Case Details: Boeing India Defense (P.) Ltd. vs. Deputy Commissioner of Income-tax [2026] 186 taxmann.com 310 (Delhi-Trib.)
Judiciary and Counsel Details
- Challa Nagendra Prasad, Judicial Member & S. Rifaur Rahman, Accountant Member
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Sriram Seshadri, Ms Kashish Gupta, CAs & Ms Shruti Khimta, AR for the Appellant.
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Ms Anima Barnwal, CIT DR for the Respondent.
Facts of the Case
Assessee was a step-down subsidiary of The Boeing Company (TBC). TBC sold the Boeing flight to the Indian Air Force (IAF). For after-sales services, TBC appointed the assessee to perform various technical services. During the year under consideration, the assessee entered into a service agreement with TBC and worked as an intermediary between TBC and IAF. It collected service charges from IAF and rendered services to TBC through intermediaries, including the assessee. The main services rendered by the TBC through the assessee to the IAF were training simulators for the C-17 and BBJ aircraft sold by TBC, and technical services at the customer station.
The assessee retained the cost exclusively incurred against contract revenue or for the period, and agreed to an arm’s-length return; the rest is passed on to the TBC. The TPO rejected the assessee’s claim that it operates only with a limited risk factor and that all the required risks to provide the training and render the technical services are borne by the TBC, and made additions to the assessee’s income.
The matter reached the Delhi Tribunal.
ITAT Held
The Tribunal held that the assessee invested neither in the simulator nor in any technology to carry out the required services to the IAF. It completely depended on the TBC’s execution of various services. The assessee was only providing assistance to the IAF in providing services through TBC.
As per the service agreement entered into by the assessee with TBC, they have clearly undertaken to provide the relevant services to IAF and to share the financials based on the work allocated between them. Based on a clear demarcation of services rendered by them, they have agreed to share the service charges collected from IAF.
They have also agreed to share the same in accordance with the agreed formula as indicated in the mutual service agreement, and to include the addendum. Therefore, the assessee was only a limited risk service provider, and the TPO had not brought on record any material to show that the assessee retained the business risk since the assessee did not possess any capacity to provide such technical and training services on its own.
Further, the intercompany contract entered into by the assessee with the TBC specifically provided that the risks with respect to any claims, such as liquidated damages, performance guarantees, etc., are borne by the TBC/AE. It clearly stated that the entire risk vests with the AE.
List of Cases Referred to
- Bharat Sanchar Nigam Ltd. v. UOI [2006] 3 STT 245 (SC)/[2006] 2 STR 161 (SC) (para 10)
- CIT v. Excel Industries Ltd. [2013] 38 taxmann.com 100/262 CTR 261/358 ITR 295/219 Taxman 379 (SC) (para 10)
- Li and Fung India (P.) Ltd. v. CIT [2013] 40 taxmann.com 300/[2014] 264 CTR 441/361 ITR 85/223 Taxman 368 (Delhi) (para 26)
- Sumitomo Corporation India (P.) Ltd. v. CIT [2016] 71 taxmann.com 290/288 CTR 1/387 ITR 611/242 Taxman 260 (Delhi) (para 26).
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