PRIMAT CAPITAL 2019-II DESIGNATED ACTIVITY COMPANY,DELHI V. DCIT,INTL TAX. CIRCLE-2(2)(2), DELHI

SA 234/DEL/2025

AI Insights

The case involves multiple applications by different assessees, all based in Ireland and engaged in the business of leasing aircraft, seeking a stay on the outstanding tax demand for the assessment years 2021-22 and 2022-23. The assessees had leased aircraft to Inter Globe Aviation Limited (INDIGO) and declared their income as nil taxable income under the India-Ireland Double Taxation Avoidance Agreement (DTAA). However, the Assessing Officer (AO) re-characterized the lease as a finance lease, treating the income as interest rather than rental, and subjected it to tax. The Tribunal had previously granted a stay to 44 other applicants under similar circumstances, which was cited by the counsel for the assessees in this case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46892 (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: SA No.104 /Del/2025 & Others
• Laws Referred To: India-Ireland Double Taxation Avoidance Agreement (DTAA), Section 90 of the Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKSH
• Assessee Lawyers: SACHIT JOLLY
• Keywords: Double taxation relief; Application of stay
• Section: 90

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH “I”, DELHI BEFORE :SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER S.A No.229/Del/2025 (In ITA No.1856/Del/2025) Assessment Years: 2022-23 Jacksons Square Aviation Ireland Limited (Successor of Connolly Aviation Capital 1 Limited and Connolly Aviation Capital 3) Limited, New Delhi Vs. DCIT International Taxation Circle -2(2)(2) Delhi (Appellant) (Respondent) And S.A. No.233/Del/2025 (In ITA No.1858/Del/2025) Assessment Year: 2022-23 Primat Capital 2019-II Designated Activity Company, Delhi Vs. DCIT International Tax. Circle 2 (2) (2) New Delhi (Appellant) (Respondent) S.A No.234/Del/2025 (In ITA No.1857/Del/2025) Assessment Year: 2022-23 Primat Capital 2019-II Designated Activity Company, (Successor of Primat Capital MSN 2138 Designated Activity Company) Delhi Vs. DCIT Intl. Tax. Circle -2 (2) (2) Delhi (Appellant) (Respondent) S.A No.230/Del/2025 (In ITA No. /Del/2024) Assessment Year: 2021-22 Connolly Aviation Capital 2 Ltd. Delhi Vs. ACIT Intl. Tax. Circle 2 (1)(2) Delhi (Appellant) (Respondent) Date of hearing 11.04.2025 Date of pronouncement 11.04.2025 Assessee by Sh. Sachit Jolly, Sr. Advocate Ms. Disha Jham, Advocate Ms. Somya Singh, Advocate Sh. Divyanshu Jain, Sh. Hardeep Singh, Chawla, Advocate Department by Sh. Om Praksh, Sr. DR ORDER Per Annapurna Gupta, Accountant Member: These four applications by different assessees seeking stay of outstanding demand of tax for the impugned years, were pointed out by the Ld. Counsel for the assessee Sh. Sachit Jolly, Sr. Advocate,to have come up before us in the background of identical facts and circumstances. It was also pointed out that the ITAT in a group of 44 stay applications of different assessees had deal with the grant of stay in facts and circumstances identical to the present assessees before us, granting complete stay of demand in all the cases and listing all the appeals for hearing on 08.05.2025. The Ld. Counsel for the assessee pointed out that the impugned applicants before usare all based in Ireland and are engaged in the business of leasing aircraft,and all the applicants had leased their aircrafts to a single entity in India i.e. Inter Globe Aviation limited (INDIGO) on dry operating lease basis. The applicants had received income on account of lease agreement entered into with Indigo which was treated as lease rental income and since the same is not taxable in India under India- Ireland Double TaxationAvoidance Agreement (DTAA), all the applicants had filed return of income for the impugned assessment year declaring nil taxable income. In effect the assessee had characterised the lease as operating lease. THE AO however, Ld. Counsel for the assessees pointed out ,re- characterised the lease as finance lease, holding that all the applicants had earned interest income as opposed to rental income claimed by them. Further he pointed out that the AO applied the principal purpose test holding that after insertion of MLI, tax residency certificate (TRC) cannot be considered as sufficient basis to claim treaty benefits and accordingly denied the benefit of the same to the assessee. Thus interest income allegedly earned on the lease was subjected to tax in the hands of the assessees as opposed to rental income returned by the assessees and claimed as not taxable by virtue of India Ireland DTAA 2. Drawing our attention to the order passed by ITAT in the case of 44 other applicants seeking stay , in SA No.104 /Del/2025 & Others ,dated 07.03.2025 placed before us at paper book page No. 82-103, Ld. Counsel for the assessee pointed out that in identical facts and circumstances the ITAT found the applicants to prima facie have a strong case in their favour,noting the contention of the applicants before it that in the case of Indigo itself the Special Bench of the Tribunal had held the lease agreement to be in the nature of operating lease and further on theissue of MLI noting that since no amendment had been made in Indian- Ireland DTAA to that effect and unless necessary amendment is made under Section 90 of the Act the assessees cannot be denied treaty benefit the ITAT . That accordingly therefore, the recovery of the entire demand was stayed for a period of 180 days and all the appeals directed to be listed for hearing on 08.05.2025. 3. Ld. Counsel for the assessee contended that the facts and circumstances raising demand in the case of present applicants being identical to that in the case of 44 applicants in the case before ITAT,he would seek a similar relief from us in the present applications. 4. The Ld. DR fairly admitted that in identical facts and circumstances other applicants had been granted complete stay by the ITAT. 5. In thelight of theabove,theapplicants having reasonably demonstrated before us of having a prima facie good case ,We direct stay of recovery of outstanding demand in the case of all the four applicants before us for a period of 180 days from the date of this order or till the disposal of the appeal whichever is earlier. The registry is directed to list the appeals of the applicants for the impugned assessment years for hearing on the 08.05.2025 to be heard alongwith the appeals of 44 other applicants. The applicants are advised to file paper book before the date of hearing of appeals with advance copy to the opposite side in accordance with ITAT rules.TheRevenue ,if so desires ,may seek any report from the AO before the date of hearing. Both sides are refrained from seeking adjournment.In case adjournmentis sought the benefit of stay granted shall be deemed to be withdrawn forthwith. We may point out that anyobservation in the order may not be construed in any manner as comment on the merits of the issue of the appeal. The appeal may be decided unfluenced by any observations whatsoever in this order by us. 6. In the result, all the stay applications are allowed in above terms. Order pronounced in the open court on 11.04.2025. Sd/- Sd/- (VIMAL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER *Neha, SR. PS * Date: 11.04.2025 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "