AWAS 36698 IRELAND LTD,IRELAND V. DCIT,CIRCLE-1(1)(1)INTL TAX, DELHI

SA 165/DEL/2025

AI Insights

This case involves a series of Stay Applications filed by various Irish companies engaged in aircraft leasing, against the Assistant Commissioner of Income Tax, International Taxation, New Delhi. The applicants argued that their lease rental income from aircraft leased to Inter Globe Aviation Ltd. (Indigo) was not taxable in India under the India-Ireland DTAA. The primary issues were the re-characterization of the lease from operating to financial and the denial of treaty benefits post the insertion of the MLI. The Tribunal referenced a similar case, Subria Five Ltd. vs ACIT, where it was held that the leases were operating leases and the treaty benefits were applicable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47105 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 11-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Other Referred Cases: Subria Five Ltd. vs ACIT, Inter Globe Aviation Ltd. vs. Additional Commissioner of Income Tax
• Laws Referred To: India-Ireland Direct Tax Avoidance Agreement, Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KOTCH
• Keywords: Depreciation; Double taxation relief; Application of stay
• Section: 6; 2; 20

Judgement Text

" आयकर अपीलीय अिधकरण िदʟी पीठ “डी”, िदʟी ŵी िवकास अव̾थी , Ɋाियक सद˟ एवं ŵी एस įरफौर रहमान , लेखाकार सद˟ क े समƗ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER SA No. 163/Del/2025 (Arising out of ITA No. 1162/Del/2025, A.Y 2022-23) DAE Leasing (Ireland) 18 Ltd. 70, Sir John Rogersons Quay Dublin 2, D02 R296, Ireland PAN: AAGCD 1216 N ...... आवेदक/Applicant बनाम Vs. Assistant Commissioner of Income Tax, International Taxation, Circle- 1(2)(2), New Delhi ..... ᮧितवादी/Respondent SA No. 164/Del/2025 (Arising out of ITA No. 1192/Del/2025, A.Y 2022-23) DAE Leasing (Ireland) 19 Ltd. 70, Sir John Rogersons Quay Dublin 2, D02 R296, Ireland PAN:AAGCD 1214 Q ...... आवेदक/Applicant बनाम Vs. Assistant Commissioner of Tax, International Taxation, Circle-1(2)(2), New Delhi ..... ᮧितवादी/Respondent SA No. 165/Del/2025 (Arising out of ITA No. 1193/Del/2025, A.Y 2022-23) AWAS 36698 Ireland Ltd. 70, Sir John Rogersons Quay Dublin 2, D02 R296, Ireland PAN:AATCA 4985 G ...... आवेदक/Applicant बनाम Vs. Deputy Commissioner of Tax, International Taxation, Circle-1(1)(1), New Delhi ..... ᮧितवादी/Respondent 2 SA Nos.163 to 169/Del/2025 SA No. 166/Del/2025 (Arising out of ITA No. 1195/Del/2025, A.Y 2022-23) DAE Leasing (Ireland) 4 Ltd. 70, Sir John Rogersons Quay Dublin 2, D02 R296, Ireland PAN:AAFCD 9885 L ...... आवेदक/Applicant बनाम Vs. Assistant Commissioner of Tax, International Taxation, Circle-1(2)(2), New Delhi ..... ᮧितवादी/Respondent SA No. 167/Del/2025 (Arising out of ITA No. 1194/Del/2025, A.Y 2022-23) AWAS 39427 Ireland Ltd. 70, Sir John Rogersons Quay Dublin 2, D02 R296, Ireland PAN:AATCA 5017 B ...... आवेदक/Applicant बनाम Vs. Deputy Commissioner of Tax, International Taxation, Circle-1(1)(1), New Delhi ..... ᮧितवादी/Respondent SA No. 168/Del/2025 (Arising out of ITA No. 1196/Del/2025, A.Y 2022-23) DAE Leasing (Ireland) 17 Ltd. 70, Sir John Rogersons Quay Dublin 2, D02 R296, Ireland PAN:AAGCD 1088 A ...... आवेदक/Applicant बनाम Vs. Assistant Commissioner of Tax, International Taxation, Circle-1(2)(2), New Delhi ..... ᮧितवादी/Respondent 3 SA Nos.163 to 169/Del/2025 SA No. 169/Del/2025 (Arising out of ITA No. 1197/Del/2025, A.Y 2022-23) DAE Leasing (Ireland) 20 Ltd. 70, Sir John Rogersons Quay Dublin 2, D02 R296, Ireland PAN:AAGCD 1215 R ...... आवेदक/Applicant बनाम Vs. Assistant Commissioner of Tax, International Taxation, Circle-1(2)(2), New Delhi ..... ᮧितवादी/Respondent आवेदक/Applicant : S/Shri Ravi Sharma & Kshitij Bansal, Advocates ŮितवादीȪारा/Respondent by : Shri Amit Kotch, Sr. DR सुनवाई कᳱ ितिथ /Date of hearing : 11/04/2025 घोषणा कᳱ ितिथ /Date of pronouncement : 11/04/2025 आदेश/ORDER PER VIKAS AWASTHY, JM: These bunch of seven Stay Applications by different assesses are taken up together as the issues in the respective appeals germinate from identical set of facts and the additions in the respective appeals for AY 2022-23 are identical. 2. Shri Ravi Sharma representing the applicants/assessees submits that since these bunch of seven Stay Applications have identical set of facts, SA No. 163/Del/2025 be taken up as a lead case, hence, the facts are narrated from said Stay Application. The ld. Counsel submits that all the applicants/assessees are based in Ireland and are engaged in the business of leasing Aircrafts. Thus, the assessee(s)/applicant(s) are tax residents of Ireland. The applicants in the instant set of applications have leased aircrafts to a single entity in India i.e. Inter Globe Aviation Ltd. (in short ‘Indigo’) on Dry Operating Lease Basis. The lease rental income of the applicant is not taxable in India under India- Ireland Direct Tax Avoidance Agreement (in short DTAA). Accordingly, the 4 SA Nos.163 to 169/Del/2025 assessee/applicant filed return of income for the impugned assessment year declaring taxable income as NIL. The assessee/applicant in the return of income filed in Ireland has claimed depreciation on asset i.e. Aircraft and has also offered to tax its income from lease rental. The ld. Counsel submitted that the facts in the present set of Stay Applications are identical to bunch of 44 stay applications lead case being SA No.104/Del/2025 titled Subria Five Ltd. vs ACIT decided vide common order dated 07/3/2025. In the instant case also, the Assessing Officer (AO) has made addition in the hands of the assessee/applicant on two counts; (i) Re-characterization of Dry Operating Lease between the assessee and Indigo as Finance Lease, (ii) Applying Principal Purpose Test (PPT) holding that after insertion of Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), TRC cannot be considered as sufficient basis to claim treaty benefits. 3. Reiterating the arguments, the ld. Counsel stated that the first issue relating to recharacterization of nature of lease, is covered by the decision of Special Bench of Tribunal in the case of Inter Globe Aviation Ltd. vs. Additional Commissioner of Income Tax reported as 131 taxmann.com 98 (Delhi), wherein lease is held to be in nature of Operating Lease As regards the issue of Treaty Benefit to the applicants, the ld. Counsel again relied on the submissions made in SA No. 104/Del/2025. 4. Per contra, Shri Amit Katoch representing the department vehemently opposed the Stay Applications and prayed for dismissing the same. The ld. DR contended that if 5 SA Nos.163 to 169/Del/2025 at all Stay Application is to be allowed, the same may be allowed subject to assessee(s)/applicant(s) paying tax equal to 20% of the outstanding demand. However, in so far as the facts narrated by ld. Counsel are concerned, the ld. DR endorsed that facts in the case of all the assessee(s)/applicant(s) are identical. The ld. DR fairly stated that the Co-ordinate Bench in the case of similarly situated applicants have considered the submissions in their respective Stay Applications. 5. We have heard the submissions made by rival sides. Both sides are unanimous in stating that facts germane to the issues raised in all appeals resulting in demand in assessment year 2022-23 are identical. Thus, the Stay Applications in respect of all the assessee(s)/applicant(s) are decided by this common order. 6. The additions in the case of respective assessees is primarily on two counts: (i) re-characterization of nature of lease i.e. from operating to financial by the AO; & (ii) denial of Treaty benefit. On similar set of facts bunch of 44 Stay Applications were decided by the Co- ordinate Bench of Tribunal vide order dated 07/3/2025 in the case of Subria Five Ltd. & Others vs ACIT (supra). The Tribunal while deciding the Stay Applications concluded, “Prima facie, we are of considered view that the assessee(s)/applicant(s) have strong case in their favour. Hence, the assessee(s)/applicant(s) deserve the benefit of stay on recovery of outstanding demand in the impugned assessment year.” Facts being pari materia, the present stay applications are allowed for similar reasons. 7. The recovery of outstanding demand is thus stayed for a period of 180 days from the date of this order or till the disposal of appeal(s), whichever is earlier. 6 SA Nos.163 to 169/Del/2025 8. The Registry is directed to list the appeals alongwith ITA No.1071/Del/2025 on 08.05.2025. Since, the date of hearing of appeals has been announced in the open court, issuance of separate notice of hearing to the parties is dispensed with. 9. The assessee if so advised, may file paper book on or before the date of hearing of appeals with an advance copy to the opposite side, in accordance with ITAT Rules. The Revenue if so desires to seek any report from the AO in these appeals, may do so, before the date of hearing. 10. On the date fixed for hearing, if adjournment is sought by the assessee(s)/applicant(s), the stay granted shall deemed to be withdrawn forthwith. 11. Before parting, we may point here that any observation in the order may not be construed in any manner as comments on merits of the issue in appeal. The appeal order may be passed on merits, uninfluenced by any observation whatsoever in this order by us. 12. In the result, Stay Applications are allowed, in the terms aforesaid. Order pronounced in the open court on Friday the 11th day of April, 2025. Sd/- Sd/- - (S RIFAUR RAHMAN) (VIKAS AWASTHY) लेखाकार सद˟/ACCOUNTANT MEMBER Ɋाियक सद˟/JUDICIAL MEMBER िदʟी / Delhi, ᳰदनांक/Dated 11/04/2025 NV/- 7 SA Nos.163 to 169/Del/2025 ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी /The Respondent. 3. The PCIT/CIT(A) 4. िवभागीय ᮧितिनिध ,आय.अपी.अिध., िदʟी / DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, DELHI "