ADIT (IT) 1(1), MUMBAI V. AIRLINE ROTABLES LTD, MUMBAI

ITA 2399/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0463 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 10-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Keywords: Business income; Double taxation relief; Retrospective amendment; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 2399 /MUM/20 14 (ASSESSMENT YEAR 20 03 - 04 ) ADIT(IT) - 1(1) ROOM NO. 117 SCIENDIA HOUSE 1 ST FLOOR BALLARD ESTATE N.M. ROAD MUMBAI - 400 038. VS. M/S. AIRLINE ROTABLES LTD. C/O. M/S. BHARAT S. RAUT & CO. LODHA EXCELUS APOLLO MILLS COMPOUND N.M. JOSHI MARG MUMBAI - 400 011. ( APPELLANT ) ( RESPONDENT ) PAN NO . AADCA8054G ASSESSEE BY SHRI FARROKH IRANI DEPARTMENT BY S HRI M.V. RAJGURU DA TE OF HEARING 31.7 . 201 7 DATE OF PRONOUNCEMENT 1 . 8 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 30.10.2013 PASSED BY THE LEARNED CIT(A) - 10, MUMBAI AND IT RELATES TO A.Y. 2003 - 04. 2. THE REVENUE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN HOLDING THAT INCOME OF THE ASSESSEE IS NOT TAXABLE AS ROYALTY IN TERMS OF PROVISIONS OF SECTION 9(1)(VI) OF THE ACT. 3. THIS IS THE SECOND ROUND OF PROCEEDINGS. FACTS RELATING TO THE CAS E ARE NARRATED AS UNDER. M/S. AIRLINE ROTABLES LTD. (HEREINAFTER REFERRED TO AS THE 'APPELLANT') IS A COMPANY INCORPORATED IN UNITED KINGDOM AND IS ENGAGED IN THE BUSINESS OF PROVIDING SPARES PARTS AND COMPONENT SUPPORT FOR AIRCRAFT S . IT HAD ENTERED INTO A N AGREEMENT WITH M/S. JET AIRWAYS (HEREINAFTER REFERRED TO AS 'JA'), WHEREBY IT SUPPLIED ROTABLES I.E. AIRCRAFT M/S. AIRLINE ROTABLES LTD. 2 COMPONENTS TO JA. IT OBTAINED FAULTY COMPONENTS FROM JA IN EXCHANGE OF COMPONENTS IN GOOD CONDITION. IT THEN REPAIRED OR OVERHAULED THE FAULTY C OMPONENTS. UNDER THE AGREEMENT, THE APPELLANT WAS EXPECTED TO PROVIDE GOOD COMPONENTS AT THE OPERATING BASE OF JA. FOR THIS PURPOSE IT MAINTAINED A STOCK OF SUCH GOOD COMPONENTS AT THE OPERATING BASE OF JA FROM WHICH SUPPLIES WERE MADE FROM TIME TO TIME. T HE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE 'AO') HAD DETERMINED THE WAREHOUSE (WHERE THE STOCK OF THE COMPONENTS WAS MAINTAINED) AS THE PERMANENT ESTABLISHMENT (HEREINAFTER REFERRED TO AS 'FE') OF THE APPELLANT. HE HAD THEN UNDERTAKEN AN EXERCISE OF ATTRIBUTION AND HAD CHARGED TO TAX TOTAL INCOME TO THE TUNE OF RS.6,67,83,270/ - . THE COMMISSIONER OF INCOME TAX (APPEALS) [ HEREINAFTER REFERRED TO AS THE 'CIT (A)' ] HAD CONFIRMED THIS FINDING. WHILE DEALING WITH THE SECOND APPEAL IN THIS CASE, THE HON' BLE MUMBAI TRIBUNAL IN ITS ORDER DATED 21 ST SEPTEMBER 2011 (IN ITA NO. 278/MUM/2007) HAD FOLLOWED THE ORDER IN THE APPELLANT'S OWN CASE FOR A.YS.1998 - 99, 1999 - 2000, 2000 - 2001, 2001 - 02 AND HELD AS UNDER: 5. I. RESPECTFULLY FOLLOWING THE DECISIONS OF THE TR IBUNAL IN ASSESSEE'S OWN CASE IN THE PRECEDING YEARS, WE HOLD THAT THE ASSESSEE COMPANY DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA . HOWEVER, WE REMIT THE MATTER TO THE FILE OF THE CIT(A) FOR ADJUDICATION ON THE QUESTION OF TAXABILITY, IF ANY, OF CON SIDERATION FOR USE, OR RIGHT TO USE, OF INDUSTRIAL, SCIENTIFIC OR COMMERCIAL EQUIPMENT CONTAINED IN THE PAYMENTS MADE BY THE AIRLINES TO THE ASSESSEE COMPANY IN LIGHT OF THE DIRECTION OF THE TRIBUNAL FOR AY 1998 - 99, WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL AGAIN IN AY 1999 - 2000 TO 2001 - 02.' IT IS THUS CLEAR THAT THE MATTER HAS BEEN REMITTED TO THE FILE OF LD CIT(A) FOR ADJUDICATION ON THE LIMITED QUESTION OF TAXABILITY, IF ANY, OF CONSIDERATION FOR USE OR RIGHT TO USE, OF INDUSTRIAL, SCIENTIFIC OR COMMERCI AL EQUIPMENT UNDER ARTICLE 13(3)(B) OF THE INDIA - UK DOUBLE TAXATION AVOIDANCE AGREEMENT (`DTAA OR TREATY) CONTAINED IN THE PAYMENTS MADE BY JA TO THE APPELLANT. M/S. AIRLINE ROTABLES LTD. 3 4. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTED THAT AMOUNT RECEIVED BY IT FROM JET AIRW AYS LTD. IS COMPOSITE RECEIPT THAT COULD COVER BOTH REP AIRS AND OVERHAUL OF COMPONENTS AND REPLACEMENT OF COMPONENTS ALSO. IT WAS SUBMITTED THAT BIFURCATION OF THE PAYMENT COULD NOT BE POSSIBLE AS PER AGREEMENT ENTERED BETWEEN THE PARTIES AND HENCE ENTIRE RECEIPTS SHALL CONSTITUTE BUSINESS INCOME IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, IT CONTENDED BEFORE THE LEARNED CIT(A) THAT TREATMENT OF PART OF SAID INCOME PERTAINING TO USE OF REPLACED COMPONENT S CANNOT BE TREATED AS ROYALTY UNDER ARTICLE 13(3)(B) O F THE DTAA. THE ASSESSEE ALSO CONTENDED THAT IT WAS SUPPLYING ONLY SPARE PARTS OF JET AIRWAYS LTD. AND SUCH SPARE PARTS CANNOT BE CALLED AS EQUIPMENT IN THE CONTEXT OF SECTION 9(1)(VI) AS WELL AS ARTICLE 13(3)(B) OF THE DTAA. F OR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LEARNED CIT(A) : - THE APPELLANT'S AR SUBMISSION IN THIS REGARD IS REPRODUCED AS UNDER: 'THE CONSIGNMENT STOCK INCLUDES STOCK OF ROTABLES BEING SPARE PARTS WHICH ARE FITTED INTO THE AIRCRAFT OF JA. A LIST OF VARIOUS COMPONENTS FORMING PART OF THE CONSIGNMENT STOCK AS MENTIONED IN SCHEDULE 2 TO THE SUPPLEMENTAL AGREEMENT IS ENCLOSED AS ANNEXURE 3. ON PERUSAL OF THE ANNEXURE 3 YOUR GOODSELF WILL APPRECIATE THE FACT THAT THE COMPONENTS OF CONSIGNME NT STOCK ARE NOTHING BUT SPARE PARTS NAMELY VALVES, TUBES, ETC. AS PER THE AGREEMENT BETWEEN THE APPELLANT AND JA THE TERM ROTABLE IS DEFINED AS: AN ITEM WITH A MANUFACTURER'S SERIAL NUMBER THAT CAN BE ECONOMICALLY RESTORED TO A SERVICEABLE CONDITION AND IN THE NORMAL C OURSE OF OPERATION IS REPEATEDLY REHABILITATED TO A FULLY , SERVICEABLE CONDITION OVER A PERIOD APPROXIMATING THE LIFE OF THE FLIGHT EQUIPMENT TO WHICH IT IS RELATED' (REFER PG 89 OF PAPER BOOK 1) AT THE OUTSET, IT IS IMPERATIVE TO UNDERS TAND THE MEANING OF THE WORD 'EQUIPMENT'. THE WORD EQUIPMENT IS NEITHER DEFINED UNDER THE ACT NOR UNDER THE TREATY. AS MENTIONED ABOVE, THE AMENDMENTS MADE TO SECTION 9(1)(VI) OF THE ACT DO NOT DEAL WITH OR CLARIFY THE MEANING OF THE TERM EQUIPMENT. IN THI S REGARD, YOUR APPELLANT CRAVES TO RELY ON THE DECISION OF THE DELHI ITAT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO. LTD (85 LTD 478) (ITAT DELHI) (FOR LIMITED PURPOSE WITH RESPECT TO THE 'DEFINITION OF THE TERM EQUIPMENT'). THIS DECISION PROVIDE S USEFUL GUIDANCE AS TO THE MEANING OF THE TERM 'EQUIPMENT. IN THIS CASE, THE ITAT OBSERVED AS FOLLOWS: 'A PART OF AN EQUIPMENT INCAPABLE OF PERFORMING ANY ACTIVITY IN ITSELF CANNOT BE TERMED AS AN EQUIPMENT. WE TAKE AN EXAMPLE OF SCISSORS WHICH HAS TWO B LADES. THIS SCISSOR IS AN EQUIPMENT BUT WHEN ONE BLADE IS SEPARATED FROM THE OTHER M/S. AIRLINE ROTABLES LTD. 4 BLADE IT CEASES TO BE AN EQUIPMENT. IN OTHER WORDS, THE BLADE IN ISOLATION CANNOT BE TERMED AS AN EQUIPMENT...' REFERENCE COULD ALSO BE MADE TO THE DICTIONARY MEANING AS DON E BY THE CHENNAI ITAT IN THE CASE OF WEST ASIA MARITIME LTD V ITO, INTERNATIONAL TAXATION II, CHENNAI (2008) 111 LTD 155 EQUIPMENT MEANS THE THINGS THAT ARE NEEDED FOR A PARTICULAR PURPOSE OR ACTIVITY. (AS PER THE MEANING IN THE NEW OXFORD ADVANCED LEARNER S DICTIONARY). EQUIPMENT' MEANS 'ALL FIXED ASSETS OTHER THAN LAND AND BUILDING' USED IN A BUSINESS ENTERPRISE (AS PER THE MEANING IN THE WEBSTERS DICTIONARY).' 5. THE LEARNED CIT(A) WAS CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE THAT THE COMPONENTS CA NNOT BE CONSIDERED AS EQUIPMENT IN THE CONTEXT OF SEC. 9(1)(VI) OF THE ACT AND ACCORDINGLY, DECIDED THE ISSUE AS UNDER : - 7. IN THE LIGHT OF THE ABOVE FACTS AND JUDICIAL PRECEDENTS, THE AR CONTENTED THAT ROTABLES ARE MERELY SPARE PARTS WHICH CANNOT PERFORM ANY ACTIVITY WHEN DIVORCED FROM THE AIRCRAFT. THEREFORE, THEY CANNOT BE TREATED AS AN EQUIPMENT UNDER PROVISIONS OF SECTION 9(1)(VI) OF THE ACT AND CLAUSE 13(3)(B) OF THE TREATY. 8. FURTHER, THE APPELLANT'S AR MENTIONED THAT THE DEFINITION OF ROYALTY DEALING WITH EQUIPMENT UNDER THE TREATY, IS LARGELY SIMILAR TO THAT UNDER THE ACT AS IT STOOD PRIOR TO THE INSERTION OF EXPLANATION 5. THE RETROSPECTIVE AMENDMENTS MADE TO SECTION 9(1)(VI) OF THE ACT, DO NOT CLARIFY THE MEANING OF THE TERM EQUIPMENT. ACCOR DINGLY, IN THE ABSENCE OF ANY CONTROL OR DIRECT USE BY THE PAYER OR ANY NOTIFICATION UNDER SECTION 90(3) OF THE ACT, PAYMENTS SHOULD NOT BE REGARDED AS 'ROYALTY' UNDER THE TREATY. 9. PARAGRAPH 3 UNDER ARTICLE 3 OF THE TREATY, PROVIDES THAT THE TERMS NOT D EFINED IN T HE TREATY SHALL, UNLESS THE CONTEXT OTHERWISE REQUIRES, HAVE THE SAME ME AN ING WHICH IT HAS UNDER THE LAWS OF THAT CONTRACTING S TATE FOR THE PURPOSE OF THE TAXES TO WHICH THE CONVENTION APPLIES. EXPLANATION 5 TO SECTION 9(1)(VI) OF THE ACT ONLY C LARIFIES THE INCLUSION OF CERTAIN CONSIDERATIONS WITHIN THE DEFINITION OF 'ROYALTY'. AS SUCH, THE ELIMINATION OF THE CONDITIONS OF 'POSSESSION AND CONTROL' AND DIRECT USE UNDER THE ACT, SHOULD NOT APPLY TO OR AFFECT THE EXISTING INTERPRETATION OF THE TERM 'ROYALTY' IN THE TREATY. M/S. AIRLINE ROTABLES LTD. 5 10. THE CONSIDERATION RECEIVED TOWARDS THE CONSIGNMENT STOCK OF SUCH SPARE PARTS - CANNOT BE CONSTRUED AS CONSIDERATION RECEIVED FOR THE USE OF, OR THE RIGHT TO USE, ANY INDUSTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT, SINCE SPARE PA RTS CANNOT BE CONSTRUED AS AN EQUIPMENT. 11. THE CONSIGNMENT STOCK MAINTAINED AT THE OPERATING BASE OF JA COMPRISES OF ROTABLES WHICH MAY BE USED BY JA ON NEED BASIS, HENCE IT IS USE OF THE COPYRIGHTED ARTICLE AND NOT A C OPYRIGHT THEREFORE CANNOT BE CONSTR UED AS ROYALTY. 12. THE CONSIDERATION FOR USE OF CONSIGNMENT STOCK WERE PART OF THE BUSINESS PROFITS AND CANNOT BE SEPARATED OUT FROM CONSIDERATION FOR REPAIRS AND OVERHAUL SO AS TO TREAT THE SAME AS ROYALTY UNDER ARTICLE 13(3)(B) OF THE TREATY. 13. THUS, THE ROTABLES ARE SPARE PARTS WHICH ARE FITTED TO AN AIRCRAFT. THESE ROTABLES CANNOT BE USED INDEPENDENTLY IF DIVORCED FROM AN AIRCRAFT HENCE CANNOT BE CHARACTERIZED AS AN EQUIPMENT IN TERMS OF DELHI ITAT'S DECISION REPORTED IN 85 ITD 478 IN THE CASE OF ASI A SATELLITE TELECOMMUNICATIONS CO. LTD. MERE MAINTENANCE CONSIGNMENT STOCK DOES NOT TANTAMOUNT TO SERVICES TAXABLE AS FEES FOR TECHNICAL SERVICES. 14. THE APPELLANT'S AR FURTHER CONTENTED THAT THE CONSIDERATION RECEIVED FROM JA TOWARDS MAINTENANCE OF CONSI GNMENT STOCK COULD NOT BE CHARACTERIZED AS FEES FOR TECHNICAL SERVICES' TAXABLE UNDER ARTICLE 13(4) OF THE TREATY AS THE APPELLANT HAD NOT MADE AVAILABLE ANY TECHNICAL KNOWLEDGE, OR EXPERIENCE. IT HAD PROVIDED ONLY CONSIGNMENT STOCK AT THE OPERATING BASE O F JA TO ENSURE THAT THE FLIGHT OPERATIONS ARE NOT INTERRUPTED. THUS THE CONSIGNMENT STOCK WAS KEPT FOR USE AS A STANDBY AND ACCORDINGLY COULD NOT BE FALL UNDER THE AMBIT OF 'FEES FOR TECHNICAL SERVICES'. 15. THE APPELLANT'S AR ALSO MENTIONED THAT THE ABOVE CON TENTIONS WERE ALSO PRESENTED BEFORE THE CIT(A) FOR AY 1998 - 99 TO AY 2001 - 02. THE CIT(A) WHILE DECIDING THE MATTER FOR EARLIER YEARS, HELD THAT THE SAID PAYMENTS WERE NOT TAXABLE UNDER THE ACT SINCE THE AMENDMENT TO CLAUSE (IVA) OF EXPLANATION 2 TO SECTION 91)(VI) WERE MADE W.E.F. FROM 1 ST APRIL 2002. 16. THUS, IN THE AFORE STATED FACTS AND ANALYSIS OF THE APPELLANT'S CASE AND ALSO AFTER THE DECISION OF THE ITAT FOR AY 2003 - 04, I HAVE EXAMINED THE TAXABILITY OF PAYMENTS UNDER ARTICLE 13(3)(B) OF THE TREATY. ON P ERUSAL OF ITEMS LISTED UNDER SCHEDULE 2 TO THE SUPPLEMENTAL AGREEMENT THE ITEMS COVERED ARE IN THE NATURE OF SPARE PARTS AND NOT COVERED UNDER ARTICLE 13(3)(B) OF THE TREATY. M/S. AIRLINE ROTABLES LTD. 6 17. THE CIT(A) VIDE PARA 4.7 OF THE ORDERS DATED 29 JULY 2011 FOR AY 1998 99 TO 2001 - 02 HAS HELD THAT PAYMENTS MADE BY THE APPELLANT BY JA CANNOT BE CHARGED TO TAX FOR USE, OR RIGHT TO USE OF INDUSTRIAL, SCIENTIFIC OR COMMERCIAL EQUIPMENT UNDER ARTICLE 13 OF THE DTAA. THE SOLE ISSUE ON WHICH THE MATTER HAS BEEN RESTORED BACK TO MY FILES T HUS GETS DECIDED IN FAVOUR OF THE APPELLANT. 6. THE LD D.R PL ACED STRONG RELIANCE ON CLAUSE (IVA) OF EXPLANATION 2 TO SEC. 9(1)(VI) OF THE ACT, WHICH DEFINES THE TERM ROYALTY. THE SAID CLAUSE READS AS UNDER: - (IVA) THE USE OR RIGHT TO USE ANY IND USTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT BUT NOT INCLUDING THE AMOUNTS REFERRED TO IN SECTION 44BB. HE SUBMITTED THAT THE AGREEMENT BETWEEN THE PARTIES PROVIDE FOR USE OF THE COMPONENTS ON THE BASIS OF FLYING HOURS AND HENCE THE SAME CANNOT BE CONSIDE RED AS THE CASE OF PROVIDING SERVICE OF REPAIRING OF COMPONENTS. ACCORDINGLY THE LD D.R SUBMITTED THAT CLAUSE (IVA) OF EXPLANATION 2 TO SEC. 9(1)(VI) SHALL SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE. 7. ON THE CONTRARY, THE LD A.R SUBMITTED THAT THE SPARE PARTS SUPPLIED BY THE ASSESSEE CANNOT BE CONSIDERED AS EQUIPMENT IN THE CONTEXT OF CLAUSE (IVA) OF EXPLANATION 2 TO SEC.9(1)(VI) OF THE ACT. THE MEANING OF THE TERM EQUIPMENT HAS BEEN EXPLAINED BY THE DELHI BENCH OF ITAT IN THE CASE OF ASIA SATELLITE TELECOMMUNICATIONS CO LTD (2003)(85 ITD 478) AS UNDER: - EQUIPMENT IS AN INSTRUMENT OR TOOL WHICH IS CAPABLE OF DOING SOME JOB INDEPENDENTLY OR WITH THE HELP OF OTHER TOOLS. A PART OF A EQUIPMENT INCAPABLE OF PERFORMING ANY ACTIVITY IN ITSELF CANNOT BE TERMED AS AN EQUIPMENT. THEREFORE, THE TRANSPONDER IS NOT AN EQUIPMENT IN ITSELF. IN OTHER WORDS, IT IS NOT CAPABLE OF PERFORMING ANY ACTIVITY WHEN DIVORCED FROM THE SATELLITE. TRANSPONDER IS PART OF SATELLITE, WHICH IS FIXED IN THE SATELLITE AND IS NEITHER MOVING IN ITSELF NOR ASSISTING THE SATELLITE TO MOVE. THEREFORE, THE TRANSPONDER BEING ONLY A PART OF IT, PLAYING HOWSOEVER IMPORTANT ROLE, CANNOT BE TERMED AS EQUIPMENT. HENCE, THE LEASING OUT OF TRANSPONDERS TO VARIOUS CUSTOMERS IN A SA TELLITE CANNOT BE EQUATED WITH THE LEASING OUT OF ANY EQUIPMENT. THE LD A.R SUBMITTED THAT THE ASSESSEE, IN THE INSTANT CASE, IS ONLY SUPPLYING SOME SPARE PARTS /COMPONENTS FOR AIRCRAFTS AND HENCE THE Y CANNOT BE CONSIDERED AS EQUIPMENT. WHEN THE BENCH R AISED A QUERY AS TO WHETHER THE M/S. AIRLINE ROTABLES LTD. 7 SPARE PARTS WOULD STILL FALL OUTSIDE THE SCOPE OF EQUIPMENT, IF IT IS CAPABLE OF DOING SOME JOB INDEPENDENTLY, FOR EXAMPLE A FAN. THE LD A.R SUBMITTED THAT THE EQUIPMENT AS USED IN SEC. 9(1)(VI) SHOULD BE UNDERSTOOD AS TH OSE EQUIPMENT WHICH SHOULD BE CAPABLE OF DOING SOME INDEPENDENT FUNCTIONS FOR WHICH IT WAS DEPLOYED, LIKE DRILLING RIGS USED IN PETROLEUM EXPLORATION. HE SUBMITTED THAT THE FANS COVERED BY THE AGREEMENT WOULD NOT BE USEFUL DEHORS THE AIRCRAFT AND HENCE IT WOULD FALL IN THE CATEGORY OF SPARE PARTS. 8. WE FIND MERIT IN THE SUBMISSIONS OF LD A.R. WE NOTICE THAT CLAUSE (IVA) OF EXPLANATION 2 TO SEC. 9(1)(VI) OF THE ACT USES THE EXPRESSION EQUIPMENT AND THE PAYMENT MADE FOR THE USE OR RIGHT TO USE ANY IND USTRIAL, COMMERCIAL OR SCIENTIFIC EQUIPMENT ( NOT FALLING U/S 44BB) SHALL FALL IN THE CATEGORY OF ROYALTY. AS PER THE DECISION RENDERED BY DELHI BENCH OF ITAT (REFERRED SUPRA), THE SPARE PARTS WOULD NOT FALL UNDER THE CATEGORY OF EQUIPMENT, WE ARE OF TH E VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN HOLDING THAT THE PAYMENTS RECEIVED BY THE ASSESSEE CANNOT BE TERMED AS ROYALTY. 9. THE LD D.R SUBMITTED THAT THE ASSESSEE IS HAVING A WAREHOUSE FACILITY IN INDIA AND THE SAME SHALL CONSTITUTE PERMANENT ESTABLIS HMENT. ACCORDINGLY HE SUBMITTED THAT THE PAYMENTS RECEIVED BY THE ASSESSEE CAN BE ASSESSED AS BUSINESS PROFITS. HOWEVER, WE HAVE NOTICED THAT THIS IS SECOND ROUND OF PROCEEDINGS AND IN THE FIRST ROUND, THE CO - ORDINATE BENCH HAS ALREADY GIVEN ITS DECISION THAT THE ASSESSEE DOES NOT HAVE PERMANENT ESTABLISHMENT IN INDIA. HENCE WE ARE UNABLE TO ADMIT THIS CONTENTION AT THIS STAGE. 10. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS TAKEN TWO MORE GROUNDS GIVEN BELOW BEFORE LD CIT(A): - (A) THE ASSESSEE HAS RECEIVED COMPOSITE PAYMENTS FOR PROVIDING COMPONENTS AS WELL AS FOR REPAIR AND OVERHAUL OF COMPONENTS. THE CONSOLIDATED PAYMENTS RECEIVED BY THE ASSESSEE CANNOT BE SEGREGATED INTO PAYMENT FOR USE OF COMPONENTS , IF ANY AND PAYMENT FOR REPAIR SERVICES. M/S. AIRLINE ROTABLES LTD. 8 (C) THE BREAKUP OF PAYMENTS IS GIVEN IN PAGE 94 OF THE PAPER BOOK AND A PERUSAL OF THE SAME WOULD SHOW THAT THE PAYMENTS WERE RECEIVED FOR SPECIFIC SERVICES ONLY. 11. WE HAVE CONSIDERED BOTH THE CONTENTIONS OF THE ASSESSEE. WE NOTICE FROM THE AGRE EMENT THAT THE TITLE OVER THE COMPONENTS PASSES OVER TO THE CUSTOMER WHEN THEY ARE FITTED BY THE ASSESSEE INTO THE AIRCRAFTS. WHEN THE COMPONENTS ARE REMOVED FROM AIRCRAFT AND HANDED OVER TO THE ASSESSEE FOR CARRYING OUT REPAIRS, THE TITLE OVER THE COMPON ENTS PASS ON TO THE ASSESSEE. THE LD A.R SUBMITTED THAT THIS ARRANGEMENT WAS MADE IN ORDER TO AVOID CONFUSION ABOUT THE OWNERSHIP OF COMPONENTS, WHEN AN INSURANCE CLAIM IS REQUIRED TO BE LODGED. SCHEDULE 2 OF THE AGREEMENT (PAGE 42 OF THE PAPER BOOK) PRE SCRIBES THE CHARGES AND THE METHOD OF PAYMENT. A PERUSAL OF THE SAME WOULD SHOW THAT THE ASSESSEE IS COLLECTING CHARGES FOR THE COMPONENTS ON THE BASIS OF FLYING HOURS SUBJECT TO MINIMUM GUARANTEE OF 11000 FLYING HOURS. SCHEDULE 1 OF THE AGREEMENT PRES CRIBES THE SERVICES. CLAUSE 1.1 OF SCHEDULE 1 STATES THAT THE ASSESSEE IS RESPONSIBLE TO PROVIDE REPLACEMENT ROTABLES (OTHER THAN THOSE DETAILED IN SCHEDULE 4) AND THOSE REPAIRABLES AS DETAILED IN SCHEDULE 6 (HEREINAFTER DEFINED AS COMPONENTS) ON AN EXC HANGE BASIS REQUIRED FOR AN AIRCRAFT AS A RESULT OF OPERATIONAL UNSERVICEABILITY. 12. A COMBINED READING OF ABOVE CLAUSES OF THE AGREEMENT WOULD SHOW THAT THE ASSESSEE IS NOT SELLING THE COMPONENTS, BUT PROVIDES THEM ON EXCHANGE BASIS TO JET AIRWAYS. FURTHER THE ASSESSEE IS COLLECTING THE PAYMENT ON THE BASIS OF FLYING HOURS SUBJECT TO MINIMUM GUARANTEE OF 11000 HOURS. THIS ARRANGEMENT IS PECULIAR AND DEFIES THE NORMAL PRACTICE OF COLLECTING SERVICE CHARGES FOR THE REPAIRS UNDERTAKEN. THE FACT THAT T HE ASSESSEE IS PROVIDING THE COMPONENTS ON EXCHANGE BASIS AND COLLECTING THE PAYMENT ON THE BASIS OF FLYING HOURS MAY GIVE A COLOUR THAT IT IS ONLY LEASING OUT THE COMPONENTS. HOWEVER, WE DO NOT PREFER TO DEAL WITH THIS ASPECT AS WE ARE CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE THAT THE COMPONENTS WOULD NOT FALL IN THE CATEGORY OF EQUIPMENT WITHIN THE SCOPE OF SEC. 9(1)(VI) OF THE ACT. ON THE M/S. AIRLINE ROTABLES LTD. 9 SAME REASONING, WE DO NOT PREFER TO DEAL WITH THE OTHER CONTENTION OF THE ASSESSEE. 13. IN VIEW OF T HE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE ORDER PASSED BY LD CIT(A) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY WE UPHOLD HIS ORDER. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 1 . 8 .201 7. SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 1 / 8 / 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