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Income Tax Appellate Tribunal, DELHI BENCH “D”: NEW DELHI
O R D E R PER M. BALAGANESH, A. M.: 1. The Assessee Bombardier Inc (hereinafter referred to as „assessee) by filing the present appeal sought to set aside the impugned order dated 29.01.2025 passed by the Assessing Officer (AO) under section 147 r.w.s. 144C(13) of the Income Tax Act, 1961 (for short „the Act‟) inconsonance with the order passed by the Dispute Resolution Panel (DRP)-1, New Delhi dated 24.12.2024 u/s 144C(5).
The Ground No. 1.1 raised by the Assessee is general in nature and does not require any specific adjudication.
The Ground Nos. 1.2. and 1.3 raised by the Assessee are challenging the validity of assumption of jurisdiction for reopening of assessment. No Page | 1 arguments were advanced by the Learned AR in this regard and accordingly the same are hereby dismissed as not pressed.
4. The Ground Nos.1.4 and 1.5 raised by the Assessee are challenging the taxability of receipts from customers as fee for technical services (FTS) / fee for included services (FIS) under the domestic provisions and under the India Canada Double Taxation Avoidance Agreement (DTAA).
We have heard the rival submissions and peruse the materials available on record. The Assessee is a non-resident company incorporated under the laws of Canada and is a tax resident of Canada in terms of article 4 of India Canada DTAA. The Assessee is holding a valid Tax Residency Certificate (TRC) issued by the Canadian Government. The Assessee during the year under consideration was a manufacturer of transportation equipment including business and commercial aircraft as well as aircraft components and was provider of related services including aftermarket component repair and overhaul as well as other services to its clients. The Assessee had entered into a „Smart Parts Q400 Agreement‟ (SPQ400 Agreement) dated 7-6-2015 with SpiceJet, an Indian company engaged in the business of commercial flight operations in India for providing maintenance, repair and overhaul services on the basis of per flight hour support in relation to the aircrafts operated by SpiceJet agreement. As per the SPQ-400 agreement, the Assessee received its fee based on the flight hours flown by the aircraft which covers the cost of consumables, replacements etc as well as maintenance. The Assessee in this regard enclosed the sample copies of invoices raised on SpiceJet in pages 66 to 79 of the paper book. It was submitted that SpiceJet undertakes periodic maintenance of components of its aircraft in order to maintain the airworthiness of the said aircrafts and to ensure that the maintenance requirements are complied with. For this purpose, SpiceJet entered into an agreement with the Assessee for pre-payment of cost coverage, mainly for parts and also for maintenance, repair and overhaul services on the basis of per flight hour support in relation to the aircrafts operated by SpiceJet which is akin to an Annual Maintenance Contract (AMC) entered into by the companies in the regular course of business.
6. The case of the lower authorities is that the nature and scope of SPQ 400 Agreement was in the nature of fee for technical services provided by the Assessee accordingly taxable under section 9(1)(vii) of the Act under the Domestic Law and also under Article 12(4) of India Canada DTAA on the ground that it satisfies the „make available clause‟ provided in Article 12(4) of the treaty. The Assessee objected to the show cause notice issued by the Learned AO by stating that the receipts from the customers are mainly towards supply of spare parts and certain services provided are in the nature of standard services / facilities and do not constitute FTS under section 9(1)(vii) of the Act. On without prejudice basis, the assessee submitted that even if the said services are considered as FTS under the Domestic Act, the same do not qualify as FIS under Article 12(4) of the India-Canada Treaty, as such services do not make available technical knowledge, experience, skill, know-how or processes, etc. to the recipient. Thus it was submitted that the amount of Rs. 41,64,62,765/- is neither taxable as FTS under Section 9(1)(vii) of the Act nor as FIS under Article 12(4) of the India-Canada Treaty. The Learned AO in the draft assessment order proceeded to treat the amounts received from SpiceJet as fee for technical services and brought to tax a sum of Rs 41,64,62,765/- as income of the Assessee and completed the draft assessment order. The Learned DRP issued directions under Section 144C(5) of the Act upholding the addition made by the Learned AO of treating the receipts as taxable both under the domestic law as well as under the Article 12(4) of the India- Canada Treaty, giving a finding that the services rendered duly satisfy the make-available clause provided therein. Pursuant to the directions of the Learned DRP, the Learned AO passed the final assessment order making the same addition of Rs 41,64,62,765/- as FTS taxable both under the Act as well as under the Treaty.
We find that Assessee had specifically submitted before the lower authorities that it is not making available to SpiceJet any technical knowledge, expertise, skill, know-how or process etc. and accordingly these services cannot be characterized as FIS for the purpose of Article 12(4) of India-Canada Treaty. Further the Assessee submitted the agreement entered into between the Assessee and SpiceJet clearly specifies at various places that Assessee‟s representatives will be assisted by the representatives of SpiceJet and the representatives of SpiceJet will collaborate with the Assessee. Smart Parts SPQ400 Agreement entered between Assessee and SpiceJet vide Article 3 “Enrollment Conditions” clearly brings out the fact of assistance by the representatives of SpiceJet to the representatives of Assessee. Further in Article 3 of Enrollment Conditions of SPQ-400 Agreement, it has been specifically mentioned in Article 3.1.4 and 3.1.5 as under:-
“3.1.4. The customer hereby agrees that at all times all Bombardier aircraft of the same model as the aircraft that is owned, operated or leased by the customer shall be enrolled in SPQ-400 Smart Parts program. Should the customer elect not to enroll all Bombardier SPQ-400 aircraft in the SPQ-400 Smart Parts program or to terminate SPQ-400 Smart Parts coverage with respect to a particular Bombardier aircraft and remain owner, operator or lessor of such aircraft then coverage under this agreement for all Bombardier aircraft owned, operated or leased by the customer shall automatically be terminated. 3.1.5. The customer shall promptly report to Bombardier those Covered Components, installed on the aircraft or customer owned Covered Components to be described in the Schedule VIII attached hereto. Following the commencement date, customer shall promptly notify Bombardier of any service bulletins, pertaining to the Covered Components, which customer intends to implement on the aircraft or to any customers owned Covered Components throughout the term.
Bombardier reserves the right to review the impact on the exchange pool (if applicable), the services fee, or the price of the implementation of the service bulletin. During the term, in the event of a removal of an unserviceable Covered Component of previous configuration other than listed in Schedule II, customer shall be solely responsible for the cost of modification of such unserviceable Covered Component to align it with the Smart Parts standard configuration, unless the parties mutually agree on an alternate commercial solution.
In our considered opinion, the make available clause as provided in Article 12(4) of the India-Canada Treaty does not get satisfied in the instant case. Per Contra, the Learned DR before us vehemently argued that the services rendered by Assessee are akin to Engineering Services and he referred to Clause 2.1.8. of SPQ400 Agreement which reads as under:-
“2.1.8. APU’s fleet management offering – Bombardier has secured, at no additional cost to Customer, a subscription to Revima‟s APU‟s fleet management offering Customer is responsible for providing the data required to achieve the full benefits of this offering. The Fleet Management Offering will include elements of : - APU Health Monitoring System * Advanced web-based visualization system, including customizable graphical trends, alerts and e-mail notifications. - APU technical support for on-wing troubleshooting - Maintenance programs adapted to leading indicators - APU removal forecasting In the instant case of the Assessee herein, supply of goods are made outside India, repairs and refurbishment are done by the Assessee outside India. The Clause 2.1.8. of the SPQ 400 Agreement relied upon by the Learned DR only states that it is subscription to third party supplies which is not at all a relevant criterion to decide participation for replacement of spares.
The Learned DR accordingly argued that the services rendered by the Assessee are merely technical services chargeable to tax both under the Act as well as the Treaty. The Learned DR placed reliance on the Co- ordinate Bench decision of Chennai Tribunal in the case of Foster Wheeler France S.A. vs DDIT reported in 157 ITD 793 dt 5-2-2016 and the decision of Hon‟ble Delhi High Court in the case of DIT vs M/s Lufthansa Cargo India in ITA 95/2005 dated 27-5-2015 in support of his arguments. We find on perusal of the said decision of the Hon‟ble Delhi High Court referred by the Learned DR, the said decision only holds that the technical services rendered are taxable as FTS as per the domestic law. With regard to taxability of FTS under the Treaty, the same was decided in favour of that Assessee wherein the revenue chose to challenge taxability of FTS only under section 9(1)(vii) of the Act under the domestic law and not under the Treaty. Hence the said decision of Hon‟ble Delhi High Court is factually distinguishable. The decision relied on Chennai Tribunal by the Learned DR is factually distinguishable in view of the fact that in that case that Assessee was admittedly making use of the advice, input, experience, experimentation and assistance rendered by the foreign company in the decision making process of management, financial and risk management etc. This is not the case before us herein. Hence both the decisions relied upon by the Learned DR does not advance the case of the revenue.
10. We find that the issue in dispute was subject matter of adjudication by the Hon‟ble Jurisdictional High Court recently in the case of CIT vs Goodrich Corporation dated 23-5-2025 reported in 175 taxmann.com 177 (Del HC) wherein it was held that where assessee, a US company, provided repair and maintenance services of aircraft equipment to Indian airline operators, since said services did not involve any transfer of technology, know-how or skill, receipts from repair and maintenance services were not taxable as FIS under article 12(4) of India-USA DTAA. The relevant operative portion of the said decision is reproduced below:-
“11. The Assessee states repair services provided by it follows two types of arrangements. The explanation regarding the said arrangements, as noted by the DRP in its order, is reproduced below: "Firstly, the Indian customer intimates the assessee about faulty aircraft equipment and sends the aircraft equipment to the designated facility (repair workshop) of the assessee in USA for repair services. On receipt of equipment from customer, the assessee sends the estimate of the proposed service work for the approval of the customer. Once the repair charges are approved the assessee performs the required repair services and sends back the equipment to the Indian customer. The assessee had also email correspondences in relation to workorder/ repair orders executed during the year on sample basis as Annexure7 (copy of submission dated 13 March 2023 along with the relevant annexures is enclosed as Item 3 of Paper-book 1) Further, no activity has been performed by assessee in India. Secondly, the assessee enters into a comprehensive agreement with the customer wherein all terms and conditions are predetermined. Further, the pricing is agreed upfront basis the number of landings during a particular period of time. As and when repairs are required, the customer sends the equipment to the repair facility. The assessee will either provide the customer with a fully refurbished replacement unit in exchange for the customer's equipment or assessee will repair the customer's equipment and send that back to the Indian customer."
……..
In CIT v. De Beers India Minerals P. Ltd. [2012] 21 taxmann.com 214/208 Taxman 406/346 ITR 467 (Karnataka), the Karnataka High Court had explained the import and meaning of 'make available' as used in Article 12(4) of the India- USA DTAA as under: "21. What is the meaning of "make available". The technical or consultancy service rendered should be of such a nature that it "makes available" to the recipient technical knowledge, know-how and the like. The service should be aimed at and result in transmitting technical knowledge, etc., so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into the terminology "making available", the technical knowledge, skills, etc., must remain with the person receiving the services even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider have gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. Technology will be considered "made available" when the person acquiring the service is enabled to apply the technology. The fact that the provision of the service that may require technical knowledge, skills, etc., does not mean that technology is made available to the person purchasing the service, within the meaning of paragraph (4)(b). Similarly, the use of a product which embodies technology shall not per se be considered to make the technology available. In other words, payment of consideration would be regarded as "fee for technical/included services" only if the twin test of rendering services and making technical knowledge available at the same time is satisfied."
This court in a recent decision in Commissioner of Income-tax, International Taxation v. RELX Inc [2024] 160 taxmann.com 109/470 ITR 611 had concurred with the view of this court in CIT v. Bio-Rad Laborataries (Singapore) Pte. Ltd. [2023] 155 taxmann.com 646/296 Taxman 167/459 ITR 5 (Delhi) and observed as under: 15. Similarly, in order for that income to fall within the ambit of "fees for included services", it was imperative for the Department to establish that the assessee was rendering technical or consultancy services and which included making available technical knowledge, experience, skill, know- how or processes. As has been found by the Tribunal, the access to the database did not constitute the rendering of any technical or consultancy services and in any case did not amount to technical knowledge, experience, skill, know-how or processes being made available.
We note that while explaining the meaning liable to be ascribed to the expression "make available", the court in CIT v. BioRad Laborataries (Singapore) Pte. Ltd. had affirmed the following opinion as expressed by the Tribunal. This is evident from a reading of paras 14, 14.1 and 15, which is extracted below (459 ITR p. 7): (SCC OnLine Del paras 14 and 15) "14. According to the Tribunal, the agreement between the respondent-assessee and its Indian affiliate had been effective from 1-1-2010, and if, as contended by the appellant-Revenue, technical knowledge, experience, skill, and other processes had been made available to the Indian affiliate, the agreement would not have run its course for such a long period. 14.1. Notably, this aspect is adverted to in paras 17 to 23 of the impugned order. For convenience, the relevant paras are extracted hereafter: 'A perusal of the aforementioned provision shows that in order to qualify as fees for technical services, the services rendered ought to satisfy the "make available" test. Therefore, in our considered opinion, in order to bring the Page | 8 alleged managerial services within the ambit of fees for technical services under the India-USA Double Taxation Avoidance Agreement, the services would have to satisfy the "make available" test and such services should enable the person acquiring the services to apply the technology contained therein. . agreement is effective from 1-1-2009 and we are in Assessment Years 2018-2019 and 2019-2020. In our considered opinion, if the assessee had enabled the service recipient to apply the technology on its own, then why would the service recipient require such service year after year every year since 2009? This undisputed fact in itself demolishes the action of the assessing officer/Dispute Resolution Panel. The facts on record show that the recipient of the services is not enabled to provide the same service without recourse to the service provider i.e. the assessee. In our humble opinion, mere incidental advantage to the recipient of services is not enough. The real test is the transfer of technology and on the given facts of the case, there is no transfer of technology and what has been appreciated by the assessing officer/learned Commissioner of Income Tax (Appeals) is the incidental benefit to the assessee which has been considered to be of enduring advantage. In our understanding, in order to invoke make available clauses, technical knowledge and skill must remain with the person receiving the services even after the particular contract comes to an end and the technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider.' (emphasis is ours) 15. We tend to agree with the analysis and conclusion arrived at by the Tribunal."
As we examine the nature of the transaction between an Indian subscriber and the assessee, it becomes manifest and apparent that it neither comprises of a transfer of copyright nor does it include a transfer of a right to apply technology and other related aspects which are spoken of in Article 12(4)(b) of the Double Taxation Avoidance Agreement.
We thus find no justification to interfere with the view as expressed by the Tribunal. The appeal fails and shall consequently stand dismissed on the aforesaid terms."
16. The issue involved in the present case is covered by the several decisions of this court including Relx Inc. (supra) We find no infirmity with the view of the learned ITAT in regard to taxability of repair and maintenance charges as FIS.”
11. Further the Co-ordinate Bench of Delhi Tribunal in the case of Rockwell Collins Southeast Asia Pte Ltd vs DCIT in & 2410 /Del/2023 dated 14-11-2024 had also decided the similar issue in favour of the Assessee. The facts of that case and the decision rendered thereon are reproduced below:-
7. The assessee provides repair and maintenance service for aircraft equipment to Indian customers. This is the primary business of the Assessee for which the assessee charge repair and maintenance fees. For the purpose of repair and maintenance, the aircraft equipments are shipped outside India where aircraft equipments are repaired and sent back to the customers in lndia. In this regard, the assessee enclosed the specimen document in relation to shipment of equipment including the e-mail communications in pages 301 to 330 of the Paper Book to prove the fact that the repairs were carried out outside India. The assessee earned revenue of 12,78,69,526/- from Indian customers on account of such repairs and maintenance services. The assessee also submitted the copy of agreement, purchase orders along with copy of invoices raised on the Indian customers on sample basis which are enclosed in pages 211 to 248 of the Paper Book. The ld AR drew our attention to the steps involved in the rendition of repairs and maintenance services by the assessee as under:- Step 1: Intimation of need for repair and maintenance services by the customer Step 2: Customer sends the aircraft equipment to the designated facility of the Assessee in Singapore Step 3: On receipt of the equipment, the Assessee evaluates repairs to be undertaken, provides estimate to customer for their approval Step 4: Post receipt of the customer‟s approval, the Assessee performs necessary repairs at the designated facility Step 5: Post completion of repairs at the designated facility in Singapore, the Assessee informs the customer and confirms the place of delivery to ship back the equipment.
From the modus operandi operated by the assessee for rendering of repairs and maintenance services, we find that the aircraft equipments are shifted outside India for repairs. The repairs are carried out outside India. The equipment after due repairs and maintenance are shipped back to the customers in India. There is absolutely no transfer of any technology, nor technical plan or design or make available technical knowledge to the recipient of the services, which would enable Page | 10 the recipient to carry out repairs on its own without the assistance of the assessee. In our considered opinion, the services rendered do not satisfy the „make available‟ clause prescribed in Article 12 of India-Singapore treaty. Further, no technical knowledge, experience, skill, knowhow, technical plan or technical design was made available or transferred by the assessee to any party while rendering the said services. No representative of the assessee had come to India for rendering any services. The entire repairs and maintenance services, at the cost of repetition, are rendered only outside India. The crisis calls are attended over phone from Singapore. No training whatsoever is given by Singapore entity to the Indian representatives. Further, it is not in dispute that the assessee does not have any PE in India. These facts are very clear from the sample Dispatch plus Product Service Agreement entered into by the assessee with Inter Globe Aviation Pvt. Ltd which is enclosed in pages 211 to 248 of the Paper Book. The copies of the invoices raised by the assessee are enclosed in pages 261 to 264 of the Paper Book.
The ld DR before us vehemently pleaded that the ld AO had applied „source rule‟ in the instant case. She doubted the fact as to whether services per se were rendered in Singapore by the assessee. She stated that services of Airbus are rendered in France which is in public knowledge. We find that this argument to be completely absurd and devoid of merit in view of the fact that no consideration was received by the assessee from Airbus. Further, this was not even the case of the ld AO for treating the receipts as FTS in the hands of the assessee. We further find that the issue in dispute is squarely covered by the co-ordinate bench decision of the Delhi Tribunal in the case of Goodrich Corporation Vs. ACIT in for AY 2018-19 dated 22.08.2024 which is a sister concern of the assessee, wherein, exactly the identical issue was subject matter of consideration. For the sake of convenience, the relevant operative portion of the said order is reproduced hereinunder:-
“Repairs and Maintenance Services-FTS or not 3. The assessee is a non-resident, TRC holder of USA primarily engaged in the business of providing services in the nature of repair & maintenance of aircraft equipment.
Before the AO, the assessee submitted that for the purpose of repair & maintenance, the aircraft equipment are shipped outside India where they are repaired and sent back to Indian customer to India and hence they do not qualify the clause of 'make available'. However, the AO held that the on ground aircraft services provided by the assessee qualify it as 'make available'.
5. The Id. DRP held that "repair and maintenance services of aircraft parts is a very specialized field requiring technical expertise skill and experience at every stage. They are specific and customer based. Customer of the assessee are airlines which operate passenger and goods carrier. They are not equipped in handling the issues related to break down of aircraft. It is a complete and separate science and art in itself. The services provided by Page | 11
way of repair and maintenance are technical in nature and fall under ambit of services under Fee for Technical Services. As discussed above, once it is established that the services which have been provided are specialized customer-based services, what remains to see is whether they pass the test of make available or not under India USA DTAA. Interpretation of make available clause will differ with specific areas of the services under consideration. For instance, interpretation of make available for a concern providing services for the agricultural sector vis-à- vis education sector would be vastly different from each other. In the same way interpretation of make available is different for a concern engaged in providing services revolving around a highly specialized sector such as Aircraft industry. The make avallable clause deals with not only making available technical knowledge or know-how or processes or consist of the development and transfer of a technical plan or technical design but also deals with imparting experience and skill. Within the make available clause itself the enduring benefit would be different for all the items mentioned in it for example the enduring benefit of a technical design or know-how cannot be same as enduring benefit coming from imparting of skill or experience. In the former case enduring benefit will outlive the enduring benefit brought in by the latter. In case of assessee company, the enduring benefit and make available fall under skill/experience which is shared by assessee company with its customers. Both the parties in these service transactions are engaged in highly specialized work which can be rendered and avalled by them only and once the skill/experience is rendered, it continues to give benefit until required again. When it comes to services rendered as skill and experience, the make available and enduring benefit, will almost always have a comparatively short shelf life in this context. This being the case, it cannot be ignored that the make available clause and enduring benefits are satisfied and the service is not of the nature which is so highly technical and specialized that it should be taxed as Fee for Technical Services."
From the above, we find that it could be technical services but the 'make available' clause is totally absent. The repairs & maintenance services are 'not made available' to the clients so that in future they can repair & maintain their own. There is no transfer of technology, no transfer of skill or knowledge or processes. There is no imparting of experience or benefit. The Id. DRP wrongly interpreted that the 'enduring benefit' gained by the client by the way of repairs & maintenance is akin to 'make available' which cannot be accepted. Rather, it should be the enduring benefit to the clients to undertake repairs & manage the maintenance services, can then only it be considered that the 'make available' clause is satisfied. Since, such 'make available' clause is not satisfied, the services cannot be treated as FTS as per India-USA DTAA.
7. The appeal of the assessee on this ground is allowed.”
It is pertinent to note that Delhi Tribunal had relied on the decision rendered by Tribunal in the case of Goodrich Corporation vs ACIT in for AY 2018-19 dated 22-8-2024, which was later approved by the Hon‟ble Delhi High Court reported in 175 taxmann.com 177 supra.
In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we hold that the receipts of the Assessee from SpiceJet are not liable to tax in India under the Article 12(4) of India Canada Treaty and accordingly not liable to tax in India in terms of section 90(2) of the Act. Accordingly, the grounds raised by the Assessee are allowed.
In the result, the appeal of the Assessee are allowed.
Order pronounced in the open court on 10/12/2025.