N.K. Choudhry ORDER
N.K. Choudhry, Member (A)
1. These appeals have been preferred by the Revenue Department against the orders dated 09.06.2017 and 30.06.2017, impugned herein, passed by the learned Commissioner of Income-tax (Appeals)-42, New Delhi (in short "Ld. Commissioner"), u/s. 250 of the Income-tax Act, 1961 (in short 'the Act') for the assessment year 2017-18.
2. As the issues and facts involved in the instant appeals are exactly similar, therefore, for the sake of brevity, we are deciding ITA No. 5662/Del/2017 as a lead case and the result of the same shall be applicable mutatis mutandis to the connected appeal i.e. ITA no. 5663/Del/2017 as well.
3. Brief facts, relevant for adjudication of the appeal, are that the Assessee had entered into an agreement with M/s. GSI Engine B.V., {a tax resident of Netherland, having its head office at Netherland} qua an aircraft engine having serial No. 779201 taken for the purpose of Assessee's own flight operation on a lease rent of US$ 65000 per month and user charges.
3.1. The Assessee had filed an application u/s. 195 of the Act for issue of certificate at "Nil" before the ITO(TDS), Ward 1(1)(1), New Delhi. The said application filed by the Assessee was rejected by the Assessing Officer by holding that the rental payment for engine hired by the Assessee is taxable as royalty @ 10% under Article 12(4) of the DTAA between India and Netherland. The Assessing Officer further held that the 'engine' is a part of aircraft and cannot be said to be an 'aircraft'. Therefore, the contention of the Applicant/Assessee does not seem to be correct. The payment is being made for the rent of engine, which is covered as equipment under Article 12(4) of the DTAA between India and Netherland and is taxable as royalty @ 10%. Therefore, the payer is authorized to make maximum payment of US$65000 per month during the F.Y. 2014-15 at 10% withholding.
The Assessing Officer further held that this certificate is provisional and is subject to final determination of tax at the time of regular assessment.
4. The Assessee being aggrieved with the order u/s. 195(2) of the Act, preferred first appeal before the ld. Commissioner, who vide impugned order, allowed the appeal of the assessee by holding that the rental income of aircraft engine does not get covered under Article 12 of India - Netherland DTAA. Further, Article 7 is also not applicable as there is no PE of M/s. GSI Engine B.V. in India. Accordingly, the rental income of aircraft engine is not chargeable to tax in India as per DTAA.
4.1. The Ld. Commissioner further held that it is a settled position that liability to deduct tax under section 195 arises only when the "sum" being paid is chargeable to tax under the Income Tax Act and since in the present case, there is no sum chargeable to tax under the provisions of the Act in view of Article 7 & 12 of the Avoidance of Double Taxation Treaty between India and Netherland, there is no requirement to withhold tax on such remittance.
5. The Revenue, being aggrieved with the findings and determination of the ld. Commissioner, is in appeal before us. In support of its case, the ld. DR relied upon the order passed by the Assessing Officer u/s. 195 of the Act and submitted that the impugned order is perverse and improper and hence, liable to be set aside.
5.1. On the contrary, the Assessee drew our attention to the order dated 23-04-2021 passed by the Hon'ble Coordinate Bench of the Tribunal {in Assessee's own case i.e. ITA Nos. 2260, 2261 and 2262/Del/2017 for second, third and fourth quarter of A.Y. 2013-14} and claimed that the Hon'ble Coordinate Bench deleted the identical addition made by the Assessing Office........