TURKISH AIRLINES INC,GURGAON vs. ACIT, INT. TAXATION , GURGAON

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, D: NEW DELHI BEFORE SHRI VIKAS AWASTHY, HON’BLE JUDICIAL MEMBER AND SMT. RENU JAUHRI, HON’BLE ACCOUNTANT MEMBER

ITA (IT) A. No. 20/Del/2025 [Assessment Year: 2023-24] Turkish Airlines INC ACIT (Inter. Taxation) Unit No. 1001A, 10th Floor, Gurgaon Time Tower, M.G. Road Vs Gurugram- 122001 Haryana PAN- AABCT9438K Assessee Revenue Assessee by Sh. Rohit Jain, Adv. Sh. Tavish Verma, Adv. Revenue by Sh. M.S. Nethrapal, CIT (DR)

Date of Hearing 12.03.2026 Date of Pronouncement 12.03.2026 ORDER PER RENU JAUHRI:

This appeal filed by the assessee is directed against the Final Assessment Order (FAO) passed u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 25.08.2025. The grounds of appeal are as under:

“1. On the facts of the case and in law, the learned Assessing Officer erred in making, and the learned DRP has erred in confirming, the impugned addition of Rs12,21,76,345/-(net after deducting 20% expenses) received by the assessee on account of Delivery Order Charges as an integral part of the consideration for air transportation of cargo, to the income returned by the 2. On the facts of the case and in law, the learned Assessing Officer erred in misconstruing the nature of the net receipt of Rs 12.21,76,345/-on account of Delivery Order Charges received, and the learned DRP has erred in confirming the said misconstruction, and, consequently, in holding that the receipt in question is not includible in profits of the assessee airline from the operation of aircraft in international traffic, including, inter-alia, "any other activity directly connected with such transportation which is not taxable in India as per Article 8 of the DTAA between India and Turkey. 3. On the facts of the case and in law, the learned Assessing Officer has erred in not appreciating that the impugned net receipts of Rs 12,21,76,345/- are part of the profits of the assessee airline from the operation of aircraft in international traffic and that such business profits of the assesses being a resident of Republic of Turkey, can only be taxed in Turkey, in terms of the provisions of Article 8 of the India Turkey Double Taxation Avoidance Agreement, and for that the learned Dispute Resolution Panel erred in confirming the said action of the Assessing Officer. 4. On the facts of the case and in law, the Assessing Officer erred in misinterpreting the provisions of the India-Turkey Double Taxation Avoidance Agreement, including, based on has notions about the "rationale behind residence- based taxation of operation of aircraft us international traffic" and other equally irrelevant extraneous factors such as "conduct of other airlines", and in thus unlawfully restricting the full and lawful scope of the provisions of Article of the India Turkey Double Taxation Avoidance 2

Agreement, and the learned Dispute Resolution Panel erred in confirming the Said action of the Assessing Officer. 5. On the facts of the case and in law, the reasoning adopted by, and conclusions arrived at by, the learned Assessing Officer and by the Dispute Resolution Panel are contrary to the scheme of the taxation of profits from the operation of aircraft in international traffic as envisaged in Article of the India Turkey DTAA and as envisaged in the UN and OECD Model Convention Commentaries on the materially similar provisions, contrary to the judicial precedents from the Hon'ble High Courts, and contrary to the actual facts of the case clearly discernable from the material on record. It is further submitted that during the DRP hearing attended by Mr. Rajiv Pal Puri (Authorised Representative) on 09.07.2025, it was specifically brought to the Panel's attention that an identical issue had arisen in Assessment Year 2021-22, in respect of which the assessee had filed an appeal before the Hon'ble Income Tax Appellate Tribunal (ITAT) New Delhi, on 22.12.2023 against the order passed under Section 143(3) r.ws. 141C(13). The said appeal, registered as ITA No. 3776/Del/2023, was duly heard, and the Hon'ble ITAT vide order dated 26.03.2025, has decided the issue in favour of the assessee. Despite the availability of this binding and relevant precedent, the DRP failed to consider the said ITAT order either in its directions or in the final assessment order, thereby rendering the order erroneous and unsustainable in law. 6. On the fact of the case, the learned Assessing officer and the Dispute Resolution Panel has gone wrong by considering the Delivery Order (DO) charges as taxable in India on account of the following reason without appreciating the nature of transportation business:

i. D.O. charges are collected after the transportation process as the activity of transportation end when the goods reach the destination. ii. D.O. charges are invoiced separately for the transportation charges to enable importer to retrieve their cargo. iii. D.O. charges are not derived from operation of aircraft but are a distinct stream of income. 7. The Appellant craves leave to add, alter, amend and/or modify any of the grounds of appeal at or before the hearing of the appeal.”

“4. We next come to the sole substantive issue between the parties. This assessee, namely, Turkish Airlines Inc., is admittedly a foreign international airline with it's head office at Istanbul, Turkey. It is admittedly engaged in the operations of aircraft in international traffic. Coming to the sole substantive issue herein, the assessee had derived revenue of Rs. 4,46,72,098/- representing it's delivery order charges in cargo transportation business. Both the learned lower authorities have admittedly held that these cargo delivery charges realized/received in India, at the time of handing over of the goods to the consignee concern(s), are taxable in India. The assessee, therefore, is aggrieved against the learned lower authorities' action to this effect.

03.02.1997. We note that Article 8 thereof deals with taxation of income of profits derived from shipping and air transport as under: "ARTICLE 8 Shipping and air transport 1. Profits derived by an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that State. 2. For the purposes of this Article, profits from the operation of ships or aircraft in international traffic shall mean profits derived by an enterprise described in paragraph 1 from the transportation by sea or air respectively of passengers, mail, livestock or goods carried on by the owners or lessees or charterers of ships or aircraft including: (a) the sale of tickets for such transportation on behalf of other enterprises; (b) other activity directly connected with such transportation; and (c) the rental of ships or aircraft incidental to any activity directly connected with such transportation. 3. Profits of an enterprise of a Contracting State described in paragraph 1 from the use, maintenance or rental of containers (including trailers, barges, and related equipment for the transport of containers) used in connection with the operation of ships or aircraft in international traffic shall be taxable only in that State. 4. The provisions of paragraphs 1 and 3 shall also apply to profits from participation in a pool, a joint business or an international operating agency. 5. For the purposes of this Article, interest on funds connected with the operation of ships or aircraft in international traffic shall be regarded as profits derived from the operation of such ships or aircraft, and the

provisions of Article 11 (Interest) shall not apply in relation to such interest.”

Sd/- Sd/- [VIKAS AWASTHY] [RENU JAUHRI] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 23.03.2026. Pooja Mittal, Sr. PS. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi,