Treaty between India and Russia – Indian decision on whether purchase of test aircraft engines is contract for sale or technical services

The Indian Income Tax Appellate Tribunal (ITAT) delivered a ruling dated 31 March 2008 in the case of Hindustan Aeronautics Ltd. v. Income Tax Officer (2008-TIOL-390-ITAT-BANG) on whether a payment to a foreign company for procurement of aircraft engines is a contract of sale or fee for technical services (FTS).

(a) Facts. The Taxpayer (i.e. Hindustan Aeronautics Ltd.) was a public sector undertaking of the Indian government, engaged in manufacture of aircraft a…