ACIT, Circle-2(1)(2)(International Taxation), New Delhi V. KLM Royal Dutch Airlines, Delhi

ITA 159/DEL/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3992 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Appeal Filed On: 27-01-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI BEFORE SHRI G.S. PANNU, PRESIDENT & SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.159/Del/2022 Assessment Years: 2017-18 ACIT,Circle-2(1)(2), (International Taxation), New Delhi-1100 57 Vs. KLM Royal Dutch Airlines, LB-46, Prakash Deep Building, Delhi PAN :AABCK3950H (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: Captioned appeal by the Revenue arises out of order dated 26.11.2021 of learned Commissioner of Income-Tax(Appeals)-43, New Delhi pertaining to assessment year 2017-18. 2. The effective grounds raised by the Revenue are as under: Assessee by Shri Salil Aggarwal, Sr. Adv. Anil Makhija, Adv., Shailesh Gupta, CA & Madhur Aggarwal, Adv. Department by Ms. Sapna Bhatia, CIT- DR Date of hearing 08.09.2022 Date of pronouncement 23.09.2022 2 ITA No. 159/Del./2022 1. Whether the ld. CIT(A) has erred on facts and in law by deleting the addition of profit of Rs.42,62,55,567/- of the assessee from providing technical services to other airlines. 2. Whether profit of the assessee from providing technical services to other airlines is covered by Article 8(1) and 8(4) of the DTAA between India and Germany, and by Article 8(1) and 8(3) of the DTAA between India and Netherlands. 3. Briefly, the facts relating to the disputed issue are, assessee is a non-resident corporate entity incorporated under the laws of Netherland and a tax resident of that country. As stated by the Assessing Officer, assessee is engaged in the business of operation of aircrafts in international traffic and derives income from providing air- services for the carriage of passenger, freight and mail in international traffic. Besides its normal business of carriage of passenger, freight and mail in international traffic, assessee also derives income from rendering technical and ground handling services to other airlines in India. In so far as Revenue earned from carriage of passengers, freight and mail in international traffic as well as technical and ground handling services provided to other airlines, the assessee claimed them to be exempt under Article 8(1) of India-Netherlands Double Taxation Avoidance Agreement (DTAA). While considering assessee’s claim 3 ITA No. 159/Del./2022 in course of assessment proceedings, though, the Assessing Officer accepted assessee’s claim of exemption under Article 8 of the Treaty in so far as it relates to income derived from carriage of passengers, freight and mail in international traffic, however, he did not accept assessee’s claim with regard to income from technical and ground handling services provided to other airlines. According to the Assessing Officer, the income from technical and ground handling services to other airlines is not in connection with assessee’s main business of carriages of passengers, freight and mail in international traffic. Accordingly, he brought such income to tax. 4. Assessee challenged the aforesaid decision of the Assessing Officer by filing an appeal before learned Commissioner (Appeals). 5. Having taken note of the fact that while deciding identical issue in assessee’s own case in assessment year 2014-15, it has been held that the income derived from technical and ground handling services are exempt under Article 8(3) read with Article 8(1) of the Treaty, learned Commissioner (Appeals) deleted the addition made by the Assessing Officer. 4 ITA No. 159/Del./2022 6. Before us, it is a common point between the parties that the issue in dispute stands squarely covered in favour of the assessee by a number of decisions of not only the Tribunal but Hon'ble jurisdictional High Court in the preceding assessment years. In this context, our attention was drawn to the decision of the Hon'ble jurisdictional High Court and Tribunal in assessment years 2015-16 and 2016-17. 7. Having considered rival submissions and perused the material on record, it is observed, taxability of income received from technical and ground handling services provided to other airlines is a recurring issue between assessee and the Revenue since assessment years 2004-05 onwards. While deciding the issue for the first time in assessment years 2004-05 to 2008-09, the Hon'ble jurisdictional High Court, in judgment dated 25.01.2017, has held that the income derived by assessee from provision of technical and ground handling services to other airlines in India is covered under Article 8(3) of the Tax Treaty, hence, not taxable. Identical view was expressed by the Hon'ble jurisdictional High Court in assessee’s own case in assessment years 2009-10 to 2012-13. 5 ITA No. 159/Del./2022 8. In the latest order passed by the co-ordinate Bench in assessee’s own case in assessment year 2015-16 and 2016-17 in ITA Nos. 8677 & 8678/Del/2019 dated 01.06.2022, it has been held as under: “8. We have heard both the parties and perused the records. Ld. counsel of the assessee submitted that issue is squarely covered in favour of the assessee by the decision of Hon’ble Delhi High Court in assessee's own case. He submitted that the assessing officer despite being told that the case is covered by Hon’ble Delhi High Court decision in assessee's own case chose to ignore the Hon’ble High Court decision and decide the issue against the assessee. Ld. DR for the Revenue, on the other hand, could not dispute the submission that identical issue has been decided in favour of the assessee by Hon’ble Delhi High Court. 9. Upon careful consideration, we note that Hon’ble Delhi High Court in the case of the assessee for assessment years 2004-05 to 2008-09 by the order dated 25.01.2017 (392 ITR 218) elaborately dealt with the issue. The question considered by the Hon’ble High Court was :- “Whether profits of the assessee from providing technical services to other airlines is covered by Article 8(1) and 8(4) of the Double Taxation Avoidance Agreement between India and Germany and by Article 8(1) and 8(3) of Double Taxation Avoidance Agreement between India and Netherland. 10. After elaborate discussion and analysis, Hon’ble High Court answered the question of law against the Revenue and in favour of the assessee and found no infirmity in the orders of the ITAT. 11. Hon’ble High Court subsequently for assessment years 2009-10, 2010-11, 2011-12 & 2012-13 followed its aforesaid order and decided the issue in favour of assessee. 6 ITA No. 159/Del./2022 12. Accordingly, respectfully following the precedent, we uphold the order of ld. CIT (A).” 9. There being no material difference in the factual position, in our view, the decision of learned Commissioner (Appeals) on the issue is in conformity with the decision of the Hon'ble jurisdictional High Court and the Tribunal rendered on the issue in the past assessment years, as discussed above. Therefore, we do not find any reason to interfere with the decision of learned Commissioner (Appeals). Accordingly, grounds raised are dismissed. 10. In the result, the appeal is dismissed. Order pronounced in the open court on September, 2022. Sd/- Sd/- ( G.S. PANNU ) (SAKTIJIT DEY) PRESIDENT JUDICIAL MEMBER Dated: 23 rd September, 2022. Mohan Lal Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 7 ITA No. 159/Del./2022 Sl. No. Particulars Date 1. Date of dictation (Order drafted through Dragon software): 15.09.2022 2. Date on which the draft of order is placed before the Dictating Member: 19.09.2022 3. Date on which the draft of order is placed before the other Member: .09.2022 4. Date on which the approved draft of order comes to the Sr. PS/PS: 20.09.2022 5. Date of which the fair order is placed before the Dictating Member for pronouncement: 21.09.2022 6. Date on which the final order received after having been singed/pronounced by the Members: 23.09.2022 7. Date on which the final order is uploaded on the website of ITAT: 26.09.2022 8. Date on which the file goes to the Bench Clerk 26.09.2022 9. Date on which files goes to the Head Clerk: 10. Date on which file goes to the Assistant Registrar for signature on the order: 11. Date of dispatch of order: