Income from Technical Handling Services Rendered by Dutch Airlines to Other Airlines in India is exempted from Tax: ITAT [Read Order]

The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) in the case of DCIT v. M/s KLM Royal Dutch Airlines, New Delhi, dismissing the appeal filed by the revenue held that the income derived from technical handling services rendered by Dutch Airlines to other airlines in India is exempted from Tax as per the DTAA.

The sole ground for appeal was that the Commissioner of Income Tax (Appeals) has erred in holding that the ground handling and the technical handling services rendered by the assessee to the other airlines in India are part of the business of the assessee from the operation of aircraft in international traffic as per Article 8 of the DTAA between India and Netherlands.

The factual matrix of the case is that the assessee company is carrying on airlines business and operates in all major countries including India. It is also into the businesses of operations of aircraft in international traffic deriving income for carriage of passengers, freight and mail in international traffic and engaged in rendering technical handling services to other airlines in India. The assessee claimed the receipt for rendering services like technical handling as exempt under Article 8 of the DTAA between India and Netherlands. The AO held against the assessee and made additions to the total income. The CIT (A) on the other hand, on appeal, deleted the additions hence the present appeal.

The Tribunal bench comprising of President G.D. Agrawal, and Judicial Member Kuldip Singh has reiterated the findings of the CIT(A) held that for the purpose of the Article of the India-Netherlands DTAA, the term “operation of aircraft” shall include transportation by air of persons, live-stock, goods or mail, carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprise, the incidental lease of aircraft on a charter basis and any other activity directly connected with such transportation.

The Tribunal is of the considered view that Article 8 of the DTAA between India and Netherlands is categoric enough in its meaning o expression “Profit from the operation of ship or aircraft in international traffic” which includes the activities carried out by the assessee company by rendering technical handling services to the other airlines in India.

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