TaxTMI 
TaxTMI 
2022 (3) TMI 1432
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to take the following grounds, which are without prejudice to one another: 1) That the Ld. AO/ Hon'ble DRP erred in facts and in law in not accepting the contentions of the Appellant that collection charges allowed to the Appellant by Airport Authority of India on payments made within a stipulated given period is a discount in nature and not in the nature of commission income taxable in the hands of the Appellant in India. That the Ld. AO/ Hon'ble DRP erred in facts and in law in rejecting the contentions of the Appellant that the collection charges allowed by Airport Authority of India to the Appellant on account of making payments within a stipulated given period is income from "operation of aircrafts" under the provisions of A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law and the principles of natural justice and is, therefore, void and vitiated. 8) The appellant craves leave to add, modify or withdraw any or all of the above grounds before or during the course of hearing in the interest of natural justice. " 3. As could be seen from the above ground Nos. 1 to 4, the primary issue to be adjudicated in assessee's appeal is as to whether the charges paid by Airport Authority of India (for short AAI) to the assessee, for assessee collecting the User Development Fee (for short UDF) from the passengers and passing it on to AAI, is not commission and even if it is so, the same is income from operation of aircraft and not liable for tax as per Article 8 of DTAA between India and Germany. 4. Brief....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r was of the view that the opportunity to earn this income may have arisen due to some connection but these activities are not incidental to the operation of aircraft. Thus the Assessing officer in the draft assessment order passed u/s 143(3) r.w.s 144C(1) of the Act on 22.11.2016, proposed to assess the collection charges received by the assessee from AAI as business income chargeable to tax under Article 7 of the Treaty. 5. The assessee filed its objection before the Ld.DRP and the Ld. DRP approved the draft order passed by the assessing officer. Further the Ld.DRP also observed that for the assessment year 2013-14 the draft order of the assessing officer was also approved on similar facts. 6. Before us the Ld. Counsel for the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. DRP and the Assessment order. It is not in dispute that the assessee's income derived from operation of aircraft is not taxable under Article 8 of DTAA between India and Germany. However, the assessee received collection charges from AAI as the assessee collected UDF from the passengers and the same was passed on to AAI. A duty was cast on the assessee to collect UDF from the passengers and pass it on to the AAI. Assessee was paid collection charges wherever the UDF is remitted to AAI within the stipulated time. The taxability of income in the hands of the is governed by Article 8 of the treaty and it reads as under: "ARTICLE 8 SHIPPLING AND AIR TRANSPORT 1. Profits from the operation of ships or aircraft in in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urn on investment. The quantum of UDF varies from airport to airport and the rate of UDF at airports is determined by the Airports Economic Regulatory Authority of India (AERA) for major airports and ministry of civil aviation for not major airports. Presently UDF collection charge at a flat rate of Rs.5/- per passenger (all inclusive) is allowed to airlines subject to payment of UDF collection to AAI within 15 days of receipt of bill. Airlines will make full payment of UDF to AAI and raise a separate invoice for the collection charges on UDF to AAI. The collection charges paid by AAI to the assessee in whatever name called i.e., either discount or commission is nothing but service charges paid, for assessee collecting UDF and passing it on....