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R.K. Gupta, Judicial Member

1. These are eight appeals filed by assessee and department against the orders of CIT (Appeals). Out of eight appeals, five appeals arise from a consolidated order passed by the CIT (A) for the three Financial Years 1997-98, 1998-99 and 1999-2000 relevant to Assessment years 1998-99 to 2000-01, respectively. The CIT (A) has partly confirmed the orders Under Section 201/201(1A) passed by the Assessing Officer holding the assessee to be in default for non-deduction of tax at source on payments made to non-resident parties for overhaul of its air-crafts, engines and components etc. She however held that such payments to the residents of UK and USA are not chargeable to tax keeping in view the provisions of the DTAAs with those countries. The Assessee is in the appeal before us for all the three years. The Revenue is in appeal for Financial Years 1998-99 to 1999-00 only. As the issues are common in all the three years, these appeals are disposed by a consolidated order.

4.1 Regarding payments made to residents of UK and USA the CIT (A) held that the payments were not in the nature of "fees for technical or included services" as per the relevant Article 12 of the DTAA read with the Memorandum of Understanding with USA which equally applied to the UK Treaty. Payments made to the residents of USA and UK were held to be 'business profits' and since those companies did not have a PE in India, their income was not chargeable to tax. The Revenue is in appal against the order of the CIT (A) on this point.

14.1 It was submitted that the CIT (A) failed to appreciate that no technician of Technik was ever deputed to India and no payment was made in this regard. It was stated that the assessee had entered into two major agreements for overhaul repairs-one with Technik for repair of components and other with ATC Lasham UK for overhaul the aircraft including the Hull. As regards hotel bills, it was stated that the CIT (A) has referred to the hotel charges paid by ATC Lasham, UK, whenever the assessee's crew flew the aircrafts to its facilities in UK for aircraft overhaul (C-Check). The attention of the Bench was drawn on the invoices of ATC Lasham at Pages 176 and 180, 250 & 225 of Paper Book 'B' filed before us which show that hotel charges were paid for stay in a hotel in UK. It is stated that the assessee's crew had to necessarily fly the aircraft to UK for "C" check (involving overhaul of the entire aircraft) and later for flying the aircraft back after the overhaul. The crew's lodgings etc. in UK were arranged for by the ATC Lasham and were billed to the assessee. It was explained to the CIT(A) that no hotel bills were paid for by Technik, as it overhauled components only. The components were flown to Technik facilities in Germany with airway bills without any personnel of the assessee accompanying them. However, in so far as payments to ATC, UK are concerned, the CIT (A) has herself finally held that these payments did not constitute 'fees for technical services' as per the provisions of the DTAA with UK. It was further stated that the assessee did not pay any hotel bill for any personnel of Technik as no employee of Technik ever visited India for supervising repairs or any consultancy service to the assessee.

56. In view of our decision allowing the main ground relating to chargeability of tax, the alternate grounds have become academic. We therefore do not propose to go into them though considerable arguments were advanced on the alternate grounds.

57. We now take up the appeals filed by the Revenue.

57.1 The grievance of the Revenue is that the CIT (A) was not correct in holding that as per the provisions of DTAAs with USA & UK, the payment for repairs made to the residents of those countries cannot be considered to be fees for included/technical services as defined in Article 12.4(b) of the US treaty and Article 13.4(c) of the UK treaty, respectively. The Ld. DR relies on the order of the Assessing Officer; whereas, according to the Ld. Counsel for the assessee, the issue is squarely covered in the assessee's favour by the decision of the ITAT, Bombay Bench 'C', in the case of Raymond Ltd. (2003 80 TTJ (Mumbai) 120). We however do not propose to go into this controversy in view of our decision that the impugned payments to non-residents for repairs of components are not chargeable to tax under the Act, and therefore the assessee was not liable to deduct tax Under Section 195 of the Act. In this view of the matter, the Revenue's appeals fail.