TaxTMI 
TaxTMI 
2020 (6) TMI 1
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.... 1786/Del/2012 and ITA No. 2212/Del/2012 as the same was argued firstly by the both the parties. The Grounds of appeal are as under:- ITA No. 1786/Del/2012 (assessee's appeal) 1. "That the Learned CIT (A) has grossly erred in not appreciating the true and correct facts of the case before passing the impugned order. 2. That the Learned CIT (A) has grossly erred in not appreciating that the appellant does not render any ground handling services and only render technical handling services even though it has been held that both are covered under Article 8 of the DTAA if rendered to IATP Pool Members. 3. That the Learned CIT (A) has grossly erred in concluding that the services rendered to one non IATP pool member would be taxable in the hands of the appellant to the extent of the revenue earned from the said customer under Article 7 of the DTAA. 4. That the appellant seeks to alter, modify and add any of the around as the case may be." ITA No. 2212/Del/2012 (revenue's appeal) 1. "On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,78,09,378/- made by the AO, by holdi....
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....ssessee filed its return of income for A.Y. 2006-07 on 31st March 2008, declaring Nil taxable income as the assessee claimed that the entire income earned by the assessee in India is exempt from taxation under Section 90 of the Income Tax Act, 1961. Thereafter, the case of the assessee was fixed for scrutiny u/s 143(2). The assessee in India derives income from the following sources; i. Carriage of passage. ii. Carriage of cargo. iii. Interest income from funds directly connected with the operation of aircraft in International Traffic. iv. Income from technical handling to other IATP Pool Members. During the course of assessment, the assessee was directed to furnish details in respect of the Technical Handling undertaken by it for other carriers along with the details of income from cargo passage and interest etc. The assessee furnished the details. The assessee submitted that the case of the assessee was squarely covered by the judgment of the Tribunal in case of Lufthansa German Airlines (90 ITD 310) and since the assessee was rendering Technical Handling services only to IATP Pool Members, it is a pooling activity and not liable to be taxed....
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....s under the pooling arrangement charge applicable rates, as may be determined by the member airlines and it is not the case wherein, by charging varied rates, the member airlines do not fall part of the IATP pool. The IATP does not prescribe the rates to be charged from other member Airlines. During the Assessment Year 2006-07, the assessee airlines had serviced only one airline i.e. Iberworld, who was not a member airline but was of the status of a guest airlines covered under the IATP pool. The Ld. AR further submitted that ad-hoc agreements with Etihad Airlines, Air Canada, Jet Airways, Air India, TNT Airways and Cambata Aviation etc. have been entered into, has mentioned by the Revenue. Thus airlines with which commencement of contract with third parties provided technical assistance during F.Y. 2006-07. The Ld. AR submitted that even ad-hoc basis agreements are agreements which are not continuous in nature and are for a limited time period and entered of and on by the member airlines depending on the requirements and was not without any agreements. The Ld. AR submitted that the IATP Manual provides raising direct invoices between member airlines as per manual and hence such in....
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....l operating agency." Whereas the Article 8(2) of the Indo - UK Treaty is differently worded as under:- "The provision of paragraph 1 of this Article shall likewise apply in respect of participation in pools of any kind enterprises engaged in air transport." Thus, the Ld. AR submitted that the CIT(A) was not right in sustaining taxability to the extent of Rs. 3,70,098/- under Article 7 of the DTAA and rejecting the claim of Article 8 of the DTAA. 7. The Ld. DR submitted that one of the activities from which assessee derived income during the years under appeal is Technical Handling. Although the assessee has been claiming that it has provided 'Technical Handling' services as per the agreements produced, the nature of services has been described as "Ground Handling". The assessee provides its services on a 'per-flight' basis for fixed duration. The services on offer also vary on quality and coverage. The Ld. DR further submitted that the assessee also provides a multitude of other facilities. The assessee does not follow a uniform pricing policy for the services provided by it and the rates charged for the same type of Aircraft i.e. A-330 vary from airlines to ai....
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....nationally recognized system for assessing the operational management and control systems of an organization that provides ground handling services for airlines and European Line Maintenance Organization (ELMO). The Ld. DR relied upon the decision of British Airways PLC vs. DCIT (ITA No. 4653 to 4655/DEL/1999, 484 to 486/DEL/2000 order dated 24.09.2001) 2003-TII-23-ITAT-DEL-INTL. 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 services referred between the head office and the branch office as per the submissions of the assessee. The entire receipts collected by the branch office are remitted to the head office, after meeting the local expenditure and th....
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....eration. 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 AIR FRANCE 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 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 B 1 1 valid from April 01,2005 PREAMBLE This Annex B is prepared in accordance with the simplified procedure whereby the Parties agree that the terms of the Main Agreement and Annex A of the SGHA of April ....
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....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....
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.... any kind" was interpreted by the Income-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 ....
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.... on this aspect by the Assessing Officer in the assessment order though the 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....
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....(3), as directed under section 144C(13) has been passed without appreciating the true and correct facts and the legal position of the instant case. 2. That the order passed u/s 143(3) along with section 144C(13) is time barred in as much as the order has been received on 17-10-2011 by the appellant company, which is beyond the period of one month as envisaged under the provisions of section 144C(13) and to that extent is bad in law. 3. That the Learned Addl. Director of Income Tax has wrongly assumed jurisdiction u/s 148 of the Income Tax in as much there was no reason believe that there has been Income Escaping assessment within the meaning of section 147. 4. That the assessee objects to the passing of the order u/s 148 read with section 143(3) of the Act as there was no fresh material on record by virtue of which it could be said that there has been Income Escaping assessment within the meaning of section 147. 5. That the Learned Addl. Director of Income Tax, in the assessment order as per directions issued by the Dispute Resolution panel have failed to appreciate the true and correct facts and circumstances of the case of the appellant and has....
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....ne sided manner contrary to various Judgments and pronouncements by various courts on similar issue. 13. The learned Addl. Director has completely misread and misunderstood the provisions of Article-8(1), Article-8(1), Article-8(3) and Article - 8(4) of DTAA between India France and has grossly erred in applying the same to the facts and circumstances of the appellant company. 14. That Learned Addl. Director in assessment order has grossly erred in concluding that Pool activity of Airlines is not part of Operation of Aircraft in International Traffic. 15. That the Learned Addl. Director has completely ignored the fact that only revenue pool envisaged in the aviation industry which affects the appellant company is IATP pool. That too is duly recognized and covered under Article 8 of DTAA and income arising there from is exempt from taxation in India. 16. That the Learned Addl. Director and the dispute resolution panel has grossly erred in proposing to tax revenue earned by the appellant under the Provisions of Article 7 of the DTAA between India & France. Although the same is covered under Article 8 of the DTAA. 17. That the Lear....
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.... Resolution panel have failed to appreciate the true and correct facts and circumstances of the case of the appellant and has framed an assessment by making additions on a issue which is already covered in favour of the appellant company by the judgment of this Hon'ble ITAT in case of Luftansa German Airlines reported in 90 ITD page 310 as also the case of KLM Royal Dutch Airlines. 6. That the Learned Addl. Director of Income Tax in assessment order has grossly erred in holding that the income by way of adjustment of book entries is liable to be taxed in India. 7. That the Learned Addl. Director of Income Tax in assessment order has failed to appreciate the fact that the income earned from technical handling was covered by the Double Taxation Avoidance Agreement between India and France and as such was exempt income and could not have been brought to tax in India. 8. That the Learned Addl. Director of Income Tax in the assessment order has grossly erred in not appreciating the fact that the case of the appellant is pari-matria to the case of Lufthansa German Airways and totally distinguishable from the facts and circumstances of the case of British Airway....
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....he DTAA between India & France. Although the same is covered under Article 8 of the DTAA. 17. That the Learned Addl. Director in the assessment order notwithstanding and without prejudice has grossly erred in estimating expenses incurred at 40% of the earnings and which in any case is without any basis and is completely arbitrary. 18. That the Learned Addl. Director has grossly erred in treating the income, from technical handling accruing to the appellant during the year under consideration, as being covered under Article 7 while as in the A.Y 2007-08 year the same had been taxed by the very same Assessing Officer under Article 13 of the DTAA as fees for technical service. 19. That the Learned Addl. Director of Income Tax in assessment order has grossly erred in initiating penalty proceedings u/s 271 (1) (c). 20. That the Learned Addl. Director of Income Tax in assessment order has grossly erred in initiating penalty proceedings u/s 271A and 271B. 21. That the Learned Addl. Commissioner has in assessment order grossly erred in charging interest u/s 234 of the Income Tax Act. 21. That the Appellant may add, alter, and a....