9911796707
TMI Blog2024 (11) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... 1489 - ITAT DELHI] which is a sister concern of the assessee, wherein, exactly the identical issue was subject matter of consideration as held that the repairs maintenance services are 'not made available' to the clients so that in future they can repair maintain their own. There is no transfer of technology, no transfer of skill or knowledge or processes. There is no imparting of experience or benefit. The Id. DRP wrongly interpreted that the 'enduring benefit' gained by the client by the way of repairs maintenance is akin to 'make available' which cannot be accepted. As such 'make available' clause is not satisfied, the services cannot be treated as FTS as per India-USA DTAA. We hold that the revenue earned by the assessee from rendition of repairs and maintenance services of aircraft equipment cannot be construed as FTS both under the Act as well as under the treaty. Accordingly, Ground Nos. 4 and 5 raised by the assessee are allowed. Chargeability of interest u/s 234A and 234B - If the return of income is filed beyond the prescribed due date u/s 139(1) of the Act, then interest u/s 234A of the Act shall be leviable - AO is directed to examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute 7. The assessee provides repair and maintenance service for aircraft equipment to Indian customers. This is the primary business of the Assessee for which the assessee charge repair and maintenance fees. For the purpose of repair and maintenance, the aircraft equipments are shipped outside India where aircraft equipments are repaired and sent back to the customers in lndia. In this regard, the assessee enclosed the specimen document in relation to shipment of equipment including the email communications in pages 301 to 330 of the Paper Book to prove the fact that the repairs were carried out outside India. The assessee earned revenue of 12,78,69,526/- from Indian customers on account of such repairs and maintenance services. The assessee also submitted the copy of agreement, purchase orders along with copy of invoices raised on the Indian customers on sample basis which are enclosed in pages 211 to 248 of the Paper Book. The ld AR drew our attention to the steps involved in the rendition of repairs and maintenance services by the assessee as under:- Step 1: Intimation of need for repair and maintenance services by the customer Step 2: Customer sends the aircraft equipment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement, both the parties also exchange the proprietary information. There are restrictions placed on both the parties to prevent the use or the disclosures to any person outside the organization of all the data received i.e. the Assessee is sharing secretive and confidential data with the customers in India which signifies that technical know-how and information is being made available to the clients in India. 9. The assessee vehemently pleaded that the revenues earned by it on account of repairs and maintenance of aircraft equipment do not constitute payment for technical services as defined in Explanation 2 to section 9(1)(vii) of the Act ; and that the repairs and maintenance services are routine maintenance services and not technical services as per the Act. The assessee placed reliance on the decision of the co-ordinate bench decision of this Tribunal in the case of Global Vectra Helicorp Ltd reported in 159 taxmann.com 282 (Del Trib) wherein it was held that the since the entire repairs and maintenance of Helicopter parts was carried out outside India and nothing was done in India, the payment in the nature of repair and maintenance services is not chargeable to tax in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , even if the services rendered by the assessee are construed as technical services under the Act, the same could not be construed as FTS under the treaty since the same does not make available technical knowledge to enable the end user to use the same by its own. In this regard, the assessee placed reliance on the decision of Hon ble Karnataka High Court in the case of De Beers India Minerals Pvt. Ltd reported in 21 taxmann.com 214 (Kar HC) and decision of the Hon ble Jurisdictional High Court in the case of Guy Carpenters reported in 20 taxmann.com 807 (Del HC), among other decisions. However, none of the aforesaid submissions were appreciated by the ld AO and ultimately the services rendered by the assessee were construed as FTS taxable u/s 9(1)(vii) of the Act as well as under Article 12 of India-Singapore Treaty. 10. From the modus operandi operated by the assessee for rendering of repairs and maintenance services, we find that the aircraft equipments are shifted outside India for repairs. The repairs are carried out outside India. The equipment after due repairs and maintenance are shipped back to the customers in India. There is absolutely no transfer of any technology, nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of repair maintenance of aircraft equipment. 4. Before the AO, the assessee submitted that for the purpose of repair maintenance, the aircraft equipment are shipped outside India where they are repaired and sent back to Indian customer to India and hence they do not qualify the clause of 'make available'. However, the AO held that the on ground aircraft services provided by the assessee qualify it as 'make available'. 5. The Id. DRP held that repair and maintenance services of aircraft parts is a very specialized field requiring technical expertise skill and experience at every stage. They are specific and customer based. Customer of the assessee are airlines which operate passenger and goods carrier. They are not equipped in handling the issues related to break down of aircraft. It is a complete and separate science and art in itself. The services provided by way of repair and maintenance are technical in nature and fall under ambit of services under Fee for Technical Services. As discussed above, once it is established that the services which have been provided are specialized customer-based services, what remains to see is whether they pass the test of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of repairs maintenance is akin to 'make available' which cannot be accepted. Rather, it should be the enduring benefit to the clients to undertake repairs manage the maintenance services, can then only it be considered that the 'make available' clause is satisfied. Since, such 'make available' clause is not satisfied, the services cannot be treated as FTS as per India-USA DTAA. 7. The appeal of the assessee on this ground is allowed. 12. In view of the aforesaid observations and respectfully following the judicial precedent hereinabove, we hold that the revenue earned by the assessee from rendition of repairs and maintenance services of aircraft equipment cannot be construed as FTS both under the Act as well as under the treaty. Accordingly, Ground Nos. 4 and 5 raised by the assessee are allowed. 13. Ground No. 6 raised by the assessee is challenging the chargeability of interest u/s 234A and 234B of the Act. If the return of income is filed beyond the prescribed due date u/s 139(1) of the Act, then interest u/s 234A of the Act shall be leviable. The ld AO is directed to examine this fact and decide accordingly. The chargeability of interest u/s 234B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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