DHL AIR LTD, MUMBAI V. DCIT (IT) 2(1)(2), MUMBAI

ITA 1438/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9246 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; Permanent establishment; Non-deduction of tax
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 1438 /MUM/20 17 (ASSESSMENT YEAR 20 12 - 13 ) DHL AIR LIMITED BLUE DART CENTRE SAHARA AIRPORT ROAD ANDHERI (EAST) MUMBAI - 400 099. PAN: AADCD 9972C VS. DY. CIT(IT) 2(1)(2) MUMBAI ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI DHANESH BAFNA & MS. CHANDNI SHAH DEPARTMENT BY S HRI SAMUEL DARSE DATE OF HEARING 26 . 9 . 201 7 DATE OF PRONOUNCEMENT 4 . 10 . 201 7 O R D E R PER B.R. BASKARA N (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 27.1.2017 PASSED BY THE ASSESSING OFFICER U/S. 143(3) READ WITH SECTION 144C(13) OF THE ACT OF THE ACT PURSUANT TO THE DIRECTION GIVEN BY THE DISPUTE RESOLUTION PANEL (DRP) . 2. AT THE TIME OF HEARING LEARNED AR DID NOT PRESS GROUND NO.5 . A CCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 3. REMAINING GROUNDS GIVE RISE TO FOLLOWING ISSUES: (A) DISALLOWANCE MADE U/S. 40(A)(I) OF THE ACT IN RESPECT OF MAINTENANCE OF AIRCRAFT AND ENGINE/ REPAIRS AND MAINTENANCE OF AIRCRAFT. (B) DISALLOWANCE U/S. 40(A)(I) OF THE ACT IN RESPECT OF TRAVELLING AND ACCOMMODATION CHARGES. 4. THE ASSESSEE HAS TAKEN AN ALTERNATIVE GROUND THAT IF INCOME IS COMPUTED U/S. 44BBA OF THE ACT, THE ABOVE SAID DISALLOWANCES ARE NOT CALLED FOR. DHL AIR LIMITED 2 5. FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSESSEE - COMPANY IS TAX RESIDENT OF UK. IT FILED ITS RETURN OF INCOME DECLARING TOTAL LOSS OF ` 174.40 LAKHS. THE ASSESSEE TOOK AN AIRCRAFT UNDER DRY LEASE AGREEMENT FROM DHL AVIAT ION, NETHERLANDS B.V, AND IN TURN , LEASED OUT THE SAME UNDER WET LEASE AGREEMENT TO AN INDIAN COMPANY NAMED M/S. BLUE DART AVIATION LIMITED (BDAL). BOTH ASSESSEE - COMPANY AND BDAL ARE HELD AT DEUTSCHE POST AG AND HENCE THE ASSESSEE - COMPANY AND BDAL ARE ASSO CIATED ENTERPRISES (AE) . 6 . UNDER WET LEASE AGREEMENT, LESSOR SHALL PROVIDE AIRCRAFT TO THE LESSEE AND IS ALSO FULLY RESPONSIBLE FOR FUNCTIONING OF THE AIRCRAFT , I.E., I T SHOULD ALSO PROVIDE COMPETE NT PERSONNEL FOR OPERATION OF THE AIRCRAFT AND SHOULD AL SO ENSURE THAT THERE IS NO INTERRUPTION IN SERVICE DUE TO STRIKE OR INJURIES TO CREW MEMBERS OR DUE TO INFERIOR QUALITY WORKING. THE ASSESSEE SHOULD ALSO ENSURE THAT THE AIRCRAFT IS PROPERLY MAINTAINED AND ALL NECESSARY MAINTENANCE SERVICES ARE CARRIED OUT AT REGULAR INTERVALS. 7 . DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED FOLLOWING EXPENSES: - (A) MAINTENANCE OF AIRCRAFT AND ENGINE : ` 113.50 LAKHS (B) REPAIRS AND MAINTENANCE OF AIRCRAFT : ` 175.93 LAKHS (C) REIMBURSEMENT OF TRAVELLING AND : ` 149. 62 LAKHS ACCOMMODATION CHARGES THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE FROM THE ABOVE SAID PAYMENTS . SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE, THE AO TOOK THE VIEW THAT THE ABOVE SAID EXPEN DITURE ARE LIABLE TO BE DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT FOR THE FAILURE TO DEDUCT TAX AT SOURCE. THE V IEW SO TAKEN BY THE ASSESSING OFFICER WAS ALSO CONFIRMED BY LEARNED DRP. A CCORDINGLY, THE ASSESSING OFFICER PASSED FINAL ASSESSMENT ORDER DI SALLOWING THE ABOVE EXPENDITURE CLAIMED BY THE ASSESSEE U/S 40(A)(I) OF THE ACT . DHL AIR LIMITED 3 8 . THE DISALLOWANCES LISTED AS (I) AND (II) RELATE TO EXPENDITURE INCURRED ON MAINTENANCE OF AIRCRAFT AND ENGINE/REPAIRS AND MAINTENANCE OF AIRCRAFT. HENCE BOTH THE ISSUES A RE ADDRESSED TOGETHER. 9. T HE ASSESSEE SUBMITTED BEFORE THE TAX AUTHORITIES THAT A SUM OF ` 113.50 LAKHS AND FURTHER A SUM OF ` 175.93 LAKHS WAS INCURRED TOWARDS REPAIRS AND MAINTENANCE OF AIRCRAFT LEASED OUT TO M/S BLUE DART AVIATION LTD. THE ASSESSE E HAD TO INCUR THESE EXPENSES FOR THE PURPOSE OF MAINTAINING OF AIRCRAFT IN WORKING CONDITION AS PER MANDATORY REQUIREMENT OF LEASE AGREEMENT. FOR CARRYING OUT TH E REPAIRS OF ALL AIRCRAFTS OPERATED BY THE ASSESSEE , IT HAD ENTERED INTO AN AGREEMENT WITH M/ S. EUROPEAN AIR TRANSPORT LEIPZIG GMBH, (EAT) GERMANY FOR PROVIDING MAINTENANCE, REPAIRS AND OVERHAUL SERVICES AND THE SAID COMPANY CHARGED THE ASSESSEE ON THE BASIS OF PER FLIGHT HOUR SUPPORT IN RESPECT OF ITS AIRCRAFTS OPERATED BY THE ASSESSEE. ACCORDING LY, EAT WAS PAID FLIGHT HOUR RATE BASED ON THE FLIGHT HOUR FLOWN BY THE AIRCRAFTS COVERED BY THE CONTRACT . THE ASSESSEE FURTHER SUBMITTED THAT EAT IS A COMPANY INCORPORATED IN GERMANY AND HENCE TAX RESIDENT OF GERMANY. IT IS ENTITLED TO BENEFITS OF INDIA - G ERMANY DOUBLE TAXATION AVOIDANCE AGREEMENT. THE ASSESSEE SUBMITTED THAT IT IS LIABLE TO DEDUCT TAX ON PAYMENTS MADE TO EAT U/S. 195(1) OF THE ACT , ONLY IF SUCH PAYMENT IS CHARGEABLE TO TAX IN INDIA. IT I S SUBMITTED THAT THE PAYMENT MADE TO EAT WAS FOR PROV IDING REPAIRS SERVICE AND HENCE THE SAME CONSTITUTE BUSINESS PROFIT S IN THE HANDS OF EAT. SINCE, EAT DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA, PAYMENT RECEIVED BY IT IS NOT TAXABLE IN INDIA. ACCORDINGLY, IT WAS SUBMITTED THAT BOTH THE PAYMENTS MADE T O EAT FOR REPAIRS AND MAINTENANCE OF AIRCRAFT/ENGINE IS NOT LIABLE FOR TAX DEDUCT ION AT SOURCE U/S. 195(1) OF THE ACT , AS THE SAID PAYMENT IS NOT CHARGEABLE TO TAX IN INDIA IN THE HANDS OF EAT. LEARNED DRP DID NOT AGREE WITH THE CONTENTION S OF THE ASSESSE E AND ACCORDINGLY REJECTED THE SAME WITH FOLLOWING OBSERVATIONS: - 4. OBJECTION NO. 2 - DISALLOWANCE OF PAYMENTS OF RS. 1,13,50, 933 MADE TO EAT TOWARDS MAINTENANCE OF AIRCRAFT ENGINES UNDER SECTION 40(A)(I) OF THE ACT DHL AIR LIMITED 4 GROUNDS OF OBJECTIONS 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ASSESSING OFFICER HAS ERRED IN PROPOSING TO DISALLOW THE PAYMENTS TOWARDS MAINTENANCE OF AIRCRAFT ENGINES MADE TO EUROPEAN AIR TRANSPORT LEIPZIG GMBH; GERMANY ('EAT') AMOUNTING TO RS. 1,13,50,933 UNDER SECTION 40( A)(I) OF THE ACT.) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ASSESSING OFFICER ERRED IN HOLDING THAT THE PAYMENT MADE TOWARDS MAINTENANCE OF AIRCRAFT ENGINES TO EAT CONSTITUTES FEES FOR TECHNICAL SERVICES ('FTS') UNDER ARTICLE 12 OF THE I NDIA - GERMANY TAX TREATY. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ASSESSING OFFICER ERRED IN HOLDING THAT THE PAYMENT MADE TOWARDS MAINTENANCE OF AI R CRAFT ENGINES TO EAT ARISES IN INDIA AS PER THE INDIA - GERMANY TAX TREATY. THE ASSESSEE PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEDUCTION IN RESPECT PAYMENTS MADE TO EAT TOWARDS ENGINE PBH AMOUNTING TO RS. 1,13,50,933'. FACTS OF THE CASE 4.1 THE ASSESSEE HAS TO MANDATORILY UNDERTAKE REGULAR, PERIODIC MAINTENANCE OF THE AIRCRAF T IN ORDER TO ENSURE THE AIRWORTHINESS OF THE AIRCRAFT. IN ORDER TO ENSURE THAT THE MAINTENANCE REQUIREMENTS ARE COMPLIED WITH, THE ASSESSEE HAS ENTERED INTO A CONTRACT WITH EUROPEAN AIR TRANSPORT LEIPZIG GMBH, GERMANY (EAT) FOR AVAILING MAINTENANCE, REPAI R AND OVERHAUL SERVICES ON THE BASIS OF PER FLIGHT HOUR SUPPORT IN RESPECT OF ITS AIRCRAFTS OPERATED BY THE ASSESSEE. ACCORDINGLY, EAT IS PAID FLIGHT HOUR RATE BASED ON THE FLIGHT HOURS FLOWN BY THE AIRCRAFTS COVERED UNDER THE CONTRACT. A STATEMENT GIVING THE DETAILS OF THE PAYMENT MADE TO EAT AMOUNTING TO RS.1,13,50,933/ - IN RESPECT OF ENGINE POWER BY HOUR (PBH) CHARGES ALONG WITH A COPY OF THE RELEVANT INVOICES WERE SUBMITTED BY THE ASSESSEE. 4.2 THE PBH INVOLVES REPLACING INTERNAL COMPONENTS OF THE AIRCR AFT ENGINES (KNOWN AS ROTABLE COMPONENTS) IF THESE COMPONENTS HAVE EXCEEDED THEIR PRESCRIBED FLYING HOURS OR IF THESE COMPONENTS HAVE BECOME UNUSABLE / DEFECTIVE. 4.3 SINCE THE PAYMENT TOWARDS MAINTENANCE OF AIRCRAFT ENGINES ARE NOT TAXABLE IN INDIA, TDS PROVISIONS ARE NOT APPLICABLE. DHL AIR LIMITED 5 AO'S CONTENTIONS 4.4 THE AO HELD THAT THE PAYMENT MADE TO EAT TOWARDS MAINTENANCE OF AIRCRAFT ENGINES IS COVERED UNDER ARTICLE 12 (ROYALTY AND FEES FOR TECHNICAL SERVICES) OF INDIA AND GERMANY TAX TREATY AND SINCE NO TAX WAS DEDUCTED, THE EXPENSE WAS DISALLOWED UNDER 40(A)(I) OF THE ACT. ASSESSEE'S SUBMISSIONS 4.5 'THE EAT HAS THE CAPABILITY TO PROVIDE CERTAIN MAINTENANCE, ENGINEERING AND LOGISTIC SUPPORT OF THE AIRCRAFT AND THE ABOVE PAYMENTS REPRESENTS BUSINESS RECEIPTS OF EAT. EAT DOES NOT HAVE A PE IN INDIA AS PER ARTICLE 5 OF THE TAX TREATY BETWEEN INDIA AND GERMANY. THEREFORE THE SAID PAYMENT TO EAT IS NOT TAXABLE IN INDIA AS PER THE INDIA GERMANY TAX TREATY. CONSEQUENTLY NO TAX IS REQUIRED TO BE DEDUCTED AT SOURCE I N RESPECT OF THE PAYMENT MADE BY THE ASSESSEE TO EAT. FURTHER, THE PAYMENTS MADE TO EAT FOR ENGINE PBH DO NOT CONSTITUTE FTS BOTH UNDER THE ACT AS WELL AS UNDER ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY SINCE THE PAYMENTS HAVE BEEN MADE FOR STANDARD SERV ICES/ FACILITIES. SINCE THE DOMINANT PURPOSE OF THE ABOVE TRANSACTION IS PURCHASE/ REPLACEMENT OF OLD PART WITH A NEW ONE AND THAT THE ABOVE SERVICES ARE IN THE NATURE OF ROUTINE REPAIRS AND REPLACEMENT FROM THE PERSPECTIVE OF AN AIRLINE COMPANY LIKE THE A SSESSEE. IN THE FOLLOWING DECISIONS THE COURTS HAVE UPHELD THE VIEW THAT PAYMENTS TOWARDS STANDARD SERVICES/ FACILITIES DO NOT CONSTITUTE ITS: KANDLA PORT TRUST V. DOT (50 SOT 109) (RAJKOT) DDRC SRL DIAGNOSTIC (P.) LTD. [2016] 157 1TD 92 (MUMBAI - TRIB.) ADIT V. BHEL - GE - GAS TURBINE SERVICING (P.) LTD. [2012] 53 SOT 460 (HYDERABAD) IN VIEW OF THE ABOVE, THE ASSESSEE SUBMITS THAT PAYMENTS MADE TO EAT ARE TOWARDS STANDARD SERVICES/ FACILITIES AND THEREFORE DO NOT CONSTITUTE FTS UNDER SECTION 9(1)(VII) OF THE ACT AS WELL AS THE ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY. WITHOUT PREJUDICE TO THE ABOVE, ASSESSEE ALSO SUBMITS THAT EVEN IF THE AFORESAID PAYMENTS ARE CHARACTERIZED AS FTS UNDER ACT, THE SAME DO NOT CONSTITUTE FTS UNDER THE ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY ON ACCOUNT OF THE FOLLOWING REASONS: PARA 6 OF THE INDIA - GERMANY TAX TREATY PROVIDES THAT 'ROYALTIES AND FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IS THAT STATE ITSELF, A LAND DHL AIR LIMITED 6 OR A POLIT ICAL SUB DIVISION, A LOCAL AUTHORITY OR A RESIDENT OF THAT STATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PERMANENT ESTABLISHMENT O R A FIXED BASE IN CONNECTION WITH WHICH T HE LIABILITY TO PAY THE ROYALTIES OR FEES FOR TECHNICAL SERVICES WAS INCURRED AND SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE BORNE BY SUCH PERMANE NT ESTABLISHMENT OR FIXED BASE, THEN SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUATED.' IN THE FACTS OF THE PRESENT CASE, THE PAYMENTS BEING MADE BY DHL AIR TO EAT WOULD BE REGARDED AS F TS ARISING IN INDIA UNDER THE A BOVE MENTIONED PARA IF THE (CUMULATIVE CONDITIONS) MENTIONED BELOW ARE SATISFIED: CONDITION 1: THE PERSON PAYING THE FTS I.E. THE ASSESSEE HAS A PE IN INDIA IN CONNECTION WITH WHICH THE LIABILITY TO PAY THE FTS WAS INCURRED; AND CONDITION 2: SUCH FTS A RE BORNE BY THE PE OF THE ASSESSEE THE AFORESAID PAYMENTS ARE BEING MADE BY THE ASSESSEE TO EAT PURSUANT TO THE COST SHARING AGREEMENT. THE SAID AGREEMENT IS A GLOBAL AGREEMENT AND NOT INDIA SPECIFIC. THE PAYMENTS ARE BEING MADE FOR REPAIRS AND MAINTENANC E OF THE 22 SPECIFIED B - 757 AIRCRAFTS OPERATED BY THE ASSESSEE. FURTHER, THE REPAIRS AND MAINTENANCE ACTIVITIES ARE UNDERTAKEN OUTSIDE INDIA . MOREOVER THIS AGREEMENT WAS ENTERED IN DECEMBER 2002 EVEN BEFORE THE PE CAME INTO EXISTENCE IN INDIA. THEREFORE TH ESE PAYMENTS ARE NOT CONNECTED WITH THE PE OF THE ASSESSEE WHICH CAME INTO EXISTENCE LATER. THE PAYMENT RECORDED IN THE BOOKS OF THE ASSESSEE S PE IN INDIA MERELY REPRESENTS AN ALLOCATION OF THE OVERALL PAYMENT MADE TO EAT BASED ON THE BASED ON THE NUMBER OF AIRCRAFTS AND THE NUMBER OF DAYS THE AIRCRAFT WAS PRESENT IN INDIA ONLY FOR THE PURPOSE OF COMPUTING PROFITS TAXABLE IN INDIA. THEREFORE THE ASSESSEE SUBMITS THAT THE LIABILITY TO MAKE THE AFORESAID PAYMENTS TO E AT WAS NOT CONNECTED WITH THE PE OF THE A SSESSEE IN INDIA. SINCE CONDITION 1 PRESCRIBED IN PARA 6 OF THE ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY IS NOT FULFILLED, THE PAYMENTS MADE TO EAT WOULD NOT QUALIFY AS FTS UNDER THE AFORESAID ARTICLE. IN VIEW OF THIS, THE PAYMENT MADE TO EAT WOULD BE TAXABLE IN INDIA ONLY IF EAT HAS A PE IN INDIA. THE ASSESSEE SUBMITS THAT EAT DOES NOT HAVE ANY PE IN INDIA. BASED ON THE ABOVE FACTS AND IN LAW, THE DISALLOWANCE OF PAYMENT TO EAT AS PROPOSED BY THE AO IS NOT JUSTIFIED AND OUGHT TO BE DELETED'. DHL AIR LIMITED 7 DIRECTIO NS OF THE DRP ON OBJECTION NO. 2 4.6 WE HAVE CONSIDERED THE ARGUM ENTS OF THE LD AR. THE CONTRACT W ITH EUROPEAN AIR TRANSPORT LEIPZIG GMBH, GERMANY (EAT IN SHORT) IS FOR AVAILING MAINTENANCE, REPAIR AND OVERHAUL SERVICES ON THE BASIS OF PER FLIGHT HOUR SUPP ORT IN RESPECT OF ITS AIRCRAFTS OPERATED BY THE ASSESSEE. THESE ARE HIGHLY SPECIALISED SERVICES REQUIRING THE TECHNICAL EXPERTISE TO KEEP THE AIRWORTHINESS OF THE AIRCRAFT AT ALL TIMES. IT IS NOT JUST AN AGREEMENT FOR THE SALE OF SPARE PARTS AS BEING PROJE CTED BY THE ASSESSEE. THIS IS FURTHER SUPPORTED BY THE FACT THAT THE BILLS ARE RAISED NOT BASED ON SUPPLY OF SPARE PARTS BUT BASED ON NUMBER OF HOURS OF FLIGHT UNDERTAKEN BY THE AIRCRAFTS. THUS, THE SUBSTANCE OF THE CONTRACT IS SERVICE AND NOT MERE SUPPLY OF SPARES. WHEN OVERALL SCOPE OF CONTRACT IS IN NATURE OF WORKS CONTRACT, THE DOMINANT PURPOSE TEST CANNOT BE APPLIED AND ALL OTHER ANCILLARY OBLIGATION PALE INTO THE MAIN CONTRACT. THIS VIEW GETS SUPPORT FROM DECISION OF 5 MEMBER BENCH OF THE HONBLE SUPR EME COURT IN CASE OF KONE ELEVATOR INDIA (P) LTD. V. STATE OF T.N., (2014) 7 SCC 1. THUS, CHANGE OF DEFECTIVE OR DAMAGED PARTS IS ONLY INCIDENTAL TO THE OVERALL COMPOSITE OBLIGATION OF MAINTENANCE SUPPORT SERVICES BEING UNDERTAKEN BY EAT. HENCE, THE SERVIC ES RENDERED BY EAT WOULD BE IN NATURE OF TECHNICAL SERVICE WITHIN THE MEANING OF SECTION 9(1)(VII). 4.7 IT IS CONTENDED THAT EAT IS RESIDENT OF GERMANY. AS PER ARTICLE 12(4) OF THE DTAA WITH GERMANY, THE FEE FOR TECHNICAL SERVICES MEANS: THE TERM 'FEES F OR TECHNICAL SERVICES' AS USED IN THIS ARTICLE MEANS PAYMENTS OF ANY AMOUNT IN CONSIDERATION FOR THE SERVICES OF MANAGERIAL, TECHNICAL OR CONSULTANCY NATURE, INCLUDING THE PROVISION OF SERVICES BY TECHNICAL OR OTHER PERSONNEL, BUT DOES NOT INCLUDE PAYMENTS FOR SERVICES MENTIONED IN ARTICLE 15 OF THIS AGREEMENT. 4.8 THUS THE TECHNICAL SERVICES RENDERED BY EAT ARE TAXABLE AS FTS UNDER THE DTAA ALSO. 4.9 FURTHER, AS PER ARTICLE 12(6), THE FTS ARISES IN THE CONTRACTING STATE IF THE PAYER HAS A PE IN THAT STATE AND THAT THE PAYMENTS ARE BORNE BY SUCH PE THEN THE FTS SHALL BE DEEMED TO ACCRUE OR ARISE IN THE STATE IN WHICH PE IS SITUATED. THE ARGUMENT OF THE APPELLANT IS THAT SINCE THE PAYMENTS ARE MADE BY APPELLANT TO EAT UNDER GLOBAL COST SHARING AGREEMENT BASE D ON ALLOCATED COST TO THE AIRCRAFTS OPERATED BY ASSESSEE IN INDIA, THE CONDITION THAT SUCH PAYMENTS SHOULD BE BORNE BY PE IS NOT SATISFIED. WE ARE UNABLE TO AGREE WITH THIS PROPOSITION OF THE ASSESSEE BECAUSE WHAT IS REQUIRED UNDER THE 12(6) IS THAT SUCH COST IS BORNE BY THE PE. UNDISPUTEDLY THE PAYMENTS MADE TO EAT ARE RECORDED IN THE BOOKS OF PE FOR COMPUTING PROFITS OF THE PE AND HENCE THE SAME CAN BE SAID TO BE BORNE BY THE PE. IT M AKES NO DIFFERENCE WHETHER SUCH COST IS BASED ON DHL AIR LIMITED 8 ALLOCATED COST UNDER T HE GLOBAL AGREEMENT. THE OTHER CONTENTION OF APPELLANT THAT THE AGREEMENT WAS EXECUTED BEFORE THE PE OF ASSESSEE CAME INTO EXISTENCE IS ALSO NOT RELEVANT AS THE PERIOD OF SERVICE FOR WHICH THE PAYMENT HAS BEEN MADE UNDER THE GLOBAL AGREEMENT; THE PE HAD CO ME INTO EXISTENCE. THE TRIGGER OF PE IS NOT TO BE SEEN FROM DATE OF AGREEMENT; RATHER THE EXISTENCE OF PE IS TO BE RECKONED AT THE TIME WHEN SERVICES WERE RECEIVED AND THE PAYMENTS WERE MADE BY SUCH PE THEREAFTER. HENCE THE ARGUMENT OF THE APPELLANT THAT P AYMENTS MADE BY IT TO EAT WERE NOT IN NATURE OF FEE FOR TECHNICAL SERVICES U/S 9(1)(VII) OF THE ACT NOR UNDER ARTICLE 12 OF THE DTAA WITH GERMANY, THEREBY CREATING NO TAX WITHHOLDING LIABILITY U/S 195, IS UNTENABLE AND THE SAME IS HEREBY REJECTED. THE ACTI ON OF THE A.O. OF MAKING THE DISALLOWANCE OF RS.1,13,50,933/ - IS UPHELD. THE OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 5. OBJECTION NO. 3 - DISALLOWANCE OF PAYMENTS OF RS.1 ,75,93,595 MADE TO EAT TOWARDS REPAIRS AND MAINTENANCE UNDER SECTION 40(A)(I) O F THE ACT . GROUNDS OF OBJECTIONS 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ASSESSING OFFICER HAS ERRED IN PROPOSING TO DISALLOW THE PAYMENT TOWARDS REPAIR AND MAINTENANCE MADE TO EAT AMOUNTING TO RS. 1,75,93,595 UNDER SECTION 40(A)(I) OF THE ACT. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE ASSESSING OFFICER ERRED IN HOLDING THAT THE PAYMENT MADE TOWARDS REPAIRS AND MAINTENANCE TO EAT CONSTITUTES FTS UNDER ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY. ON THE FACTS AND CIRCUM STANCES OF THE CASE, AND IN LAW, THE ASSESSING OFFICER ERRED IN HOLDING THAT THE PAYMENT MADE TOWARDS MAINTENANCE OF AIRCRAFT ENGINES TO EAT ARISES IN INDIA AS PER THE INDIA GERMANY TAX TREATY. THE ASSESSEE PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW DEDUCTION IN RESPECT PAYMENTS MADE TO EAT TOWARDS REPAIRS AND MAINTENANCE AMOUNTING TO RS. 1,75,93,595/ - '. FACTS OF THE CASE 5.1 THE ASSESSEE HAD AVAILED REPAIRS AND MAINTENANCE SERVICES UNDER THE COST SHARING CONTRACT WITH EAT. THE SERVICES WERE IN THE NATURE OF ROUTINE AIRCRAFT REPAIR AND MAINTENANCE. THESE EXPENSES HAVE TO BE INCURRED IN ORDER TO MAINTAIN THE AIRWORTHINESS OF THE AIRCRAFTS. A STATEMENT GIVING THE DETAILS OF THE PAYMENT MADE TO EAT AMOUNTING TO RS.1,75,93,595 IN RESPECT OF REPAIRS A ND MAINTENANCE CHARGES ALONG WITH DHL AIR LIMITED 9 A COPY OF THE SAMPLE INVOICE WERE SUBMITTED BY THE ASSESSEE. 5.2 SINCE THE PAYMENT TOWARDS REPAIRS AND MAINTENANCE ARE NOT TAXABLE IN INDIA, TDS PROVISIONS ARE NOT APPLICABLE. AO'S CONTENTIONS 5.3 THE AO HELD THAT THE PA YMENT MADE TO EAT TOWARDS MAINTENANCE OF AIRCRAFT ENGINES IS COVERED UNDER ARTICLE 12 (ROYALTY AND FEES FOR TECHNICAL SERVICES) OF INDIA AND GERMANY TAX TREATY AND SINCE NO TAX WAS DEDUCTED, THE EXPENSE WAS DISALLOWED UNDER 40(A)(I) OF THE ACT. ASSESSEE'S SUBMISSIONS 5.4 'THE EAT HAS THE CAPABILITY TO PROVIDE CERTAIN MAINTENANCE, ENGINEERING AND LOGISTIC SUPPORT OF THE AIRCRAFT AND THE ABOVE PAYMENTS REPRESENTS BUSINESS RECEIPTS OF EAT. EAT DOES NOT HAVE A PE IN INDIA AS PER ARTICLE 5 OF THE TAX TREAT Y B ETWEEN INDIA AND GERMANY. THEREFORE THE SAID PAYMENT TO EAT IS NOT TAXABLE IN AS PER THE INDIA GERMANY TAX TREATY. CONSEQUENTLY NO TAX IS REQUIRED TO BE DEDUCTED AT SOURCE IN RESPECT OF THE PAYMENT MADE BY THE ASSESSEE TO EAT. FURTHER, THE PAYMENTS MADE TO EAT FOR ENGINE PBH DO NOT CONSTITUTE FTS BOTH UNDER THE ACT AS WELL AS UNDER ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY SINCE THE PAYMENTS HAVE BEEN MADE FOR STANDARD SERVICES/FACILITIES. SINCE THE DOMINANT PURPOSE OF TH E ABOVE TRANSACTION IS PURCHASE/ R EPLACEMENT OF OLD PART WITH A NEW ONE AND THAT THE ABOVE SERVICES ARE IN THE NATURE OF ROUTINE REPAIRS AND REPLACEMENT FROM THE PERSPECTIVE OF AN AIRLINE COMPANY LIKE THE ASSESSEE. IN THE FOLLOWING DECISIONS THE COURTS HAVE UPHELD THE VIEW THAT PAYMENTS TO WARDS STANDARD SERVICES/ FACILITIES DO NOT CONSTITUTE FTS: KANDLA PORT TRUST V. DC1T (50 SOT 109) (RAJKOT) DDRC SRL DIAGNOSTIC (P.) LTD. [2016] 1571TD 92 (MUMBAI - TRIB.) ADIT VS. BHEL - GE - GAS TURBINE SERVICING (P.) LTD. (2012] 53 SOT 460 (HYDERABAD) IN VI EW OF THE ABOVE, THE ASSESSEE SUBMITS THAT PAYMENTS MADE TO EAT ARE TOWARDS STANDARD SERVICES/FACILITIES AND THEREFORE DO NOT CONSTITUTE FTS UNDER SECTION 9(1)(VII) OF THE ACT AS WELL AS THE ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY. WITHOUT PREJUDICE TO THE ABOVE, ASSESSEE ALSO SUBMITS THAT EVEN IF THE AFORESAID PAYMENTS ARE CHARACTERIZED AS FTS UNDER ACT, THE SAME DO NOT CONSTITUTE FTS UNDER THE ARTICLE 12 OF THE INDIA - GERMANY TAX TREATY ON ACCOUNT OF THE FOLLOWING REASONS: DHL AIR LIMITED 10 PARA 6 OF THE INDIA - GERMANY TAX TREATY PROVIDES THAT 'ROYALTIES AND FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAY ER IS THAT STATE ITSELF, A LAND OR A POLITICAL SUB DIVISION, A LOCAL AUTHORITY OR A RESIDENT OF THAT STATE. WHERE, HOWEVER, TH E PERSON PAYING THE ROYALTIES OR FEES FOR TECHNICAL SERVICES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PERMANENT ESTABLISHMENT OR A FIXED BASE IN CONNECTION WITH WHICH THE LIABILITY TO PAY THE ROYALTIES PR FEES FOR TECHNICAL SERVICES WAS INCURRED , AND SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE BORNE BY SUCH PERMANENT ESTABLISHMENT OR FIXED BASE , THEN SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS SITUATED.' IN THE FACTS OF THE PRESENT CASE, THE PAYMENTS BEING MADE BY DHL AIR TO EAT WOULD BE REGARDED AS FTS ARISING IN INDIA UNDER THE ABOVE MENTIONED PARA IF THE (CUMULATIVE CONDITIONS) MENTIONED BELOW ARE SATISFIED: O CONDITION 1: THE PERSON PAYING THE FTS I.E. THE ASSESSEE HAS A PE IN INDIA IN CONNECTION WITH WHICH THE LIABILITY TO PAY THE FTS WAS INCURRED; AND O CONDITION 2: SUCH FTS ARE BORNE BY THE PE OF THE ASSESSEE THE AFORESAID PAYMENTS ARE BEING MADE BY THE ASSESS EE TO EAT PURSUANT TO THE COST SHARING AGREEMENT. THE SAID AGREEMENT IS A GLOBAL AGREEMENT AND NOT INDIA SPECIFIC. THE PAYMENTS ARE BEING MADE FOR REPAIRS AND MAINTENANCE OF THE 22 SPECIFIED 8 - 757 AIRCRAFTS OPERATED BY THE ASSESSEE. FURTHER, THE REPAIRS AN D MAINTENANCE ACTIVITIES ARE UNDERTAKEN OUTSIDE INDIA. MOREOVER THIS AGREEMENT WAS ENTERED IN DECEMBER 2002 EVEN BEFORE THE PE CAME INTO EXISTENCE IN INDIA. THEREFORE THESE PAYMENTS ARE NOT CONNECTED WITH THE PE OF THE ASSESSEE WHICH CAME INTO EXISTENCE LA TER. THE PAYMENT RECORDED IN THE BOOKS OF THE ASSESSEE'S PE IN INDIA MERELY REPRESENTS AN ALLOCATION OF THE OVERALL PAYMENT MADE TO EAT BASED ON THE BUSED ON THE NUMBER OF AIRCRAFTS AND THE NUMBER OF DAYS THE AIRCRAFT WAS PRESENT IN INDIA ONLY FOR THE PURP OSE OF COMPUTING PROFITS TAXABLE I N INDIA. THEREFORE THE ASSESSEE SUBMITS THAT THE LIABILITY TO MAKE THE AFORESAID PAYMENTS TO EAT WAS NOT CONNECTED WITH THE PE OF THE ASSESSEE IN INDIA. SINCE CONDITION I PRESCRIBED IN PARA 6 OF THE ARTICLE 12 OF THE IND IA - GERMANY TAX TREATY IS NOT FULFILLED, THE PAYMENTS MADE TO EAT WOULD NOT QUALIFY AS FTS UNDER THE AFORESAID ARTICLE. IN VIEW OF THIS, THE PAYMENT MADE TO EAT W OULD BE TAXABLE IN INDIA ONLY IF EAT HAS A PE IN INDIA. THE DHL AIR LIMITED 11 ASSESSEE SUBMITS THAT EAT DOES NOT HAVE ANY PE IN INDIA. BASED ON THE ABOVE FACTS AND IN LAW, THE DISALLOWANCE OF PAYMENT TO EAT FOR REPAIRS AND MAINTENANCE AS PROPOSED BY THE AO IS NOT JUSTIFIED AND OUGHT TO BE DELETED'. DIRECTIONS OF THE DRP ON OBJECTION NO. 3 5.5 THE APPELLANT HAS RAISE D OBJECTION AGAINST THE ACTION OF THE AO FOR DISALLOWANCE U/S 40(A)(I) OF THE PAYMENT MADE TO EAT AMOUNTING TO RS.1,75,93,595 IN RESPECT OF REPAIRS AND MAINTENANCE CHARGES. AS THE REASONS GIVEN BY AO AS WELL THE ARGUMENTS GIVEN BY APPELLANT IS SIMILAR TO T HE ONE AS DISCUSSED IN OBJECTION NUMBER 2 ABOVE AND NATURE OF SERVICES ALSO BEING SIMILAR AS WELL AS THE RECIPIENT OF THE AMOUNTS IS ALSO THE SAME, THEREFORE, FOR THE SAME REASONS GIVEN BY US WHILE GIVING DIRECTIONS TO OBJECTION NUMBER 2 ABOVE, THE OBJECTI ONS RAISED BY THE APPELLANT IS FOUND UNTENABLE AND THE SAME IS REJECTED. THE ACTION OF THE A.O. OF MAKING THE DISALLOWANCE OF RS.1,75,93,595/ - IS UPHELD. THE OBJECTION FILED BY THE A SSESSEE IS DISMISSED. 10. THE LD A.R SUBMITTED THAT THE GERMAN ENTITY , VIZ., EAT DID NOT ENTER INDIA N SOIL AT ALL, IN ORDER TO REPAIR THE AIRCRAFTS, I.E., THE AIRCRAFT WAS TAKEN OUTSIDE INDIA AND THE MAINTENANCE SERVICES WERE CARRIED OUT OUTSIDE INDIA. FURTHER, THE EXPENSES CLAIMED BY THE ASSESSEE ARE NOT AIRCRAFT SPECIFIC , BUT IT WAS ALLOCATION MADE OUT OF OVER ALL EXPENSES TO THE AIRCRAFT LEASED OUT IN INDIA . THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS TREATED THE IMPUGNED PAYMENTS AS FEE FOR TECHNICAL SERVICES. HE INVITED OUR ATTENTION TO ARTICLE 12 OF INDIA - GER MANY TREATY RELATING TO ROYALTIES AND FEES FOR TECHNICAL SERVICES. HE SUBMITTED THAT CLAUSE (1) OF ARTICLE 12 STATES THAT THE ROYALTY AND FEE FOR TECHNICAL SERVICES ARISING IN THE CONTRACTING STATE AND PAID TO A RESIDENT OF OTHER CONTRACTING STATE MAY B E TAXED IN THE OTHER STATE. HE SUBMITTED THAT THE PAYMENT WAS MADE TO A GERMAN COMPANY AND HENCE IT MAY BE TAXED ONLY IN GERMANY. HE SUBMITTED THAT THE TAX AUTHORITIES HAVE PLACED THEIR RELIANCE ON CLAUSE (6) OF ARTICLE 12, WHICH READS AS UNDER: - (6) R OYATIES AND FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN A CONTRACTING STATE WHEN THE PAYER IS THAT STATE ITSELF, A LAND OR POLITICAL SUB - DIVISION, A LOCAL AUTHORITY OR A RESIDENT OF THAT STATE. WHERE, HOWEVER, THE PERSON PAYING THE ROYALTIES O R FEES FOR TECHNICAL SERVICES, WHETHER HE IS A RESIDENT OF A CONTRACTING STATE OR NOT, HAS IN A CONTRACTING STATE A PERMANENT ESTABLISHMENT OR A FIXED BASE IN DHL AIR LIMITED 12 CONNECTION WITH WHICH THE LIABILITY TO PAY THE ROYALTIES OR FEES FOR TECHNICAL SERVICES WAS INCUR RED, AND SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES ARE BORNE BY SUCH PERMANENT ESTABLISHMENT OR FIXED BASE, THEN SUCH ROYALTIES OR FEES FOR TECHNICAL SERVICES SHALL BE DEEMED TO ARISE IN THE STATE IN WHICH THE PERMANENT ESTABLISHMENT OR FIXED BASE IS S ITUATED. THE LD A.R SUBMITTED THAT THE ABOVE SAID CLAUSE SHALL APPLY ONLY IF THE LIABILITY WAS INCURRED IN CONNECTION WITH THE PE. HE SUBMITTED THAT THE ASSESSEE HAD INCURRED OVERALL EXPENDITURE ON REPAIRS AND MAINTENANCE OUTSIDE INDIA AND IT HAS ALLOCATED THE SAME TO THE INDIAN AIRCRAFT ON AN EQUITABLE BASIS. ACCORDINGLY HE SUBMITTED THAT THE LIABILITY WAS NOT INCURRED IN INDIAN PE. HE SUBMITTED THAT SUCH KIND OF ALLOCATION CANNOT ALSO BE CONSIDERED TO BE A LIABILITY INCURRED IN CONNECTION WITH PE AND HENCE THE PROVISIONS OF ARTICLE 12(6) SHALL NOT APPLY TO THE ASSESSEES CASE. IN SUPPORT OF THIS CONTENTION, THE LD A.R INVITED OUR ATTENTION TO AN ILLUSTRATION GIVEN BY OECD ON TAXABILITY OF INTEREST UNDER ARTICLE 11. HE SUBMITTED THAT THE CLAUSE 11(5) RELATING TO INTEREST PAYMENTS AND CLAUSE 12(6) RELATING TO PAYMENT OF ROYALTY AND FEES FOR TECHNICAL SERVICES ARE IDENTICALLY WORDED. HE SUBMITTED THAT THE OECD HAS EXAMINED DIFFERENT KIND S OF SITUATIONS VIS - - VIS THE TAXABILITY OF INTEREST INCOME U NDER ARTICLE 11(5). ONE OF THE SITUATIONS IS THAT, IF THE LOAN IS CONTRACTED BY THE HEAD OFFICE OF THE ENTERPRISE AND ITS PROCEEDS ARE USED FOR SEVERAL PERMANENT ESTABLISHMENTS SITUATED IN DIFFERENT COUNTRIES . IT HAS BEEN SPECIFICALLY EXPLAINED THAT THE A BOVE SAID SITUATION FALLS OUTSIDE THE PROVISIONS OF PARAGRAPH 5, AS IT PRECLUDES THE ATTRIBUTION OF MORE THAN ONE SOURCE TO THE SAME LOAN. ACCORDINGLY THE LD A.R CONTENDED THAT THE EXPENDITURE INCURRED OUTSIDE INDIA AND ALLOCATED TO AN INDIAN PE SHALL FAL L OUTSIDE THE SCOPE OF ARTICLE 12(6). 11. THE LD A.R FURTHER SUBMITTED THAT THE ANNUAL MAINTENANCE CONTRACT GIVEN TO CARRYOUT REPAIRS AND MAINTENANCE WORKS IS A WORKS CONTRACT AND HENCE THE SAME CONSTITUTES BUSINESS PROFIT. IN THIS REGARD, THE LD A.R PLACED RELIANCE ON THE FOLLOWING CASE LAW: - DHL AIR LIMITED 13 (A) KANDLA PORT TRUST (50 SOT 109) (B) DDRC SRC DIAGOSTICS (P) LTD (2016) (157 ITD 92) HE SUBMITTED THAT THE CO - ORDINATE BENCHES HAVE PLACED RELIANCE ON THE CIRCULAR NO.715 DATED 08 - 08 - 1995 ISSUED BY CBDT, WHERE IN THE BOARD HAS CLARIFIED AS UNDER: - Q.NO.29 : WHETHER A MAINTENANCE CONTRACT INCLUDING SUPPLY OF SPARES WOULD BE COVERED UNDER SECTION 194C OR 194J OF THE ACT? ANS: ROUTINE, NORMAL MAINTENANCE CONTRACTS WHICH INCLUDES SUPPLY OF SPARES WIL L BE COVERED UNDER SECTION 194C. HOWEVER, WHERE TECHNICAL SERVICES ARE RENDERED, THE PROVISIONS OF SECTION 194J WILL APPLY IN REGARD TO TAX DEDUCTION AT SOURCE. ACCORDINGLY HE SUBMITTED THAT THE ANNUAL MAINTENANCE CONTRACTS WOULD FALL OUTSIDE THE SCOPE OF SECTION 194J, WHICH IS RELATED TO FEES FOR TECHNICAL SE R VICES. HE SUBMITTED THAT THE DEFINITION OF THE EXPRESSION FEES FOR TECHNICAL SERVICES IS IDENTICALLY WORDED BOTH UNDER THE ACT AND INDIA - GERMAN DTAA. HENCE THE IMPUGNED PAYMENTS CONSTITUTE PAYM ENT MADE FOR WORKS CONTRACT AND HENCE SHALL CONSTITUTE BUSINESS PROFITS IN THE HANDS OF M/S E A T. SINCE E A T DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA, THE BUSINESS PROFITS ARE NOT TAXABLE IN INDIA. SINCE THE IMPUGNED PAYMENTS ARE NOT TAXABLE IN IND IA, THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT. 12. ON THE CONTRARY, THE LD D.R PLACED STRONG RELIANCE ON THE ORDERS PASSED BY L D DRP/AO. 13. WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE AND PERUSED THE RECORD. THE IMPUGNED E XPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN PURSUANCE OF MAINTENANCE CONTRACT BETWEEN THE ASSESSEE AND M/S E A T , GERMANY. IN THE CASE OF KANDLA PORT TRUST (SUPRA), IT WAS HELD THAT THE PAYMENT MADE FOR ANNUAL MAINTENANCE CONTRACTS WOULD NOT FALL UNDER THE CATEGORY OF FEE FOR TECHNICAL SERVICES WITHIN THE MEANING OF PROVISIONS OF SEC. 194J OF THE ACT. IN THE CASE OF DDRC SRL DIAGNOSTIC (P) LTD (SUPRA), THE CO - ORDINATE BENCH HAS NOTICED THAT THE CBDT HAS EXPRESSED THE VIEW IN CIRCULAR NO.715 (SUPRA) THAT DHL AIR LIMITED 14 ROUTINE, NORMAL MAINTENANCE CONTRACTS WHICH INCLUDES SUPPLY OF SPARES WILL BE COVERED BY SEC. 194C OF THE ACT. THE BENCH FURTHER NOTICED THAT THE REVENUE COULD NOT PRODUCE ANY MATERIAL TO SHOW THAT THE CLARIFICATIONS ISSUED BY THE CBDT WOULD NOT APPLY TO THE FACTS AVAILABLE IN THE CASE BEFORE IT. ACCORDINGLY THE BENCH HELD THAT THE PROVISIONS OF SEC. 194C SHALL APPLY TO THE PAYMENT MADE TOWARDS MAINTENANCE CONTRACTS. 14. IN THE INSTANT CASE ALSO, NO MATERIAL WAS PLACED BEFORE US TO SHOW THAT THE CLAR IFICATIONS ISSUED BY THE CBDT WOULD NOT APPLY TO THE FACTS OF THE PRESENT CASE. HENCE, CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE CITED CASES, WE HOLD THAT THE PAYMENT MADE TOWARDS ANNUAL MAINTENANCE CONTRACTS WOULD FALL UNDER THE CATEGORY OF WORKS CONTR ACT. IN THAT VIEW OF THE MATTER, THE PAYMENT GIVEN BY THE ASSESSEE WOULD CONSTITUTE BUSINESS RECEIPTS IN THE HANDS OF M/S E A T AND THE SAME IS NOT TAXABLE IN INDIA, SINCE IT DOES NOT HAVE PE IN INDIA. IN THAT CASE, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT IT IS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 195 OF THE ACT , AS NO PART OF THE AMOUNT PAID TO M/S EAT IS CHARGEABLE IN INDIA IN THE HANDS OF M/S E A T . ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY AO ON THIS ISSUE AND DIRECT HIM TO DELETE T HE IMPUGNED ADDITIONS. 15. THE NEXT ISSUE CONTESTED BY THE ASSESSEE RELATES TO THE DISALLOWANCE U/S. 40(A)(I) OF THE ACT IN RESPECT OF TRAVELLING AND ACCOMMODATION CHARGES. THE LD A.R SUBMITTED THAT M/S BLUE DART AVIATION LTD (BDAL) HAD INCURRED CERT AIN EXPENSES ON BEHALF OF THE ASSESSEE, BEING IN THE NATURE OF TRAVELLING AND ACCOMMODATION CHARGES OF CREW MEMBERS. HE SUBMITTED THAT M/S BDAL HAD DEDUCTED TAX AT SOURCE, WHEREVER REQUIRED WHILE MAKING PAYMENT ON BEHALF OF THE ASSESSEE. THE AO WAS OF TH E VIEW THAT THE ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE WHILE REIMBURSING THE AMOUNT TO M/S BDAL AND ACCORDINGLY DISALLOWED THE CLAIM OF THE ASSESSEE U/S 40(A)(I) OF THE ACT. THE LD A.R PLACED RELIANCE ON THE DECISION RENDERED BY CO - ORDINATE BENCH IN THE CASE OF ASK WEALTH ADVISORS (P) LTD VS. ACIT (2014)(51 TAXMANN.COM 128) AND SUBMITTED THAT THE CO - ORDINATE BENCH HAS HELD THAT NO DISALLOWANCE CAN BE DHL AIR LIMITED 15 MADE IN THE HANDS OF SUBSIDIARY COMPANY ON THE REIMBURSEMENTS MADE BY IT TO THE HOLDING COMPANY, IF TH E HOLDING COMPANY HAS DEDUCTED TAX AT SOURCE FROM THE PAYMENTS. THE LD A.R SUBMITTED THAT M/S BDAL HAS ALREADY DEDUCTED TAX AT SOURCE, WHEREVER REQUIRED AND ACCORDINGLY CONTENDED THAT THE AO WAS NOT CORRECT IN LAW IN INVOKING THE PROVISIONS OF SEC. 40(A)( I) FOR MAKING THE IMPUGNED DISALLOWANCE. 16. WE HAVE HEARD LD D.R AND PERUSED THE RECORD. AT THE TIME OF HEARING, THE ASSESSEE WAS ASKED TO FURNISH BREAK - UP DETAILS OF REIMBURSEMENTS DULY DESCRIBING THE DETAILS OF DEDUCTION OF TAX AT SOURCE. HOWEVER, TILL THE DATE OF FINALIZING THIS ORDER, THE SAME HAS NOT BEEN RECEIVED. IN ANY CASE, THE CLAIM OF THE ASSESSEE REQUIRES VERIFICATION AT THE END OF THE AO. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY THE AO ON THIS ISSUE AND RESTORE THE SAME TO HIS FILE WITH THE DIRECTION TO EXAMINE THIS ISSUE AFRESH BY DULY FOLLOWING THE RATIO OF DECISION RENDERED IN THE CASE OF ASK WEALTH ADVISORS (P) LTD (SUPRA). 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. OR DER HAS BE EN PRONOUNCED IN THE COURT ON 4 . 10 .201 7. SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 4 / 10 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI