TaxTMI 
TaxTMI 
2026 (4) TMI 1457
X X X X Extracts X X X X
X X X X Extracts X X X X
....espectively. 2. As these are cross appeals having identical issues, they are disposed of by this common order for the sake of convenience. 3. Let us take up the cross appeals for the assessment year 2017-18 first and the decision rendered thereon shall apply mutatis mutandis for assessment year 2018-19 also in view of identical facts, except with variance in figures. 4. For the Assessment Year 2017-18, the assessee has raised the following grounds of appeal:- "1) That the order u/s 250 of the Income Tax Act, 1961, has been passed without appreciating the true and correct facts and the legal position of the instant case of the assessee. 2) That the Learned Commissioner of Income Tax (Appeals) has grossly erred in confirming the addition by the assessing officer that collection charges as income of the assessee without appreciating the fact that "Collection Charges" is not the income of the assessee company, but the same is in the nature of discount provided by the Airport Authorities for timely payment of PSF/UDF and does not partake the character of income. 3) That the Learned Commissioner of Income Tax (Appeals) has grossly erred in not apprecia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt. Thus, the assessee submitted, the amount received is not in the nature of income. Without prejudice, it was submitted that even if the amount received assumes the character of income it will be covered under Article 8 of the Tax Treaty. The Assessing Officer, however, did not accept the claim of the assessee and brought it to tax by linking it to the PE in India. The addition made was upheld by the first appellate authority. 19. We have considered rival submissions and perused the materials on record. Some airports in India levy UDF/PSF on embarking passengers to modernize the airport and augment the facilities provided to passengers in airport. The fee to be charged from the passengers is determined by a Regulatory Authority. The airlines operating to and from the airports are entrusted the task of collecting UDF/PSF travelling in their airlines. In case, the UDF/PSF collected is remitted to the airport authority within the specified time limit, the airline gets certain percentage out of the amount collected as PSF/UDF on behalf of the airport. The amount retained by the airlines from UDF/PSF is known as discount or commission. It is the claim of the assessee that eve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....'s own case by this Tribunal in earlier years. The Learned AR referred to the consolidated order passed by this Tribunal for assessment years 2007-08 to 2015-16 except 2010-11 dated 24-2-2023 wherein it was observed as under:- 3. Basically, the dispute in these appeals relate to taxability of following items of income: i. Technical handling income received from IATP Members. ii. Technical handling income received from non-IATP Members. iii. Interest income iv. Collection charges v. Commission income (i) Technical Handling Income Received from IATP Members. ITA No. 4812/Del/2010 AY: 2007-08 Ground nos. 3 to 19, 21 and 22 ITA No. 5010/Del/2011 AY: 2008-09 Ground nos. 3 to 15, 17 and 18 ITA No. 1150/Del/2015 AY: 2011-12 Ground nos. 2 to 16 and 19 ITA No. 276/Del/2016 AY: 2012-13 Ground nos. 2 to 20 ITA No. 838/Del/2018 AY: 2013-14 Ground nos. 3 to 20 ITA No. 837/Del/2018 AY: 2014-15 Ground nos. 3 to 20 ITA No. 4698/Del/2019 AY: 2015-16 Ground nos. 2 to 15 4. Briefly the facts relating to this issue are, the assessee, a branch office of a non-resident c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ved from technical handling services applying the rate of 40% after allowing expenses on estimate basis. Against the aforesaid decision of the Assessing Officer in the assessment years under dispute, the assessee either approached learned DRP or learned Commissioner (Appeals). However, the authority concerned agreed with the view of the Assessing Officer in all these assessment years. 5. Before us, learned counsel appearing for the assessee submitted that the issue is squarely covered by the decision of the Tribunal in assessee's own case in assessment years 2004-05, 2005-06 and 2006-07. He submitted, facts being identical in these assessment years, the decision of the Tribunal would squarely apply. Further, he placed strong reliance on a decision of the Hon'ble Jurisdiction High Court in case of Director of Income Tax Vs. KLM Royal Dutch Airlines (2017) 78 taxmann.com 1 (Del.). 6. Proceeding further, he submitted, the miscellaneous applications filed by the Revenue against the appellate order passed by the Tribunal in assessment years 2004-05 and 2005-06 has been dismissed by the Tribunal. Thus, he submitted, the issue stands squarely covered in favour of the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ervices, as discussed earlier, involve verification of air worthiness of the aircrafts flying into Indian airports to take the next journey. Undisputedly, assessee has claimed exemption of the income derived from technical handling services taking recourse to Article 8(2) of the India - France DTAA. It is the case of the assessee that since as a member of IATP the assessee has provided such services to other pool members, it is covered under Article 8(2). Notably, identical nature of dispute arising in assessee's own case in assessment years 2004-05, 2005-06 and 2006-07 came up for consideration before the Tribunal earlier. While deciding the issue in ITA No. 5008/Del/2011 and others dated 22.05.2020, the Tribunal has held as under: "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 mere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sis which flying is allowed. The assessee is member of "International Airlines Technical Pool" (IATP). As an IATP member the assessee extends technical facilities (line maintenance facilities) to other IATP Members only during the year under consideration. No such facility or service has been provided by assessee to any non IATP Member during the year under consideration. 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 locati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll mean business of transportation by air of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft and any other activity directly connected with such 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 thro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ablishment in India was taxable as the same was not covered under the double taxation avoidance agreement. (v) Article 8(2) of the Double Taxation Avoidance Agreement between India and UK provided that paragraph 1 of article 8 shall likewise apply in respect of participation in pools of any kind. The words "pools of 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 servic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Pool" (IATP) Agreement along with the Standard Handling Agreement in consonance with the DTAA between India and France, it can be seen that the assessee company is a member of IATP and the services provided by the assessee company to the relevant air companies were also the member of the IATP. There is no dispute 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 internationa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e's own case, as discussed above, we hold that the income from technical handling services is not taxable in India as it is covered under Article 8(2) read with Article 8(1) of India - France DTAA. Accordingly, the additions made in all theses assessment years are directed to be deleted. (ii) Income from Technical Handling Services to Non-IATP Members. ITA No.275/Del/2016 AY: 2009-10 Ground nos. 2 to 4 10. The crux of the dispute is whether income derived from technical handling services provided to non-IATP member airlines in India will be covered under Article 8(2). Though, learned Commissioner (Appeals) allowed assessee's claim of benefit under Article 8(2) of India - France DTAA in respect of services provided to other airlines in India who are members of IATP, however, he did not allow the benefit in case of income derived from services rendered to non-IATP member airlines. 11. We have heard the parties and perused the materials on record. On carefully going through IATP pool manual as placed in the paper-book, it is observed that there is no restriction or bar imposed therein to the extent that services cannot be provided to non-IATP pool m....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd. He submitted, since, the FDs are made out of funds connected with the operation of aircraft in India, the interest income is exempt from tax under Article 8(3) of the treaty. 15. Learned Departmental Representative relied upon the observations of departmental authorities. 16. We have considered rival submissions and perused the materials on record. It is evident, in course of proceedings before the departmental authorities, the assessee had emphasized that the interest income earned is on fixed deposits, either made out of surplus funds generated from its business of operating airlines in international traffic or from fixed deposits kept as security deposit with Airport Authority of India Ltd. The departmental authorities have not doubted or disputed this factual position. Assessee's claim has been rejected only on the ground that the interest income is not connected with the operation of aircraft in international traffic. Article 8(3) of Indian - France DTAA reads as under" "For the purpose of this Article, interest on funds connected with the operation of aircraft in international traffic shall be regarded as profits derived from the operation of ....