Kingfisher Airlines Ltd. v. Dy. DIT (IT) (2019) 179 ITD 367 (Bang.)(Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India – Fees for technical services – Training of pilots and cabin crew – Can not be assessed as fees for technical services or royalties – Not liable to deduct tax at source – OECD Model Convention , Art, 12 [ S.9(1)(vi) , 195 ]

Assessee was carrying on business of airline . During relevant years assessee sent its personnel for training of pilots and cockpit crew to various countries. AO  held that services rendered by foreign companies were highly technical in nature, therefore, any consideration paid towards those services would come within nature of FTS and, assessee ought to have deducted tax at source as per S. 195 of the Act . CIT (A) upheld order of AO only on ground of retrospective amendment to S. 9 by insertion of an Explanation by Finance Act, 2010, with retrospective effect from 1-6-1976 . On appeal the Tribunal held that tax deduction at source obligation cannot be fastened on a person on basis of a retrospective amendment to law, which was not in force when payments were made. Since, in instant case, when assessee made payments to non-residents in assessment years in question, such a provision did not exist, assessee could not be held liable to deduct tax at source on said payments on basis of retrospective amendment to law. (AY. 2007 -08 , 2008 -09)