Treaty protection for airline handling receipts extends to ground and technical services integral to international aircraft operations.

Receipts from ground handling and technical handling services provided to other airlines in India were treated as part of the business of operation of aircraft in international traffic under the applicable DTAAs. In the absence of a treaty definition, the Tribunal applied its earlier co-ordinate bench view and read the expression in the treaty context, holding that such receipts are integral to the airline business. Section 44BBA of the Income-tax Act was not accepted as a basis to depart from that interpretation. The receipts were therefore covered by Article 8 of the relevant DTAAs and were not separately taxable in India on the Revenue's stand.

---

---

Issues: Whether receipts from ground handling and technical handling services rendered to other airlines in India form part of the business of operation of aircraft in international traffic and are therefore taxable only under Article 8 of the relevant DTAA, or whether they are separately taxable in India under the Income-tax Act.

Analysis: The Tribunal followed its earlier decisions on the same issue and noted that the relevant treaty provisions did not define the expression "operation of aircraft in international traffic" in the India-Netherlands and India-Germany DTAAs. It accepted that, in the absence of a treaty definition, the expression had to be understood in the treaty context and with reference to the earlier co-ordinate bench view, which had treated ground handling and technical handling receipts as integral to the airline business. The Revenue's reliance on section 44BBA of the Income-tax Act, 1961 was not accepted as sufficient to depart from the earlier interpretation, since the Tribunal had already construed the treaty provisions to include such receipts within the operation of aircraft in international traffic.

Conclusion: The receipts were held to be covered by Article 8 of the applicable DTAAs and not separately taxable in India on the Revenue's stand; the Revenue's appeals failed.

---