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Facts
The assessee, a UK resident engaged in international air transportation, received delivery order charges. The revenue assessed these charges as taxable income in India. The assessee appealed against this assessment for AY 2020-21 and AY 2022-23.
Held
The Tribunal held that delivery order charges are an integral part of the transportation of goods and are covered under Article 8(3) of the India-UK Double Taxation Avoidance Agreement (DTAA) as an activity directly connected with transportation. Therefore, these charges are not taxable in India.
Key Issues
Whether delivery order charges received by an international air transportation company are taxable in India as income from services incidental to transportation under the India-UK DTAA?
Sections Cited
143(3), 144C(13)
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Income Tax Appellate Tribunal, DELHI BENCH “D”, DELHI
(A.Y.2022-23) Virgin Atlantic Airways Ltd., CA Nagesh Kumar, 314, 3rd Floor, Times Tower, M.G Road, Gurgaon, Haryana 122001 ...... अपीलाथ�/Appellant PAN: AABCV-6250-D बनाम Vs. Deputy Commissioner of Income Tax, International Taxation, HSIIDC Building, Vanijya Nikunj Udhyog Vihar, Phase-V, ..... �ितवादी/Respondent Gurgaon, Haryana 122001 अपीलाथ� �ारा/ Appellant by : Shri Nagesh Kumar Behl, Advocate & Shri Amit Khurana, Chartered Accountant �ितवादी�ारा/Respondent by : Shri M.S Nethrapal, CIT(DR) सुनवाई क� ितिथ/ Date of hearing : 10/09/2025 घोषणा क� ितिथ/ Date of pronouncement : : 26/11/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: These two appeals by the assessee are directed against the assessment order dated 26.07.2023 for AY 2020-21 passed u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) and assessment order dated 20.012.2024 for AY 2022-23, respectively.
1.1. Since identical issues are involved in both appeals, these appeals are taken up together for adjudication and are decided by this common order. For the sake of convenience the appeal of assessee for AY 2020-21 is taken up as a lead case, hence, facts are narrated from the said appeal.
AY 2020-21 2. Shri Nagesh Kumar Behl, appearing on behalf of the assessee submitted that the assessee is a tax resident of United Kingdom and has branch office in India. The assessee is engaged in the business of transportation of passenger, mail, livestock and goods by air through aircraft in International Traffic. The ld. Counsel submitted that though the assessee has raised multiple grounds of appeal but the assessee is only pressing ground no. 6 of appeal at this stage assailing the Assessment Order in holding that delivery order charges Rs.2,62,84,839/- received by the assessee during the period relevant to impugned assessment year are taxable in India as there are allegedly income derived from an activity subsequent to transportation in goods in International Traffic.
3. The ld. Counsel submits that receipts from delivery order collection charges are related to assessee’s business of transportation of cargo in International Traffic. The transportation of goods is not completed without issue of delivery order. Thus, delivery is not a separate activity but is an integral and inextricably linked to transportation of goods in International Traffic. Referring to Article 8(3) of India-UK Double Taxation Avoidance Agreement (DTAA) he asserted that delivery order charges are covered by, “any other activity connected with such transportation”. He submitted that identical issue was considered by the Co- ordinate Bench of Tribunal in the case of Turkish Airline Inc. vs. ACIT in ITA no.
& 4240/DEL/2009 (A.Y.2003-04) 3776/Del/2023 for AY 2021-22. The Tribunal vide order dated 26.03.2025 after examining the relevant provisions of India-Turkiye DTAA deleted the addition holding that delivery charges are not taxable in India.
4. Per contra, Shri M.S Nethrapal representing the department vehemently placed reliance on the assessment order and prayed for dismissing appeal of the assessee.
Both sides heard, orders of the authorities below examined. The short issue for consideration before us, in the present appeal is: Whether the receipts on account of delivery charges are covered by Article 8 of India-UK DTAA? 6. In so far as tax residence status and activities carried out by the assessee, they are not in dispute. The income of the assessee from operation of aircraft in International Traffic is not subject to tax in India in light of the provisions of Article 8 of India-UK DTAA. Before proceeding further it would be imperative to refer to Article 8 of India-UK DTAA which deals with Air Transport: “1. Profits derived from the operation of aircraft in international traffic by an enterprise of one of the Contracting States shall not be taxed in the other Contracting State.
The provisions of paragraph 1 of this Article shall likewise apply in respect of participation in pools of any kind by enterprises engaged in air transport.
For the purposes of this Article the term "operation of aircraft" shall include transportation by air of persons livestock, goods or mail, carried on by the owners or lessees or charterers of aircraft, including the sale of tickets for such transportation on behalf of other enterprises, the incidental lease of aircraft on a character basis and any other activity directly connected with such transportation.
Gains derived by an enterprise of a Contracting State from the alienation of aircraft owned and operated by the enterprise, the income from which is taxable only in that State, shall be taxed only in that State.”
& 4240/DEL/2009 (A.Y.2003-04) 7. Clause 3 of Article 8 defines the term of “Operation of Aircraft”. The expression operation of aircraft not only includes transportation by air of persons, livestock, goods or mail, it also includes sale to tickets for such transportation, incidental lease of aircrafts on charter basis and any other activity directly connected with such transportation. The activity of delivery of goods carried out by the assessee is inextricably linked to the main activity of transportation by air of goods or mail, etc, as the assessee is complying with delivery orders which are directly connected with the transportation of goods/mail, etc. in international traffic.
The Co-ordinate Bench of the Tribunal in the case of Turkish Airline Inc. vs. ACIT (supra) in identical set of facts after considering the provisions of Article 8(2)(b) of India-Turkiye DTAA held that income from delivery charges is from the activity directly connected with its air-cargo business, hence, not taxable in India. We find that provisions of Article 8(3) of India-UK DTAA are peri matria to the provisions of Article 8(2) of India-Turkiye DTAA.
Thus, in facts of the case and considering provisions of Article 8(3) of India- UK DTAA, we find merit in ground no. 6 of appeal, hence, the same is allowed.
Since, we have allowed the appeal of assessee on merits, the ground no. 3 to 5 of appeal assailing validity of the assessment have become academic, hence, not deliberated at this stage.
In the result, appeal of the assessee is allowed.
AY 2022-23 12. Both the sides are unanimous in stating that the facts germain to the addition of Rs.3,44,84,410/- are identical to the facts in AY 2020-21. Thus, the & 4240/DEL/2009 (A.Y.2003-04) submissions made for AY 2020-21 would equally hold good for the present appeal.
We find that the assessee in appeal has inter alia assailed addition of Rs.3,44,84,410/- in respect of receipt of delivery order charges. The issue in present appeal is identical to the one decided by us in (supra). Thus, the findings given by us while deciding the issue in AY 2020-21 would mutatis mutandis apply to instant appeal. For parity of reasons, appeal of the assessee for AY 2022-23 is allowed.
To sum up, appeal of the assessee in & 947/Del/2025 are allowed. Order pronounced in the open court on Wednesday the 26th day of November, 2025. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER िद�ी/Delhi, �दनांक/Dated 26/11/2025 NV/- �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/The Appellant , 1. 2. �ितवादी/ The Respondent.