ACIT Vs AIR France (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, disposed of cross appeals filed by the Revenue and the assessee concerning taxability of various income streams under the India–France Double Taxation Avoidance Agreement (DTAA) for Assessment Years 2019–20 and 2020–21.
The Revenue challenged the deletion of additions relating to (i) technical handling income, (ii) interest income on fixed deposits, and (iii) commission income earned from domestic airlines. The assessee, in its cross appeal, contested the addition made on account of collection charges.
On technical handling income of ₹1.74 crore, the Assessing Officer treated the receipts as “fees for technical services” taxable in India. However, the Commissioner (Appeals) deleted the addition by relying on earlier Tribunal decisions holding that such income is covered under Article 8 of the DTAA as profits derived from operation of aircraft in international traffic. The Tribunal upheld this finding, noting that the issue had consistently been decided in favour of the assessee in earlier years and no distinguishing facts were brought on record. Accordingly, the addition was deleted.
Regarding interest income on fixed deposits, the Assessing Officer taxed a portion of the interest, considering it unrelated to aircraft operations. The Commissioner (Appeals) deleted the addition following earlier decisions. The Tribunal affirmed that interest earned on funds connected with operation of aircraft in international traffic falls under Article 8(3) of the DTAA and is not taxable in India. Thus, the deletion of addition was upheld.
