Sky High Lxxix Leasing Co. Ltd. Vs ACIT (IT) (ITAT Mumbai)
The appeals were filed by various assessees against assessment orders passed under Section 143(3) read with Section 144C(13) for AY 2022-23. The common issue was whether income earned from leasing aircraft to Indian airlines was taxable in India. The Tribunal considered ITA No. 1546/Mum/2025 as the lead case. The assessee, an Ireland tax resident and a special purpose vehicle of the ICBC Leasing group, leased aircraft to Indian airlines on a dry lease basis and filed its return declaring nil income, claiming exemption under Article 8 of the India-Ireland Double Taxation Avoidance Agreement (DTAA). The Assessing Officer rejected the claim, holding that the assessee failed the Principal Purpose Test (PPT) under Articles 6 and 7 of the Multilateral Instrument (MLI), treated the lease rentals as royalty under Section 9(1)(vi), and made additions. The Dispute Resolution Panel (DRP) upheld the assessment, further holding that the leases were finance leases and that the leased aircraft constituted the assessee’s Permanent Establishment (PE) in India.
The Tribunal noted that a co-ordinate bench had already considered identical issues involving the same leasing group and summarised its findings. On the applicability of the MLI and PPT, the Tribunal recorded that the earlier bench had held that although the India-Ireland DTAA was a Covered Tax Agreement under the MLI, no separate notification under Section 90(1) had incorporated the MLI into the DTAA. Accordingly, Articles 6 and 7 of the MLI could not be enforced in the absence of such notification. Even assuming the PPT applied, the earlier bench held that the assessee possessed a valid Irish Tax Residency Certificate, operated through a genuine corporate structure in Ireland, and that the Revenue had not established any sham, treaty shopping or fraudulent purpose. The treaty benefits under Article 8 were found to be consistent with the object and purpose of the India-Ireland DTAA.
