Pratt & Whitney Canada Corp. Vs DCIT (ITAT Delhi)
“Make-Available” Clause Saves Pratt & Whitney – Wins ₹242 Cr FTS Dispute- Aircraft Engine Repair Abroad Not FTS – Tribunal Holds No Transfer of Know-How to Indian Clients
Delhi ITAT in Pratt & Whitney Canada Corp. & Pratt & Whitney Canada (SEA) Pte Ltd vs DCIT (International Taxation), delivered a common order holding that receipts from aircraft engine repair & overhaul services carried out entirely outside India are not taxable as Fees for Technical Services (FTS) under either the Income-tax Act or the DTAAs with Canada & Singapore. The Bench applied the “make-available” test & followed earlier coordinate Bench decisions in Goodrich Corporation, Rockwell Collins SEA Pte Ltd, & Global Vectra Helicorp Ltd.
The Assessees-foreign companies of the Pratt & Whitney group-are engaged globally in design, manufacture & servicing of gas-turbine engines. They undertook repairs of aircraft engines for Indian operators such as India Flysafe Aviation Ltd., with all works executed in overseas facilities. For AY 2018-19, Pratt & Whitney Canada Corp. received ₹236.18 crore for such repairs & minor ancillary receipts aggregating to ₹237.74 crore.
AO reopened the case u/s 148 & treated ₹242.65 crore as taxable FTS, on the ground that such specialized services “involved transfer of technical skill”. The DRP confirmed the addition. Identical additions were made for AY 2022-23 & for the Singapore entity under the corresponding DTAA.
