Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 22.08.2024 passed by the Income Tax Appellate Tribunal for Assessment Year 2018–19. The Tribunal had allowed the assessee’s appeal and set aside the assessment order passed under Section 147 read with Section 144C(13).

The assessee, Goodrich Corporation, is a tax resident of the United States of America and had furnished a valid Tax Residency Certificate. During the relevant previous year, the assessee received ₹51,50,28,965/- from Indian customers towards repair and maintenance services of aircraft equipment. Additionally, it received ₹1,28,46,717/- as corporate allocation charges claimed to be reimbursement of costs incurred on behalf of its Indian associate, Goodrich Aerospace Services Pvt. Ltd.

The Assessing Officer treated the receipts as taxable in India as fees for technical services under Section 9(1)(vii) of the Act and as fees for included services under Article 12(4) of the India–US DTAA, alleging that the services involved transfer of technical knowledge and skill.

Issues Involved

Whether repair and maintenance services of aircraft equipment rendered by a US tax resident satisfy the “make available” condition under Article 12(4) of the India–US DTAA, whether such receipts are taxable as fees for technical or included services, and whether reimbursement of corporate allocation charges could be taxed as FTS/FIS.

Petitioner’s Arguments (Revenue)

The Revenue contended that aircraft repair and maintenance is a highly specialised technical activity requiring expertise, skill, and experience, and therefore constitutes technical services. It was argued that the services imparted enduring benefit in the form of skill and experience to Indian customers, thereby satisfying the “make available” condition under Article 12(4). The Revenue also argued that corporate allocation charges involved training and advisory services and were not pure reimbursements.

Respondent’s Arguments (Assessee)

The assessee argued that the services were standard repair and maintenance services performed entirely outside India, without transfer of technical knowledge, know-how, skill, or process. It was submitted that Indian customers were not enabled to perform such services independently in future. The assessee also contended that corporate allocation charges were mere reimbursements of actual costs and did not involve any rendering of technical or consultancy services.

Court Order / Findings

The Delhi High Court upheld the findings of the ITAT and held that the repair and maintenance services did not satisfy the “make available” test under Article 12(4) of the India–US DTAA. The Court reiterated that for a service to qualify as fees for included services, technical knowledge or skill must be transmitted to the recipient in a manner that enables independent application in future.

Relying on earlier decisions including CIT v. De Beers India Minerals Pvt. Ltd., CIT v. Bio-Rad Laboratories (Singapore) Pte. Ltd., and CIT v. Relx Inc., the Court held that mere rendering of services using technical expertise does not amount to making technology available. The Court also accepted the ITAT’s factual finding that no employees of the assessee had visited India for training and that corporate allocation charges were reimbursements without any transfer of technology.

Important Clarification

The Court clarified that incidental or short-term benefit derived by a customer from specialised services does not satisfy the “make available” condition. Unless the recipient is enabled to apply the technical knowledge or skill independently after the service ends, Article 12(4) of the India–US DTAA is not attracted.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration and affirmed that the receipts from repair and maintenance services and corporate allocation charges were not taxable in India as fees for technical or included services under the Act or the India–US DTAA. Pending applications were also dismissed.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769677237_PR.COMMISSIONEROFINCOMETAXINTERNATIONALTAXATION1NEWDELHIVsGOODRICHCORPORATION.pdf

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