No Requirement to Deduct Tax on Payment Made to NRs for Repair & Maintenance of Helicopter Parts | ITAT

Case Details: Global Vectra Helicorp Ltd. v. DCIT - [2024] 159 taxmann.com 282 (Delhi-Trib.)

Judiciary and Counsel Details

• • Saktijit Dey, Vice-President & Dr B.R.R. Kumar, Accountant Member
  • Deepak Chopra, Anmol Anand & Ms Priya Tandon, Advs. for the Appellant.
  • Ms Binita Devi Naorem, CIT (DR) for the Respondent.

Facts of the Case

The Delhi Income Tax Appellate Tribunal recently ruled in favour of assessee-Global Vectra Helicorp Ltd. in a case involving the company’s tax liability on payments made to non-resident entities for the repair and maintenance of helicopter parts.

The case involved payments made to non-resident entities in the USA, UK, Australia, Canada, Singapore, UAE, Spain, Netherlands, and France. The Assessing Officer (AO) had treated these payments as Fee for Technical Services (FTS) and disallowed them under section 40(a)(i) for non-deduction of tax at source.

On appeal, the Commissioner (Appeals) ruled in favour of the assessee. The matter reached before the Delhi Tribunal.

ITAT Held

The ITAT ruled that the payments made to non-residents were not chargeable to tax in India. It was held that the make-available condition as available in the relevant Double Taxation Avoidance Agreements (DTAA) remained unfulfilled. The make available condition is a clause in DTAA that says that a payment can be treated as FTS only if the service provider has made available technical knowledge, know-how, skill, etc. to the service recipient while rendering the service.

The ITAT said that the AO had failed to demonstrate with cogent evidence that the make-available condition enshrined in the concerned treaties was satisfied. The tribunal also said that the entire repair and maintenance of helicopter parts was carried out outside India, and nothing was done in India by the non-resident payees. Therefore, the payments made to the non-residents were not chargeable to tax in India, and the assessee was not required to withhold tax under section 195.

Further, the payments made to non-residents could not be taxed in India as business profits or as other income in terms of Article 7 or 22 of the treaty. The tribunal said that since none of the entities had any Permanent Establishment (PE) in India, the payments made to them could not be taxed in India as business profits.