly covered by the decision of Hon'ble Mumbai ITAT in the case of United Helicharters Pvt Ltd in ITA No. 5135 & 5136/Mum/2011. [CLPB 28 - 31] Para 5 - "..................He has referred para 4 of Article 12 and submitted that as per the meaning given in para 4 of the Article 12 of the Indo-US DTAA the 'fees for included services' means inter alia if such services make available technical knowledge, experience, skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training was given to the pilots and other engineering staff as per the requirement of DGCA therefore it does not amount to services make available technical knowledge, experience, skill, know-how etc." [emphasis supplied] Para 9 - "..........................we further noted that as per para 4(b) of Article 12 of Indo-US DTAA fees for included services means if such services made available technical knowledge, experience, skill, know-how, or processes, or consists of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing given by the Non-resident company is part of its routine business and does not involve transfer of any technology. The training involves use of technology by the training company but there is no technology transfer to the pilots of the assessee company. Consequently, the services cannot be regarded as technical in nature. Further, even in the DTAA with USA, technical services is defined on 'included services' basis. In such cases both hardware and technology have to be transferred together which is not the case with party concerned herein. Above decision of Hon'ble Karnataka High Court has been followed by Hon'ble ITAT Ahmedabad Bench in the case of Veeda Clinical Research (P) Ltd [2013] 35 taxmann.com 577 (Ahd) holding in favor of the assessee by dealing with the issue of 'make available' aspect of technical services and referring to the MoU to India-US DTAA. [CLPB 26 - 27] 12. Article 7 of the India - USA DTAA is also not attracted owing to absence of a PE of the non-resident in India to create a business connection in India. Tax Residency Certificate (TRC) and Form 10F required under section 90(5) of the Act were furnished before the Ld. ITO. [PB 160 - 161] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate a business connection in India. Tax Residency Certificate (TRC) and Form 10F required under section 90(5) of the Act were furnished before the Ld. ITO. [PB 162 - 164] 20. Accordingly, the appellant was not required to deduct tax at source under section 195 of the Act on the payment made to CAMP Systems International Inc. USA, and hence not an assessee in default under section 201(1) of the Act. 21. In respect of payment to Rockwell Collins, USA, it is engaged in providing avionics and information technology systems and services and enhanced map overlay services. Appellant availed subscription for enhanced map overlays and route navigation services. 22. Copy of invoice raised by Rockwell Collins, USA for providing subscription for enhanced map overlays and route navigation services for its aircraft Lear jet 60 was furnished before the Ld. TDS Officer which is reproduced in the impugned order also. [PB 204] The description in the invoice states - "Enhanced Map Overlays Subscription". The invoice also states the 'Start Date' and 'End Date'. 23. Annual subscription charges paid to Rock Collins, USA towards for obtaining standard enhanced map overlays and route naviga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rock Collins USA, and hence not an assessee in default under section 201(1) of the Act. 11. Ld. D.R. opposed the submissions and supported the orders of authorities below. Ld. DR submitted that essentially the services provided by the assessee fall within the technical services. 12. We have heard rival submissions and perused the material available on record and gone through the orders of lower authorities. The assessee company made payments towards for pilots mandatorily required as per Directorate General of Civil Aviation (DGCA) manual to CAE Simuflite Inc. USA of Rs. 61,80,162/-. Further, the assessee company made payments to Rockwell Collins, USA for providing services in respect of Route navigation of Rs.3,82,186/-. It is contended that as per the DGCA guidelines that all flight crew members hold an applicable and valid license acceptable to DGCA and were suitably qualified and competent to conduct duties assigned to them. Further, each flight crew member undergoes the checks required by para 9.2 (PPC) and the training and checks required by para 9.5(SEP) before commencing supervised line flying (SLF) and for multi-crew operations, the pilot completed an appropriate com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esulted in transfer of technology, knowledge and / or experience. 9.3 Decision of Hori'ble Mumbai Tribunal in the case of United Helicharters Private Limited Vs ACIT (ITA No. 5136/ Mum/2011 & ITA No. 5135/Mum/2011) dealt with the issue of training services taxability which was mandated by the DGCA. In the case of United Helicharters, the Mumbai Tribunal has not considered the aspect whether the training resulted in transfer of knowledge, and merely on the basis that the training was mandatorily required under DGCA rules proceeded to hold that the services were not made available. For this reason, I am of the considered opinion that these case laws cannot be applied to the facts in the present case. 9.4 Also, said decision is not a jurisdictional bench decision and is also distinguishable on facts and context. Further, it is seen from the invoices submitted by the AR during Appellant proceedings that the training provided by CAE are of various descriptions. *In Invoice Proforma Number 220GSIM029572PB dated lst March, 2015 training description IS mentioned as "8357051-International Procedures Initial". *In Invoice Proforma Number 220GSIM027682PB dated 25th Nov, 2014, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, and industrial engineering) ; 2.Architectural services; and 3.Computer software development. Under paragraph 4(b), technical and consultancy services could make technology available in a variety of settings, activities and industries. Such services may, for examples, relate to any of the following areas: 1.Bio- technical services ; 2.Food processing; 3.Environmental and ecological services; 4.Communication through satellite or otherwise; 5.Energy conservation; 6.Exploration or exploitation of mineral oil or natural gas; 7.Geological surveys; 8.Scientific services; and 9.Technical training." Thus, the Memorandum of understanding (MOU) concerning fees for included services in Article 12 between India and USA Tax treaty clearly illustrates that Technical training is make technology available under paragraph 4(b), and is included in technical and consultancy services. If the issue is covered directly under a specific clause of the DTAA and if the income of the non~resident is taxable from the bare reading of the treaty and there is no ambiguity in the language of the treaty then there is no scope of interpretation of the language used. Here, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Proficiency. Service provider is not imparting any additional skill to the pilots." This contention of the assessee is also not correct. The copy of offer letter issued by the nonresident has already been scanned and pasted in this order. As per the offer letter the amount mentioned to be paid are as under: One time initial flight training course- $ 31000/ One time recurrent Flight Training Course $ 20400/- Standalone IR PPC Check Ride- $ 5000/ CRIV- $800/- As per the cheat mentioned above it can be seen that mojor portion has been charged for flight training course and only a minor amount has been. charged for proficiency test. The assessee itself stated that the pilots have been sent for training as per DGCA Notification enclosed. The said notification has been examined by the undersigned and discussed below in short as the notification. is too lengthy to scan and paste here: - The notification is named as file No- AV- 2202412412016-FSD issued by DGCA New Delhi. - The Subject of notification is- "Flight Crew Training and qualification requirements for scheduled commuter and nan-scheduled operators having aeroplanes with AUW Exceeding 5700 KGS. Introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re course schedule. Even otherwise, any mandatory requirement does not alter the characteristic and nature of service rendered. There is no dispute that the alleged training is technical training and as per MOU to the India-USA tax treaty, technical training is make technology available hence the service is fees for included services under Article 12 paragraph 4(b) of the treaty and there: no exception to the FIS. Further, the observation of the Hon'ble Mumbai Tribunal in the case of United Helicharters Private Limited Vs ACIT (ITA No. 5136/Mum/2011 & ITA 'a. 5135/Mum/2011)has provided relief to the assesse on the issue of retrospective amendment following the principle of "lex non cogit ad imposaibillia" i.e, law cannot ask Assessee to do impossible task. After giving relief on account of retrospective amendment, there was no requirement to give any observation on the merits of the case. In view of the same, said observation of Hon'ble Mumbai Tribunal isobiter dicta and_hence does not laid down principle of law. 9.8 Without prejudice to the above, in the assessment order at Page 35, Learned AO has quoted relevant part of the offer letter sent by the CAE to the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same, without prejudice to the above observations, the income earned by CAE for training services is also taxable under Article 12 as royalty Income. 9.13 Further, as discussed above, it appears that the relevant applicable treaty is not the India-USA treaty but India-UAE treaty as the proposal is signed between Decore Exxoifs Pvt. Ltd. And Emirates-CAE Flight Training LLC. The fact was brought to the notice of the AR but the AR made no submission in this regard. The Appellant has not made any submission with respect to UAE nor has the AR submitted TRC of UAE LLC. Therefore benefit of treaty or argument ts relating to make available a se is not applicable in this case and the Appellant is liable for deduction of tax at source under section 195 of the Act on this ground as well. 9.14 Further, since the services being technical training which is make technology available, as per the MOU to India -USA tax Treaty, income is otherwise also chargeable to tax under section 9(1)(vi) and (vii) of the Act or the relevant article of the tax treaty and hence the payments made to CAE are liable for deduction of tax at source under section 195 of the Act. In view of the above, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 195 of the Act on payments made to Learjet Inc. USA for providing part under "Smart parts plus agreement" and providing service bulletins of Rs.11,73,873/-. Ld. counsel for the assessee reiterated the submission as made in the written submissions. The contentions of the assessee are that appellant operator entered in to Smart Parts Plus Agreement with Learjet Inc. USA for comprehensive component coverage of its Learjet 60 aircraft. The agreement covered a. Most scheduled component removals b. Most unscheduled component removals and c. Certain Learjet service bulletin kits It is contended that the copies of invoices raised by Learjet Inc. USA were furnished. One of such invoice shows description as "Flight Manual, Crew Checklist, Dispatch Deviation Guide, Auxiliary Power Unit Manual, Pilots Manual, Service Bulletins, Smartfix Plus Trouble Shooting Tool" along with specific period. It is contended that TDS officer relied on the decision Hon'ble Karnataka High Court in the case of CIT vs. De Beers India Minerals (P.) Ltd. (2012) 21 taxmann.com 214 (Karnataka) which in fact rules in favour of the assessee. It is contended that Hon'ble Court held that the technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory training for pilots to CAE Simuflite inc. - Rs 16,39,768/- 1.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned Income Tax officer (IT & TP), Bhopal, (hereinafter referred to as learned TDS officer) by holding that services provided by CAE qualify as fees for included service (FIS) under the India -USA Double Taxation Avoidance Agreemtn (India -USA DTAA) and hence taxable under Article 12 of the India-USA DTAA. 1.2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned TDS officer by holding that services provided by CAE makes available technology to the pilots of the Appellant. 1.3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned TDS officer by holding that the technical inputs provided by CAE during the provision of services are considered as "making technology available", even as per the Memorandum of Understanding ('MOU') signed between India- USA pursuant to the India- USA DTAA. 1.4. On the facts and circumstances of the case and in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgments relied by the assessee was not required to deduct tax at source. 20. Per contra Ld. DR opposed the submission and adopted the same arguments as were in ITANo.197/Ind/2018. 21. We have heard rival submissions and perused the material available on records. In respect of payment made to CAE Simuflite Inc. USA, the facts are identical as were ITANo.197/Ind/2018. We have decided the issue in par 10 to 14 by disposing of ground No.2 to 4 of the assessee's appeal held as under: 10. Now coming to ground No.2 to 4 are against applicability of provisions of section 195 of the Act on payments towards mandatory training for pilots, to CAE simuflite Inc., USA (CAE)- Rs.61,80,162/-. Ld. counsel for the assessee vehemently argued that the authorities below were not justified in making the addition and sustaining the same in respect of payments made towards mandatory training for pilots. Ld. counsel further reiterated the submissions as made in the written submissions for the sake of clarity submission are reproduced as under: B. Apropos Ground No. 02 to 04 - on payments made to non residents in the USA towards pilot training mandatorily required by DGCA, providing alerts on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB 120-121] z. Clause 9.5 - Safety and emergency (SEP) procedures training and checking: ............. The period of validity of a line route check shall be 12 months. [PB 121] aa. Clause 9.6 - CRM: An operator shall ensure that i. 9.6.1 - Elements of CRM (refer Appendix 5) are integrated into all appropriate phases of the recurrent training and; ii. 9.6.2 - Each flight crew member undergoes specific modular CRM training. All major topics of CRM training shall be covered over a period not exceeding three years; [PB 121] bb. Clause 9.7 - Ground refresher training: An operator shall ensure that each flight crew member undergoes ground and refresher training at least every 12 months. [PB 121] cc. Clause 10 - Pilot Qualification to operate in either pilot's seat [PB 122] dd. Clause 11 - Recent Experience [PB 122] ee. Clause 12.5 - The operator shall maintain a record sufficient to satisfy the DGCA of the qualification of the pilot and of the manner in which such qualification has been achieved. [PB 123] ff. Appendix 5 to CAR - The table given in the said appendix lists down all the core elements of training which are covered under the head "Recurrent Training" f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training in the case in hand was given to the pilots and other staff as per the requirement of the DGCA Rules therefore, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term "service make available". [emphasis supplied] 34. Further, these are standard training services which are provided as per the DGCA norms referred in the invoices itself. Accordingly, reliance is placed on the decision of Hon'ble Supreme Court in the case of Kotak Securities Ltd (supra). 35. Ld. TDS Officer relied on Article 12, Para 4(b) of the India - USA DTAA to adopt an adverse view on the subject matter. [AO Page 39 - 43] Para 4(b) of Article 12 of the said DTAA states about make available technical knowledge, experience, skill, know-how or process. The MoU of DTAA very categorically states that ".........The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skill, etc. are ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were furnished before the Ld. ITO. [PB 160 - 161] 39. Accordingly, the appellant was not required to deduct tax at source under section 195 of the Act on the payment made to CAE Simuflite Inc. USA, and hence not an assessee in default under section 201(1) of the Act. 40. In respect of payment to Camp Systems International Inc., USA, it is the world's leading aircraft maintenance tracking solution provider. Appellant availed subscription for maintenance tracking services and electronic log books for its aircraft Lear jet 60. 41. Copy of invoice raised by CAMP Systems International Inc, USA for providing subscription for maintenance tracking services and electronic log books for its aircraft Lear jet 60 was furnished before the Ld. TDS Officer which is reproduced in the impugned order also. [AO page 44 and PB 203] 42. The description in the invoice states - "CAMP Maintenance Tracking Services for Lear 60, Updates and Support to CAMP's Electronic Log Books [AO page 44 and PB 203] The invoice also states the 'Start Date' and 'End Date' along with 'Subscription ID'. 43. Clause 4.10 of the Smart Parts Plus Agreement with Learjet Inc, USA also requires the appellant ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtaining standard enhanced map overlays and route navigation services for its aircraft Lear jet 60 does not fall within the term 'fees for technical services' under the provisions of the Act. Nothing remains with the appellant operator after the expiry of subscription for the service provided. Article 12 of the India - USA DTAA also does not cover the instant transaction within the meaning of included services of managerial, technical or consultancy. In the instant case, there is no transfer of technology in the subscription of services so availed by the appellant operator. The MoU of DTAA very categorically states that ".........The fact that the provision of the service may require technical input by the person providing the service does not per se mean that technical knowledge, skill, etc. are made available to the person purchasing the service within the meaning of para 4(b)." [emphasis supplied] 50. In availing the above subscriptions from the nonresidents, there was no human interaction or intervention. Ld. TDS Officer relied on the decision of Bharti Cellular Ltd by Hon'ble Delhi High Court [2008] 175 Taxman 573 (Del) which deals with the requirement of human ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations, the pilot completed an appropriate command course. It is contended that copies of invoice raised by CAE Simuflite Inc. USA for providing different training to the pilots of the assessee operator were furnished before the Ld. TDS Officer. The discretion in the invoice stated that "Indian DGCA Standalone check", "Indian DGCA Check pilot training including 20 hrs ground school". The invoices was issued from US and remittance details also contains place as Dallas TX, US. It is further submitted that it is evident from the invoice that the training to pilots of the operator appellant have been arranged to meet the mandatory requirement of DGCA. It is contended that the issue is squarely covered by the decision of the Coordinate Bench of this Tribunal rendered in the case of United Helicharters Pvt. Ltd. in ITANo. 5135 & 5136/Mum/2011. It is also contended that the decision relied by the Ld. CIT(A) and TDS Officer of Hon'ble Karnataka High Court in the case of De Beers (2012) 21 taxmann.com 214(Kar) which in fact rules in favour of the assessee. However, Ld. CIT(A) rejected the contention of the assessee. "9. I have carefully considered the facts of the case, order an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oforma Number 220GSIM027682PB dated 25th Nov, 2014, training description is mentioned as "8344228- Learjet60XRPilot Initial'. *In Invoice Proforma Number 220GSIM028237PB dated 05th JAN, 2015, training description is mentioned as "8344228- Learjet60XRPilot Initiaf'. *In Invoice Proforma Number 220GSIM024833PB dated 14th July, 2014 training description is mentioned as "8348434- L60XRIndfan DGCA check pilot training (Including 20hrs Ground Sohool]', 9.5 It is further seen that vide Reference No. 300616_MKT_BEXO_PRO V2 dated 20 JUNE 2016 Emirates - CAE Flight Training made an offer to Decore Exxoils Pvt. Ltd. The proposal included to conduct FAA approved initial and recurrent training courses. Thus the training was not meant only for skilled pilots but also towards initial training of the pilots. Hon'ble Mumbai Tribunal decision in the case of United Helicharters Private Limited Vs ACIT (ITA No. 5136/Mum/2011 & ITA No. 5135/Mumj2011) is distinguishable to that extend that the pilots were not always skilled and training was not always recurrent in nature. In the case of the Appellant, pilots were given initial trainings and the same is evident from the descripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no scope of interpretation of the language used. Here, in the given case, general interpretation of make technology available shall not be applicable as the issue is specifically covered under MOU to the DTAA wherein it is mentioned in unambiguous term that 'Technical training is Make technology available' . The general principle of 'specific overriding the general' needs to be followed here. It is not disputed that the training rendered was technical training in nature therefore due to unambiguous provisions of the MOU, the said technical training is Make technology available and any interpretation contrary to the same is Error in Law and requires immediate rectification for Mistake in Law. Before the AO, the Appellant argued that the MOU to the tax treaty has used the word 'may' and hence it provides a discretion and not mandate. However, the AO has observed that it can be seen that MOU does not used the word "May" but used the words "Typical categories of services that generally involve", hence this point of the assessee cannot be accepted. The relevant extract of the AO's order in AY. 2016-17: "The assessee itself submitted that the services p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g aeroplanes with AUW Exceeding 5700 KGS. Introduction of the notification says that- "The annex requires operators to establish and maintain approved ground and. flight training programmers Which ensures that: all flight crew members are adequately trained and qualified to perform their assigned duties" It is clear that after attending the flight training programmes all the crew members become adequately trained. ] - Para 5 of the notification mentioned the requirement of Crew Resource Ianaqemeni (C""'RM) training as per appendix 5 of the notification. Appendix 5 describes a detail program of the training. - Para 6 of the notification mentioned the requirement of Type rating course which is also a training course for the crew members. - Para 6.4 of the notification. mentioned the requirement of Zero Flight Time Training (ZFJT) course which includes a simulator training. - Para 7 requires the differences training and familiarisation training which requires additional knowledge and training for various aspect. - Para 8 includes the command course including extended ground recurrent training as per appendix 3 and appendix 2 of the notification. - Para 9 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the offer letter sent by the CAE to the Assessee. Please note that the said offer letter is received from Emirates - CAE Flight Training. From another offer letter dated 30 .June 2016 submitted by the Appellant along with signed proposal reflecting payment terms and validity with submission dated 18 Aug 2017, is executed between Decore Exxoils Pvt. Ltd. And Emirates-CAE Flight Training LLC and the address of the Emirates - CAE Flight Training LLC. is in UAE. Further, the agreement is signed between the Appellant and the said LLC Emirates - CAE Flight Training LLC. Whereas only invoices are raised from CAE from USA. From these documentary evidenccsin the form of the offer letter and invoice, it is believed that the agreement is between Appellant and the Emirates CAE Flight Training LLC. Based in Dubai, UAE though the invoices are received from CAE USA and CAE USA is not be the beneficial owner of the income received. In view of the same, income received by CAE is not eligible for the benefit under India - USA Tax Treaty. 9.9 Further, the underlying concept of training is to equip the trainees with the required skills sets. In the present case also, the Appellant ha that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 195 of the Act. In view of the above, the payments made by the appellant to CAE simuflite Inc. qualified as fees for technical services both, under the Act and India-USA tax Treaty/India-UAE Treaty. In view of the above, this ground of the appellant is rejected." 13. The ld. CIT(A) rejected the grounds regarding failure to deduct tax in respect of payments made towards mandatorily training for pilots to CAE Simuflite Inc., USA. It is contention of the assessee that under the identical facts of Coordinate Bench of this Tribunal has taken a view in favour of the assessee in the case of United Helicharters Pvt. Ltd. in ITANO.5135 & 5136/Mum/2011. The Tribunal in that case held as under: Therefore, in view of the legal proposition discussed by the Ahmedabad Bench (supra) we agree with the contention of the assessee that the assessee has acted under bonafide belief that no tax was to be deducted at source on these payments. Apart from the bonafide belief we further noted that as per para 4(b) of Article 12 of Indo-US DTAA fees for included services means if such services made available technical knowledge, experience, skill, know-how, or processes, or consists of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spatch Deviation Guide, Auxiliary Power Unit Manual, Pilots Manual, Service Bulletins, Smartfix Plus Trouble Shooting Tool" along with specific period. It is contended that TDS officer relied on the decision Hon'ble Karnataka High Court in the case of CIT vs. De Beers India Minerals (P.) Ltd. (2012) 21 taxmann.com 214 (Karnataka) which in fact rules in favour of the assessee. It is contended that Hon'ble Court held that the technical knowledge or skills of the provider should be imparted and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. It is contended that there is no human element involved when Learjet Inc. USA was supplying the component part or providing manual alerts, and service bulletins to the appellant operator for maintenance of its aircraft. Further, it is contended that Article 7 of the India-USA DTAA is also not attracted owing to absence of a PE of the non-resident in India to create a business connection in India. Our attention was drawn to the Tax Residency Certificate (TRC) and form 10F required under section 90(5) of the Act which were furnished before Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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