2018 (9) TMI 2095 - AT - Income Tax

Income deemed to accrue or arise in India - whether the income earned from technical handling is duly covered by Article 8 of the Double Taxation Avoidance Agreement between India and Netherland and as such income accruing to assessee during the year under consideration is fully exempt from taxation in India and could not have been brought to tax in India? - HELD THAT - After hearing both the sides we find that Tribunal in assessee s own case for assessment years 2004-05 2005-06 passed has dealt and decided the identical issue relating handling services and technical handling services rendered by the assessee to other airlines in India in assessee s own case while explaining the meaning of profit from the operation of ships and aircrafts in international traffic has took into consideration the bye laws of international airlines technical pool (IATP) because this organization authorized its members to share air-crafts pooling ground handling equipment and manpower all over the world. ITAT has considered the relevant clauses of IATP manual and thereafter concluded that any receipt received by the assessee due to participation in the pool as provided in IATP manual and also explained in sub article 4 of Indo German DTAA will not be taxable in India under sub-Article 1 of Article 8. In the present appeals there is no disparity on facts. Ld. DR except raising an argument that ground handling and technical handling services are different activities then operation of any air-craft in international traffic failed to bring any rules regulations byelaws for substantiating his contentions. - Decided in favour of assessee.

Summary

Issues involved:
1. Whether the income earned from technical handling is exempt from taxation in India under the Double Taxation Avoidance Agreement between India and Netherlands.

Analysis:
The appeal was filed by the Assessee challenging the Order passed by the Assessing Officer under the Income-tax Act, 1961. The Assessee contended that the income earned from technical handling is covered by Article 8 of the DTAA between India and Netherlands, making it exempt from taxation in India. The Assessee, a company incorporated in Netherlands, operates in the airlines business providing air services internationally. The Assessing Officer held that the income from technical handling services to airlines in India is taxable in India. The Assessee argued that a similar issue was decided in their favor by the Tribunal in previous years.

The Assessee relied on a previous Tribunal decision in their own case for assessment years 2004-05 & 2005-06, which dealt with the issue of technical handling services. The Tribunal had dismissed the Revenue's appeals on similar grounds, stating that the income from technical handling is exempt from taxation in India under the DTAA. The Tribunal considered the provisions of the DTAA between India and Netherlands and compared them with other treaties to determine the taxability of such income. The Tribunal found no merit in the Revenue's arguments and allowed the Assessee's appeal based on judicial precedence.

In conclusion, the Tribunal allowed the Assessee's appeal, following the precedent set in their previous case where a similar issue was decided in their favor. The Tribunal held that the income earned from technical handling services to airlines in India is exempt from taxation in India under the Double Taxation Avoidance Agreement between India and Netherlands. The decision was based on a detailed analysis of the relevant provisions of the DTAA and previous Tribunal decisions on the matter.