DIT, New Delhi Vs KLM Royal Dutch Airlines (Delhi High Court)

IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on: 22.10.2008

ITA 1241/2008 and ITA 1245/2008

DIRECTOR OF INCOME TAX, NEW DELHI … Appellant Versus

KLM ROYAL DUTCH AIRLINES … Respondent Advocates who appeared in this case:

For the Appellant: Mr Sanjeev Sabharwal

For the Respondent: Mr Prakash Kumar

CORAM: – HON’BLE MR JUSTICE BADAR DURREZ AHMED HON’BLE MR JUSTICE RAJIV SHAKDHER

BADAR DURREZ AHMED, J (ORAL) CM No. 14909/2008 in ITA 1241/2008 Allowed subject to all just exceptions. ITA 1241/2008 and ITA 1245/2008

1. These appeals under Section 260A of the Income Tax Act, 1961 arise out of the common order dated 3 1.03.2008 passed by the Income Tax Appellate Tribunal in ITA Nos. 96-97/Del/2002 relating to the assessment years 1996-1997 and 1997-1998.2.

The limited question that arose for consideration before the Tribunal was whether the recovery/ adjustment of rent from CSC Private Limited by the assessee (KLM) was an income chargeable to tax in India. This question arose in the backdrop of Articles 6 and 8 of the Double Taxation Avoidance Agreement between India and the Netherlands. There is no dispute that the assessee is a company incorporated in the Netherlands and its main activity is operation of aircrafts in international traffic both for transport of passengers as well as of cargo handling. There is also no dispute that the profits from the international traffic would be taxable in the Netherlands, being the place of effective management of the assessee.