PRATT & WHITNEY CANADA CORP.,QUEBEC, CANADA vs. DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE 2(2)(2), NEW DELHI, DELHI

आयकर अपीलीय अधिकरण धिल्ली पीठ “डी”, धिल्ली श्री धिकास अिस्थी, न्याधयक सिस्य एिं श्री ब्रजेश कुमार स िंह, लेखाकार सिस्य के समक्ष

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER& SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER आअसं. 48/धिल्ली/2026 (धि.ि. 2023-24) IT(IT)A No. 48/DEL/2026 (A.Y. 2023-24)

Pratt & Whitney Canada Corp., 1000, Boul, Marie-Victorin, Longueuil, Quebee-J4G1A1, Edmonton AB, Canada ...... अपीलार्थी/Appellant PAN: AAPCP-1595-F बिाम Vs. Deputy Commissioner of Income Tax, International Taxation, Circle 2(2)(2), Civic Centre, .....प्रधििािी/Respondent Minto Road, New Delhi 110002 आअसं. 57/धिल्ली/2026 (धि.ि. 2019-20) IT(IT)A No. 57/DEL/2026 (A.Y. 2019-20) Pratt & Whitney Canada (Sea) Pte. Ltd., 10, Loyang Crescent, Loyang Industrial Estate, Singapore 509010 ...... अपीलार्थी/Appellant PAN: AAFCP-6345-K बिाम Vs. Deputy Commissioner of Income Tax, International Taxation, Circle 2(2)(2), Civic Centre, .....प्रधििािी/Respondent Minto Road, New Delhi 110002 अपीलार्थी द्वारा/ Appellant by: Shri Rajan Vora & Ms. Aarashana Chauhan, Chartered Accountants प्रधििािीद्वारा/Respondent by: Shri M.S Nethrapal, CIT-DR सुििाई की धिधर्थ/ Date of hearing : 20/04/2026 घोषणा की धिधर्थ/ Date of pronouncement : 20/04/2026

2 ITA No.48 & 57/Del/2026 (A.Y. 2023-24 & 2019-20) आिेश/ORDER PER VIKAS AWASTHY, JM:

These two appeals by two different assessees are taken up together as both appeals involve identical issues. For the sake of convenience, facts are narrated from appeal of the assessee in ITA No.48/Del/2026.

ITA No.48/Del/2026 (AY 2023-24)

3 ITA No.48 & 57/Del/2026 (A.Y. 2023-24 & 2019-20)

“General ground 1. erred in assessing the income of Appellant at Rs. 203,33,56,945 as against Nil returned income; Taxability of repair and maintenance services rendered by the Appellant 2. erred in making an addition of INR 203,33,56,945 by treating total income received from repair, maintenance and other related services rendered by the Assessee as fee for technical services (FTS') under the provisions of the Act without appreciating the fact that repair and maintenance services were performed outside India and do not constitute technical services as per the provisions of the Act as well as India- Canada Double Taxation Avoidance Agreement ('DTAA'); 3. erred in making an addition of INR 203,33,56,945 by treating total income received from repair, maintenance and other related services rendered by the Assessee as FTS under the provisions of Article 12 of the India- Canada DAA without appreciating the fact that repair and maintenance services do not 'make available' any technical knowledge, know-how or skill to the customers in India and hence, not taxable under Article 12 of India- Canada DTAA; 4. ought to have appreciated that the Hon'ble Tribunal in the Appellant's own case for AY 2018-19 and AY 2022-23 on same set of facts has held that repairs and maintenance services are not taxable as FTS in India; Levy of interest under section 234B of the Act 5. erred in charging the interest under section 234B of the Act of INR 7,32,74,025; Initiation of penalty proceedings under section 270A of the Act 6. erred in initiating penalty proceedings under section 270A of the Act against the appellant.” 5. Shri Rajan Vora, appearing on behalf of the assessee submits that by rendering of repair and maintenance services, the assessee is not making available any technical knowhow, experience, skill or process or transferring any technical knowledge, technical plan or design. Therefore, the payments received for rendering of such services do not qualify as FTS as per provisions of India-Canada

4 ITA No.48 & 57/Del/2026 (A.Y. 2023-24 & 2019-20) DTAA. He further submitted that identical issue was decided by the Tribunal in assessee’s group concern Pratt & Whitney Canada Corp. vs. DCIT, reported as 179 taxmann.com 228 (Delhi-Trib.). The Coordinate Bench of Tribunal after examining the nature of receipts held that the payments received by the assessee are not liable to tax as FTS. He further placed reliance in the case of GE Engine Services LLC, USA vs. ACIT, 184 taxmann.com 238 (Delhi-Trib.). Wherein, the Tribunal followed the decision in the case of Pratt & Whitney Canada Corp. vs. DCIT (supra) and Rockwell Collins Southeast Asia Pte. Ltd., vs. DCIT in ITA No.2409/Del/2023 decided on 14.11.2024 and deleted the addition holding that the receipts for repair and maintenance and other auxiliary services are not in the nature of FTS.

"For the purpose of this Article "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy nature (including through the provision of services of technical or other personnel) if such services:

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(a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how or processes, or consist of the development and transfer of a technical plan or technical design." It is unambiguously clear that for falling within the definition of FIS, “make available” of technical knowledge is a sine qua non.

“23. The factual matrix in the instant case of the assessee is that the assessee manufactures, sells and provide servicing of gas turbine engines, such as turbofan, turboprop and turboshaft engines and Auxiliary Power Units (APU). When a customer purchases an aircraft from an aircraft manufacturer, it also purchases the engine associated with the aircraft which belongs to PWCC. As opposed to the large commercial engines market or APU, aircraft manufacturers do not typically offer engine alternatives to their platforms for regional aviation, general aviation, or helicopters (PWCC main products) and hence, customers purchasing an aircraft will necessarily purchase PWCC's engine. The customer acquires title to the engines from the aircraft manufacturer, not from PWCC and generally the repair and maintenance plan with PWCC is decided at the time of sale of engine along with the aircraft to the customers. Under the repair and maintenance services, company offers customers two options for maintenance: (i) enrolling in a Pay Per Hour (PPH) program/maintenance plans or (2) independent repairs as and when required. 24. In such a scenario, what we have to determine is whether when the assessee provides repairs and maintenance services to its customers, does it transfer the technical knowledge and expertise to its customer so that the customer can carry out the repairs and maintenance of the aircraft/engines itself. We find that the AO has not established that such a technical knowledge is transferred to the customer to make them self sufficient/relient in using the technology and that the customer has derived an enduring benefit and utilized the knowledge or know-how on his own in future without the aid of the service provider. We do not find that the technical knowledge, skills, etc remained with

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the customer receiving the services even after the particular contract comes to an end. Thus, we are of the considered view that the requirement of "make available" clause as per the India-Canada DTAA and India-Singapore DTAA are not satisfied in the case of the assessee. Since the receipts on account of repair and maintenance received by the assessee during the subject year from other customers are of similar nature as the receipts from Global Vectra discussed above, therefore, the above judgement applies to all the receipts from repair and maintenance received by the assessee. In view of the judicial precedence as discussed above, we have no hesitation to hold that the receipts on account of repair and maintenance services received by the assessee are not liable to be taxed as FTS in the hands of the assessee during the subject year. Ground 4 to 6 are allowed.” (emphasized by us) 10. In the case of GE Engine Services LLC vs. ACIT (supra), the AO held that receipts towards repair and overhaul support received by the assessee from Indian customers is in the nature of FTS. The matter travelled to the Tribunal, the Coordinate Bench after considering the fact and various decisions held as under:-

“13.3 In this regard, the relevant provisions of Article 12(4) of India-US DTAA are reproduced as under : "For purposes of this Article, "fees for included services" means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the provision of services of technical or other personnel) if such services : (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received ; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design." 13.4 Under the present factual matrix, the submission of the Assessee that it was not providing any ancillary or subsidiary services as described under para (a) and therefore, it is required to be seen if these services fall under sub-para (b) above is acceptable. In this regard from a reading of clause (b), it can be reasonably inferred that technical or consultancy services would fall under FIS only if they make available technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or design to its Indian customers in this case. As stated above the assessee submits that it did not make available technical knowledge, experience, skill, know-how, or processes or consist of the development and transfer of a technical plan or design to its

7 ITA No.48 & 57/Del/2026 (A.Y. 2023-24 & 2019-20)

Indian customers from whom amount of Rs. 471,64,50,980/- was received during the year. In this regard the assessee also relied upon the two orders of the coordinate bench of the Tribunal in the case of Pratt & Whitney Canada Corp. Pratt & Whitney Canada Corp. (supra)and Rockwell Collins Southeast Asia Pte Ltd (supra) 13.5 We notice that in the case of Pratt & Whitney Canada Corp. Pratt & Whitney Canada Corp. (supra), the Assessing Officer passed draft assessment order under section 144C(1) of the Act on 23.03.2024 and held that the payments received from the Indian customers on account of repair, maintenance and related services of aircraft engineering amounting to Rs. 242,65,46,501/- is taxable income of the assessee as Fees for Technical services ('FTS') under the provisions of section 9(1)(vii) of the Act and under the provisions of India- Canada DTAA. The Assessing Officer in the cited case noted that the assessee had received the following receipts from its Indian customers. SI No. Nature of Income Amount (in INR.) taxability in fetnco of income filed Income from repair 2,36,18,82,958 and maintenance of aircraft engines Sale of Publications 1,38,86,712 in relation to aircraft engines Non-Taxable Receipts from 12,86,000 engineering services Support Services in 4,01,103 relation to aircraft engine Total receipts declared in the return of 2,37,74,56,773 income filed

13.6 The assessee submitted before the AO in the cited case that the assessee had claimed receipts from aforesaid services as non-taxable while filing return of income for the subject year on the ground that since the services of repair, maintenance, publication, engineering and support services resulting in income of Rs. 2,37,74,56,773/- did not "make available" any technical knowledge, skill, knowhow or process or consisted of the development and transfer of a technical plan or technical design, the same did not qualify as Fees for Technical Services ('FTS') as per the provisions of India-Canada Double Taxation Avoidance Agreement ('DTAA').” 11. Since, facts in the impugned assessment year are pari materia to the decisions discussed above, we see no reason to take a different view. Hence, for parity of reasons, we hold that the receipts by the assessee towards repairs and

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maintenance are not in the nature of FTS within the meaning of Article 12(4) of the India-Canada DTAA, therefore, not taxable in India.

ITA No.57/Del/2026 AY 2019-20

“Taxability of repair and maintenance services rendered by the Appellant 4. erred in making an adhoc addition of Rs. 17,61,92,425 by treating 20% of the total income received from repair and maintenance services rendered by the Assessee as FTS under the provisions of the Act without appreciating the fact that repair and maintenance services were performed outside India and do not constitute technical services as per the provisions of the Act as well as India-Singapore Double Taxation Avoidance Agreement ('DTAA'); 5. erred in making an adhoc addition of Rs. 17,61,92,425 by treating 20% of the total income received from repair and maintenance services rendered by the Assessee as FTS under the provisions of Article 12 of the India-Singapore DAA without appreciating the fact that repair and maintenance services do not 'make available' any technical knowledge, know-how or skill to the customers in India and hence, not taxable under Article 12 of India- Singapore DTAA; 6. erred in following the methodology adopted while concluding assessment for AY 2014- 15, AY 2015-16, AY 2018-19, AY 2020-21 and AY 2022-23 and making adho addition of 20% alleging the same to be related to operations carried out in India when all the repair and maintenance work has been performed outside India;

9 ITA No.48 & 57/Del/2026 (A.Y. 2023-24 & 2019-20) 7. ought to have appreciated that the Hon'ble Tribunal in the Appellant's own case for AY 2018-19 and AY 2022-23 on same set of facts has held that repair and maintenance services are not taxable as FTS in India” 14. The definition of FTS as per Article12(4) of India-Singapore DTAA is as under:-

"The term "fees for technical services" as used in this Article means payments of any kind to any person in consideration for services of a managerial, technical or consultancy nature (including the provision of such services through technical or other personnel) if such services: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in paragraph 3 is received; or (b) make available technical knowledge, experience, skill, know-how or processes, which enables the person acquiring the services to apply the technology contained therein; or (c) consist of the development and transfer of a technical plan or technical design, but excludes any service that does not enable the person acquiring the service to apply the technology contained therein." In India-Singapore treaty, the “make available” condition is required to be satisfied, before the payment is brought to tax in India. The nature of services provided by the assessee and the payments received thereof are identical to the payments received and services provided by the assessee in ITA No.48/Del/2026. Both the sides are unanimous in stating that the facts in the instant appeal are pari materia to ITA No.48/Del/2026.

10 ITA No.48 & 57/Del/2026 (A.Y. 2023-24 & 2019-20) 17. To sum up, ITA Nos.48 & 57/Del/2026 for AY 2023-24 & 2019-20 are allowed.

Order pronounced in the open court on Monday the 20th day of April, 2026.

Sd/- Sd/- (BRAJESH KUMAR SINGH) (VIKAS AWASTHY) लेखाकार सिस्य/ACCOUNTANT MEMBER न्याधयक सिस्य/JUDICIAL MEMBER धिल्ली / Delhi, धििांक/Dated 24/04/2026

NV/- प्रतितिति अग्रेतििCopy of the Order forwarded to : अपीलार्थी/The Appellant , 1. प्रधििािी/ The Respondent. 2. 3. The PCIT धिभागीय प्रधिधिधि, आय.अपी.अधि., सिल्ली DR, ITAT, धिल्ली 4. गाडड फाइल/Guard file. 5.

BY ORDER,

//True Copy// (Asstt. Registrar) ITAT, DELHI