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TMI Blog2020 (10) TMI 1355X X X X Extracts X X X X X X X X Extracts X X X X ..... pilots - HELD THAT:- The requirement of tax in respect of fee for technical services and technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Another requirement is that as per the Article 7 of the India USA DTAA the service provider should have a Permanent Establishment (PE) in India. We find in the contention of the Ld. counsel for the assessee that the judgment relied by the TDS officer rendered in the case of De Beers [ 2012 (5) TMI 191 - KARNATAKA HIGH COURT ] which in fact helps the case of the assessee. We, therefore, direct the assessing officer to delete this addition.- Decided in favour of assessee. - ITA No.196 & 197/Ind/2018 - - - Dated:- 20-10-2020 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For the Appellant : Shri Girish Agrawal, Nisha Lahoti Shri S.S. Deshpande, ARs For the Revenue : Shri Ashish Porwal, Sr. DR ORDER PER KUL BHARAT, J.M: These two appeals by the Assessee are directed against two different orders of the CIT(A)-13, Ahmedabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uded Services ('FIS') under the India USA Double Taxation Avoidance Agreement (,India-USA DTAA') and hence, taxable under Article 12 of the India-USA DTAA. 2.2. 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. 2.3. 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. 2.4. 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 applicable DTAA is India- UAE DTAA and not India-USA DTAA, even if the payment is made to CAE, USA. Ground No 3 - Applicability of provisions of Section 195 of the Act on payments made to Camp Systems Internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 5 - Applicability of provisions of Section 195 of the Act on payments made to Learjet Inc., USA ('Learjet USA') for providing parts under Smart parts plus agreement and providing service bulletins - Rs 11,73.873 5.1. 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 components of aircraft as well as services provided by Learjet 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. 5.2. 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 scheduled/unscheduled component removals' and service bulletins containing kits used for maintenance of aircraft, by Learjet Inc. is a service which makes available technology to the Appellant. 5.3. 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 hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncements, he further reiterated the submissions as made in the written synopsis. For the sake of clarity submissions of the assessee are reproduced as under: Apropos Ground No. 01 on payment made towards Instrument Flight Rules (IFR) paper charts to Jeppessen GmBH, Germany Rs. 1,93,335 1. Jeppessen GmBH, Germany is inter alia engaged in the business of providing IFR paper charts used for navigation of aircrafts. It has developed navigational information for several routes in the world and upon requisition, it provides subscription of the same to aircraft operators for desired route and for agreed annual subscription charges. 2. The paper charts for air traffic routes are standard charts generated through automated system developed by Jeppessen GmBH and are only informative which contain up to date navigational information. 3. These paper charts for air traffic routes are standardized and routine charts which are available on annual subscription basis. They do not require human intervention except for the incidental ones. 4. Copies of invoices raised by Jeppessen GmBH, Germany for the annual subscription of standard paper charts for air traffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be having interest in the subject of law. When a subscriber accesses the online database maintained by Taxman/CTR online etc. he only gets access to a copyrighted article or judgment and not the copyright. Similar is the case with the assessee. Therefore, in the facts of the present case, the subscription fee received by the assessee cannot be treated as royalty under Article-12(3) of India-Germany Tax Treaty. [emphasis supplied] b. Kotak Securities Ltd. [2016] 67 taxmann.com 356 (SC) Para 8 ..All such services, fully automated, are available to all members of the Stock Exchange in respect of every transaction that is entered into. There is nothing special, exclusive or customised service that is rendered by the Stock Exchange. 'Technical services' like 'Managerial and Consultancy service' would denote seeking of services to cater to the special needs of the consumer/user as may be felt necessary and the making of the same available by the service provider. It is the above feature that would distinguish/identify a service provided from a facility offered. While the former is special and exclusive to the seeker of the service, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term fees for technical services under the provisions of the Act. Article 12 of the India Germany DTAA also does not cover the instant transaction within the meaning of services of managerial, technical or consultancy nature. 9. Article 7 of the India Germany 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. In its declaration, the non-resident payee stated its facts about non-existence of any business connection in India and that income from the assessee shall be included in its income liable to be taxed in Germany. [PB 156 158] Accordingly, the appellant was not required to deduct tax at source under section 195 of the Act, and hence not an assessee in default under section 201(1) of the Act. 7. On the contrary Ld. Departmental Representative (DR) opposed the submissions and submitted that the authorities bellow were justified in treating the services provided to the assessee in the nature of technical services. It is contended that case laws relied by the Ld. coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from the sample invoice submitted that Invoice No.420148444 dated 31st October 2014, description of service includes a)IFR Paper Chart Services AMES07 Middle East and South Asia Enroute b)Electronic chart services Middle East and South Asia.J V Collins Proline 21 IFR. Coverage c)Electronic chart services. J V Collins Proline 21 software Assembly d)Electronic chart services. J V Collins Proline 21 Avionics Thus, it is evident that the service does not cover only IFR paper chart as claimed by the AR but also include Electronic services including software assembly, avionics and electronic chart. 7.6 From the above narration mentioned in the invoice, it is very much clear that various kinds of charts and services are mentioned. Such a variation in the output cannot be provided without human intervention and person with expert knowledge is required to assess these reports before sending it to the Appellant. 7.7 On account of the above facts mentioned in the charts and invoice, it is evident that these services are highly technical and require human intervention and supervision at multiple levels. In view of the same, the Appellant's conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points have been observed: As per reply dated 1 7.11.2015 Jeppesen GMBH Germany provides aviation training materials, Aeronautical charts, flight planning, navigational data and aviation weather. We had procured electronic chart services, IFR paper chart services from Jappesen GMBH Germany . The undersigned issued letter dated 12.10.15 and 28.4.16 to the assessee and asked to sJIbmit the copy of agreement with Jappesen GMBH Ger1!lany but the assesse did not submit any copy 01 the agreemen!. The assessee submitted only the copy of the invoice and written submission about nature of services rendered by the non-resident. It can be seen from the simple perusal of the invoice and various reply submitted by the assessee that the non-resident is responsible for providing aviation training materials, Aeronautical charts, flight planning, navigational data and aviation weather electronic charge services IFR paper chart services. All these services require sufficient technical knowledge, expertise in aviation field, experience and skills. These service are clearly covered as Technical Services as defined in the Explanation section 9(1)(vii} of the Act I am in conform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing officer to delete this addition. 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: A. 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 aircraft maintenance, providing route navigation, providing components under smart parts plus agreement and service bulletins [S. No. 2 to 4 in table above] 1. CAE Simuflite Inc. USA is engaged in the business of providing trainings to pilots. It provided training to the pilots of the appellant in compliance to the mandatory requirement by the Directorate General of Civil Aviation (DGCA). 2. As per the DGCA manual, the operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dular CRM training. All major topics of CRM training shall be covered over a period not exceeding three years; [PB 121] l. 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] m. Clause 10 Pilot Qualification to operate in either pilot s seat [PB 122] n. Clause 11 Recent Experience [PB 122] o. 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] p. 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 for overview. It is stated in the Note at the bottom of the table that Recurrent CRM training shall be carried out annually. [PB 134] 4. Copies of invoices raised by CAE Simuflite Inc., USA for providing different trainings to the pilots of the appellant operator were furnished before the Ld. TDS Officer. [PB 140 145] 5. The description in the invoice states Indian DGCA Standalone Check ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make available . [emphasis supplied] 8. 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). 9. 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 made available to the person purchasing the service within the meaning of para 4(b). [emphasis supplied] Ld. TDS Officer relied on the decision of Hon ble Karnataka High Court in the case of De Beers [2012] 21 taxmann.com 214 (Kar) which in fact rules in favor of the appellant. It is stated that the Hon ble Court held that the technical knowledge or skills of the provider should be imparte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intenance tracking solution provider. Appellant availed subscription for maintenance tracking services and electronic log books for its aircraft Lear jet 60. 15. 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] 16. 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 . 17. Clause 4.10 of the Smart Parts Plus Agreement with Learjet Inc, USA also requires the appellant operator to properly record in the Aircraft log book all the details relating to aircraft flight. [PB 58] 18. Annual subscription charges paid to CAMP Systems International Inc, USA towards for obtaining standard maintenance tracking services for Lear 60, updates and support to CAMP s electronic log books does not fall within the term fees for technical service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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] 24. 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 element in providing services so as to give them the color of technical services as envisaged in section 9(1)(vii) of the Act. Hon ble Supreme Court in its decision of Bharti Cellular Ltd [2010] 193 Taxman 97 (SC) stated in respect of human involvement in Para 7 Whether at that stage, any human intervention is invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and the submissions of the Appellant including the case laws relied upon and donot agree with the contentions of the Appellant on account of the following reasons; 9.1. CAE has provided training to the pilots of the Appellant and the AO has relied on the MOU to India - USA Tax Treaty to wherein provisions of Technical Training is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0GSIM024833PB 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 description in the invoice. 9.6 Further, with due respect to the decision of Hon'ble Mumbai Tribunal, in the said decision in the case of United Helicharters Private Limited Vs ACIT, understanding as per the Memorandum Of Understanding (MOU) to India - USA tax treaty that Technical Training is Make Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;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 provided by CAE are technical . The only contention of the assessee is that it does not fall under the category of make available clause as per Article 12 of DTAA between India and USA. The assessee also accepted that as per MOU technical training may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sures 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 the notification requires recurrent training and checking. Recurrent training includes ground recurrent training, aeroplane/ FS1'D training and safety and emergency procedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the training / test were to ensure that the pilots are component t0 handle contingency situations. It is not disputed that the training provided to pilots is tech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, 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 mandatory 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 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 Officer. Hence, it is contended that the assessee was not required to deduct tax at source under section 195 of the Act on the payment made to Learjet Inc. USA, and hence not an assessee in default under section 201(1) of the Act. 16. On the contrary Ld. DR opposed these submissions and supported the orders of the authorities below. 17. We have heard rival submissions and perused the material available on records. The Assessing officer treated the assessee in default. The requirement of tax in respect of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the learned TDS officer by holding that the applicable DTAA is India- UAE DTAA and not India-USA DTAA, even if the payment is made to CAE, USA. Ground No 2 - Applicability of provisions of Section 195 of the Act on payments made to Learjet Inc., USA ('Learjet USA') for providing parts under Smart parts plus agreement and providing service bulletins - Rs 20,40,761/- 2.1. 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 components of aircraft as well as services provided by Learjet 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. 2.2. 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 scheduled/unscheduled component removals' and service bulletins containing kits used for maintenance of aircraft, by Learjet Inc. is a service which makes available technology to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... route navigation, providing components under smart parts plus agreement and service bulletins [S. No. 2 to 4 in table above] 27. CAE Simuflite Inc. USA is engaged in the business of providing trainings to pilots. It provided training to the pilots of the appellant in compliance to the mandatory requirement by the Directorate General of Civil Aviation (DGCA). 28. As per the DGCA manual, the operator i.e. the appellant company has to mandatorily arrange for the training and proficiency tests of the pilots it has engaged for its flight operations. The training to pilots was given outside India and payments for the same are also made outside India. All the ingredients of the transaction are outside India. 29. The DGCA manual, Civil Aviation Requirement (CAR) specifies the flight crew training and qualification requirements for scheduled and non-scheduled operators. This manual casts an onerous responsibility on the operator to ensure all of its compliance so as to hold a valid flight operator permit. In the instant case, appellant company is engaged as an operator of Learjet aircraft having non-scheduled operator permit. From the DGCA manual, certain k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining for overview. It is stated in the Note at the bottom of the table that Recurrent CRM training shall be carried out annually. [PB 134] 30. Copies of invoices raised by CAE Simuflite Inc., USA for providing different trainings to the pilots of the appellant operator were furnished before the Ld. TDS Officer. [PB 140 145] 31. The description in the invoice states Indian DGCA Standalone Check ; Indian DGCA check pilot training including 20 hrs Ground School [Notes: PPC + Check Pilot Training] [PB 140] The invoice is issued from US and remittance details also contains place as Dallas TX, US. Another invoice states training description Lear Jet 60XR Pilot Recurrent . [PB 141 and 145] Other invoices states training description Lear Jet 60XR Pilot Initial / International Procedures Initial . [PB 142 - 144] 32. It is evident from the invoices that the training to pilots of the operator appellant have been arranged to meet the mandatory requirements of DGCA. There is a dependency factor inherent in the flight operating business of the appellant for maintaining an effective flight crew of pilot. The operator is mandatorily require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kill, etc. are made available to the person purchasing the service within the meaning of para 4(b). [emphasis supplied] Ld. TDS Officer relied on the decision of Hon ble Karnataka High Court in the case of De Beers [2012] 21 taxmann.com 214 (Kar) which in fact rules in favor of the appellant. It is stated that the Hon ble Court held that the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. 36. As already stated above, the appellant as an operator is dependent on the service provider to comply with the mandatory requirements of DGCA. There is no make available of technology by the service provider to the appellant to make it independent for its future technical requirements. The decisive factor is not the fact of training services per se but the training services being of such a nature that it results in transfer of technology. In the instant case, there is no transfer of technology in the DGCA mandated training of pilots. Nothing remains with the appellant operator after the expiry of period after wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Learjet Inc, USA also requires the appellant operator to properly record in the Aircraft log book all the details relating to aircraft flight. [PB 58] 44. Annual subscription charges paid to CAMP Systems International Inc, USA towards for obtaining standard maintenance tracking services for Lear 60, updates and support to CAMP s electronic log books 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] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi High Court [2008] 175 Taxman 573 (Del) which deals with the requirement of human element in providing services so as to give them the color of technical services as envisaged in section 9(1)(vii) of the Act. Hon ble Supreme Court in its decision of Bharti Cellular Ltd [2010] 193 Taxman 97 (SC) stated in respect of human involvement in Para 7 Whether at that stage, any human intervention is involved is required to be examined, which again needs a technical data. We are only highlighting these facts to emphasise that these types of matters cannot be decided without any technical assistance available on record. [emphasis supplied] In the instant case, there is no human element involved when CAMPS Systems International Inc, USA and Rockwell Collins, USA supplied their subscription services to the appellant operator for operation of its aircraft. [AO Page 19] 51. 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 165 167] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee. 9. I have carefully considered the facts of the case, order and the submissions of the Appellant including the case laws relied upon and donot agree with the contentions of the Appellant on account of the following reasons; 9.1. CAE has provided training to the pilots of the Appellant and the AO has relied on the MOU to India - USA Tax Treaty to wherein provisions of Technical Training is considered as making available technical knowledge to the recipient of income. 9.2. Decision of Hon'ble Ahmedabad Tribunal in the case of ITO v Veeda Clinical Research Private Limited (ITA No. 1406/ Ahdj2009), relied upon by the Appellant is distinguishable on facts. The said judgment was ruled in the context of training pertaining to market awareness and development. These are soft skills training and not technical trainings. It was on the context of these soft skills trainings, Hon'ble Ahmedabad Tribunal ruled that no technology is involved and it is not making available any technical knowledge and skills to the recipient of services. In view of the same, the reliance placed by the Appellant on the decision of Hon'ble Ahmedabad Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n nature. In the case of the Appellant, pilots were given initial trainings and the same is evident from the description in the invoice. 9.6 Further, with due respect to the decision of Hon'ble Mumbai Tribunal, in the said decision in the case of United Helicharters Private Limited Vs ACIT, understanding as per the Memorandum Of Understanding (MOU) to India - USA tax treaty that Technical Training is Make Technology Available for the purpose of Article 12 paragraph 4(bJ has not been considered or overlooked. Mere fact that the trainings are mandated by DGCA does not alter the fact that the training is a technical training and making available technical knowledge. There is no such exception mentioned in the MOU that if mandated by DGCA, it will alter the nature of service rendered 9.7 Further, it is seen from the bare reading of the May 15, 1989 U.S. - INDIA TAX TREATY, Memorandum of understanding concerning fees for included services in Article 12 is as follows: Typical categories of services that generally involve either the development and transfer of technical plants or technical designs, or making technology available as described in paragraph 4(b), i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provided by CAE are technical . The only contention of the assessee is that it does not fall under the category of make available clause as per Article 12 of DTAA between India and USA. The assessee also accepted that as per MOU technical training may be one which makes available the technical knowledge but the assessee also contended that MOU used the words may and to arrive at the final conclusion whether technical training is fees for included services or not, the same needs to be checked against the substantive provision of MOU in conjunction with the facts of same. This contention of the assessee is not genuine as MOU clearly scribe the position as under: Typical categories of services that generally involve either the development and transfer of technical plants or technical designs, or making technology available as described in paragraph 4(b}, include: 1 . 9. Technical training. T can be seen that MOU does not used the word Mau but used the wards Typical categories of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining 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 the notification requires recurrent training and checking. Recurrent training includes ground recurrent training, aeroplane/ FS1'D training and safety and emergency procedures training and Crew resource tnanaqement training. Recurrent checking includes pilot proficiency checks, route checks and safety and emergency procedures checking. By above discussion it is clear that as per the DGCA notification. the crew members attended the training proqranis which includes above types of training. The statement of the assessee awl service provider is only checking his Proficiency is not correct. The services provider provided sufficient knowledge, experience and training to the pilots by which they became trained and used that knowledge and experience for their own use without the help of the services provider. I am in agreement with the said observations of the AO.The contentions of the Appellant are factually incorrect. The claim of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the training / test were to ensure that the pilots are component t0 handle contingency situations. It is not disputed that the training provided to pilots is technical in nature. Once training is imparted and the necessary certification is issued by CAE Simuflire confirming their eligibility, the pilots become equipped with knowledge and possess the required skills sets. Therefore, it cannot be at there is no transfer of knowledge, technology and/or experience. 9.10 The Hon'ble Delhi Tribunal in case of Steel Authority of India Ld. (120 TTJ 297) held that fees received by the UK entity for imparting technical training was taxable in India as fees for technical services. 9.11 In the case of Maruti Udyog Ltd (34 SOT 480), the Hori'ble Delhi Tribunal held that fees paid to a French entity for conducting impact test on motor cars and providing the testing reports was technical in nature. These decisions were rendered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 . The decisions relied upon by the Ld. DR are on the taxability of the income in the hand of the non-resident in view of the retrospective amendment therefore the said principle cannot be applied while deciding the issue of disallowance u/s 40(a)(i). In view of the above discussion and the facts and circumstances of the case we are of the considered opinion that the ITA No. 5136 5135/M/2011 United Helicharters Pvt. Ltd. disallowance of u/s 40(a)(i) is not justified and accordingly the same is deleted. 14. The facts of the case are ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 Officer. Hence, it is contended that the assessee was not required to deduct tax at source under section 195 of the Act on the payment made to Learjet Inc. USA, and hence not an assessee in default under section 201(1) of the Act. 16. On the contrary Ld. DR opposed these submissions and supported the orders of the authorities below. 17. We have heard rival submissions and perused the material available on records. The Assessing officer treated the assessee in default. The requirement of tax in respect of fee for technical services and technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Another requirement is that as per the Article 7 of the India USA DTAA the service provider should have a Permanent Establishment (PE ..... X X X X Extracts X X X X X X X X Extracts X X X X
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