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TMI Blog2023 (2) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14, 2014-15 and 2015-16. 2. Since, the issues raised in all these appeal are more or less common, appeals have been clubbed together and disposed of in a common order, for the sake of convenience. 3. Basically, the dispute in these appeals relate to taxability of following items of income: i. Technical handling income received from IATP Members. ii. Technical handling income received from non-IATP Members. iii. Interest income iv. Collection charges v. Commission income (i) Technical Handling Income Received from IATP Members. ITA No. 4812/Del/2010 AY: 2007-08 Ground nos. 3 to 19, 21 and 22 ITA No. 5010/Del/2011 AY: 2008-09 Ground nos. 3 to 15, 17 and 18 ITA No. 1150/Del/2015 AY: 2011-12 Ground nos. 2 to 16 and 19 ITA No. 276/Del/2016 AY: 2012-13 Ground nos. 2 to 20 ITA No. 838/Del/2018 AY: 2013-14 Ground nos. 3 to 20 ITA No. 837/Del/2018 AY: 2014-15 Ground nos. 3 to 20 ITA No. 4698/Del/2019 AY: 2015-16 Ground nos. 2 to 15 4. Briefly the facts relating to this issue are, the assessee, a branch office of a non-resident corporate entity is incorporated in France and a tax resident of France. Its head office is situated in Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Against the aforesaid decision of the Assessing Officer in the assessment years under dispute, the assessee either approached learned DRP or learned Commissioner (Appeals). However, the authority concerned agreed with the view of the Assessing Officer in all these assessment years. 5. Before us, learned counsel appearing for the assessee submitted that the issue is squarely covered by the decision of the Tribunal in assessee's own case in assessment years 2004-05, 2005-06 and 2006-07. He submitted, facts being identical in these assessment years, the decision of the Tribunal would squarely apply. Further, he placed strong reliance on a decision of the Hon'ble Jurisdiction High Court in case of Director of Income Tax Vs. KLM Royal Dutch Airlines (2017) 78 taxmann.com 1 (Del.). 6. Proceeding further, he submitted, the miscellaneous applications filed by the Revenue against the appellate order passed by the Tribunal in assessment years 2004-05 and 2005- 06 has been dismissed by the Tribunal. Thus, he submitted, the issue stands squarely covered in favour of the assessee. 7. Learned Departmental Representative submitted, Article 8(2) of the treaty will not cover income from technica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney. Undisputedly, assessee has claimed exemption of the income derived from technical handling services taking recourse to Article 8(2) of the India - France DTAA. It is the case of the assessee that since as a member of IATP the assessee has provided such services to other pool members, it is covered under Article 8(2). Notably, identical nature of dispute arising in assessee's own case in assessment years 2004-05, 2005-06 and 2006-07 came up for consideration before the Tribunal earlier. While deciding the issue in ITA No.5008/Del/2011 and others dated 22.05.2020, the Tribunal has held as under: "8. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee company is claimed benefit under the DTAA under Article 8 of the Treaty, since the entire revenue receipts are from operation of aircraft in international traffic as per the assessee before the Assessing Officer. The assessee also submitted during the assessment proceedings that the Indian Branch office is merely a branch office of the foreign company, which is engaged in the operation of aircraft in international traffic. There are no specific service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e maintenance facilities) to other IATP Members only during the year under consideration. No such facility or service has been provided by assessee to any non IATP Member during the year under consideration. The services as per the Standard Ground Handling Agreement 1998 Main Agreement along with Annexure A and Annexure B is as under: "IATP FORM-55 LINE MAINTENANCE POOLING ANNEXURE B.12/OS-DEL LOCATION, AGREED SERVICES AND CHARGES To the Standard Ground Handling Agreement of April 1998 Between AUSTRIAN AIRLINES having its principal office at And having its principal office at 45 Rue de PARIS Fortanastrasse : P.O. Boax 50 95747 ROISSY CDG CEDEX A-1107, Vienna FRANCE Austria And hereinafter referred to as and hereinafter referred to as "the Handling Company" "the Carrier" Holding EASA PART 145 approval "the Carrier" Holding EASA PART 145 approval Certificate Nbr : FR.145 010 Effective from: October 25,1998 This Annex B for the location: Delhi (DEL) Is valid from: April 1* 2006 And replaces: Annex B11 valid from April 01,2005 PREAMBLE: This Annex B is prepared in accordance with the simplified procedure whereby the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h transportation." The Revenue contended that the assessee provides its services both to airlines who are members of IATA/IATP as well as members who are not members of IATP. The Ld. DR pointed out that the assessee does not receive any reciprocal services in India and considering the scale of activities both inside India as well as outside and the collaborations with KLM & Air France Ground Handling Pvt. Ltd. to provide the services and facilities, it can be safely concluded that it is an independent commercial and business activity which is in no way ancillary or connected to the business in the operation of aircraft as defined by Article 8(4) of the DTAA between India & France. Therefore, the Ld. DR submitted that the Assessing Officer was right in rejecting the claim of the Assessee under Article 8 of the DTAA between India and France. While going through the submissions of both the parties, it is pertinent to note the relevant points of the decision in case of the Hon'ble High Court in case of DIT vs. KLM Royal Dutch Airlines & Lufthansa German Airlines (2017) 392 ITR 218 (Del.) wherein while dismissing the appeals, the Hon'ble High Court held that the assessee participa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Appellate Tribunal by taking the dictionary meaning of the word "pool". These are missing in the two the double taxation avoidance agreements in question. (vi) Article 8(3) of the Double Taxation Avoidance Agreement between India and UK provided that the terms "operation of aircraft" shall include "...3. For the purposes of this article the term "operation of aircraft" shall include transportation by air of persons, live-stock, goods or mail, carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other activity directly connected with such transportation". These terms are not present in the two double taxation avoidance agreements in the present set of appeals. (vii) After meeting the requirement of its own flights, the services of employees were required for handling other airlines' operation for generating income. Having regard to these facts, this court is of opinion that the amplification of the term "operation of aircraft" in article 8(1) through article 8(3), i.e.," .. 3. For the purposes of this article the term "operation of aircraft" shall include transportation by air of persons, liv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. DR is contending contrary that some of the airlines whom the services provided were not members of IATP. But that is not the case in the present Assessment Year. In fact as per Annexure "A" of IATP manual, it is evidently clear that there is no bar on member airline to provide service to non IATP Pool member and in fact, even non IATP Pool members if takes such service from a pool would be considered as a pool service to them. Thus the submission of the Ld. DR is factually incorrect. Now coming to the DTAA between India and France, it can be seen that Article 8(2) specifically mentions that the DTAA will apply to the profits derived by an enterprise of a Contracting State from the operation of aircraft in international traffic from the participation in a pool, a joint business or an international operating agency and shall be taxable only in that Contracting States. In the present case, the contracting state is France and though under domestic law the assessee has to pay tax in India while deriving income from Indian territory, yet because of Article 8(2) of the DTAA agreement, Air France is exempted to pay any tax in India as its services/activities and profit thereof derives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground nos. 2 to 4 10. The crux of the dispute is whether income derived from technical handling services provided to non-IATP member airlines in India will be covered under Article 8(2). Though, learned Commissioner (Appeals) allowed assessee's claim of benefit under Article 8(2) of India - France DTAA in respect of services provided to other airlines in India who are members of IATP, however, he did not allow the benefit in case of income derived from services rendered to non-IATP member airlines. 11. We have heard the parties and perused the materials on record. On carefully going through IATP pool manual as placed in the paper-book, it is observed that there is no restriction or bar imposed therein to the extent that services cannot be provided to non-IATP pool members. In this regard, the following observations of the Coordinate Bench in assessee's own case (supra) hold much relevance: "........................The IATP manual clearly set out that there is no bar on member airline to provide service to non IATP Pool member and in fact, even non IATP Pool members if takes such service from a pool would be considered as a pool service to them. Thus, the assessee being a pool ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income earned is on fixed deposits, either made out of surplus funds generated from its business of operating airlines in international traffic or from fixed deposits kept as security deposit with Airport Authority of India Ltd. The departmental authorities have not doubted or disputed this factual position. Assessee's claim has been rejected only on the ground that the interest income is not connected with the operation of aircraft in international traffic. Article 8(3) of Indian - France DTAA reads as under" "For the purpose of this Article, interest on funds connected with the operation of aircraft in international traffic shall be regarded as profits derived from the operation of such aircraft, and the provisions of Article 12 shall not apply in relation to such interest." 17. Undisputedly, it is a fact on record that the fixed deposits made by the assessee are out of funds connected with the operation of aircraft in international traffic, hence, covered under Article 8(1) as the assessee has no other business. Therefore, in our view, the interest earned on such fixed deposits will be covered under Article 8(3), hence, not taxable. Therefore, the Assessing Officer is direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the nature of income, however, it will be covered under Article 8 of the tax treaty. It is observed, assessee's claim has been accepted by learned DRP in assessment yea 2012-13 and by learned Commissioner (Appeals) in assessment year 2013-14. However, on examining the nature of receipts, we are of the view that it has no connection with assessee's business of operation of aircrafts in international traffic. 20. Rather, the assessee gets some incentive for making timely payment of UDF/PSF to the airports. Therefore, the collection charges are not directly connected to assessee's business of operating aircraft in international traffic, as per Article 8(1) read with Article 8(4) of India - France DTAA. Therefore, we uphold the addition. Ground raised is dismissed. (v) Income from Commission ITA No.276/Del/2016 AY: 2012-13 Ground No. 25 ITA No.131/Del/2018 AY: 2013-14 Appeal by the Revenue 21. Briefly the facts are, in some cases a passenger travelling in aircraft operated by the assessee, for instance, from Paris to New Delhi and then to Chennai completes his/her domestic leg of travel through some domestic airlines. For the domestic leg of travel the assessee re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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