GE Engine Services LLC v ACIT: ITAT Delhi on Offshore Aircraft Engine Repair & India-US DTAA FIS Taxability

GE Engine Services LLC, a US-incorporated entity, carried out aircraft engine repair and overhaul services entirely at its facility outside India and supplied spare parts on an offshore basis. The Indian tax authorities classified the resulting receipts — aggregating over Rs. 471 crore — as "Fee for Included Services" (FIS) taxable under Article 12(4)(b) of the India-US Double Taxation Avoidance Agreement (DTAA) as well as under section 9(1)(vii) of the Income Tax Act, 1961. The ITAT Delhi's order in ITA No. 3700/Del/2023, pronounced on 11 March 2026, bears directly on the recurring question of whether purely offshore repair and maintenance services performed by a non-resident, with minimal technical interaction with Indian customers, attract withholding tax in India under the treaty's FIS clause.

This page is a research summary of one specific Indian tax judgment, NOT legal advice. Always verify against the full judgment and consult a professional for case-specific guidance.

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The case at a glance

• Parties: GE Engine Services LLC, United States Of vs Assistant Commissioner Of Income Tax
• Bench: Income Tax Appellate Tribunal - Delhi
• Date: 11 March 2026
• Court level: Tribunal (ITAT)
• Sections engaged: 143(3), 144C
• Outcome: Taxpayer succeeded

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Facts of the case

GE Engine Services LLC (the assessee) is a company incorporated in the United States. For Assessment Year 2021-22, it filed a return of income on 14 March 2022 declaring total income of Rs. 37,71,935 and claimed a refund of Rs. 60,22,600. The case was selected for scrutiny under CASS, and a notice under section 143(2) was issued on 27 June 2022. The assessee's principal business activity during the relevant year consisted of overhaul and repair of aircraft engines carried out entirely at its facility located outside India, accompanied by offshore supply of spare parts. Its customers — including Air India, Tata SIA Airlines Limited, Fly-By-Wire International Pvt. Ltd., Zest Aviation Pvt. Ltd., Karnavati Aviation, and AirAsia (India) Limited — were Indian airlines. Total receipts from these activities amounted to Rs. 4,71,64,50,980, none of which was offered to tax in India.

The Assessing Officer (AO) noted that the factual matrix was similar to AY 2019-20, where analogous receipts of Rs. 976,68,90,940 had been taxed at 10% as Fees for Technical Services under section 9(1)(vii) of the Act and Article 12(4)(b) of the India-US DTAA. Relying on those earlier proceedings, the AO proposed treating the AY 2021-22 receipts similarly. The assessee contested this before the Dispute Resolution Panel (DRP), which issued its directions on 13 September 2023. The Final Assessment Order (FAO) was subsequently passed under section 143(3) read with section 144C(13) on 20 October 2023, pursuant to those DRP directions under section 144C(5). Aggrieved, the assessee appealed to the ITAT Delhi.

A significant procedural backdrop informed the AY 2021-22 appeal. For AY 2018-19 and AY 2019-20 (ITA Nos. 1859 & 1860/Del/2022), a co-ordinate bench of the Tribunal had previously set aside the matter and remanded it to the DRP with directions to issue clear, implementable instructions to the AO — observing that the AO had not followed the DRP's original directions and that such non-compliance would only lengthen proceedings. The DRP thereafter issued fresh directions on 24 March 2025, and the AO passed consequential Orders Giving Effect on 25 March 2025. The assessee then filed a writ petition before the Delhi High Court challenging those consequential orders on the ground that they were barred by limitation, which remained pending at the time of the AY 2021-22 hearing before the ITAT.

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Issues raised

• Whether the receipts of Rs. 4,71,64,50,980 from offshore aircraft engine repair, overhaul, and spare-parts supply constituted "Fee for Included Services" taxable under Article 12(4)(b) of the India-US DTAA.
• Whether the said receipts were taxable as "Fees for Technical Services" under section 9(1)(vii) of the Income Tax Act, 1961, given that the services were rendered entirely outside India and no technical knowledge was transferred to Indian customers.
• Whether the AO's assessment order under section 143(3) read with section 144C(13) was sustainable in law, or was vitiated by incorrect appreciation of facts and misapplication of law, as alleged under Grounds 1 and 2 of the appeal.
• Whether the principle settled in earlier Tribunal decisions — including those in the cases of Pratt & Whitney Canada Corp. v. DCIT (ITA No. 665/DEL/2025) and Rockwell Collins Southeast Asia Pte Ltd v. DCIT (ITA No. 2409/Del/2023) — governed and concluded the issue for AY 2021-22.

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What the court held

The ITAT Delhi decided the appeal in favour of the assessee (outcome: Taxpayer succeeded). The Tribunal's dispositive reasoning, as reflected in the source order, turned on the characterisation of the offshore repair and overhaul activities. The assessee's position — summarised by the DRP itself in its order dated 13 September 2023 — was that the repair and overhaul services were effectuated entirely outside India, that no technical knowledge was transferred to the Indian customers by virtue of rendering those services, and that the interaction between the assessee's team and the Indian customers' teams was minimal throughout the process (from inspection and testing of parts through to repair, replacement, or exchange).

The Tribunal took note of the submission that the issue was no longer res integra and was covered by the recent decisions of the Tribunal in Pratt & Whitney Canada Corp. v. DCIT (ITA No. 665/DEL/2025) and Rockwell Collins Southeast Asia Pte Ltd v. DCIT (ITA No. 2409/Del/2023), both of which — per the assessee's submission placed before the Bench — addressed the same question of taxability of offshore aircraft-related services under the India-US/applicable DTAA. The procedural history of the earlier assessment years (AY 2018-19 and AY 2019-20), including the pending Delhi High Court writ petition on limitation, was also placed before the Bench as contextual background going to the reliability of the AO's reliance on those earlier proceedings as a template for AY 2021-22.

The Tribunal's ruling — that the taxpayer succeeded — reflects acceptance of the core submission that receipts from purely offshore repair and overhaul services, with minimal technical interaction with Indian customers, do not constitute FIS under Article 12(4)(b) of the India-US DTAA or Fees for Technical Services under section 9(1)(vii) of the Act so as to be taxable in India.

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Strategy observations

1. Jurisdictional and factual challenge mounted at the outset: An additional ground was raised before the Tribunal — Ground No. 1 — contesting the validity of the Final Assessment Order under section 143(3) read with section 144C on the basis of incorrect factual foundation and misapplication of law. The Tribunal recorded this as a general ground that did not require separate adjudication, disposing of it along with the substantive challenge.

2. Reliance on co-ordinate bench precedents involving comparable offshore service providers: The assessee's representative placed two decisions of the ITAT Delhi — Pratt & Whitney Canada Corp. v. DCIT (ITA No. 665/DEL/2025) and Rockwell Collins Southeast Asia Pte Ltd v. DCIT (ITA No. 2409/Del/2023) — before the Bench. Both decisions appear in the text of the order as relied upon by the assessee. The Tribunal's decision in favour of the taxpayer is consistent with treating the issue as settled by these precedents.

3. DRP's own reasoning used as a pivot: A notable feature of the record is that the assessee reproduced the DRP's own summarised findings from its 13 September 2023 order — to the effect that no technical knowledge was transferred and that interaction with Indian customers was minimal — as part of its submission before the Tribunal. The DRP's characterisation of the facts thus served as an acknowledged baseline from which the Tribunal proceeded.

4. Procedural backdrop of earlier assessment years disclosed to the Bench: The Tribunal had itself, at an earlier clarification hearing on 28 November 2025, sought the status of proceedings for prior years. In response, the assessee placed on record the full history: the coordinate bench's earlier remand, the DRP's consequential directions of 24 March 2025, the AO's Orders Giving Effect of 25 March 2025, and the pending Delhi High Court writ petition on limitation. This disclosure of the parallel litigation landscape formed part of the factual matrix before the Tribunal when it pronounced its order on 11 March 2026.

5. The locus of service performance — entirely outside India — was treated as a central factual plank: The assessee consistently maintained, and the DRP's own order acknowledged, that the overhaul and repair process from start to finish was conducted at the assessee's facility outside India. This factual foundation — offshore performance with no technology transfer — underpinned the treaty non-taxability argument under both the DTAA and section 9(1)(vii).

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Why this case matters

The GE Engine Services LLC order is significant for the non-resident services taxation space, particularly for foreign entities rendering aircraft maintenance, repair, and overhaul (MRO) services to Indian airlines under contracts structured as purely offshore transactions. The recurring pattern — visible across AY 2018-19, 2019-20, and now AY 2021-22 — of Indian tax authorities characterising such receipts as FIS or Fees for Technical Services under section 9(1)(vii) and Article 12(4)(b) of the India-US DTAA, and the Tribunal's consistent rejection of that characterisation, signals a body of ITAT Delhi jurisprudence on the point. The co-ordinate bench decisions in Pratt & Whitney Canada Corp. and Rockwell Collins Southeast Asia Pte Ltd, cited within this order, indicate that the principle of non-taxability of purely offshore MRO services is being applied across multiple comparable non-resident service providers operating in the aviation sector.

For in-house tax teams at multinational corporations and for transfer-pricing/international-tax practitioners, this case reinforces the analytical distinction between services that involve transfer of technical knowledge to the Indian customer and services that are merely performed offshore with the finished product or overhauled asset thereafter returned to the customer. The order also illustrates the procedural complexity that can arise when earlier assessment years involving the same issue remain in litigation before the High Court simultaneously — a dynamic that the ITAT had to navigate in determining the AY 2021-22 appeal on its own merits.

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Source

This case is drawn from the TaxNoticeAI structured legal corpus (16,101 Indian tax judgments, CBIC circulars, ITAT rulings, AAR rulings, GSTAT rulings), sourced from indiankanoon.org and official court portals. Original document: https://indiankanoon.org/doc/34880460/