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2023 (2) TMI 1165 - AT - Income TaxIncome taxable in India - income from technical handling services - India – France DTAA - HELD THAT:- As respectfully following the decision of the Coordinate Bench in assessee’s own case [2020 (6) TMI 1 - ITAT DELHI] we hold that the income from technical handling services is not taxable in India as it is covered under Article 8(2) read with Article 8(1) of India – France DTAA. Accordingly, the additions made in all theses assessment years are directed to be deleted. Income from Technical Handling Services to Non-IATP Members - whether income derived from technical handling services provided to non-IATP member airlines in India will be covered under Article 8(2)? - HELD THAT:- On carefully going through IATP pool manual as placed in the paper-book, it is observed that there is no restriction or bar imposed therein to the extent that services cannot be provided to non-IATP pool members. As relying on assessee own case [2020 (6) TMI 1 - ITAT DELHI] held assessee being a pool member and providing service in that capacity to the guest members comes under the purview of Article 8(2) of the DTAA between India and France. Therefore, the CIT(A) was not right in sustaining the taxability under Article 7 of the DTAA - we direct the Assessing Officer to delete the addition. Taxability of Interest Income - AO noticed that the assessee, though, had earned interest on fixed deposits, however, they were not offered to tax - HELD THAT:- Undisputedly, it is a fact on record that the fixed deposits made by the assessee are out of funds connected with the operation of aircraft in international traffic, hence, covered under Article 8(1) as the assessee has no other business. Therefore, in our view, the interest earned on such fixed deposits will be covered under Article 8(3), hence, not taxable. Therefore, the Assessing Officer is directed to delete these additions in all the assessment years. These grounds are allowed. Income from Collection Charges - AO did not accept the claim of the assessee and brought it to tax by linking it to the PE in India. The addition made was upheld by the first appellate authority - HELD THAT:- The amount retained by the airlines from UDF/PSF is known as discount or commission. It is the claim of the assessee that even assuming that it is in the nature of income, however, it will be covered under Article 8 of the tax treaty. It is observed, assessee’s claim has been accepted by learned DRP in assessment yea 2012-13 and by learned Commissioner (Appeals) in assessment year 2013-14. However, on examining the nature of receipts, we are of the view that it has no connection with assessee’s business of operation of aircrafts in international traffic. Rather, the assessee gets some incentive for making timely payment of UDF/PSF to the airports. Therefore, the collection charges are not directly connected to assessee’s business of operating aircraft in international traffic, as per Article 8(1) read with Article 8(4) of India – France DTAA. Therefore, we uphold the addition. Ground raised is dismissed. Income from Commission - income connected to operation of aircraft in international traffic - HELD THAT:- The facts on record reveal that when a passenger travels in assessee’s airlines, for instance, from Paris to New Delhi and then to Chennai the assessee books ticket for the entire travel including the domestic leg, though, the domestic leg travel is taken up by the domestic airlines. A part of the cost of tickets of the domestic travel payable to the domestic airlines is retained by the assessee as commission. Thus, entire journey of the passenger from the starting point to the destination is arranged by the assessee, though, the domestic leg of travel is completed by a domestic carrier. Thus, in our view, the commission income earned by the assessee is directly connected to operation of aircraft in international traffic, hence, covered under Article 8(1) read with Article 8(4), therefore, is exempt from taxation in India. Accordingly, ground raised by the assessee is allowed, whereas, the Revenue’s ground is dismissed.
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