Milestone Aviation Asset Holding Group No. 25 Ltd. Vs ACIT (Delhi High Court)
Delhi High Court held that as per Article 12 of India-Ireland DTAA revenue receipt from aircraft leasing is outside the purview of taxation. Thus, it is impermissible to invoke section 9(1)(vi) in light of express exemption under DTAA.
Facts- The instant writ petition impugns the reassessment action which has been initiated for Assessment Year 2016-2017. As is manifest from the reasons which have been ascribed and which appear to have weighed upon the Assessing Officer to come to the conclusion that income had escaped assessment was a receipt of INR 6,35,91,111/- by the petitioner from one M/s Global Vectra Helicorp Ltd during Financial Year 2015-2016. The respondent had proceeded on the assumption that the aforesaid receipt was on account of aircraft leasing. It was on the aforesaid premise that the AO had proceeded to hold that the consideration received by the writ petitioner would be in the nature of “royalty” for use of aircraft and thus taxable both in terms of Section 9(1)(vi) of the Income Tax Act,1961 as well as the provisions of the India-Ireland Double Taxation Avoidance Agreement.
Conclusion- Held that it is the respondent who had proceeded on the premise that the revenue and consideration received was in connection with aircraft leasing and would thus amount to “royalty” by virtue of the relevant provisions of the DTAA. However, on a plain reading of Article 12 (3)(a) of the DTAA, the view as taken is rendered wholly unsustainable. Thus it would be wholly impermissible for the AO to invoke Section 9(1)(vi) of the Act in light of the express exemption under the DTAA. Insofar as the question of interplay between provisions contained in a domestic legislation and those in the DTAA, we have in Commissioner of Income Tax-International Taxation -3 Vs. Telstra already held that the latter would override being more beneficial to the assessee.
