TaxTMI 
TaxTMI 
2026 (3) TMI 1264
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.... ground which agitates against the action of the Ld. AO in making an addition to the returned income of the Appellant on a misunderstanding of fact and misapplication of law. The detailed contentions are stated in the ensuing paragraphs. 2.1 The above ground is general in nature and does not require any separate adjudication. 3. Ground no. 2 of the appeal and the submissions of the assessee are reproduced as under : On the facts and circumstances of the case & in law, the assessment order is erroneous and bad in law as it was passed on an incorrect understanding of facts and incorrect interpretation of the provisions of law. In doing so, a. the Ld. AO erred in basing the conclusions upon the open domain enquiry which have no link/applicability to the facts of the case B. Assessee's submission The above ground is a general ground. It is submitted that the Ld. AO has passed the final assessment order in complete disregard to facts and submission made by Appellant during the course of the assessment proceedings. 3.1 The above ground is general in nature and does not require any separate adjudication and is dealt later in this order. 4. B....
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.... are still pending before the Hon'ble Delhi High Court. The relevant extracts of the submission of the assessee are reproduced as under : 1.1 "The subject matter for AY 2021-22 was listed for a clarification hearing on November 28, 2025 During the course of the hearing the Hon'ble Bench sought the status of the proceedings for the previous years. 1.2 The principal issue in the present appeal concerns the taxability of receipts arising from the performance of offshore aircraft engine repair and overhaul activities, which have been classified as "Fee for Included Services" (FIS) by the tax authorities. It is pertinent to note that since the assessment order for the subject year makes specific reference to the assessment proceedings to the findings of previous year i.e. AY 2019-20, the Hon'ble Bench sought the details of the proceedings for the previous year 1.3 Pursuant to the Bench's direction, the Appellant herein-below submits the status of proceedings for the earlier years ie. AY 2018-19 & 2019-20 referenced in the assessment order for the subject appeal 1.4 It is submitted that the appeals for AY 2018-19 & 2019-20 bearing ITA n....
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.... Corp. v. DCIT (ITA No. 665/DEL/2025) (enclosed herewith Annexure D) and Rockwell Collins Southeast Asia Pte Ltd v. DCIT (ITA No. 2409/Del/2023) (enclosed herewith as Annexure E). 1.8 The above summary of facts is being submitted for your Honors' kind consideration." 4.4 During the course of the assessment proceedings for AY 2021-22, the assessee submitted before the AO that the said amount of Rs. 471,64,50,980/- was not taxable either under section 9(1)(vii) of the Act nor under Article 12(4)(b) of the India-USA DTAA. The reasons for its non-taxability have been summarized by the Ld DRP in para no. 4.3.1 vide its order dated 13-09-2023 and the relevant extracts of the same are reproduced as under: 1. the repair/overhaul services are effectuated outside India and that there is no technical knowledge that can be said to have been transferred to the customers in India by virtue of rendering the aforesaid services. 2. the conduct of repair & maintenance activities the interacting between the Applicant's team and Indian customers' team was minimal as the entire process (starting from inspection/ testing of part to repair/ replacement/exchange o....
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....llowed for performing the repair activities otherwise as well. 9. The "make available" condition prescribed under Article 12(4)(b) of the India-US DTAA is said to be satisfied if the service provider imparts technical knowledge, experience, skill, knowhow, or processes to the service recipients. The receiver of the services can be said to acquire the relevant skills used by the services provider only if he acquires those skills in such way that he can himself use or apply them independently without getting any assistance or being dependent on the service provider in future. From the explanation provided under the MOU, it can be inferred that the receiver of the services can be said to acquire the relevant skills used by the services provider only if he acquires those skills in such a way that he can himself use or apply them independently without getting any assistance or being dependent on the service provider in future. 10. In the instant case, the activities performed by applicant may require specialized skills and technological expertise but by no stretch of imagination these activities make available any technical knowledge, experience, skill, know-how or pro....
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....esaid agreement is not taxable in India. The assessee also said that the receipt is not taxable in India as per beneficial provisions of Article 12(royalty and fee for included service) of the India USA DTAA. The reply of the assessee has been perused but not found tenable. It is to be noted based on discussion in foregoing paras and on basis of contract agreement the services have been provided to Indian customer as repair and maintenance, overhaul are of technical nature. Such services are technical in nature and are taxable u/s 9(1)(vii) read with article 12 of India USA DTAA. Section 9(1)(vii) of the Act is reproduced below for ready reference: (vii) income by way of fees for technical services payable by- (a) the Government; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person 90 outside India or for the purposes of making or earning any income from any source outside India 90; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such per....
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....l expertise and ability required in such cases is not only exacting but specific, in that, aircraft supplied by manufacturer has to be serviced and its components maintained, serviced or overhauled by designated centres. it is this specification which makes the aircraft safe and airworthy because international and national domestic regulatory authorities mandate that certification of such component safety is a condition precedent for their airworthiness. the exclusive nature of these services cannot but lead to the inference that they are technical services within the meaning of section 9(1)(vii) of the act. the ITAT's findings on this point are, therefore, erroneous, this question is accordingly answered in favour of the revenue. On the basis of submission of assessee as well as discussion in the foregoing paras the services provided by the assessee are in the nature of fees for technical services u/s 9(1)(vii) of the income tax act 1961. According to India-USA DTAA under article 12 4. For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy ....
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.... plan and data with the customer to detect the problem and take maintenance decision and these things cannot be done without sharing the technical knowledge. The assistance and guidance is provided using skill, expertise and experience of the Assessee which it gained over a period of time and have expertise in it. Thus, the Applicant is making available his technical expertise in the area to Indian customer enabling it to take better decisions and perform its functions in more effective manner The activities are completely different from activities where final solution is provided. Once these advices and training is given by the assessee, the final task is performed by Indian customer as "IT remains the sole responsibility of airline to conclusively identify and resolve aircraft and engine faults or adverse trends and make all maintenance decision affecting airlines aircraft." And these tasks cannot be performed without having technical knowledge, skill and experience and thus assessee develop and transfer of a technical plan or technical design to Indian customer, knowledge to detect the fault and take repair and maintenance decision. Indian customer becomes wiser with each advice....
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.... to tax in the USA. It is also undisputed that for taxation purposes, the assessee is a LLC. 4.4 LLCs also do not come under the special clause for partnerships and trusts laid down in paragraph 1(b) of Article 4 of the DTAA, which states "in the case of income derived or paid by a partnership, estate, or trust, this term [resident] applies only to the extent that the income derived by such partnership, estate, or trust is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners or beneficiaries". It is clear from a reading of paragraph 1(b) of Article 4 of the DTAA that it covers only partnership, estate or trust. The assessee is a corporation (LLC) in the eyes of US tax law. Corporations or Limited Liability Corporations are not covered under the special clause of paragraph 1(b) of Article 4 of the DTAA. Thus, in the case of LLCs, even if the shareholders are resident in USA, Treaty benefits are not available to the corporation. 4.5. Thus, the assessee is not a resident of USA in terms of the definition of resident given in Article 4 of the India-US DTAA, and is therefore not entitled to the benefit and applic....
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....mphasis supplied by us) 4.7 Thus, the AO proposed an addition of Rs. 471,64,50,980/- to be taxed @ 10% for fees for technical services u/s 9(1)(vii) of the Act as well as Article 12(4)(b) of the India-US DTAA. Further, the AO also held that without prejudice to the above. the assessee was not a resident of USA in terms of the definition of resident given in Article 4 of the India-US DTAA and, was therefore, not entitled to the benefit and applicability of the DTAA. 5. Aggrieved with the said order, the assessee filed its objections before the DRP. The DRP by its order dated 13.09.2023 upheld the findings of the AO in the draft assessment order on both counts i.e. taxability of Rs. 471,64,50,980/- @ 10% for fees for technical services u/s 9(1)(vii) of the Act as well as Article 12(4)(b) of the India-US DTAA and the AO's without prejudice finding that the assessee was not a resident of USA in terms of the definition of resident given in Article 4 of the India- US DTAA and, was therefore, not entitled to the benefit and applicability of the DTAA. The relevant extracts of the order of the Ld DRP are reproduced as under issue wise along with our findings : On the issue of....
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....f the DTAA. The assessee is a tax transparent entity in USA. In order to be eligible for benefits under Indo-US DTAA, the assessee must be satisfying the criteria of being resident of the contracting state that is the USA in this case. This in turn implies that the assessee must be 'liable to tax' under the laws of US. The assessee clearly fails to meet the requirement of being the resident of the contracting state within the meaning of Article 4 of DTAA. In view of the above, the Panel finds no infirmity in the conclusion of the AO in treating the assessee not eligible for treaty benefits. Hence, the objections raised in Ground 2 are rejected. 6. Aggrieved with aforesaid findings of the DRP, the assessee is in appeal before us on the following grounds of appeal "3. On the facts and circumstances of the case & in law, the Ld. AO/DRP grossly erred in denying the entitlement to the Appellant of the benefit under the India- US DTAA by erroneously holding that the Appellant, being an LLC, is not covered under Article 4 of the India-US DTAA. In doing so, 3.1. the Ld. AO erred in contending that the Appellant is not liable to tax under the laws in USA." 7.....
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....the recent order of the Hon'ble Delhi Tribunal in the case of General Motors Company USA Vs ACIT (ITA No. 2359/Del/2022 and ITA No. 2360/Del/2022) wherein the Hon'ble Tribunal after analysing the language used in the TRC of a single member LLC (identical to the language used in the Applicant's TRC) held that a fiscally transparent entity qualifies as a resident under Article 4 of the Indo-US Tax Treaty and consequently eligible for treaty benefits under the India-US DTAA. The relevant extract is reproduced below for the Hon'ble Panel's ready reference: "4.3 ...We consider it appropriate to reproduce the language used in the TRC dated 30.03.2015 available at page 14 of the paper book which is as follows:- "I certify that, to the best of our knowledge, the above-named Limited Liability Company is a branch, division, or business unit of a U.S. corporation that is a resident of the United States of America for purposes of U.S. taxation." 4.4 The aforesaid discussion further establishes that under US federal income tax law, an LLC with a single owner is disregarded as separate from its owner unless the LLC elects to be treated as a corporation for US ....
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....Electric Company. A copy of the Tax Residency Certificate (TRC) was also attached at Page No 24-25 of the Paper Book. On the perusal of the above certificate, it is seen that it was certified by the US tax authorities that to the best if their knowledge, the above-named Limited Liability Company was a branch, division, or business unit of a U.S. corporation that is a resident of the United States of America for purposes of U.S. taxation. Therefore, in this regard the submission of the assessee that a perusal of the above TRC highlights that the assessee though a fiscally transparent entity is referred to as the taxpayer and it has been allotted a Tax Identification Number. Further, the assessee submits that the US Revenue Department has certified that the Assessee is a business unit of a US tax resident, meaning thereby that the any taxes liable to be paid on the income earned by the assessee will be paid by the U.S. corporation and the assessee in the capacity of LLC is liable to taxation is acceptable. In this regard the assessee has placed reliance on the three orders of the co-ordinate Bench of the Tribunal in the case of General Motors Company USA Vs ACIT(supra), Wild West Dom....
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.... for only part of the year for which it was not an LLC appears to be not correct. 12. Further it is the observation of the AO that income of the assessee is not liable to be taxed in the hands of the USA instead of it is taxed in the hands of the shareholders, therefore, the assessee is a fiscally transparent entity in its country of resident as it allows all income to pass through it. In other words it is the observation of the AO that assessee do not enjoy the benefits of income it earns to passes it for the enjoyment of its partners. Therefore, the AO is of the view that the assessee lacks beneficial ownership for income earned by it from India and in turn is not eligible to be considered as a resident for the purposes of India US DTAA. In so far as the TRCs are concerned as we have mentioned earlier, both the TRCs issued by US Authorities clearly show that the assessee is a resident of US filing returns and was treated as resident for the purpose of taxation. 13. In the case of Union of India Vs. Azadi Bachao Andolan (supra) the Hon'ble Supreme Court held as under: "It is urged by the learned Attorney General and Shri Salve for the appellants that the....
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....ould have used some appropriate words like "pays tax"................. .................87. In a Manual on the OECD Model Tax Convention on Income and on Capital, at paragraph 4B. 05, while commenting on Article 4 of the OECD Double Tax Convention, Philip Baker points out that the phrase 'liable to tax' used in the first sentence of Article 4.1 of the Model Convention has raised a number of issues, and observes: ......... ......"It seems clear that a person does not have to be actually paying tax to be "liable to tax" - otherwise a person who had deductible losses or allowances, which reduced his tax bill to zero would find himself unable to enjoy the benefits of the convention. It also seems clear that a person who would otherwise be subject to comprehensive taxing but who enjoys a specific exemption from tax is nevertheless liable to tax, if the exemption were repealed, or the person no longer qualified for the exemption, the person would be liable to comprehensive taxation..........." (Emphasis Supplied by us)" 14. In the case of Sarva Capital LLC Vs. ACIT (153 taxmann.com 618) the coordinate bench of Delhi Tribunal following the decis....
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....as a pass through entity for UK tax purposes. While holding so the Tribunal observed as under: "56. Modalities or mechanism of taxation may vary from jurisdiction to jurisdiction, as domestic law is a sovereign function and a bilateral tax treaty, or even the need of uniformity in entity classification approach- no matter how desirable someone may consider it to be, does not dictate such modalities of taxation being legislated. The fact of taxation, however, can be decided in an objective and uniform manner. Take, for example, a situation, in which the residence country of partnership does not regard it as a taxable unit and the entire income from partnership is taxed in the hands of the persons constituting such partnership, and some of those partners are not even residents of the tax jurisdiction in which partnership firm is resident. In such a situation, in case partnership firm seeks treaty protection from the other Contracting State, it could possibly be argued that income of the partnership firm is not entirely taxable even in the Contracting State in which partnership firm has fiscal domicile, and, therefore, the income of the partnership was not taxed in the reside....
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....ed thus, all that matters is whether that tax jurisdiction has a right to tax or not; the actual levy of tax by the tax jurisdiction cannot govern whether a person has fiscal domicile in that jurisdiction or not.......... 79. In view of the above discussions, as also bearing in mind the entirety of the case, we hold that the Assessee was indeed eligible to the benefits of India- UK tax treaty, as long as entire profits of the partnership firm are taxed in UK - whether in the hands of the partnership firm though the taxable income is determined in relation to the personal characteristics of the partners, or in the hands of the partners directly. To that extent, objection taken by the learned Departmental Representative, on the question of admissibility of India-UK tax treaty benefits, is held as maintainable but rejected on merits......" 16. The ratios of the above decisions squarely applies to the fact situation of the assessee. Reliance placed by the Ld. DR on the decision of the coordinate bench in the case of Go Daddy.com LLC Vs. DCIT in ITA No.8085/Del/2018 dated 23.09.2022 is of no help to the Revenue. Perusal of the order of the Tribunal in the case of Go Da....
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....e coordinate bench has given benefit of DTAA, irrespective of the fact that the assessee in that case was fiscally transparent entity in USA, like the present assessee. Accordingly, ground No.2 is sustained in favour of the appellant." 9.3 As noted above in para no 9 of this order that the facts are identical to the facts of the aforesaid two cases, in as much as that in the present case, the assessee has been allotted Tax Identification Number and it was certified by the US tax authorities that to the best of their knowledge, the above-named Limited Liability Company was a branch, division, or business unit of a U.S. corporation that is a resident of the United States of America for purposes of U.S. taxation. Further, the Hon'ble Supreme Court in the case of Union of India vs Azadi Bachao Andolan (supra) held as under : In our view, the contention of the respondents proceeds on the fallacious premise that liability to taxation is the same as payment of tax. Liability to taxation is a legal situation; payment of tax is a fiscal fact. For the purpose of application of article 4 of the DTAC, what is relevant is the legal situation, namely, liability to taxation, and not t....
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....poses of treatment of receipts on account of services of technical nature as FTS under section 9(1)(vii) of the Act, the place of rendering of services is immaterial. The services may be provided in India or outside India. Thus, the assessee's argument that the services were rendered from outside India and that no person of the assessee visited India during the relevant FY cannot be a determining factor to decide if the services for which payments were received by the assessee from Indian customers are FTS or otherwise. From an overall reading of the contractual arrangement for provision of repair and overhaul services between the assessee and the Indian customers, it emanates that the assessee is not only providing the services of overhaul and repair of engine parts for Indian Airlines including supply of spare parts, which per se are prima facie technical in nature, but is also helping, guiding and assisting Indian customers by providing technical training and sharing technical plan with the customers to take maintenance related decisions. This necessarily involves sharing of knowledge, skill and know-how on the part of the assessee satisfying the make available criteria laid....
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....eciating the fact that the offshore repair activity involves replacement or refurbishment of parts, sub- parts components, consumables, etc. and no standalone services are rendered to the Indian customers 11.1 In support of the above ground the assessee filed a written submissions vide submissions. The relevant extracts of the submissions filed by the assessee are as under: 15 " The Appellant is a company incorporated under the laws of the United States of America ('USA'). It is a tax resident of USA under Article 4 of the India-USA Double Tax Avoidance Agreement ('DTAA'). Copy of the tax residency certificate for the relevant period is attached at Page No 24-25 of the Paper Book. 16 The Appellant is one of the leading providers of aircraft engine maintenance support and undertakes various related activities. The Appellant is engaged in the business of carrying out engine repair and overhaul activities. The customers of the Appellant are airline companies which use sophisticated GE engines in their aircrafts. These engines are required to be handled in a proper manner to ensure their smooth and efficient functioning. The Appellant carries out overhaul, repair w....
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....for approval. The customer and the Appellant discuss the contents of the proposed workscope and finalise the "workscope" mutually. 8. Step 3 - Repair work and delivery of Engine: Based on the agreed workscope, the Appellant dismantles, carries out detailed inspection and then performs repair activities at their centers located outside of India. The repair activities may require replacement of parts. After the repair services are carried out, the engine is assembled, tested and delivered back to the customer. 9. Step 4 - Installation: The customer receives the engine and installs the same back in the Aircraft. 15.1 It is submitted that the Ld. AO has erred in holding that the repair/overhaul activities carried out by the Appellant during the relevant year had resulted in the satisfaction of the conditions prescribed under Article 12(4)(b) of the India-US DTAA; and thus, has reached an erroneous conclusion that the receipt towards such repair/overhaul activities will qualify as FIS. Further, the Ld. AO has erred in holding that the repair support (including supply of spare part) provided by the Appellant shall qualify as FTS in accordance with the provision....
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.... be performed or parts that are required to replace in a formal job card which is referred to as a workscope as defined in the above extracts. After preparation, the workscope is then sent to the customer for approval. The customer and Appellant thereafter discuss the content of workscope and finalise it mutually. Therefore, the subject step is a part of normal process which is typically performed for conducting the repair activities. In view of the above, the assertion/allegation made by the Ld. AO that the Appellant is making available technical knowledge or sharing technical plans to the customer through the workscope is far-fetched and cannot be sustained. 15.8 In this regard, the Appellant wishes to submit that the receipt earned towards performance of repair / overhaul activities is not taxable in India either as FTS under section 9(1)(vii) of the Act or as FIS as per Article 12 of the India-US DTAA. The submission of the Appellant on this aspect is as under: (a) The Ld. AO has erred in concluding that the receipts earned by the Appellant from the Indian customers will qualify as FIS as per Article 12(4)(b) of the India-US DTAA 15.9 As per ....
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....ne Manufacturer's warranties are deemed void if any person other than an authorized service provider undertakes repairs or overhauls the engines and therefore, even for argument' sake if it is assumed that the customers are trained to undertake the repairs, they would not be willing to perform such tasks on their own. 15.22 Further, it is stated in the customer agreement that the Appellant will prepare and provide to customer a "workscope" identifying the services required to return the aircraft engine to serviceable condition. It is further mentioned in the agreement that a "workscope" is a document written by the Appellant and approved by customer describing the prescribed repair or approach to repair of Equipment to meet the requirements of the repair specification. After looking at these clauses of the agreement, the Ld. AO observed that the 'workscope' was prepared by the Appellant in mutual agreement with the employees of the customers. Basis this fact pattern, the Ld. AO alleged that the preparation of workscope with mutual agreement of the employees of customers has resulted in impartation of technical skill or knowledge to the employees of the Indian customers. ....
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....* Infact, the customers continued to engage with the Appellant for such offshore work in subsequent years on an ongoing basis. (c) Ld. AO has erred in contending that the Appellant has transferred technical plan and data to the Indian customers 15.31 During the year under consideration, the Appellant has provided aircraft engine repair and overhaul services only which entails supply of spare parts. The Appellant was not involved in any development and transfer of technical plan or technical design to the Indian customers. Thus, the assertions made by the Ld. AO in the impugned assessment order are incorrect and are not based on the actual activities performed by the Appellant. 15.32 The Ld. AO highlighted the clause 2.6.3 of the customer agreement which states that "It remains the exclusive responsibility of customer to conclusively identify and resolve any aircraft or engine faults or adverse trends.", and concluded that Appellant has provided technical module, technical plan and data to the customer in order to help the customers in identifying the fault and take decision for repair and maintenance services. 11.2 Further, the Ld. AR also submitted th....
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....ions of the assessee that as per provisions of section 90(2) of the Act, that the assessee being a non-resident has the option of being taxed in India under provisions of the Act or provisions of the DTAA entered between India and the country of residence of such non-resident, whichever is more beneficial and accordingly, the Assessee's claim for availing the beneficial provisions of the India-US DTAA is justified and acceptable. Relying upon Article 12 (4) (b) of INDIA-USA DTAA the assessee submitted that the receipts from repair and overhaul support received from Indian customers were not taxable in India as the condition of 'make available' as laid down in Article 12 (4) (b) of INDIA-USA DTAA was not satisfied. 13.3 In this regard, the relevant provisions of Article 12(4) of India-US DTAA are reproduced as under : "For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : a) are ancillary and subsidiary to the application or enjoyment of the right....
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....sp; Support Services in relation to aircraft engine 4,01,103 Total receipts declared in the return of income filed 2,37,74,56,773 13.6 The assessee submitted before the AO in the cited case that the assessee had claimed receipts from aforesaid services as non-taxable while filing return of income for the subject year on the ground that since the services of repair, maintenance, publication, engineering and support services resulting in income of Rs. 2,37,74,56,773/- did not "make available" any technical knowledge, skill, know- how or process or consisted of the development and transfer of a technical plan or technical design, the same did not qualify as Fees for Technical Services ('FTS') as per the provisions of India-Canada Double Taxation Avoidance Agreement ('DTAA'). 13.7 The Tribunal after examining the entire facts and the India-Canada DTAA held that the AO had not been able to establish that a technical knowledge was transferred to the customers to make them self-sufficient/ reliant in using the technology and that the customer had derived an enduring benefit and utilised the knowledge or know-how on his own in future without the aid of the servi....
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....r consultancy nature (including the provision of such services through technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein ; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein. 18. We find that both the Treaties incorporate the "make available" clause for treating the payments as FTS. On the issue of meaning of and satisfaction of the clause "make available", the Hon'ble Jurisdictional High Court in the case of Goodrich Corporation ITA No. 173/2025 (Del) vide order dated 23.05.2025 has held as under: "14. In CIT v. De Beers India Minerals P. Ltd.: (2012) 346 ITR 467, the Karnataka High Court had explained the import and meaning of 'make available' as u....
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....he database did not constitute the rendering of any technical or consultancy services and in any case did not amount to technical knowledge, experience, skill, know-how or processes being made available. 16. We note that while explaining the meaning liable to be ascribed to the expression "make available", the court in CIT v. Bio Rad Laborataries (Singapore) Pte. Ltd. had affirmed the following opinion as expressed by the Tribunal. This is evident from a reading of paras 14, 14.1 and 15, which is extracted below (459 ITR p. 7): (SCC OnLine Del paras 14 and 15) " 14. According to the Tribunal, the agreement between the respondent-assessee and its Indian affiliate had been effective from 1-1-2010, and if, as contended by the appellant-Revenue, technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, the agreement would not have run its course for such a long period. 14.1. Notably, this aspect is adverted to in paras 17 to 23 of the impugned order. For convenience, the relevant paras are extracted hereafter: 'A perusal of the aforementioned provision shows that in order to qualify as fees for techn....
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....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 ld. 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 make available or not under India USA DTAA. Interpretation of make available clause will differ with specific areas of th....
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....the clients to undertake repairs & manage the maintenance services, then only it can 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." 20. The ld. counsel for the assessee also relied on the decision of the co-ordinate bench in the case of Rockwell Collins Southeast Asia Pte Ltd ITA No. 2409/DEL/23 dated 14.11.2024 wherein it has followed the order of the ITAT, Delhi in the case of Goodrich Corporation [supra] and has held as under: "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." 21. There is a recent development in the case of the assessee's own customer namely Global Vectra Helicorp Ltd. vs DCIT [2024] 159 taxmann.com 282 (Delhi - Trib.), where the co-ordinate bench has held that repair and maintenance services rendered to Global Vectra are not liable to be taxed either under the provisions of the Act or under the provisio....
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....es undertake necessary repair and maintenance work of the said parts. After repair/overhaul, the non-resident entities send the repaired parts/item along with invoices for repair and maintenance work carried out. On receipt of the invoices and helicopter parts, the assessee makes the payments after taking necessary declaration and documents from the non resident entity. It is further evident, to support its contention that there was no requirement for deduction of tax at source as the income of the non-residents are not taxable in India, the assessee had furnished the details of maintenance/repair, sample copies of invoices, sample copies of airway bills evidencing that the parts of the helicopters were sent outside India for carrying out necessary repair and sample copies of Form 15CB and 15CA etc. The Assessing Officer, however, held that the services rendered by the non residents are technical and consultancy in nature, hence, quantifies as FTS requiring withholding of tax under section 195. 19. On a careful reading of section 195(1) of the Act, it is very much clear that the provision gets triggered only when payment made to the non-resident entity is chargeable to tax....
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.... treaty provisions, in terms with section 90(2) of the Act, treaty provisions being more beneficial would override the provisions contained in the domestic law. That being the legal position, in our view, the payments made to the residents of USA, UK, Australia, Canada and Singapore, being not chargeable to tax in India, section 195 is not applicable. Accordingly, we hold that the assessee was not required to deduct tax at source while making payment to residents of the aforesaid countries." 23. The factual matrix in the instant case of the assessee is that the assessee manufactures, sells and provide servicing of gas turbine engines, such as turbofan, turboprop and turboshaft engines and Auxiliary Power Units (APU). When a customer purchases an aircraft from an aircraft manufacturer, it also purchases the engine associated with the aircraft which belongs to PWCC. As opposed to the large commercial engines market or APU, aircraft manufacturers do not typically offer engine alternatives to their platforms for regional aviation, general aviation, oг helicopters (PWCC main products) and hence, customers purchasing an aircraft will necessarily purchase PWCC's engine.....
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....s of the said receipts are reproduced as under: Nature of Income Amount (in Rs.) Taxability Comment Repair services for aircraft equipment 12,78,69,526 Non-Taxable under the Act as well India- Singapore tax Treaty In dispute " 13.9 The relevant findings of the Tribunal in this case in Para No. 6 to 12 are reproduced as under : "6. We have heard the rival submissions and perused the material available on record. Assessee is a company established under the laws of Singapore and is engaged in providing repair and maintenance services of aircraft equipment to Indian customers. For the captioned year, the assessee filed its return of income on 13 January 2021 declaring total income as NIL. The assessee claimed credit of the entire taxes deducted at source ('TDS') of Rs. 76,08,630/- as refund during the subject year. During the year under consideration, the Assessee has earned following receipts from Indian customers:- Nature of Income Amount (in Rs. ) Taxability Comment Repair services for aircraft equipment 12,78,69,526 Non-Taxable under the Act as well India- Singapore tax Treaty In dispute Income from HR consul....
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....e solution provided by the assessee through a automated process by using of data provided by the customers involved special knowledge. The assessee raised an objection that services are rendered outside India. The ld AO buttressed this argument of the assessee by observing that place of rendition of service is not important as long as the services are utilized for a business or profession carried on in India. The ld AO also observed that income of the recipients would be chargeable to tax in the country where the source of payment is located i.e. where the buyer is located. In support of this proposition, he relied on the decision of the Hon'ble Supreme Court in the case of GVK Industries reported in 332 ITR 130 (SC). The ld AO also observed that the repairs and maintenance services were made available to the Indian customers so that they can use it independently without the support of the assessee. The equipments/ parts are essential parts of an aircraft and due to lack of technical expertise in India, the equipments are sent to Singapore for technical repair and maintenance. Once the parts are sent back to customer in India, the client is equipped to use that part and fly the....
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....tenance of aircraft would fall at best under the category of works contract constituting business receipts and in absence of PE in India, the same would not be taxable even as per the India Singapore Treaty. In support of this proposition, the assessee relied on the decision of the Mumbai Tribunal in the case of DHL Air Ltd Vs. DCIT reported in 86 taxmann.com 277 (Mum Trib) wherein, it was held that services for repairs and maintenance of aircraft cannot be termed as technical services as defined in section 9(1)(vii) of the Act and rather it falls under the category of works contract as per section 194C of the Act which fact is also clarified by CBDT in its Circular No. 715 dated 08.08.1995 vide Question No. 29. Further, the assessee also submitted that co-ordinate bench of Delhi Tribunal in the case of Parasrampuria Synthetics Ltd reported 20 SOT 248 (Del Trib) held that use of services of technically qualified persons to render the services did not bring the amount paid as "fee for technical services" within the meaning of Explanation 2 to Section 9(1)(vii) of the Act. Similar decision was rendered by Delhi Tribunal in the case of Spicejet Ltd reported in 145 taxmann.com 622 (Del....
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....facts are very clear from the sample Dispatch plus Product Service Agreement entered into by the assessee with Inter Globe Aviation Pvt. Ltd which is enclosed in pages 211 to 248 of the Paper Book. The copies of the invoices raised by the assessee are enclosed in pages 261 to 264 of the Paper Book. 11. The ld DR before us vehemently pleaded that the ld AO had applied "source rule" in the instant case. She doubted the fact as to whether services per se were rendered in Singapore by the assessee. She stated that services of Airbus are rendered in France which is in public knowledge. We find that this argument to be completely absurd and devoid of merit in view of the fact that no consideration was received by the assessee from Airbus. Further, this was not even the case of the ld AO for treating the receipts as FTS in the hands of the assessee. We further find that the issue in dispute is squarely covered by the co-ordinate bench decision of the Delhi Tribunal in the case of Goodrich Corporation Vs. ACIT in ITA No. 988/Del/2024 for AY 2018-19 dated 22.08.2024 which is a sister concern of the assessee, wherein, exactly the identical issue was subject matter of consideration. ....
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....ring benefit of a technical design or know-how cannot be same as enduring benefit coming from imparting of skill or experience. In the former case enduring benefit will outlive the enduring benefit brought in by the latter. In case of assessee company, the enduring benefit and make available fall under skill/experience which is shared by assessee company with its customers. Both the parties in these service transactions are engaged in highly specialized work which can be rendered and availed by them only and once the skill/experience is rendered, it continues to give benefit until required again. When it comes to services rendered as skill and experience, the make available and enduring benefit, will almost always have a comparatively short shelf life in this context. This being the case, it cannot be ignored that the make available clause and enduring benefits are satisfied and the service is not of the nature which is so highly technical and specialized that it should be taxed as Fee for Technical Services." 6. From the above, we find that it could be technical services but the 'make available' clause is totally absent. The repairs & maintenance services are '....
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.... in Article 12 (4) (b) of INDIA-USA DTAA is not satisfied in this case. 13.12 Further, we note that the Assessing Officer in view of the findings as reproduced earlier in this order held that in this case the assessee had made available the technical services and thus was taxable as per the provisions of Article 12(4)(b) of the India-USA DTAA. In this regard the main findings of the AO are reproduced once again for ready reference : "The description of above services clearly brings out that the assessee as provided these services from offshore basis and it is the customer whose sole responsibility was to detect the problem related to engine, and thus assessee is helping, guiding, and assisting customer by providing technical training and sharing technical plan and data with the customer to detect the problem and take maintenance decision and these things cannot be done without sharing the technical knowledge. The assistance and guidance is provided using skill, expertise and experience of the Assessee which it gained over a period of time and have expertise in it. Thus, the Applicant is making available his technical expertise in the area to Indian customer enabling it ....
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....s to "make available" technical knowledge in other items as mentioned there in, which in our considered view is that the assessee has to "make available" the said technical knowledge with a design and with a conscious efforts and not by implication as the case has been made out by the Assessing Officer in the present case. The engineers/technicians working with the Indian customers will have a knowledge of aeronautical engineering relating to the aeroplanes which includes its engine for which they have been hired by the respective Indian companies for which they were paid. But the issue here is if the Indian customers could get their engines repaired by their in- house engineering team then why the Indian customers would send the engines to the assessee at the service centres by paying such huge amount towards "Receipts towards repair and overhaul support". Flying of an aeroplane is an engineering miracle but it has to observe zero error norms of safety. In this regard, Hon'ble Delhi High Court in the case of Director of Income Tax Delhi vs M/S Lufthansa Cargo India (supra) observed that there are strict guidelines to keep the aircrafts safe and airworthy because international and ....