SKY HIGH XXII LEASING COMPANY LIMITED,STATE OUTSIDE INDIA vs. THE ASSISTANT COMMISSIONER OF INCOME-TAX (INTERNATIONAL TAX) CIRCLE 3(1)(2), DELHI, DELHI

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ITA 1483/DEL/2025Status: DisposedITAT Delhi31 October 2025AY 2022-23Bench: SHRI VIKAS AWASTHY (Judicial Member), SHRI KRINWANT SAHAY (Accountant Member)5 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the leases were operating leases, the assessees were eligible for benefits under the India-Ireland DTAA, and the leased aircraft did not constitute a PE in India. It also ruled that the MLI did not automatically render the DTAA inoperative without specific notification.

What were the facts?

The assessees, Irish tax residents, leased aircraft to Indian aviation companies. The Assessing Officer treated the leases as finance leases, denied DTAA benefits, and held that the aircraft constituted a Permanent Establishment (PE) in India.

What were the issues?

The key issues were the nature of the lease (operating vs. finance), the applicability of the India-Ireland DTAA and the MLI, and whether the leased aircraft constituted a Permanent Establishment in India.

Which sections of the Income-tax Act were involved?

Section 90(1)

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Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, DELHI BENCH “D”, DELHI

For Appellant: Shri Percy Pardiwalla Sr. Advocate with S/Shri Madhur Agarwal, Harsh R. Shah & Pratik Poddar
Hearing: 30/09/2025

& 1484/Del/2025 (AY 2022-23) आदेश/ORDER PER VIKAS AWASTHY, JM: These two appeals by two different assessees are directed against the assessment orders for AY 2022-23 in their respective cases. Both the impugned assessment orders are of even date i.e. 27.01.2025. Since, the grounds of appeal in both appeals are identical these appeals are taken up together for adjudication and are decided by this common order.

2. Shri Percy Pardiwala, Sr. Advocate appearing on behalf of the appellants/assessees submitted that the grounds raised in the present appeals are identical to the one decided by the Tribunal in the case of Sky High Appeal XLIII Leasing Company Ltd. vs ACIT, 177 taxmann.com 579 (Mum Trib.) and the order of Delhi Bench of Tribunal in the case of Kosi Aviation Leasing Ltd. vs. ACIT in for AY 2022-23 decided on 30.09.2025 . The facts of the case and the nature of Lease Agreements in the instant appeals are identical to the one considered by the Tribunal in the above mentioned cases. The ld. Counsel submits that the submissions made in the above appeals would equally apply to the present appeals.

3. Per contra, M.S Nethrapal representing the department submitted that the department has engaged Special Counsel to argue these matters; hence, he is not in a position to make submissions in these appeals.

4. We have heard the submissions made by ld. Counsel for the assessees and have examined the orders of authorities below. The assessees are tax resident of Ireland and are engaged in the activity of Leasing of Aircrafts. The assessees have & 1484/Del/2025 (AY 2022-23) leased AIRBUS, aircrafts to Indian Aviation Companies i.e. Spice Jet Ltd. and Go Air India Ltd., respectively. The Assessing Officer (AO) has inter alia held as under:- (i) The nature of lease is Finance Lease as against assessees claim of Operating Lease; (ii) There is no application of Article 8 of India-Ireland DTAA; (iii) The assessees have Permanent Establishment in India as the aircrafts are operating in India; & (iv) The assessees are not eligible to claim the benefit of India-Ireland DTAA as the said DTAA is a ‘covered tax agreement’, hence, provisions of Article 6 and 7 of Multilateral Instrument (MLI) would apply automatically.

5.

The assessees in their respective appeals has assailed the assessment order by raising as many as 19 grounds of appeal. No submissions were made by the Counsel for the assessee in respect of ground no. 2 to 4 of appeal. The issues raised in other grounds of appeal are as under:- (i) Lease entered into by the assesses/appellants as Lessors with the Indian Aviation Companies as Lessees for leasing of aircrafts - Whether Operating lease or Financial lease?; (ii) Applicability of Multilateral Instruments (MLI) vis a vis India-Ireland Double Taxation Avoidance Agreement (DTAA); (iii) Whether the assesses/appellants are eligible for benefit of Article 8 of India-Ireland DTAA?; & & 1484/Del/2025 (AY 2022-23) (iv) Whether the aircraft leased by the assesses/appellants to an Indian lessee constitutes a PE?.

6.

We find that the above issues have been considered by the Coordinate Mumbai Bench of the Tribunal in the case of Sky High Appeal XLIII Leasing Company Ltd. vs ACIT (supra) and Delhi Bench of the Tribunal in the case of Kosi Aviation Leasing Ltd. vs. ACIT (supra). The Tribunal after examining the Lease Agreements, Provisions of Act, MLI, India-Ireland DTAA various decisions and other relevant documents decided the primary issues as under:- (i) Lease is in the nature of Operating Lease; (ii) Single omnibus notification u/s.90(1) of the Act would not legislate the amendments/modifications in existing DTAA. A specific notification for each country is required u/s.90(1) of the Act where the MLI has the effect of amending/altering bilateral treaties. Thus, in the instant case Article 6 & 7 of MLI would not render India-Ireland DTAA inoperative; (iii) The assessees are entitled to avail benefit of Article 8 of India-Ireland DTAA; & (iv) Leased Aircraft does not constitute PE in India. Since, the issues in the present set of appeals are identical. The findings given by the Co-ordinate Bench while adjudicating the appeals in the case of Kosi Aviation Leasing Ltd. vs. ACIT (supra) would mutatis mutandis apply to the present appeals as well.

& 1484/Del/2025 (AY 2022-23) 7. Hence, the present appeals by the assessees are allowed protanto, for parity of reasons. Order pronounced in the open court on Friday the 31st day of October, 2025.

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