ITAT Delhi Holds Aircraft Maintenance Receipts Not Taxable as FTS/FIS in India

Bombardier Inc., a Canadian tax resident, entered into a Smart Parts Q400 Agreement with SpiceJet for supply of spare parts and maintenance, repair, and overhaul services on a per-flight-hour basis for aircraft operated in India.

For AY 2018-19, the Assessing Officer reopened the assessment and treated receipts of Rs. 41.64 crore from SpiceJet as fee for technical services under Section 9(1)(vii) of the Income Tax Act and as fee for included services under Article 12(4) of the India-Canada DTAA. The Dispute Resolution Panel upheld the addition, holding that the services satisfied the “make available” clause. Bombardier challenged the addition before the ITAT.

Main Issue: Whether receipts from aircraft maintenance and repair services rendered by Bombardier to SpiceJet constituted taxable FTS/FIS in India under the Income Tax Act and the India-Canada DTAA.

ITAT’s Decision: The Hon’ble ITAT allowed the appeal and deleted the addition. The Tribunal held that although the services involved technical expertise, Bombardier did not “make available” any technical knowledge, skill, experience, know-how, or process to SpiceJet that would enable it to perform such services independently in future. The repairs and refurbishment were carried out outside India, there was no transfer of technology, and no enduring technical capability was imparted to the Indian customer.

Relying on Goodrich Corporation, the Tribunal concluded that the receipts were not taxable as FIS under Article 12(4) of the India–Canada DTAA and, by virtue of Section 90(2), could not be taxed in India.

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