AIR France, New Delhi V. Addl. CIT, New Delhi

ITA 5008/DEL/2011

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1278 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 11-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G K DHALL INT TAX
• Keywords: Double taxation relief; Earning of tax free income; Permanent establishment; Tax effect; Reason to believe; TDS
• Section: 143(3); 144C; 115A; 13; 22; 148; 90

Judgement Text

1 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. NO. 5008/DEL/2011 (A.Y 2004-05) AND I.T.A. NO. 5009/DEL/2011( A. Y 2005-06) AIR FRANCE LB-46,PRAKASH DEEP BUILDING 7, TOLSTOY MARG NEW DELHI AAACA5284B (APPELLANT) VS ADDL. CIT INTERNATIONAL TAXATION CIRCLE-1 NEW DELHI (RESPONDENT) ITA NO. 1786/DEL/2012 ( ASSESSMENT YEAR - 2006-07 ) AIR FRANCE, LB-46, PRAKASH DEEP BUILDING, 7, TOLSTOY MARG NEW DELHI (PAN : AAACA 5284 B) (APPELLANT) VS ADIT CIRCLE - 1(1), NEW DELHI. (RESPONDENT) AND ITA NO. 2212/DEL/2012 ( ASSESSMENT YEAR - 2006-07 ) ADIT, CIRCLE - 1(1), INTERNATIONAL TAXATION, 204, DRUM SHAPED BUILDING, I.P. ESTATE, NEW DELHI 110 002 (APPELLANT) VS AIR FRANCE, LB-46, PRAKASH DEEP BUILDING, 7, TOLSTOY MARG NEW DELHI. (RESPONDENT) APPELLANT BY SH. SALIL AGGARWAL, ADV. RESPONDENT BY SH. G. K. DHALL, CIT-DR (INT. TAX.) 2 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 ORDER PER SUCHITRA KAMBLE, JM THERE ARE TWO APPEALS WHICH ARE FILED BY THE ASSESS EE AGAINST THE ASSESSMENT ORDER DATED 04/10/2011 PASSED BY THE A SSESSING OFFICER U/S 143 (3) READ WITH SECTION 144C OF THE INCOME TAX AC T, 1961 AS CONFIRMED BY THE DRP VIDE ITS ORDER DATED 02.08.2011 FOR ASSESSM ENT YEAR 2004-05 & 2005-06 RESPECTIVELY AND TWO APPEALS ARE FILED BY T HE ASSESSEE AND REVENUE AGAINST THE ORDERS DATED 06.02.2012 PASSED BY CIT(A )-XI, NEW DELHI FOR ASSESSMENT YEAR 2006-07. 2. FIRSTLY WE ARE TAKING UP APPEALS FOR A.Y. 2006-0 7 BEING ITA NO. 1786/DEL/2012 AND ITA NO. 2212/DEL/2012 AS THE SAME WAS ARGUED FIRSTLY BY THE BOTH THE PARTIES. THE GROUNDS OF APPEAL ARE AS UNDER:- ITA NO. 1786/DEL/2012 (ASSESSEES APPEAL) 1. THAT THE LEARNED CIT (A) HAS GROSSLY ERRED IN NOT APPRECIATING THE TRUE AND CORRECT FACTS OF THE CASE BEFORE PASSING THE IM PUGNED ORDER. 2. THAT THE LEARNED CIT (A) HAS GROSSLY ERRED IN NOT A PPRECIATING THAT THE APPELLANT DOES NOT RENDER ANY GROUND HANDLING SERVI CES AND ONLY RENDER TECHNICAL HANDLING SERVICES EVEN THOUGH IT HAS BEEN HELD THAT BOTH ARE COVERED UNDER ARTICLE 8 OF THE DTAA IF RENDERED TO IATP POOL MEMBERS. 3. THAT THE LEARNED CIT (A) HAS GROSSLY ERRED IN CONCL UDING THAT THE SERVICES RENDERED TO ONE NON IATP POOL MEMBER WOULD BE TAXABLE IN THE HANDS OF THE APPELLANT TO THE EXTENT OF THE REVENUE EARNED FROM THE SAID CUSTOMER UNDER ARTICLE 7 OF THE DTAA. 4. THAT THE APPELLANT SEEKS TO ALTER, MODIFY AND ADD A NY OF THE AROUND AS THE CASE MAY BE. ITA NO. 2212/DEL/2012 (REVENUES APPEAL) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,78,09,378/- MADE BY THE AO, BY HOLDING THE ASSESSEES INCOME FROM GROUND HANDLING AND TECHNICAL DATE OF HEARING 25.02.2020 DATE OF PRONOUNCEMENT 22.05.2020 3 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 HANDLING SERVICES TO THIRD PARTY AIRLINES ARE WITHI N THE AMBIT OF OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC AND HENCE COV ERED BY ARTICLE 8 OF INDO- FRENCH DTAA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF RECEIPTS FROM RENDERING ENGINEERING AND GROUND HANDLING SERVICES TO THIRD PARTY AIRLINES, EVEN THOUGH SUCH RECEIPTS ARE NOT COVERED UNDER ART ICLE 8 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND FRAN CE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF RECEIPTS FROM RENDERING ENGINEERING AND GROUND HANDLING SERVICES TO THIRD PARTY AIRLINES ARE NOT DIRECTLY CONNECTED TO OPERATION OF AIRCRAFT S IN INTERNATIONAL TRAFFIC AS ENVISAGED IN ARTICLE 8 OF THE INDO- FRANCE DTAA AND ACCORDINGLY, THE RECEIPTS FROM SUCH ACTIVITIES ARE TAXABLE IN INDIA. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF RECEIPTS FROM RENDERING ENGINEERING AND GROUND HANDLING SERVICES TO THIRD PARTY AIRLINES, BY RELYING UPON THE DECISIONS OF ITAT, NEW DELHI IN THE CASES OF LUFTHANSA GERMAN AIRLINES AND KLM ROYAL DUTCH AIRLINES, WHILE IGNORING THE DECISION OF THE HONBLE ITAT IN THE CASE OF BRITISH AIRWAYS PLC (ITA 3098/DEL/2009, DATED 30.10.2009), WHICH IS SQUARELY APPLICABLE IN THE PRESENT CASE. 5. THE APPELLANT CRAVES TO ADD, AMEND, MODIFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE THE HEARING OF THE APP EAL. 3. DURING THE HEARING, THE LD. DR POINTED OUT THAT TAX LIMIT IN APPEAL BEING ITA NO.2212/DEL/2012 FILED BY THE REVENUE IS BELOW RS. 50 LAKHS WHICH SQUARELY FALLS WITHIN THE AMBIT OF CIRCULAR N O. 17/2019 DATED 08.08.2019 ISSUED BY THE CENTRAL BOARD OF DIRECT TA XES PRESCRIBING THE TAX EFFECT FOR PREFERRING APPEALS BEFORE TRIBUNAL BY TH E REVENUE AND SUBSEQUENT CLARIFICATION ISSUED BY CBDT ON 20 TH AUGUST, 2019. THEREFORE, ITA NO.2212/DEL/2012 FILED BY THE REVENUE IS DISMISSED. 4. NOW WE ARE TAKING UP ITA NO. 1786/DEL/2012. THE ASSESSEE IS A FOREIGN COMPANY, ENGAGED IN THE OPERATION OF AIRCRA FT IN INTERNATIONAL TRAFFIC. THE ASSESSEE IS A TAX RESIDENT OF FRANCE AND IS LIA BLE FOR TAXATION IN FRANCE. THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 20 06-07 ON 31 ST MARCH 2008, DECLARING NIL TAXABLE INCOME AS THE ASSESSEE CLAIME D THAT THE ENTIRE INCOME EARNED BY THE ASSESSEE IN INDIA IS EXEMPT FR OM TAXATION UNDER SECTION 90 OF THE INCOME TAX ACT, 1961. THEREAFTER, THE CASE OF THE ASSESSEE WAS FIXED FOR SCRUTINY U/S 143(2). THE ASS ESSEE IN INDIA DERIVES 4 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 INCOME FROM THE FOLLOWING SOURCES; I. CARRIAGE OF PASSAGE. II. CARRIAGE OF CARGO. III. INTEREST INCOME FROM FUNDS DIRECTLY CONNECTED WITH THE OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC. IV. INCOME FROM TECHNICAL HANDLING TO OTHER IATP PO OL MEMBERS. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE WAS DIRECTED TO FURNISH DETAILS IN RESPECT OF THE TECHNICAL HANDLIN G UNDERTAKEN BY IT FOR OTHER CARRIERS ALONG WITH THE DETAILS OF INCOME FRO M CARGO PASSAGE AND INTEREST ETC. THE ASSESSEE FURNISHED THE DETAILS. T HE ASSESSEE SUBMITTED THAT THE CASE OF THE ASSESSEE WAS SQUARELY COVERED BY THE JUDGMENT OF THE TRIBUNAL IN CASE OF LUFTHANSA GERMAN AIRLINES (90 I TD 310) AND SINCE THE ASSESSEE WAS RENDERING TECHNICAL HANDLING SERVICES ONLY TO IATP POOL MEMBERS, IT IS A POOLING ACTIVITY AND NOT LIABLE TO BE TAXED IN INDIA. THE ASSESSING OFFICER PASSED AN ASSESSMENT ORDER THEREB Y TREATING THE TECHNICAL INCOME AS FEE FOR TECHNICAL SERVICES AT RS. 1,81,79,476/- COVERED U/S 115A READ WITH SECTION 44D AND TAXED TH E SAME AT 20% OF THE GROSS RECEIPTS. 5. BEING AGGRIEVED BY THE ASSESSMENT ORDER THE ASSE SSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 6. THE LD. AR SUBMITTED THAT AS PER THE GENERAL RUL ES SPECIFIED UNDER THE IATP MANUAL, WHEREIN, FOR ACTIVITIES COVERED, U NDER GROUND MAINTENANCE EQUIPMENT AND AIRCRAFT RECOVERY IS IDE NTIFIED UNDER STANDARD AGREEMENTS IS E WHEREAS THE IDENTIFICATION TO BE AFFIXED ON SUCH STANDARD AGREEMENTS AT THE TIME OF ENTERING INTO SU CH AGREEMENTS BY THE MEMBER AIRLINES FOR LINE MAINTENANCE SERVICES, THE CODE IS TO BE USED L AND WHICH HAS BEEN CONSISTENTLY DONE AND FOLLOWED B Y THE ASSESSEE AIRLINES. EVERYWHERE ON THE AGREEMENT AND THE DESCR IPTION OF THE SERVICES BEING MADE IS THAT OF TECHNICAL SERVICES. THUS IT I S CLEAR THAT NO GROUND 5 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 HANDLING ACTIVITY IS UNDERTAKEN OR CARRIED OUT BY THE ASSESSEE AIRLINES. THE LD. AR FURTHER SUBMITTED THAT ONLY TECHNICAL H ANDLING SERVICES HAS BEEN UNDERTAKEN. LOCAL COMPANY WITH AF (HO) AS A SH AREHOLDER AND A LOCAL INDIAN COMPANY AS THE OTHER SHAREHOLDER HAD F LOATED A PVT. LTD. CO. IN THE NAME AND STYLE OF AIR FRANCE GROUND HANDLING INDIA PVT. LTD. WHICH WAS FOR THE OBJECT AND MAIN PURPOSE OF BEING UNDERT AKING GROUND HANDLING ACTIVITIES AND NOT TECHNICAL HANDLING AC TIVITIES. THIS WAS A SEPARATE ENTITY INCORPORATED UNDER COMPANIES ACT, 1 956 AND WAS FOR GROUND HANDLING SERVICES WHICH NEVER TOOK OFF AND WAS WOUND UP SUBSEQUENTLY. THE ASSESSEE AIRLINES IS PROVIDING SE RVICES ON A PER-FLIGHT BASIS. THE SERVICES OFFERED BY THE ASSESSEE AIRLINE S VARIES IN QUALITY AND COVERAGE AND IT IS OFFERING FACILITIES LIKE STORAG E TO SOME OF THE AIRLINES, LOAN OF EQUIPMENT TO SOME AIRLINES PROVIDING QUA LIFIED MAN POWER ETC. TO DIFFERENT AIRLINES. THE LD. AR FURTHER SUBMITTED THAT THE RATES CHARGED BY THE SERVICING AIRLINES TO THE SERVICE RECEIVER A IRLINES IS DEPENDENT ON NUMBER OF FLIGHTS HANDLED, DISCOUNT OFFERED DUE TO HANDLING NUMBER OF FLIGHTS AND DETERMINATION OF COST SHARING RULES, WH ICH IS DETERMINED ACCORDING TO THE GENERAL RULES OF THE IATP MANUAL. WHEREIN, BASED ON NUMBER OF FLIGHTS HANDLED, GLOBAL FLIGHTS HANDLED A ND AGREEMENT BETWEEN AIRLINES UNDER THE POOLING ARRANGEMENT CHARGE APPLI CABLE RATES, AS MAY BE DETERMINED BY THE MEMBER AIRLINES AND IT IS NOT THE CASE WHEREIN, BY CHARGING VARIED RATES, THE MEMBER AIRLINES DO NOT F ALL PART OF THE IATP POOL. THE IATP DOES NOT PRESCRIBE THE RATES TO BE C HARGED FROM OTHER MEMBER AIRLINES. DURING THE ASSESSMENT YEAR 2006-07 , THE ASSESSEE AIRLINES HAD SERVICED ONLY ONE AIRLINE I.E. IBERWOR LD, WHO WAS NOT A MEMBER AIRLINE BUT WAS OF THE STATUS OF A GUEST AIRLINES C OVERED UNDER THE IATP POOL. THE LD. AR FURTHER SUBMITTED THAT AD-HOC AGRE EMENTS WITH ETIHAD AIRLINES, AIR CANADA, JET AIRWAYS, AIR INDIA, TNT A IRWAYS AND CAMBATA AVIATION ETC. HAVE BEEN ENTERED INTO, HAS MENTIONED BY THE REVENUE. THUS AIRLINES WITH WHICH COMMENCEMENT OF CONTRACT WITH T HIRD PARTIES PROVIDED TECHNICAL ASSISTANCE DURING F.Y. 2006-07. THE LD. A R SUBMITTED THAT EVEN AD-HOC BASIS AGREEMENTS ARE AGREEMENTS WHICH ARE NO T CONTINUOUS IN 6 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 NATURE AND ARE FOR A LIMITED TIME PERIOD AND ENTERE D OF AND ON BY THE MEMBER AIRLINES DEPENDING ON THE REQUIREMENTS AND W AS NOT WITHOUT ANY AGREEMENTS. THE LD. AR SUBMITTED THAT THE IATP MANU AL PROVIDES RAISING DIRECT INVOICES BETWEEN MEMBER AIRLINES AS PER MANU AL AND HENCE SUCH INVOICES ARE IN ACCORDANCE WITH THE IATP MANUAL. TH E LD. AR FURTHER SUBMITTED THAT DEDUCTION OF TDS IS MERELY A RECOVER Y PROCEDURE AND NOT A LEVY OF TAX. THERE ARE ONLY NOTIONAL CREDITS AND DE BITS BETWEEN THE MEMBER AIRLINES AND THERE IS NO TRANSACTION OF MONEY AND P ROVISION OF TDS DOES NOT MAKE ANY RECEIPT AS TAXABLE. THE LD. AR FURTHER SUBMITTED THAT SERVICE TAX IS A LEVY WHICH IS DIFFERENT FROM INCOME TAX AC T AND IS LEVIED ON SERVICES BEING PROVIDED BY ONE PART TO ANOTHER AND SUCH SERVICES ARE CHARGEABLE TO SERVICE TAX IN INDIA. IN THE INSTANT CASE, IT IS NOT A DISPUTE AND OTHER SERVICES BEING RENDERED BY ASSESSEE AIRLI NES BUT ON THE OTHER HAND, THE DISPUTE IS WHETHER THE SERVICES RENDERED BY THE ASSESSEE AIRLINES IS PART AND PARCEL AS POOL ARRANGEMENT AND SUBJECTE D TO TAX AT HOME BASE RATHER THAN SOURCE. IT IS NOT A DISPUTE AS TO WHETH ER SERVICE HAS BEEN RENDERED BY ASSESSEE AIRLINES TO OTHER AIRLINES OR NOT. THE LD. AR FURTHER SUBMITTED THAT NO MONIES WERE PAID OR RECEIVED IN I NDIA ON ACCOUNT OF SERVICES RENDERED BY THE ASSESSEE AIRLINES TO OTHER AIRLINES WHICH ARE PART AND PARCEL OF POOL. BUT ONLY NOTIONAL CREDITS AND D EBITS ARE GIVEN THROUGH POOL ACCOUNTING MECHANISM I.E. IATA CLEARING HOUSE. THE FACILITIES EXTENDED BY THE ASSESSEE AIRLINES ARE IN THE NATURE OF LINE MAINTENANCE FACILITIES AND THESE ARE PREDOMINANTLY WITH THE VIE W TO ASSIST THE AIRLINES AS A MEANS OF COLLABORATING THE AIR TRANSPORT ENTER PRISES. THE LD. AR RELIED UPON THE DECISION OF THE TRIBUNAL IN CASE OF LUFTAN SA GERMAN AIRLINES 90 ITD 310 AND SINCE THE ASSESSEE WAS RENDERING TECHNI CAL HANDLING SERVICES TO IATP POOL MEMBERS, IT IS A POOLING ACTIVITY AND NOT LIABLE TO BE TAXED IN INDIA. THE LD. AR ALSO RELIED UPON THE DECISION OF KLM ROYAL DUTCH AIRLINES DECIDED IN ITA NO. 403 & 404/DEL/2010 AND ITA NO. 4811/DEL/2010 OF THE TRIBUNAL AND THE HONBLE HIGH COURT DECISION IN CASE OF DIT VS. KLM ROYAL DUTCH AIRLINES & LUFTHANS A GERMAN AIRLINES (2017) 392 ITR 218 (DEL.). THE LD. AR ALSO FURNISHE D THE COMPARISON OF THE 7 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 DTAA BETWEEN UK, NETHERLANDS, GERMANY AND FRANCE. T HE LD. AR SUBMITTED THAT THE PROVISIONS OF ARTICLE 8(4) OF TH E INDO GERMAN TREATY AND ARTICLE 8(2) OF THE INDO FRANCE TREATY AND AR TICLE 8(3) OF THE INDO NETHERLAND TREATY ARE IDENTICALLY WORDED AS UNDER:- THE PROVISIONS OF PARAGRAPH 1 SHALL ALSO APPLY FRO M THE PARTICIPATION IN A JOINT BUSINESS OR AN INTERNATION AL OPERATING AGENCY. WHEREAS THE ARTICLE 8(2) OF THE INDO UK TREATY IS DIFFERENTLY WORDED AS UNDER:- THE PROVISION OF PARAGRAPH 1 OF THIS ARTICLE SHALL LIKEWISE APPLY IN RESPECT OF PARTICIPATION IN POOLS OF ANY KIND ENTER PRISES ENGAGED IN AIR TRANSPORT. THUS, THE LD. AR SUBMITTED THAT THE CIT(A) WAS NOT RIGHT IN SUSTAINING TAXABILITY TO THE EXTENT OF RS. 3,70,098/- UNDER AR TICLE 7 OF THE DTAA AND REJECTING THE CLAIM OF ARTICLE 8 OF THE DTAA. 7. THE LD. DR SUBMITTED THAT ONE OF THE ACTIVITIES FROM WHICH ASSESSEE DERIVED INCOME DURING THE YEARS UNDER APPEAL IS TEC HNICAL HANDLING. ALTHOUGH THE ASSESSEE HAS BEEN CLAIMING THAT IT HAS PROVIDED TECHNICAL HANDLING SERVICES AS PER THE AGREEMENTS PRODUCED, THE NATURE OF SERVICES HAS BEEN DESCRIBED AS GROUND HANDLING. THE ASSESS EE PROVIDES ITS SERVICES ON A PER-FLIGHT BASIS FOR FIXED DURATION . THE SERVICES ON OFFER ALSO VARY ON QUALITY AND COVERAGE. THE LD. DR FURTHER SU BMITTED THAT THE ASSESSEE ALSO PROVIDES A MULTITUDE OF OTHER FACILIT IES. THE ASSESSEE DOES NOT FOLLOW A UNIFORM PRICING POLICY FOR THE SERVICE S PROVIDED BY IT AND THE RATES CHARGED FOR THE SAME TYPE OF AIRCRAFT I.E. A- 330 VARY FROM AIRLINES TO AIRLINES. SIMILARLY, THERE ARE DIFFERENT RATES ON T HE BASIS OF DURATION OF SERVICES AS WELL AS FOR ADDITIONAL SERVICES AS REFL ECTED IN THE TABLE PRODUCED DURING THE HEARING. THE LD. DR FURTHER SUBMITTED TH AT THE ASSESSEE PROVIDES ITS SERVICES BOTH TO AIRLINES WHO ARE MEMB ERS OF IATA/IATP AS WELL AS MEMBERS WHO ARE NOT MEMBERS OF IATP. THE AS SESSEE ALSO PROVIDES ITS SERVICES UNDER BILATERAL SERVICE AGREEMENTS AS WELL AS ON AN AD-HOC 8 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 BASIS WITHOUT ANY AGREEMENTS. THE ASSESSEE RAISED D IRECT INVOICES SPECIFYING THE AMOUNT PAYABLE ON THE BASIS OF ACTUA L USAGE OF SERVICES AS WELL AS THE PERIOD I.E. 30 DAYS WITHIN WHICH SUCH A MOUNT IS PAYABLE. THE ASSESSEE ALSO RECEIVES SERVICE CHARGES DIRECTLY FRO M THE SERVICE RECIPIENTS. THE AGREEMENTS FOR THE PROVISION OF SERVICES WITH C ERTAIN AIRLINES HAVE INBUILT PROVISION FOR TDS AND AUSTRIAN AIRLINES HAV E DEDUCTED TDS TOO. SIMILARLY, AMOUNT RECEIVED FROM AUSTRIAN AIRLINES A ND OTHERS ARE SUBJECTED TO SERVICE TAX. THE AGREEMENT WITH SINGAP ORE AIRLINES HAS INBUILT TERMINATION CLAUSE AS WELL AS PROVISION F OR ANNUAL PRICING REVIEW. THE AGREEMENT WITH SINGAPORE AIRLINES & AU STRIAN AIRLINES ALSO PROVIDES FOR THE SUB-CONTRACT OF THE SERVICES TO KL M. HOWEVER, WHILE THE ASSESSEE CHARGES US DOLLAR 625 & EURO 340 FROM SING APORE & AUSTRIAN AIRLINES RESPECTIVELY FOR ITS SERVICES. THE ASSESSE E ALSO PROMOTED A JV NAMED AIR FRANCE GROUND HANDLING PVT. LTD. WITH INT ERGLOBE TO ASSIST IT IN THE PROVISION OF GROUND HANDLING SERVICES AND PAYS TO THE SAID CONCERN FOR THE SAME. THE ACTIVITIES INVOLVING PROVISION OF SER VICES AND FACILITIES ARE NOT ONLY RESTRICTED TO DELHI BUT HAS ALSO TAKEN COM MERCIAL SPACE AT OTHER AIRPORTS LIKE CHENNAI, BANALORE & MUMBAI AS PER ITS WEBSITE. THUS SERVICES ARE OFFERED AT THESE STATIONS AS WELL. AS EVIDENT FROM THE ABOVE THE BILATERAL AGREEMENTS BETWEEN THE ASSESSEE AND OTHER AIRLINES ARE VARIED BOTH IN TERMS OF THE NATURE AND QUALITY OF SERVICES PROVIDED, SERVICE CHARGES AS WELL AS OTHER SERVICES CONDITIONS AND NO TWO AGREEMENTS ARE IDENTICAL. THE RESULT OF THE ABOVE WELL ORGANIZED, INDEPENDENT AND PARALLEL COMMERCIAL/BUSINESS STRUCTURE IS THE SURE AND CONST ANT INCREASE IN THE REVENUE EARNED FROM THE PROVISION OF SERVICES AND F ACILITIES OVER THE YEARS. THE ASSESSEE IS ALSO A MEMBER OF VARIOUS OTHER POOL S LIKE IATA FUEL QUALITY POOL (IFQP), IATAS SAFETY AUDIT OF GROUND OPERATIONS (ISAGO) WHICH IS AN INTERNATIONALLY RECOGNIZED SYSTEM FOR A SSESSING THE OPERATIONAL MANAGEMENT AND CONTROL SYSTEMS OF AN ORGANIZATION T HAT PROVIDES GROUND HANDLING SERVICES FOR AIRLINES AND EUROPEAN LINE MA INTENANCE ORGANIZATION (ELMO). THE LD. DR RELIED UPON THE DEC ISION OF BRITISH AIRWAYS PLC VS. DCIT (ITA NO. 4653 TO 4655/DEL/1999 , 484 TO 9 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 486/DEL/2000 ORDER DATED 24.09.2001) 2003-TII-23-IT AT-DEL-INTL. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NOTE THAT T HE ASSESSEE COMPANY IS CLAIMED BENEFIT UNDER THE DTAA UNDER ARTICLE 8 OF T HE TREATY, SINCE THE ENTIRE REVENUE RECEIPTS ARE FROM OPERATION OF AIRCR AFT IN INTERNATIONAL TRAFFIC AS PER THE ASSESSEE BEFORE THE ASSESSING OF FICER. THE ASSESSEE ALSO SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THAT TH E INDIAN BRANCH OFFICE IS MERELY A BRANCH OFFICE OF THE FOREIGN COM PANY, WHICH IS ENGAGED IN THE OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC. THERE ARE NO SPECIFIC SERVICES REFERRED BETWEEN THE HEAD OFFICE AND THE B RANCH OFFICE AS PER THE SUBMISSIONS OF THE ASSESSEE. THE ENTIRE RECEIPTS CO LLECTED BY THE BRANCH OFFICE ARE REMITTED TO THE HEAD OFFICE, AFTER MEETI NG THE LOCAL EXPENDITURE AND THE SAID RECEIPT OF THE BRANCH OFFICE ARE FROM THE PUBLIC AT LARGE AND NOT FROM RENDERING OF SERVICES TO THE HEAD OFFICE A S PER THE ASSESSEE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBMIT SOUR CES OF INCOME INCLUDING FROM GROUND HANDLING, FLIGHT MAINTENANCE ETC. AND ASKED TO EXPLAIN THE TAXABILITY OF THE SAME VIS--VIS JUDGME NTS OF THE AUTHORITIES IN THE CASES OF BRITISH AIRWAYS AND LUFTANSA AIRLINES OF THE TRIBUNAL. THE ASSESSEE SUBMITTED THAT DURING THE YEAR UNDER CONSI DERATION AIR FRANCE HAS PROVIDED TECHNICAL HANDLING SERVICES TO OTHER I ATP POOL MEMBERS AGGREGATING TO RS. 1,81,79,476/-. THE SAME IS COVER ED UNDER ARTICLE 8 OF THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEME NT BETWEEN INDIA AND FRANCE (DTAA). THE ASSESSEE FURTHER SUBMITTED THAT IT IS PART AND PARCEL OF THE INCOME COVERED UNDER OPERATION OF AIRCRAFT OF I NTERNATIONAL TRAFFIC. THE TECHNICAL HANDLING SERVICES ARE PROVIDED BY AIR FRA NCE TO ONLY ITAP POOL MEMBERS. THE ASSESSING OFFICER FURTHER ASKED THE FO LLOWING QUERIES: (I) THE NATURE OF TECHNICAL HANDLING SERVICES AND T HE STEPS INVOLVED IN THE SAME? (II) BASIS OF FIGURE OF RS. 1,81,79,476/- (III) TAXABILITY OF THE SAME VIS--VIS DECISIONS OF THE ITAT IN THE CASE OF BRITISH AIRWAYS AND LUFTHANSA AIRLINES AND ALSO TO SHOW CAUSE, WHY THE 10 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 RECEIPTS SHOULD NOT BE TAXED IN INDIA? (IV) THE EXTENT OF TECHNICAL SERVICES PROVIDED TO I TS OWN AIRCRAFTS AND THE AIRCRAFTS OF THE OTHER AIRLINES. THE ASSESSEE PROVIDED THE COPIES OF INVOICES, CONT RACTS FOR TECHNICAL HANDLING TO THE ASSESSING OFFICER. THE ASSESSING OF FICER AFTER GOING THROUGH THE CONTRACTS AND INVOICES OBSERVED THAT TH E SERVICES ARE NOT MENTIONED IN ANNEXURE B OF THE AGREEMENT. THE ASS ESSEE EXPLAINED TECHNICAL HANDLING SERVICES AS NOTHING, BUT VERIFYI NG THE TECHNICAL PARAMETERS OF THE AIRCRAFT, AFTER IT HAS TAKEN A JO URNEY TO VERIFY THAT THE SAME IS IN AN AIRWORTHY AND SAFE CONDITIONS TO FLY AGAIN. SUCH EXAMINATION AIRWORTHINESS CERTIFICATE IS PROVIDED T O THE AIRLINES BY AF BASIS WHICH FLYING IS ALLOWED. THE ASSESSEE IS MEMB ER 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 FACILI TY OR SERVICE HAS BEEN PROVIDED BY ASSESSEE TO ANY NON IATP MEMBER DURING THE YEAR UNDER CONSIDERATION. THE SERVICES AS PER THE STANDARD GRO UND 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 PRIN CIPAL OFFICE AT 45 RUE DE PARIS FORTANASTRASSE : P.O. BOAX 50 95747 ROISSY CDG CEDEX A-1107, VIENNA 11 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 FRANCE AUSTRIA AND HEREINAFTER REFERRED TO AS AND HEREINAFTER R EFERRED 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 LOCATION: DELHI (DEL) IS VALID FROM: APRIL 1* 2006 AND REPLACES: ANNEX B 1 1 VALID FROM APRIL 01,20 05 PREAMBLE THIS ANNEX B IS PREPARED IN ACCORDANCE WITH THE SIM PLIFIED PROCEDURE WHEREBY THE PARTIES AGREE THAT THE TERMS OF THE MAI N AGREEMENT AND ANNEX A OF THE SGHA OF APRIL 1998 AS PUBLISHED BY T HE INTERNATIONAL AIR TRANSPORT ASSOCIATION SHALL APPLY AS IF SUCH TERMS WERE REPEATED HERE IN FULL. BY SIGNING THIS ANNEX B, THE PARTIES CONFIRM THAT T HEY ARE FAMILIAR WITH THE AFOREMENTIONED MAIN AGREEMENT, ANNEX A AND INTERNAT IONAL AIRLINE TECHNICAL POOL RULES. PARAGRAPH 1 SERVICES CONTRACTED 1.1 FOR A SINGLE GROUND HANDLING CONSISTING OF THE ARRIVAL AND THE SUBSEQUENT DEPARTURE AT AGREED TIMINGS OF THE SAME AIRCRAFT, THE HANDLING COMPANY SHALL PROVIDE THE FOLLOWING SERVICES OF ANN EX A AT THE FOLLOWING RATES. 1.1.1 SECTION 2 2.2.1, 2.2.2. SECTION 6 6.3.1, 6.3.2.(A), (B), 6.6.1(C) SECTION 7 7.1.3 SECTION 8 8.1.1., 8.1.2(B), 8.1.4, 8.1.5, 8.1.6, 8.1.9, 8.1.10, 12 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 8.1.11, 8.1.12, 8.2.1, 8.2.2, 8.2.3 SECTION 9 9.1.1, 9.1.2, 9.1.3, 9.1.4 (A), 9B), 9. 2.1 (SEE 1.2), 9.2.2, 9.2.3, 9.2.4, 9.2.5, 9.3.1(B), 9.3.2, 9.3.3 (TO A LIMITED EXTENT). SECTION 14 14.4.2(B5) (IF REQUIRED) AIRCRAFT TYPE / ENGINE TYPE TURNAROUND INSPECTION LINE TRANSIT (GRD. TIME < 5HRS.) A - 330/PW 4168 A-340/CFM56 EUROS 340 EUROS 340 1.2 SERVICE 9.2.1 IS LIMITED TO A MAXIMUM OF 2 MAN- HOUR ADDITIONAL WORK BEYOND THE PROVISION INCLUDED IN THE FLAT RATE WILL BE CHARGED AT EUROS 84 PER MAN-HOUR. NOW WE ARE QUOTING THE RELEVANT ARTICLE 8 OF DTAA B ETWEEN INDIA AND FRANCE AS FOLLOWS: ARTICLE 8 AIR TRANSPORT 1. PROFITS DERIVED BY AN ENTERPRISE OF A CONTRACTIN G STATE FROM THE OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC SHAL L BE TAXABLE ONLY IN THAT CONTRACTING STATE. 2. THE PROVISIONS OF PARAGRAPH 1 SHALL ALSO APPLY T O PROFITS FROM THE PARTICIPATION IN A POOL, A JOINT BUSINESS OR AN INT ERNATIONAL OPERATING AGENCY. 3. FOR THE PURPOSE OF THIS ARTICLE, INTEREST ON FUN DS CONNECTED WITH THE OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC SHAL L BE REGARDED AS PROFITS DERIVED FROM THE OPERATION OF SUCH AIRCRAFT, AND TH E PROVISIONS OF ARTICLE 12 SHALL NOT APPLY IN RELATION TO SUCH INTE REST. 4. THE TERM OPERATION OF AIRCRAFT SHALL MEAN BUSI NESS OF TRANSPORTATION BY AIR OF PASSENGERS, MAIL, LIVESTOCK OR GOODS CARR IED ON BY THE OWNERS OR LESSEES OR CHARTERERS OF AIRCRAFT, INCLUD ING THE SALE OF TICKETS FOR SUCH TRANSPORTATION ON BEHALF OF OTHER ENTERPRI SES, THE INCIDENTAL LEASE OF AIRCRAFT AND ANY OTHER ACTIVITY DIRECTLY C ONNECTED WITH SUCH TRANSPORTATION. THE REVENUE CONTENDED THAT THE ASSESSEE PROVIDES IT S SERVICES BOTH TO AIRLINES WHO ARE MEMBERS OF IATA/IATP AS WELL AS ME MBERS WHO ARE NOT 13 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 MEMBERS OF IATP. THE LD. DR POINTED OUT THAT THE AS SESSEE DOES NOT RECEIVE ANY RECIPROCAL SERVICES IN INDIA AND CONSIDERING TH E SCALE OF ACTIVITIES BOTH INSIDE INDIA AS WELL AS OUTSIDE AND THE COLLABORATI ONS WITH KLM & AIR FRANCE GROUND HANDLING PVT. LTD. TO PROVIDE THE SER VICES AND FACILITIES, IT CAN BE SAFELY CONCLUDED THAT IT IS AN INDEPENDENT C OMMERCIAL 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 AS SESSING OFFICER WAS RIGHT IN REJECTING THE CLAIM OF THE ASSESSEE UNDER ARTICLE 8 OF THE DTAA BETWEEN INDIA AND FRANCE. WHILE GOING THROUGH THE SUBMISSIONS OF BOTH THE PAR TIES, IT IS PERTINENT TO NOTE THE RELEVANT POINTS OF THE DECISI ON IN CASE OF THE HONBLE HIGH COURT IN CASE OF DIT VS. KLM ROYAL DUTCH AIRLI NES & LUFTHANSA GERMAN AIRLINES (2017) 392 ITR 218 (DEL.) WHEREIN W HILE DISMISSING THE APPEALS, THE HONBLE HIGH COURT HELD THAT THE ASSES SEE PARTICIPATED IN THE INTERNATIONAL AIRLINES TECHNICAL POOL AND EARNED CE RTAIN REVENUES FROM SUCH ACTIVITIES AND ALSO INCURRED EXPENDITURE. THERE WAS CLEAR RECIPROCITY AS TO THE EXTENSION OF SERVICES; MEMBERSHIP WAS PREMISED UPON EACH PARTICIPATING MEMBER BEING ABLE TO PROVIDE FACILITI ES FOR WHICH IT WAS FORMED. AS THERE WAS RECIPROCITY IN THE RENDERING A ND AVAILING OF SERVICES, THERE WAS CLEARLY PARTICIPATION IN THE POOL; IN TER MS OF TWO DOUBLE TAXATION AVOIDANCE AGREEMENTS (BETWEEN INDIA AND GERMANY AND BETWEEN INDIA AND THE NETHERLANDS) THE PROFITS FROM SUCH PARTICIPATIO N WERE NOT TAXABLE IN INDIA. WHILE DISTINGUISHING THE BRITISH AIRWAYS (SU PRA) THE HONBLE HIGH COURT IN CASE OF KLM ROYAL DUTCH AIRLINES & LUFTHAN SA GERMAN AIRLINES (SUPRA) EXTRACTED THE TRIBUNALS DECISION AS FOLLOW S IN PARA 31: : (I) BRITISH AIRWAYS PROVIDED ENGINEERING AND GROUND HAN DLING SERVICES AT IGI AIRPORT, NEW DELHI TO 11 OTHER AIRLINES, AT CHENNAI TO 5 OTHER AIRLINES AND CERTAIN OTHER AIRLINES AT MUMBAI. IT H AS NOT AVAILED ANY SERVICES/FACILITIES FROM ANY AIRLINES IN INDIA. THU S, THERE WAS NO 14 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 RECIPROCITY IN THE AGREEMENT ENTERED INTO BETWEEN B RITISH AIRWAYS AND OTHER AIRLINES ; (II) BRITISH AIRWAYS HAD A SEPARATE ESTABLISHMENT AND SE PARATE OFFICE SET UP TO MONITOR GROUND HANDLING SERVICES AND DIFF ERENT ESTABLISHMENT AT INTERNATIONAL AIRPORTS NEW DELHI D ID NOT FORM PART AND PARCEL OF THE OPERATION OF BRITISH AIRWAYS PERT AINING TO THE OPERATION OF AIRCRAFTS IN INTERNATIONAL TRAFFIC. TH ERE IS NO SUCH FINDING IN THE PRESENT APPEALS. (III) BRITISH AIRWAYS SERVICES AND FACILITIES IN INDIA T O THE OTHER AIRLINES WAS A COMMERCIAL ACTIVITY. THE EXCESS/IDLE CAPACITY WAS PROVIDED TO VARIOUS AIRLINES AT A PRICE. THE SERVICES PROVIDED IN TERMS OF THE IATP MANUAL ARE NOT BASED ON ANY CONSIDERATION PAID OR R ECEIVED ; A SYSTEM OF CREDITS HAS BEEN CREATED FOR IATP MEMBERS . (IV) BRITISH AIRWAYS HAS A BRANCH OFFICE IN INDIA, WHICH CONSTITUTED A PERMANENT ESTABLISHMENT (PE) IN INDIA, AND, THERE FORE, THE INCOME DERIVED FROM PERMANENT ESTABLISHMENT IN INDIA WAS T AXABLE AS THE SAME WAS NOT COVERED UNDER THE DOUBLE TAXATION AVOI DANCE AGREEMENT. (V) ARTICLE 8(2) OF THE DOUBLE TAXATION AVOIDANCE AGREE MENT BETWEEN INDIA AND UK PROVIDED THAT PARAGRAPH 1 OF ARTICLE 8 SHALL LIKEWISE APPLY IN RESPECT OF PARTICIPATION IN POOLS OF ANY K IND. THE WORDS POOLS OF ANY KIND WAS INTERPRETED BY THE INCOME-T AX APPELLATE TRIBUNAL BY TAKING THE DICTIONARY MEANING OF THE WO RD POOL. THESE ARE MISSING IN THE TWO THE DOUBLE TAXATION AVOIDANC E AGREEMENTS IN QUESTION. (VI) ARTICLE 8(3) OF THE DOUBLE TAXATION AVOIDANCE AGREE MENT BETWEEN INDIA AND UK PROVIDED THAT THE TERMS OPERATION OF AIRCRAFT SHALL INCLUDE 3. FOR THE PURPOSES OF THIS ARTICLE THE T ERM OPERATION OF AIRCRAFT SHALL INCLUDE TRANSPORTATION BY AIR OF PE RSONS, LIVE-STOCK, GOODS OR MAIL, CARRIED ON BY THE OWNERS OR LESSEES OR CHARTERERS OF AIRCRAFT, INCLUDING THE SALE OF TICKETS FOR SUCH TR ANSPORTATION ON BEHALF OF OTHER ACTIVITY DIRECTLY CONNECTED WITH SU CH TRANSPORTATION. THESE TERMS ARE NOT PRESENT IN THE TWO DOUBLE TAXAT ION AVOIDANCE AGREEMENTS IN THE PRESENT SET OF APPEALS. (VII) AFTER MEETING THE REQUIREMENT OF ITS OWN FLIGHTS, T HE SERVICES OF EMPLOYEES WERE REQUIRED FOR HANDLING OTHER AIRLINES OPERATION FOR GENERATING INCOME. 15 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 HAVING REGARD TO THESE FACTS, THIS COURT IS OF OPIN ION THAT THE AMPLIFICATION OF THE TERM OPERATION OF AIRCRAFT IN ARTICLE 8(1) THROUGH ARTICLE 8(3), I.E., .. 3. FOR THE PURPOSES OF THIS ARTICLE THE TERM OPERA TION OF AIRCRAFT SHALL INCLUDE TRANSPORTATION BY AIR OF PERSONS, LIVE-STOC K, GOODS OR MAIL, CARRIED ON BY THE OWNERS OR LESSEES OR CHARTERERS OF AIRCRA FT, INCLUDING THE SALE OF TICKETS FOR SUCH TRANSPORTATION ON BEHALF OF OTHER ENTERPRISE, THE INCIDENTAL LEASE OR AIRCRAFT ON A CHARTER BASIS AND ANY OTHER ACTIVITY DIRECTLY CONNECTED WITH SUCH TRANSPORTATION HAD THE EFFEC T OF LIMITING THE NATURE OF ACTIVITIES THAT COULD BE COMPREHENDED IN THE POO L ENVISIONED IN ARTICLE 8(2); IN OTHER WORDS, THE EXPANDED MEANING OF OPERA TION OF AIRCRAFT INCLUDED THOSE ACTIVITIES IN ARTICLE 8(3) THROUGH T HE EXTENDED DEFINITION AND NO MORE. ON THE OTHER HAND, THERE IS NO SUCH LIMITA TION IN THE DOUBLE TAXATION AVOIDANCE AGREEMENTS IN QUESTION, IN THESE CASES. THIS CONSTITUTED THE MOST SIGNIFICANT DIFFERENCE BETWEEN THE TWO SETS OF CASES ON THE ONE HAND, AND BRITISH AIRWAYS (SUPRA) ON THE OTHER. FOR THESE REASONS, THIS COURT REJECTS THE REVENUES CONTENTIO NS. IN THE PRESENT CASE FROM THE RECORDS, IT CAN BE SEE N THAT THE INDIAN BRANCH OFFICE IS MERELY A BRANCH OFFICE OF THE FORE IGN/ASSESSEE COMPANY, WHICH IS ENGAGED IN THE OPERATION OF AIRCRAFT IN IN TERNATIONAL TRAFFIC. THERE ARE NO SPECIFIC SERVICES REFERRED BETWEEN THE HEAD OFFICE AND THE BRANCH OFFICE AS PER THE SUBMISSIONS OF THE ASSESSEE WHICH APPEARS TO BE CORRECT AND NO DISTINGUISHING FACTS WERE BROUGHT ON RECORD BY THE REVENUE BEFORE US. THE ENTIRE RECEIPTS COLLECTED BY THE BRANCH OFF ICE ARE REMITTED TO THE HEAD OFFICE, AFTER MEETING THE LOCAL EXPENDITURE AN D THE SAID RECEIPT OF THE BRANCH OFFICE ARE FROM THE PUBLIC AT LARGE AND NOT FROM RENDERING OF SERVICES TO THE HEAD OFFICE. THUS, THE ASSESSEE COM PANY IS NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA. THEREFORE, THE OB SERVATION OF THE ASSESSING OFFICER THAT THE ASSESSEE COMPANY IS HAVI NG PERMANENT ESTABLISHMENT IN INDIA AND HENCE INCOME ARRIVED IN INDIA IS TAXABLE, IS NOT CORRECT FINDING ACCORDING TO THE FACTS ON RECORD. F URTHER, FROM THE PERUSAL OF THE SUBMISSIONS OF BOTH THE PARTIES AND AFTER GOING THROUGH THE INTERNATIONAL AIRLINES TECHNICAL POOL (IATP) AGRE EMENT ALONG WITH THE STANDARD HANDLING AGREEMENT IN CONSONANCE WITH THE DTAA BETWEEN INDIA AND FRANCE, IT CAN BE SEEN THAT THE ASSESSEE COMPAN Y IS A MEMBER OF IATP AND THE SERVICES PROVIDED BY THE ASSESSEE COMPANY T O THE RELEVANT AIR 16 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 COMPANIES WERE ALSO THE MEMBER OF THE IATP. THERE I S NO DISPUTE ON THIS ASPECT BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER THOUGH THE LD. DR IS CONTENDING CONTRARY THAT SOME OF THE AIRLINES WH OM 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 IAT P MANUAL, IT IS EVIDENTLY CLEAR THAT THERE IS NO BAR ON MEMBER AIRLINE TO PRO VIDE 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 T O THEM. THUS THE SUBMISSION OF THE LD. DR IS FACTUALLY INCORRECT. NO W COMING TO THE DTAA BETWEEN INDIA AND FRANCE, IT CAN BE SEEN THAT ARTIC LE 8(2) SPECIFICALLY MENTIONS THAT THE DTAA WILL APPLY TO THE PROFITS DE RIVED 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 INTERNATIONAL OPERATING AGENCY AND SHALL BE TAXABLE ONLY IN THAT CONTRACTING STATES. IN THE PRESENT CASE, THE CONTRACTING STATE IS FRANCE A ND THOUGH UNDER DOMESTIC LAW THE ASSESSEE HAS TO PAY TAX IN INDIA W HILE DERIVING INCOME FROM INDIAN TERRITORY, YET BECAUSE OF ARTICLE 8(2) OF THE DTAA AGREEMENT, AIR FRANCE IS EXEMPTED TO PAY ANY TAX IN INDIA AS I TS SERVICES/ACTIVITIES AND PROFIT THEREOF DERIVES FROM POOL PARTICIPATION. THE HONBLE HIGH COURT IN CASE OF KLM ROYAL DUTCH AIRLINES & LUFTHANSA GER MAN AIRLINES (SUPRA) CLEARLY SET OUT HOW THE FACTS OF THE BRITISH AIRWAY S ARE DISTINGUISHABLE. IN THE PRESENT CASE, AS WELL THE RATIO LAID DOWN IN BR ITISH AIRWAYS WILL NOT BE APPLICABLE, AS THE ASSESSEE COMPANY IS A MEMBER OF IATP AND THE DTAA BETWEEN INDIA & FRANCE CLEARLY SET OUT THAT THOSE W HO ARE MEMBERS OF POOL ARE EXEMPT FROM TAX IN INDIA. THUS, THE ASSESSING O FFICER WAS NOT RIGHT IN REJECTING THE CLAIM OF THE ASSESSEE THAT PROFIT FRO M TECHNICAL HANDLING SERVICES IS COVERED BY ARTICLE 8 AND IN TREATING T HE TECHNICAL INCOME AS FEE FOR TECHNICAL SERVICES AT RS. 1,81,79,476/- C OVERED U/S 115A READ WITH SECTION 44D AND TAXED THE SAME AT 20% OF THE G ROSS RECEIPTS. THE CIT(A) RIGHTLY HELD THAT THE ASSESSEES INCOME FROM GROUND HANDLING AND TECHNICAL HANDLING SERVICES IS COVERED BY ARTICLE 8 OF THE INDO-FRENCH DTAA. BUT THE CIT(A) FURTHER HELD THAT INCOME EARNE D FROM RENDERING 17 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 SERVICE TO IBERWORLD A NON IATP MEMBER AMOUNTING TO RS. 3,70,098 WOULD BE TAXED UNDER ARTICLE 7, THAT IS WHAT CHALLENGED B EFORE US BY THE ASSESSEE. THE IATP MANUAL CLEARLY SET OUT THAT THER E 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 ASSESSEE BEING A POOL MEMBER AND PROVIDING SERVICE IN THAT CAPACITY TO THE GUEST MEM BERS COMES UNDER THE PURVIEW OF ARTICLE 8(2) OF THE DTAA BETWEEN INDIA A ND FRANCE. THEREFORE, THE CIT(A) WAS NOT RIGHT IN SUSTAINING THE TAXABILITY T O THE EXTENT OF RS. 3,70,098 UNDER ARTICLE 7 OF THE DTAA. THUS, APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN RESULT, APPEAL BEING ITA NO. 1786/DEL/2012 FI LED BY THE ASSESSEE IS ALLOWED AND APPEAL BEING ITA NO. 2212/DEL/2012 FILE D BY THE REVENUE IS DISMISSED. 10. NOW WE ARE TAKING UP GROUNDS OF APPEAL FOR A.Y. 2004-05 AND 2005-06 I.T.A. NO. 5008/DEL/2011 THE ASSESSMENT ORDER DATED 04/10/2011 AS CONFIRMED BY THE DISPUTE RESOLUTION PANEL VIDE ITS ORDER DATED 02/08/2011 WH EREIN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT 12,89,056/- IS BE ING CHALLENGED TO BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 253 OF THE ACT, ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER PASSED U/S 143(3), AS DIRECTED UN DER SECTION 144C(13) HAS BEEN PASSED WITHOUT APPRECIATING THE TRUE AND C ORRECT FACTS AND THE LEGAL POSITION OF THE INSTANT CASE. 2. THAT THE ORDER PASSED U/S 143(3) ALONG WITH SECT ION 144C(13) IS TIME BARRED IN AS MUCH AS THE ORDER HAS BEEN RECEIVED ON 17-10-2011 BY THE APPELLANT COMPANY, WHICH IS BEYOND THE PERIOD OF ON E MONTH AS ENVISAGED UNDER THE PROVISIONS OF SECTION 144C(13) AND TO THA T EXTENT IS BAD IN LAW. 3. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX HA S WRONGLY ASSUMED 18 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 JURISDICTION U/S 148 OF THE INCOME TAX IN AS MUCH T HERE WAS NO REASON BELIEVE THAT THERE HAS BEEN INCOME ESCAPING ASSESSM ENT WITHIN THE MEANING OF SECTION 147. 4. THAT THE ASSESSEE OBJECTS TO THE PASSING OF THE ORDER U/S 148 READ WITH SECTION 143(3) OF THE ACT AS THERE WAS NO FRESH MAT ERIAL ON RECORD BY VIRTUE OF WHICH IT COULD BE SAID THAT THERE HAS BEEN INCOM E ESCAPING ASSESSMENT WITHIN THE MEANING OF SECTION 147. 5. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX, I N THE ASSESSMENT ORDER AS PER DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL HAVE FAILED TO APPRECIATE THE TRUE AND CORRECT FACTS AND CIRCUMSTA NCES OF THE CASE OF THE APPELLANT AND HAS FRAMED AN ASSESSMENT BY MAKING AD DITIONS ON A ISSUE WHICH IS ALREADY COVERED IN FAVOUR OF THE APPELLANT COMPANY BY THE JUDGMENT OF THIS HONBLE ITAT IN CASE OF LUFTANSA G ERMAN AIRLINES REPORTED IN 90 ITD PAGE 310 AS ALSO THE CASE OF KLM ROYAL DUTCH AIRLINES. 6. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS GROSSLY ERRED IN HOLDING THAT THE INCOME BY WAY OF ADJUSTMENT OF BOOK ENTRIES IS LIABLE TO BE TAXED IN INDIA. 7. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS FAILED TO APPRECIATE THE FACT THAT THE INCOME EARNE D FROM TECHNICAL HANDLING WAS COVERED BY THE DOUBLE TAXATION AVOIDANCE AGREEM ENT BETWEEN INDIA AND FRANCE AND AS SUCH WAS EXEMPT INCOME AND COULD NOT HAVE BEEN BROUGHT TO TAX IN INDIA. 8. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN THE ASSESSMENT ORDER HAS GROSSLY ERRED IN NOT APPRECIATING THE FACT THAT THE CASE OF THE APPELLANT IS PARI-MATRIA TO THE CASE OF LUFTHANSA GERMAN AIRW AYS AND TOTALLY DISTINGUISHABLE FROM THE FACTS AND CIRCUMSTANCES OF THE CASE OF BRITISH AIRWAYS PIC. AND HAS TOTALLY IGNORED AND BRUSHED AS IDE THE REPLIES AND DETAILS FILED BY THE APPELLANT IN THIS REGARD. 9. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS GROSSLY ERRED IN RELYING UPON THE JUDGMENT OF THE H ONBLE TRIBUNAL IN THE CASE OF BRITISH AIRWAYS PIC WHICH JUDGMENT IN ANY C ASE IS TOTALLY DISTINGUISHABLE FROM THE FACTS AND CIRCUMSTANCES OF THE APPELLANT COMPANY 19 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 AND COMPLETELY INAPPLICABLE TO THE FACTS AND CIRCUM STANCES OF THE APPELLANT. 10. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX H AS GROSSLY ERRED IN NOT APPRECIATING THE COMMENTARY OF OECD RELIED U PON BY THE APPELLANT AND HAS FURTHER ERRED IN OBSERVING THAT OECD COMMEN TARY IS NOT BINDING ON INDIA AS INDIA IS NOT A MEMBER OF OECD. IN THE P ROCESS HAS IGNORED VARIOUS JUDGMENTS AND PRONOUNCEMENTS PASSED BY VARI OUS COURTS UPHOLDING THE CONTRARY VIEW OF THE COURTS AND OTHER APPELLATE AUTHORITIES ON THE ISSUE. 11. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX I N ASSESSMENT ORDER HAS GROSSLY ERRED IN NOT APPRECIATING THAT OE CD COMMENTARY IS THE GUIDING PRINCIPAL FOR INDIAN COURT AS HAS BEEN HELD IN THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT COMPANY . 12. THAT THE ADDL. DIRECTOR OF INCOME TAX HAS GROSS LY ERRED IN INTERPRETING THE PROVISIONS OF THE DTAA IN A VERY N ARROW AND ONE SIDED MANNER CONTRARY TO VARIOUS JUDGMENTS AND PRONOUNCEM ENTS BY VARIOUS COURTS ON SIMILAR ISSUE. 13. THE LEARNED ADDL. DIRECTOR HAS COMPLETELY MISRE AD AND MISUNDERSTOOD THE PROVISIONS OF ARTICLE-8(1), ARTIC LE-8(1), ARTICLE-8(3) AND ARTICLE - 8(4) OF DTAA BETWEEN INDIA FRANCE AND HAS GROSSLY ERRED IN APPLYING THE SAME TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT COMPANY. 14. THAT LEARNED ADDL. DIRECTOR IN ASSESSMENT ORDE R HAS GROSSLY ERRED IN CONCLUDING THAT POOL ACTIVITY OF AIRLINES IS NOT PART OF OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC. 15. THAT THE LEARNED ADDL. DIRECTOR HAS COMPLETELY IGNORED THE FACT THAT ONLY REVENUE POOL ENVISAGED IN THE AVIATION IN DUSTRY WHICH AFFECTS THE APPELLANT COMPANY IS IATP POOL. THAT TOO IS DULY RE COGNIZED AND COVERED UNDER ARTICLE 8 OF DTAA AND INCOME ARISING THERE FR OM IS EXEMPT FROM TAXATION IN INDIA. 16. THAT THE LEARNED ADDL. DIRECTOR AND THE DISPUT E RESOLUTION PANEL 20 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 HAS GROSSLY ERRED IN PROPOSING TO TAX REVENUE EARNE D BY THE APPELLANT UNDER THE PROVISIONS OF ARTICLE 7 OF THE DTAA BETWE EN INDIA & FRANCE. ALTHOUGH THE SAME IS COVERED UNDER ARTICLE 8 OF THE DTAA. 17. THAT THE LEARNED ADDL. DIRECTOR IN THE ASSESSM ENT ORDER NOTWITHSTANDING AND WITHOUT PREJUDICE HAS GROSSLY E RRED IN ESTIMATING EXPENSES INCURRED AT 40% OF THE EARNINGS AND WHICH IN ANY CASE IS WITHOUT ANY BASIS AND IS COMPLETELY ARBITRARY. 18. THAT THE LEARNED ADDL. DIRECTOR HAS GROSSLY ER RED IN TREATING THE INCOME, FROM TECHNICAL HANDLING ACCRUING TO THE APP ELLANT DURING THE YEAR UNDER CONSIDERATION, AS BEING COVERED UNDER ARTICLE 7 WHILE AS IN THE A.Y 2007-08 YEAR THE SAME HAD BEEN TAXED BY THE VERY SA ME ASSESSING OFFICER UNDER ARTICLE 13 OF THE DTAA AS FEES FOR TE CHNICAL SERVICE. 19. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS GROSSLY ERRED IN INITIATING PENALTY PROCE EDINGS U/S 271 (1) (C). 20. THAT THE LEARNED ADDL. COMMISSIONER HAS IN ASS ESSMENT ORDER GROSSLY ERRED IN CHARGING INTEREST U/S 234 OF THE I NCOME TAX ACT. 21. THAT THE APPELLANT MAY ADD, ALTER, AND AMEND AN Y OF IF SO REQUIRED. ITA NO. 5009/DEL/2011 THE ASSESSMENT ORDER DATED 04/10/2011 AS CONFIRMED BY THE DISPUTE RESOLUTION PANEL VIDE ITS ORDER DATED 02/08/2011 WH EREIN THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT 12,89,056/- IS BE ING CHALLENGED TO BY THE ASSESSEE UNDER THE PROVISIONS OF SECTION 253 OF THE ACT, ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER PASSED U/S 143(3), AS DIRECTED UN DER SECTION 144C(13) HAS BEEN PASSED WITHOUT APPRECIATING THE TRUE AND C ORRECT FACTS AND THE LEGAL POSITION OF THE INSTANT CASE. 2. THAT THE ORDER PASSED U/S 143(3) ALONG WITH SECT ION 144C(13) IS TIME BARRED IN AS MUCH AS THE ORDER HAS BEEN RECEIVED ON 17-10-2011 BY THE APPELLANT COMPANY, WHICH IS BEYOND THE PERIOD OF ON E MONTH AS ENVISAGED UNDER THE PROVISIONS OF SECTION 144C(13) AND TO THA T EXTENT IS BAD IN LAW. 3. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX HA S WRONGLY ASSUMED 21 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 JURISDICTION U/S 148 OF THE INCOME TAX IN AS MUCH T HERE WAS NO REASON BELIEVE THAT THERE HAS BEEN INCOME ESCAPING ASSESSM ENT WITHIN THE MEANING OF SECTION 147. 4. THAT THE ASSESSEE OBJECTS TO THE PASSING OF THE ORDER U/S 148 READ WITH SECTION 143(3) OF THE ACT AS THERE WAS NO FRESH MAT ERIAL ON RECORD BY VIRTUE OF WHICH IT COULD BE SAID THAT THERE HAS BEEN INCOM E ESCAPING ASSESSMENT WITHIN THE MEANING OF SECTION 147. 5. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX, I N THE ASSESSMENT ORDER AS PER DIRECTIONS ISSUED BY THE DISPUTE RESOLUTION PANEL HAVE FAILED TO APPRECIATE THE TRUE AND CORRECT FACTS AND CIRCUMSTA NCES OF THE CASE OF THE APPELLANT AND HAS FRAMED AN ASSESSMENT BY MAKING AD DITIONS ON A ISSUE WHICH IS ALREADY COVERED IN FAVOUR OF THE APPELLANT COMPANY BY THE JUDGMENT OF THIS HONBLE ITAT IN CASE OF LUFTANSA G ERMAN AIRLINES REPORTED IN 90 ITD PAGE 310 AS ALSO THE CASE OF KLM ROYAL DUTCH AIRLINES. 6. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS GROSSLY ERRED IN HOLDING THAT THE INCOME BY WAY OF ADJUSTMENT OF BOOK ENTRIES IS LIABLE TO BE TAXED IN INDIA. 7. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS FAILED TO APPRECIATE THE FACT THAT THE INCOME EARNE D FROM TECHNICAL HANDLING WAS COVERED BY THE DOUBLE TAXATION AVOIDANCE AGREEM ENT BETWEEN INDIA AND FRANCE AND AS SUCH WAS EXEMPT INCOME AND COULD NOT HAVE BEEN BROUGHT TO TAX IN INDIA. 8. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN THE ASSESSMENT ORDER HAS GROSSLY ERRED IN NOT APPRECIATING THE FACT THAT THE CASE OF THE APPELLANT IS PARI-MATRIA TO THE CASE OF LUFTHANSA GERMAN AIRW AYS AND TOTALLY DISTINGUISHABLE FROM THE FACTS AND CIRCUMSTANCES OF THE CASE OF BRITISH AIRWAYS PIC. AND HAS TOTALLY IGNORED AND BRUSHED AS IDE THE REPLIES AND DETAILS FILED BY THE APPELLANT IN THIS REGARD. 9. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS GROSSLY ERRED IN RELYING UPON THE JUDGMENT OF THE H ONBLE TRIBUNAL IN THE CASE OF BRITISH AIRWAYS PIC WHICH JUDGMENT IN ANY C ASE IS TOTALLY DISTINGUISHABLE FROM THE FACTS AND CIRCUMSTANCES OF THE APPELLANT COMPANY 22 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 AND COMPLETELY INAPPLICABLE TO THE FACTS AND CIRCUM STANCES OF THE APPELLANT. 10. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX H AS GROSSLY ERRED IN NOT APPRECIATING THE COMMENTARY OF OECD RELIED U PON BY THE APPELLANT AND HAS FURTHER ERRED IN OBSERVING THAT OECD COMMEN TARY IS NOT BINDING ON INDIA AS INDIA IS NOT A MEMBER OF OECD. IN THE P ROCESS HAS IGNORED VARIOUS JUDGMENTS AND PRONOUNCEMENTS PASSED BY VARI OUS COURTS UPHOLDING THE CONTRARY VIEW OF THE COURTS AND OTHER APPELLATE AUTHORITIES ON THE ISSUE. 11. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX I N ASSESSMENT ORDER HAS GROSSLY ERRED IN NOT APPRECIATING THAT OE CD COMMENTARY IS THE GUIDING PRINCIPAL FOR INDIAN COURT AS HAS BEEN HELD IN THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT COMPANY . 12. THAT THE ADDL. DIRECTOR OF INCOME TAX HAS GROSS LY ERRED IN INTERPRETING THE PROVISIONS OF THE DTAA IN A VERY N ARROW AND ONE SIDED MANNER CONTRARY TO VARIOUS JUDGMENTS AND PRONOUNCEM ENTS BY VARIOUS COURTS ON SIMILAR ISSUE. 13. THE LEARNED ADDL. DIRECTOR HAS COMPLETELY MISRE AD AND MISUNDERSTOOD THE PROVISIONS OF ARTICLE-8(1), ARTIC LE-8(1), ARTICLE-8(3) AND ARTICLE - 8(4) OF DTAA BETWEEN INDIA FRANCE AND HAS GROSSLY ERRED IN APPLYING THE SAME TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT COMPANY. 14. THAT LEARNED ADDL. DIRECTOR IN ASSESSMENT ORDE R HAS GROSSLY ERRED IN CONCLUDING THAT POOL ACTIVITY OF AIRLINES IS NOT PART OF OPERATION OF AIRCRAFT IN INTERNATIONAL TRAFFIC. 15. THAT THE LEARNED ADDL. DIRECTOR HAS COMPLETELY IGNORED THE FACT THAT ONLY REVENUE POOL ENVISAGED IN THE AVIATION IN DUSTRY WHICH AFFECTS THE APPELLANT COMPANY IS IATP POOL. THAT TOO IS DULY RE COGNIZED AND COVERED UNDER ARTICLE 8 OF DTAA AND INCOME ARISING THERE FR OM IS EXEMPT FROM TAXATION IN INDIA. 16. THAT THE LEARNED ADDL. DIRECTOR AND THE DISPUT E RESOLUTION PANEL 23 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 HAS GROSSLY ERRED IN PROPOSING TO TAX REVENUE EARNE D BY THE APPELLANT UNDER THE PROVISIONS OF ARTICLE 7 OF THE DTAA BETWE EN INDIA & FRANCE. ALTHOUGH THE SAME IS COVERED UNDER ARTICLE 8 OF THE DTAA. 17. THAT THE LEARNED ADDL. DIRECTOR IN THE ASSESSM ENT ORDER NOTWITHSTANDING AND WITHOUT PREJUDICE HAS GROSSLY E RRED IN ESTIMATING EXPENSES INCURRED AT 40% OF THE EARNINGS AND WHICH IN ANY CASE IS WITHOUT ANY BASIS AND IS COMPLETELY ARBITRARY. 18. THAT THE LEARNED ADDL. DIRECTOR HAS GROSSLY ER RED IN TREATING THE INCOME, FROM TECHNICAL HANDLING ACCRUING TO THE APP ELLANT DURING THE YEAR UNDER CONSIDERATION, AS BEING COVERED UNDER ARTICLE 7 WHILE AS IN THE A.Y 2007-08 YEAR THE SAME HAD BEEN TAXED BY THE VERY SA ME ASSESSING OFFICER UNDER ARTICLE 13 OF THE DTAA AS FEES FOR TE CHNICAL SERVICE. 19. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS GROSSLY ERRED IN INITIATING PENALTY PROCE EDINGS U/S 271 (1) (C). 20. THAT THE LEARNED ADDL. DIRECTOR OF INCOME TAX IN ASSESSMENT ORDER HAS GROSSLY ERRED IN INITIATING PENALTY PROCE EDINGS U/S 271A AND 271B. 21. THAT THE LEARNED ADDL. COMMISSIONER HAS IN ASSE SSMENT ORDER GROSSLY ERRED IN CHARGING INTEREST U/S 234 OF THE I NCOME TAX ACT. 21. THAT THE APPELLANT MAY ADD, ALTER, AND AMEND AN Y OF IF SO REQUIRED. 11. THE FACTS FOR BOTH THE ASSESSMENT YEARS 2004-05 AND 2005-06 ARE IDENTICAL, THEREFORE, WE ARE FIRSTLY TAKING UP ITA NO. 5008/DEL/2011. THE ASSESSEE RENDERS TECHNICAL AND ENGINEERING HANDLING SERVICES TO OTHER AIR LINES OVER AND ABOVE ITS REGULAR AIR TRANSPORTATION BUSINESS. ENGINEERING AND TECHNICAL HANDLING SERVICES ARE RENDERED BY THE ASSESSEE THROUGH ITS ENGINEERS TO OTHER AIRLINES. THE ASSESSING OFFICER HELD THAT THESE SERVICES ARE NOT COVERED UNDER THE HEAD AIR TRANSPORT BUSINE SS AND, THEREFORE, THE INCOME OF THE ASSESSEE IS NOT COVERED UNDER ARTICLE 8 OF INDO-FRENCH DTAA. THE ASSESSING OFFICER ALSO HELD THAT THE ACTIVITY I S NOT A COOL ACTIVITY. THE ASSESSING OFFICER FURTHER HELD THAT THE TERM BILL A ND JOINT BUSINESS ARE ONLY RELATED TO PRESERVATION OF PASSENGER AND GOODS TRAN SPORT AND BY NO MEANS 24 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 COVERER SEPARATE BUSINESS ACTIVITIES. THE ASSESSEE FILED OBJECTIONS TO THE DRAFT ORDER ON 24/1/2011. THE DRP VIDE ORDER DATED 2/8/2011 PASSED DIRECTION U/S 144C(5) OF THE INCOME TAX ACT, 1961 T HEREBY DISPOSING OF THE OBJECTIONS OF THE ASSESSEE. VIDE ASSUMPTION ORDER DATED 4/10/2011. THE ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSE E THAT PROFIT FROM TECHNICAL HANDLING SERVICES IS COVERED BY ARTICLE 8 . THE ASSESSING OFFICER HELD THAT SINCE ASSESSEE HAS A PERMANENT ESTABLISHM ENT IN INDIA PROFITS OF ASSESSEE ARE TAXABLE IN INDIA. THE ASSESSING OFFIC ER FURTHER HELD THAT FEES FOR TECHNICAL SERVICES ARE EFFECTIVELY CONNECTED WITH THE PERMANENT ESTABLISHMENT AS THE SERVICES ARE BEING RENDERED BY PERSONAL LOCATED IN INDIA, PROVISIONS OF ARTICLE 7 OF THE DTAA ARE APPL ICABLE AND THUS INCURRING OF EXPENSES IS COMPUTED ON ESTIMATED BASIS AS WAS D ONE IN 2007-08 & 2008-09 AT 60% OF GROSS RECEIPTS OF RS.21,48,427/- FROM OTHER AIRLINES ON ACCOUNT OF MAINTENANCE AND TECHNICAL SERVICES WHICH AMOUNTS TO RS.12,089,56/- FOR ASSESSMENT YEAR 2004-05 AND RS. 34,63,105/- FOR ASSESSMENT YEAR 2005-06. 12. DURING THE COURSE OF ARGUMENTS, THE ASSESSEE AR GUED ASSESSMENT YEAR 2006-07 FIRSTLY WHICH IS DEALT ON MERIT HEREIN ABOVE PARAS AND THEREAFTER ARGUED ASSESSMENT YEAR 2004-05 & 2005-06 . THE LD. AR HAS NOT PRESSED GROUND NO. 2 FOR A.Y. 2004-05 AND 2005-06 I N BOTH THESE APPEALS. THEREFORE, GROUND NO. 2 IN BOTH THE APPEALS FOR A.Y . 2004-05 AND 2005-06 ARE DISMISSED. 13. THE LD. AR SUBMITTED THAT THE ASSUMPTION OF JUR ISDICTION BY THE ASSESSING OFFICER WHO RESORTED TO PASSING THE IMPU GNED ORDERS BY INITIATING PROCEEDINGS U/S 148 OF THE ACT IS BAD IN LAW AND W ITHOUT JURISDICTION ON THE GROUND THAT THE REASONS RECORDED WERE NOT COGENT. ON MERITS, THE LD. AR CONTENDED THAT PROFITS EARNED BY WAY OF RECEIPTS FR OM TECHNICAL HANDLING SERVICES DURING ASSESSMENT YEAR 2004-05 & 2005-06 A RE DULY COVERED BY ARTICLE 8(2) OF INDO-FRENCH DTAA AS WAS THE CASE BE FORE THE HONBLE DELHI HIGH COURT IN CASE OF DIT VS. KLM ROYAL DUTCH AIRLI NES 392 ITR 218, AS ARTICLE 8 (2) IS IDENTICALLY WORDED AS ARTICLE 8 (3 ) & 8(4) OF INDO-NETHERLAND 25 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 AND INDO-GERMAN TREATY RESPECTIVELY. THE LD. AR FU RTHER SUBMITTED THAT INDO-FRANCE DTAA HAVE NOT GONE ANY AMENDMENT OR CHA NGE AND THUS THE SAME DESERVES TO BE TREATED AT PAR AS ARTICLE 8(1) OF THE DTAA. 14. THE LD. DR AS REGARDS ASSUMPTION OF JURISDICTIO N UNDER 148 OF THE ACT SUBMITTED THAT ADMITTEDLY NO RETURN WAS FILED BY TH E ASSESSEE AND THUS, PRIMA FACIE, THE ASSESSING OFFICER HAS REASON TO BE LIEVE THAT INCOME HAS ESCAPED. THUS, IT MAKES NO DIFFERENCE WHETHER THE INCOME IS LATER ASSESSED AS FEES FOR TECHNICAL SERVICES OR UNDER ARTICLE 7 A S BUSINESS PROFITS. AS ON MERITS, THE LD. DR CONTENDED THAT THE SUBMISSIONS W HICH WERE PLACED BEFORE ASSESSMENT YEAR 2006-07 MAY BE TAKEN UNDER T HESE YEARS AS WELL. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER GOING THROUGH THE REASONS IT CAN BE SEEN THAT THE ASSESSING OFFICER HAS PRIMA FACIE REASON TO BELIEVE THAT THER E IS ESCAPEMENT OF INCOME AS NO RETURN WAS FILED BY THE ASSESSEE WHICH IS ADM ITTED FACT. THUS, INITIATING PROCEEDINGS U/S 148 OF THE ACT ARE JUST AND PROPER. THUS, GROUND NO. 3 AND 4 IN BOTH THE APPEALS ARE DISMISSED. ON M ERITS, WE HAVE ALREADY DECIDED THE ISSUE OF APPLICABILITY OF ARTICLE 8 OF DTAA IN ASSESSMENT YEAR 2006-07. THUS, GROUND NOS. 5 TO 21 IN BOTH THE APPE ALS ARE ALLOWED. HENCE, ITA NO. 5008 & 5009/DEL/2011 FOR A.Y. 2004-05 & 200 5-06 IS PARTLY ALLOWED. 16. IN RESULT, ITA NO. 5008 & 5009/DEL/2011 FOR A.Y . 2004-05 & 2005-06 FILED BY THE ASSESSEE ARE PARTLY ALLOWED AND ITA NO . 1786 & 2212/DEL/2012 FOR A.Y. 2006-07 FILED THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 22 ND DAY OF MAY, 2020 . - SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22/05/2020 PRITI YADAV, SR. PS/R.N* 26 ITA NOS. 5008 & 5009/DEL/2011 ITA NOS. 1786 & 2212/DEL/2012 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 22.5.2020 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK