Virgin Atlantic Airways Ltd Vs DCIT (ITAT Delhi)
Assessee, a tax resident of UK operating aircraft in International Traffic, challenged addition of ₹2,62,84,839/- (AY 2020-21) & ₹3,44,84,410/- (AY 2022-23) towards delivery order charges on cargo consignments. AO held that these were taxable in India as income from activities subsequent to transportation. CIT(A) upheld the additions.
Before Tribunal, Assessee argued that delivery order charges are an integral & inseparable part of air-cargo transportation, falling within “any other activity directly connected with such transportation” under Article 8(3) of India–UK DTAA. Tribunal examined Article 8 in detail noting that operation of aircraft includes transportation of goods, sale of tickets, incidental leases & all directly connected activities.
Tribunal relied on its own decision in Turkish Airlines Inc Vs ACIT (ITA 3776/Del/2023) where delivery charges were held covered under Article 8(2)(b) of India–Turkiye DTAA. It observed that Article 8(3) of India–UK DTAA is pari materia & carries identical language.
Tribunal held that delivery order issuance is an essential component of cargo transportation & cannot be separated as a standalone service. Income from such activity forms part of International Traffic income & is therefore not taxable in India under Article 8.
Since the issue was decided on merits, other grounds relating to validity of assessment were treated as academic. For AY 2022-23, both parties agreed that facts are identical; Tribunal applied the same reasoning mutatis mutandis. Both appeals were allowed.
