British Airways PLC vs DCIT

“4 . Shri Tarandeep Singh, appearing on behalf of t he assessee submits that the s olitary i ssue f or adj udication in appeal is t axabi lity of Ground Ha ndling and Engi neeri ng Servi ce C harge received by the assessee in Indi a. Nar rating facts of the case, the ld. C ounsel submits t hat the assessee company was i nc orpor ated in United Ki ngdom (UK) and is engaged i n t he busi ness of ope ration of airc rafts in Int ernatio nal Traffic and is also rend eri ng G round Handli ng and Engi neeri ng S ervi ce Charge to ot her airlines i n Indi a and e arns reve nue from said services. The inco me earned by assessee from ope ration o f aircraft in international traffic and from participati on in pools of any ki nd i s exempt i n India under Arti cle 8 o f India –UK DTAA. T he r evenue ear ned by assess ee f rom ground handling and engi ne ering servic es re ndered to ot her airlines was held as taxable by the Ass essi ng Officer (AO) for t he first time i n A Y 1996-97. The benefit o f Article 8 of India-UK Doubl e Tax Avoidance Agr eement (DTAA) claimed by the ass essee on such rec eipts was deni ed by t he AO. The matter travelled to the Tribunal, the Tribunal vide o rder dated 24.09.2021 common for AY 1996-97 to 1998-99 reported as 80 ITD 90 (D el.) decided the issue of t axability of t he amount rec eiv ed by assessee on re nderi ng ground/engi nee ring servic es to other airl ines agai nst the assess ee. The ld. Couns el submits t hat t he said decision of the Tribunal was bas ed on wrong assumptio n of facts that the assessee is providing ground engi neeri ng services to the ot her airlines onl y and is not r eceiving simil ar servi ces under ‘pool’ at other airp orts i n Indi a from other ai rl ines. He fur ther co ntended that the Tribunal has co nstrued the meani ng of expression ‘operation of aircraft ’ as used in Article 8 (1) of India-UK DTAA in a ver y narr ow se nse. The expr essi on ‘operation of ai rcraft’ has to be understo od i n a broad manner to i nclude other ancillary servic es as well. The ground handling and engi neering servic es are provided by the ass essee to other airlines under Standard A greement as per Int ernati onal Airlines Technic al Pool (IATP) guideli nes. The ld. C ounsel drew our attenti on to Form 55 at page 774 of the paper bo ok to show that at Bangalo re Airport, the assessee is providi ng gro und handling and technical services t o Air Fr ance. He furthe r refer red to page 794 of the paper book t o show that at Hyderabad Ai rport , KLM R oyal Dutc h Airlines is pro viding similar ground handling and technical s ervices to the assessee . The ld. C ouns el for the assessee re ferring to page 15 of the impugned or der poi nt ed t hat b efor e t he CIT(A) it was categori cally stated tha t t he ass essee was providi ng gr ound handli ng and engi neeri ng services i n India under ‘L ’ Pool in Delhi, Mumbai , Chennai, Kolkata and Hyderabad and ‘G ’ Pool servic es at Del hi and Mumbai. The assessee rec eived ‘L’ Pool s ervices at Hyder abad. 4.1. The CIT(A ) in para 7.6 .2 of the impugned order accepts that the assess ee has not only pro vided servi ces to othe r airli nes but also availed ser vices fr om ot her airli nes withi n India as well as outside India. T he l d. Couns el referr ed to the decisio n of Del hi Benc h of t he Tri bunal i n the c ase of Lufthansa Germa n Airli nes vs. DCIT 90 ITD 310 to cont end that for renderi ng and rec eiving services requisi tion i s to be made in IATP Form 53 as pe r IA TP ma nual . T he ld. Counsel referred to Form 55 as per IATP manual in s upport of his submi ssions at page 345 of t he paper book. To further elaborate meani ng of various pools, the ld. Counsel referred to page 523 of t he paper bo ok V ol-III. The ld. C ounsel contended t hat i n the c ase of KLM Royal Dutch Airlines and Lufthansa German Airlines, the Tribunal granted relie f t o the assessee holdi ng that ser vices r endered and availed were as per IA TP manual and there were recipr ocation of ser vices between members of pool. IATP pool is covered under A rticl e 8(4) of DTAA (India Netherlands DTAA & India-Germany DTAA ), therefore, such pr ofits could not be brought into tax in India. The Departme nt car ried the issue i n appeal before t he Ho n’bl e High C ourt, the Hon’bl e High C our t while adj udicati ng bot h t he appeals of the Revenue i.e. i n t he case of KLM Royal Dutc h Airlines and Lufthansa Ge rman Airlines reporte d as 392 ITR 218 accepting the servi ces rend er ed under pool, upheld the decisi on of Tribunal. Dur ing the cours e of discussion bef ore the Hon’ble High Court, t he Rev enue placed reliance o n Tr ib unal decision in t he cas e of Briti sh Air ways PLC vs . Deputy C IT, 80 ITD 90 (Del . ) (supra). The H on’ble Hi gh Court distinguished, the decision of British Airwa ys. The ld. Counsel submi ts tha t the Hon’ble High Cour t has distinguis hed case of assessee on wrong ass umpti on of fac ts. Whereas, t he servic es rend ered by the assessee under IATP pool are similar to t he one rendered by KLM Royal Dutch Airlines and Lufthansa Ger man Airlines.

4.2.

The ld. Counsel furt her r eferred to India-UK DTAA Article 8 to contend that profits derived from ‘operation of aircraft’ in i nt er nati onal traffic inc luded profits derived in respect of pa rticipati on i n pools of any kind by ent erpris es engaged in air transport. The s ervices provided by ass essee under pooling activities are not distinc t or separate activities but inter-c onnected t o t he activity of ‘operatio n of aircraft’, henc e eligibl e for benefit under Art icle 8 of India-UK DTAA. To furt her buttress hi s argume nt, the l d. Couns el placed relia nce on OECD c ommentary on Article 8. The l d. C ounsel contended that as per OECD commenta ry para 4.1 any activity carried on primarily in connecti on with t he tr anspo rtation, by t he enterprises, of pass engers or cargo by ships or aircraft that it operates i n i nternati onal tr affic should be considered directly connec ted wit h such tr anspo rtation. Furthe r, referri ng t o an example f rom t he OECD commentary t he ld. Couns el contende d that where the ent erprises is advertising for other ent erprises in magazi nes offer ed onboard aircraft that it oper ates or at its busi ness locations s uch activity is ancillary t o its ope rations and pro fits generated by suc h advertising falls withi n Article 8. The ld. Co unsel thus prayed for rev ersi ng fi ndings of the CIT(A) i n holding that ground handling and engineering services ar e not eligible for exemption under A rticle 8 of Indi a-UK DTAA.

5.

Per c ontr a, S hri Vikram Si ngh Sharma, repr esenting the department vehemently defending the impugned order prayed for dismissing appeal of the assessee. The ld. DR reiterati ng findi ngs of the CIT(A ) submits that there is signi ficant differ ence i n India-UK DTAA and Indi a-Germany/India-Nether lands DTAA. In India-Germany and India-Netherlands D TAA ground handling servic es are incl uded, where as, in India -UK DTAA such servic es are not incl uded. He further submit ted that ground handling and e ngi neeri ng services cannot be considered directly c onnected activity t o operation of aircraft merely becaus e it i s po ol IATP ac tivity. The l d. DR asserted t hat India has made i ts position clear on OECD commentary Ar ticle 8 that India r eserves its position on application of Ar ticle 8 to i ncome from ancillary activities . The ld. DR further stated that i n any case OECD commentary cannot ov erride tax tr eaty, henc e, OECD c ommentary is not bi nding.

6.

We have hear d s ubmissions ma de by rival si des at lengt h. We have also considered t he doc uments and decisi ons referred to duri ng the c ourse of submissions by ld. Couns el for the assessee. The is sue for c onsiderat ion in the i nstant case falls withi n narro w e ncom pass i.e. assessee’s eli gibility to claim benefit of Article 8 of Indi a-UK DTAA on revenue generat ed from renderi ng of ground handling and engi neering services t o ot her airli nes i n India.

7.

The assessee is engaged i n the busi ness of ‘operati on of aircraft ’ in i nternati onal tr affic. Before pr oce eding further, it wo uld be relevant to re fer to Article 8 of India-UK DTAA which refers to revenue from ope rati on of aircraft. The s ame rea ds as under:-

ARTILCE 8

AIR TRANSPORT

“1 . Pr ofits derived fr om the operatio n of airc raft i n inte rnational tr affic by an enterprise of o ne of the Contracting S tat es shall not be taxed i n the ot her Contracting S tate.

2.

The provisions of paragr aph 1 of this Article s hall like wise apply i n respect of partici pati on i n pools of any ki nd by enterprises enga ged i n air tr ansport.

3.

For the purposes of this Ar ticle the term “opera ti on of aircr aft” shall incl ude tra nsportation by air of persons livestock, goods or mail, carri ed on by the owners or l essees or charterers of aircraft, i ncl uding the sale of tickets fo r such transportati on on behalf of ot her ent erprises, the incidental lease of aircraft on a character basi s a nd any other activity dir ect ly connected wi th such transportation.

4.

Gains derive d by an enterprise o f a C ontracti ng Stat e fro m the aliena tion of aircraft owned and ope rated by t he enter prise, the i ncome from whic h is taxabl e only in that State, shal l be taxed onl y in that Stat e.”

8.

As per c ontention of the assess ee, t he ground handling and engi nee ri ng ser vi ces rendered by t he assess ee to ot her airlines i n India are ancillary to the mai n ac tivity of ope ration of aircr aft in India and s uch ancil lary s ervices rend er ed by the assessee falls under pooling activity. He nce, the reve nue generat ed from renderi ng of suc h servic es deserves the benefit of India-UK DTAA under Article 8(2 ). We find that the iss ue raised by t he assessee i n present appeal is a le gacy iss ue, t he assessee was deni ed treaty bene fit on the revenue generated from such pooli ng activity for the fi rst time in AY 1996-97 and t hereafter i n s ubse quent ass essme nt ye ars , t he revenue has consistently deni ed benefit of Article 8 of India-UK DTAA on rec ei pts from r enderi ng of ground handling and engi neering services t o ot her airli nes i n India.

9.

We fi nd t hat submissi ons made before us are si milar to the submissions that wer e made on behalf o f the assessee before the C oordi nat e Bench i n appeal s of the assessee for AY 1996- 97 to 1998-99. For the sa ke of ready reference, the r el evant exc erpts from t he submissi ons made on behalf of the ass essee in AY 1996-97 to 1998-99 ar e r eproduc ed herei n under :-

“19.

With specifi c refer ence t o the facts of t he assessee's case it was poi nted out by its couns el that Britis h Airways w as o ne of t he leadi ng op erators of aircrafts i n international fli ghts f or carriage of pass engers and cargo and it had bee n a member of the Int ernatio nal Air Transport Ass ocia tion (hereinaft er c alled IA TA ) and IATP Or gani zation. I t was explained that IA TP was for med for t he p urpos e of providi ng r eciprocal technical support at l ine stations thr ougho ut the world and the s uppor t i ncl uded spare parts, gr ound and ramp handl ing equipment and manpower. Acc ording to the ass essee the primar y aim of IATP was to generat e economic savings and it was dedicated to the spirit of m utual coope ration and hi gh degr ee o f technica l per formance. It was explai ned that under the A gr eement the parties provided cer tai n technical faciliti es a nd services as may be avai lable with them at a particular airport for use by ot her parties on recipr ocal basis. Suc h a greeme nts , accordi ng to the assessee, wer e "pool agree ments " ent ered i nt o for providi ng technical services and faciliti es on the basis of "Standard Ground Handli ng Agreem ent" (hereinafter called SHA). It was stat ed tha t British Ai rways had provided engi ne eri ng and ground handling ser vice s at t he International Airport of Delhi to 11 other airli nes and at Chennai t o 5 airli nes and certai n other airl ines at Mumbai. Accordi ng to the assessee simil ar services had been availed of by Briti sh Airways from Qa ntas Airlines and Cathay Paci fic Air lines at inter national airports i n Manila and Taipei.

20.

It was explai ned tha t the mai n purpose of the A TP agre ements was to pool and shar e technic al resources, infras tructure f acilities and manpower wi th a view to ac hieve economic savings by reduci ng costs : It was further s ubmitted that the servi ce and facilities provided by British Airways to the other airli nes did not i nvolve any separate and disti nc t business activity from its busi ness of oper ati ng aircraft in i nt ernati onal tr affic. The plea was that there was unity of management , c ontr ol and fi nanc es which were i nt er -connected, inter-l aced and i nte rdepende nt. In pl aci ng relia nce on the decision o f t he Hon'ble S upreme Co urt in t he case of CI T v. Prit hvi Insurance C o. Li d. [1967) 63 ITR 632. It was c ontended t hat the ser vices provided by B ritish Airways to othe r airlines did not constitute a se parate or disti nct business activity. I t was als o t he further submission t hat the t er m "operati on of air craft" included any other activity directly connected wit h such transporta tion and it was specifically poi nted out that providing ground handli ng servic es to its own aircra ft as also the aircr aft of any ot her airline was a n activity dir ectly c onnected wi th the transportation by air of perso ns, live-s toc k, goods etc. It was t he s ubse quent ar gument t hat t he Revenues gene rated from t hese services we re exempt from tax i n India vide paragraphs 1 and 3 of A rticle 8 . Attention was als o invited to the m eani ng of the word "pool " in va rious dictionari es and it was argued that the expr essi on "par ticipati on i n pools of any ki nd" meant s hari ng in operational s phere as also t he commercial spher e for mutual bene fit. It was furt her argued that para graph 2 of Article 8 was of wide amplitude and i t was not circumv ented or restricted or subjected t o any conditi on o r qualificatio n.”

“52.

Dealing at this stage with the argume nts of t he lear ned counsel for t he assess ee about the f ormati on of "pools " vis-a-vi s clause (2 ) of A rticle 8, this i n our opi ni on envisages co-operation betwe en vari ous Airlines to carr y on i dentical activities by pooli ng t hei r res ourc es and divi ding t he res ultant profits. This may involve provision of s ervices t o each ot her or to persons outside the pool. No facts of the af oresaid nat ure emerge from the rec ord i n the present cas e since the i ncome ear ned by the assessee is from vari ous othe r A irlines for pr oviding Engi neeri ng servic es f or their aircraft etc. There is not hi ng to s how tha t similar type of services have be en availed off by the assess ee f rom any o ther Airline altho ugh it is submitt ed so. In other words we hav e t o hold t hat a pool does not e xist and the question of participati on thereof withi n the m eani ng of Article 8(2) does not arise.

53.

Before we c onclude this part of the order, we fi nd it nec essary to understand t he meani ng of t he te rm/expr ession " pool " as follows :-

"(1 ) As per the New Webs ter’s Dictionary of the English Language pool as noun i s defi ned as "a combi nation of individuals or organizati ons formed for t he purpose of spec ul ati on as for mani pulati ng the prices of st ocks... .", "a combination of interests or funds for common advantage", "a s ervice or facility s hared by a number of pe ople, as a car pool." "Pool " as verb means "to put as i nteres t or money , into a P ool o r c ommon stoc k or fund. "

(2 ) As per "Words and Phras es Legally Defi ned", "Pool " is defined thus : "the defi nit io ns of t he word "Pool " s how t hat in order to constitute a "Po ol " there must be an a ggregati on of i nterest or a throwi ng of revenue or property into one commo n fund o r a shar i ng of interest in that fund by al l on an equal or previ ously agreed basis" Canadian Fur Aucti on Sales Co. (Queb ec) Ltd. v. Neely (1954) 11, W.W.R. (N.S .) 254.

(3 ) As per Stroud’s Judicial Dictiona ry, "a s toc k exchange "P ool " i s an arrange ment between two or more persons for sel ling or buyi ng some par ticular class of stoc k, s hares or s ecurities and apportioni ng the res ult among themselv es..... ."

(4 ) As per O xfor d S hor ter Englis h Dictionar y, "Pool " as v erb mea ns t o "put (resources etc.) i n a common stock of fund: shar e i n common, combi ne for t he common benefit."

54.

We are afrai d the ass ess ee does not fit into a ny of the above expressions vis -a-vis the activity under consideratio n.

55.

The learned counsel made anot her submissi on duri ng t he heari ng and that was that the ground handling services formed part and parcel of the pric e of the tic ket. Thi s is not supported by evidenc e or mat erial.

56.

Learned c ounsel i n f act cont ended bef ore us that "Pooling" be unders tood as per the "Mission Stat ement " of IA TP appende d a t pages 200 t o 207 of the pap er b ook. He refe rred to the followi ng at p age 201 :

"Most airlines would li ke to have critical spares parts availabl e at down rout e loc ati ons to avoid excessive disruption t o schedules if aircraft defects arise. Spa re parts are expe nsi ve and airlines mus t balanc e the ri sk of needi ng a spare against the cos t. IA TP airli nes exchange information on thei r fleets , thei r route networks and avai lability of spare parts . In this way, an airli ne may s hare access t o a spare part provide d by anothe r airline by payi ng a s hare of the cost . Thus IA TP airli nes enjoy a wider availability of spar es at lower cost and the opportuni ty to rec eive regular payment f or spar es whi ch t hey hold . This i s the basic pri nciple of pooli ng. To be co me a member of IA TP, an airline mus t be willing to pr ovide spares as well as share. The pri nciple of pooli ng is also applie d t o gr ound equi pment. An airline that holds an item of equipment at a down route l ocation can ob tai n payment by s hari ng t he equi pment wit h other airlines ."

57.

This was als o co nsider ed b y the CIT(Appeals) w ho opi ned that irrespective of the nomenclatur e us ed i n t he IATP Mission Stat ement t here was no bri nging toget her of the assets or personnel under joint command and nor was t here any apporti o nment of profits. According to the CIT(A ppeals) a mechanis m was for med thr ough t he IATP under whic h airlines which did not have ground facilities at some stati ons could utilize the exi sting facilities of ot her airlines, but the ne cessary pre-requisites for c onstituti ng a pool i.e. bri ngi ng toget her of res ourc es under a joi nt command and shari ng of profits were missing. The positi on acc ording to t he CIT(Appeals) wo uld have been different if t he IA TP woul d have brought t ogether the facilities under a common umbrella contai ni ng the two aforesaid featur es and t his would have brought i nt o e xistenc e a po ol.

58.

We agr ee wi t h t he vi ew taken by the CIT(Appeals) and fur ther hold t hat there are no smaller pools wi thin the larger po ol s envisaged by the IA TP doc ument as canv assed by the lea rned couns el and whic h could mee t the twi n r equirements of A rticle 8(2 ). In c omi ng to t he conclusi on t hat we have arri ved at, due note i s tak en of vari ous models, conventions, commentari es etc. to which the parti es had adve rted during t he cours e of t he heari ng. The rel evant extracts placed on the pa per books fi led by t he parties have been thor oughl y perused.

59.

Another argument advanced was that t he asses see had its own sta ff for se rvicing its aircraft and it was only during t he i nterveni ng period when suc h staff w as free then t hei r s ervices were supplie d to other airli nes. We do not t hi nk that t he gro und handli ng services to other airlines are of s uch a casual nature since it is an accept ed fact between the partie s tha t there are agreem ents between t he ass es see and other airlines f or rendering of s uch services, t he assesse e had qualified engi neer s and technicians at vari ous metropolitan citi es in the count ry t o render such services whic h are bri efly explai ned as certifyi ng the airwort hiness of aircr aft of other ai rlines before take off, but the s ervi ces rende red appear t o enc ompass many mor e activities which are detaile d at pa ges 6 to 8 of the present order.

60.

No do ubt the C IT(A ppeals) has not held t he aforesaid to be a separate busi ness acti vit y but it is qui te clea r that re nderi ng services to other airlines is an organized and planned ac tivity to ea rn i nc ome and the tax authorities have ri ghtly opi ned tha t such ser vices r endered to o wn aircraft do not involve any taxabl e event, but imparti ng the s ame t o other airli nes does res ult in taxabl e i ncome fro m a planned commercial activity. It has in fact been obs erved that non renderi ng of such ser vices would not have any impact o n the working of t he ass essee ’s own airline. We agree with the observati ons and t he ul timate view express ed by t he tax authorities .

61.

We now come to Article 8 itsel f with its separat e claus es and on which have centered the arguments of both the parties.

62.

Coming to A rticle 8(1) the re is no confusion or ambi guity si nce it exempts fr om the pale of taxa tion in a contracti ng S tate the profit earned by the ent er pris e of the ot her contracti ng Stat e from the operation of aircraft i n i nter national traffic if the ent erprise has effective mana ge-ment i n the contracting S tat e.

63.

Article 8(2) i n our opi ni on s peaks o f t he same type of activity gi ving rise t o pr ofits ear ned by t he enterprise participati ng i n a pool for e arni ng t he pro fits derived from internati onal tr affic. In ot her words, what is done by an enterpris e singl y in Arti cle 1 is done by the same e nter prise j oi ntly with ot hers by participati ng in a pool. We have i n the ea rlier part of this order discussed at le ngth the concept of "P ool s" and no thi ng more is to be said so we move on to Article 8 (3 ).

64.

Article 8(3) expands the meani ng of the t erm "operati on of aircraft" to incl ude tra nsportation by air of (1) persons; (2) livestock goods o r mail carried on by t he owners or less ees or char terer s of aircra ft; (3) sale of tickets for such trans portation on behalf of ot her enterprises; (4) i ncide ntal lease of aircraft o n a c hart er basis; (5) any other activity direc tly connected wi th suc h trans portati on.

65.

Both the parti es are agreed that this clause is bo th activity bas ed as also enterpris e based, but "trans port ati on" by air craft of human bei ngs and specified goods and even t he term "any other ac tivity" has to be c onside red wi th reference to such "trans port ati on" as aiding it s upport ing it and incident al theret o. The tax a uthorities have refer red to three such activities, nam ely :—

"(i)

the operation of a bus service connecti ng a town with its airport;

(ii)

transp ortation of goods by t ruck c onnecting a depot with the airpo rt; and

(iii)

mai ntenance and runni ng of a hotel by t he airli nes strictly for the use of its pas sengers for ni ght accommodation and if t he cost there of is included i n the price of t he ticket and the hotel does not cat er to any other category of pers ons."

66.

The above examples in our opi ni on do aptly qualify for i ncl usion i n the catego ry of "any other activity directly connected with suc h tr ansporta tion" and by no stret ch of ima gi nation woul d it include t he engi neeri ng/gr ound ha ndli ng s ervices provided by t he assessee to ot her airlines.

67.

It is cl ear from the disc ussi on of the vari ous claus es that t he activities, which are tax exem pt i n Indi a ar e specified and dete rmi ned and ther e i s no scop e fo r an i nterpretati on which could bri ng somet hi ng more into the fold."

11.

The ld. Couns el for the assessee has tri ed to draw parit y between t he cas e o f assessee and KLM R oyal Dutch Airlines and L uft hansa Ger man Airl ines. The C oordi nate Bench, while deciding appeal i n the case of Lufthansa German Airlines vs. DCIT (supra) c onside red t he decision in the c ase of ass essee and has dis tingui shed the sa me on facts.

12.

The Revenue carri ed the issue in appeal before the Ho n’bl e Hi gh Court. The Revenue agai n placed relianc e on t he decision of Tribunal in the case Britis h Airways (s upra). The Hon’ble High Court distinguis hed the decisi on of Trib unal rendered i n the case of assess ee and held as under:-

“31.

The terms of the India -UK DTAA as contrast ed with the DTAA between India and Germany are dissimilar in some si gnificant ways. The B ritish Airways (supra) decision was based on the fol lowi ng facts- as held by the ITAT:

(i)

B ritish Air way s provided engi nee ring and ground handling services at IGI Airport, New Delhi to 11 other airlines , at Chennai to 5 othe r ai rli nes and cer tai n other airlines at Mumbai . It has not availed any ser vices/facilities fro m a ny a irlines i n India. Thus, there was no r eciprocity in the a greement entere d into between British Airways and ot her airli nes;

(ii)

B ritish Air ways had a s epar ate establis hment and sep arate office s et up to monit or ground handling ser vices and different es tablishme nt at Int ernati onal Ai rports Ne w Delhi did not for m part and parc el of the operation of British Air ways per tai ni ng to t he operation of aircr afts in internati onal tra ffi c. The re i s no s uc h fi ndi ng in the present appeal s.

(iii)

B riti sh Airways’ ser vices and fac ilities i n India to the other airlines was a comm ercial activit y. The excess/idle capaci ty was pro vided to vari ous airlines at a pr ice. The services provided i n terms of the IA TP manual are no t based on a ny c ons ider ation paid or rec eived; a syst em of credits has be en creat ed for IATP me mbers .

(iv)

Britis h Airways has a br anch office i n India, which constit uted a Perma nent Est ablishment (“PE”) in India, and, t herefore, the i ncom e derive d fr om PE in India was taxable as the s ame was not cover ed under DTAA.

(v)

Article 8(2 ) of DTAA be tween India and UK provided t hat para graph 1 of Article 8 s hall likewis e apply i n r espec t of pa rticipation in pools of a ny kind. The wor ds ―pools of any ki nd was i nter pr eted by t he ITAT by taki ng t he dicti onary meani ng of the word ―pool . These are missing i n t he t wo DTAAs i n questi on.

(vi ) Ar ticle 8(3) of DTAA between Indi a and UK provided that the terms “operati on of aircr aft” shall incl ude “…3. For the purposes of thi s article the t erm

"operati on of aircraft" shall incl ude transpor tati on by air of persons , l ive-stock, goods or mail , carried on by the owners or lessees or charter ers of aircraft, incl udi ng the sale of tick ets for such transportation on behalf of other enterprise, the incidental lease of aircraft on a charter basis and any other ac ti vity directly connecte d wi th such tr ansportation”. These terms are not present i n the two D TAAs i n the pres ent set of appeals.

(vi i) After meeting t he r equirement of its own flights , the s ervices of employees were r equired for handling other airlines’ operati on for gene rati ng i nc ome.

32.

Havi ng r egard to thes e fac ts, this Court is of opi ni on t hat the amplification of the term ―opera tion of aircraft i n A rtic le 8 (1) through Article 8 (3), i.e., “. ..3 . For t he purpos es of t his arti cle the ter m

"operati on of airc raft" shall include trans portation by air of pers ons, live-stock, goods or mail, carrie d on by the owners or lessees o r charterers of aircraft , incl udi ng the sal e of tickets f or such transportati on on behalf of other ent erpris e, the incidental lease of aircraft on a charter basis and any other activity directly connected with suc h transportati on...” had t he effect of limiting t he nature of activities that could be comprehe nded i n the po ol envisione d i n Article 8 (2 ): in other words, the expanded meaning of oper ati on o f aircraft i ncl uded t hos e activiti es in Arti cle 8(3 ) thr ough the extended defi nition and no more. On t he ot her hand, there i s no s uc h limitati on i n the DTAAs i n questi on, i n t hese cas es . This c ons tituted the mos t significant differ ence bet ween the two sets of c as es on the one hand, and Britis h Airways (s upra) on t he ot her. For these reasons, this Cour t rejects the Revenue’s c ontent ions. ”

13.

The Hon’ble High Cour t inter alia hel d that the provisions of A rticle 8 of India-UK DTAA a re not pari mat eria to t he provisions of Article 8 of India-Germany/Netherlands DTAA. The provisi ons of Article 8 of UK DTAA a re narr ower and does not extend to pool ing servic es as e nvisaged in Article 8(4 ) of Indi a-Germany/Netherlands D TAA. Thus, the decision rendered in the case of KL M Royal Dutch Ai rlines and Lufthans a German Airlines by H on’ble Hi gh Co urt, does not support the cause of assessee i n any manner. The ld. C ounsel has further ma de an effort t o draw some benefit from OECD commentary on Article 8 of tax treaty. It is a well-accepted pro posi tion that OECD commentary is not bindi ng pr ecedent. In any case, Govt. of India has expr essed its reservation in acc epti ng t he co mmentary on A rticl e 8 wi th respec t to i ncome from ancillary activities.

14.

It would not be out of place to mention t hat no mat erial was plac ed on r ecord by t he ass essee t o s how tha t the decision of Tribunal in ass essee’s appeals for AY 1996-97 t o 1998- 99 was ever agi tated befor e t he Higher Appellat e A uthority. Thus , fi ndi ngs of t he Tribunal on the issue attai ned fi nali ty. The ld . Counsel for t he ass essee has urged t hat the Tribunal order for AY 1996-97 to 1998-99 is based on wrong ass umption of facts. The ld. Couns el has not placed on r eco rd any material to subst antiat e that any a ttempt was made by the assessee/appellant for r ectification of alleged wrong facts rec orde d i n the said order of Tribunal. In subseque nt assessment years the issues were either settl ed under Vivad se Vishwas Scheme or under Mutual Agreeme nt Procedur e (MA P). In appeal of the a ssesse e fo r AY 2005-06 similar issue was decided by the Tribunal [r eported as 2009 taxmann.c om 1013 (Del hi Trib.)] a gai ns t t he assessee followi ng order of the Tribunal for AY 1996-97 to 1998-99 (supra). Thus, the issue of taxability of income arisi ng from renderi ng ground ha ndli ng and engi neeri ng services t o other airlines in India, has been consistently hel d as taxable i n India.

15.

Thus, in light of facts of the case and decisi ons discuss above, we fi nd no merit i n ground no. 1 of the appeal, he nce, gr ound no. 1 and other gr ounds raised i n support of gr ound no . 1 ar e dismissed.

16.

In the res ul t, appeal of the assessee is dismissed.

ITA N o. 2201/Del/2017 (AY 2010-11)

17.

Both sides are unanimous st ati ng that the grounds of appeal a nd facts i n the appeal for AY 2010-11 are identical to facts and ground i n A Y 2009-10. Therefore, the s ubmissi ons already made would equally apply to this appeal.

18.

Si nc e, t he grounds of app eal and the facts are identical in both t he appeals, t he findi ng given by us whil e adj udicati ng appeal of the assessee i n AY 2009-10 woul d mutatis mutandis apply t o the pr ese nt appeal . For parit y of reasons, appe al of the assessee is dismissed. ”

“11.

In ground N o. 10 the appella nt has challenged t he additi on of Rs. 8 3,64,061/- in respect of cas h deposits made duri ng t he demonetizati on peri od.

11.1

The a ppellant has sought to explain the cash deposits by way of som e additi onal evidences whic h are sampl e cash deposit slips showing name of the deposi tor; t he t otal amount of cash c ollected from the airport counte r; locatio n (the airpor t) from where the c as h has been c ollec ted etc.

11.2

The nature of additional evide nces is such that t he same cannot be doubted. The AO has also not doubt ed t he credibility o f the evi dences. The evidences are produced only to explai n the co ntentio n of the appellant.

11.3

It is settled law that if the additi onal evidences ar e cr ucial and its c onsideration and appr aisal woul d r ender t he substantial justice to the appellant, suc h evidences shoul d be a dmitte d by the appellat e authority. The Hon’bl e Del hi Hi gh Court i n the case of C IT v. Vir gi n Securities a nd Credits P. Ltd (2011) 332 ITR 396 (Del ) has held that t he CIT(A ) sho uld admit t he additi onal evidence i f he fi nds that the same is crucial f or the disposal of the appeal. Furthe r, Hon’ble Del hi High C ourt’s in t he c ase of Cha ndr akant Chanu B hai Pat el 202 Taxman 262 has held that if additi onal e vidence is without any blemish and i n order to advance the ca use of justice, the same ought t o be admitted.

11.4

In vi ew of above, the additio nal evidences are admitted i n the inter est of substantive justice as t he same go i nto t he root of the matt er and ar e crucial for decidi ng the appeal.

11.5

Aft er pe rusi ng the additi onal evidences, it i s observed that the appellant which i s a large i nt ernational air craft carrier has suffici ently explained t hat it has collec te d cash fr om pass engers a nd cargo agents at air port counters , which is mai nly towards trans porta tion of cargo, purchase of excess baggage a nd ticket upgrade of passengers etc . This is evidenc ed from cas h deposit sli ps furni shed by the a ppellant duri ng the c ours e of pr oceedi ngs before me. It has been shown that t he cash collec te d is directly in connection with operation of air craft i n i nter national traffic and the same has no relation wi th the demonetization dri ve of the G over nment of India. The appellant has als o submitted d etail of cash deposited i n bank accounts month-wis e duri ng t he rel evant fi nancial year. As per the said detail, cash collec te d in m onths pri or to demonetization is more as compa red t o cash c ollected duri ng and post demonetization. This also explains that the cas h i s generat ed from regul ar busines s operati ons and t here are no ext raordi na ry cash receipts of the a ppellant duri ng t he demonetization peri od. It has been s hown that cash deposit was i n respect of us ual cash col lected from pass engers and car go a gents a t air port c ounters, mainly towards transportati on of cargo, purchas e of excess baggage and tic ket upgrade of passengers etc. The re is no reaso n to doubt this expla nation i n respe ct of a multi-nati onal , one of the largest, i nt ernational carri er .

11.6

It is c oncl uded that the AO was not j ustified i n ma ki ng addi tion o f Rs. 83,64,061/-on account of cash deposits during demonetizati on per iod. The ad diti on i s del eted. T his ground is allowe d.”