Kosi Aviation Leasing Ltd. Vs ACIT (ITAT Delhi)
Operating Lease, Not Financial Lease – Aircraft Lease Rentals Not Taxable in India- Article 8 of India-Ireland DTAA Shields Aircraft Rentals – Tribunal Gives Major Relief to Global Aviation Leasing Cos
A batch of 75 appeals involving various Irish aircraft leasing companies, including Kosi Aviation Leasing Ltd., Hoohly Aviation Leasing Ltd., Luni Aviation Leasing Ltd., Sabarmati Aviation Leasing Ltd., Padma Aviation Leasing Ltd., DAE Leasing (Ireland) entities, GY Aviation Lease entities, AWAS Ireland entities & others came up before Delhi Bench “D”. The common issue in all appeals was the taxability of lease rentals received from Indian airlines such as Indigo, Air India & SpiceJet, arising from lease of Airbus aircrafts.
Assessees contended that the lease agreements were in the nature of operating leases & hence lease rentals fell within Article 8 of the India-Ireland DTAA, taxable only in Ireland. They relied heavily on the earlier decision in Celestial Aviation Trading 15 Ltd. Vs. ACIT (176 taxmann.com 902) (Del ITAT) & also the Special Bench decision in InterGlobe Aviation Ltd. Vs. ACIT (131 taxmann.com 98). It was argued that the agreements did not contain any clause of transfer of ownership, the aircraft had to be returned to lessor after expiry, deposits were refundable on redelivery, & economic life of aircraft was far longer than the lease term, thus negating the Revenue’s case of finance lease.
