Tax residents of Ireland engaged in aircraft leasing are entitled to non-taxable income in India under the India-Ireland DTAA.

आदशे /ORDER

PER VIKAS AWASTHY, JM:

These bunch of seven Stay Applications by different assesses are taken up together as the issues in the respective appeals germinate from identical set of facts and the additions in the respective appeals for AY 2022-23 are identical.

2. Shri Ravi Sharma representing the applicants/assessees submits that since these bunch of seven Stay Applications have identical set of facts, SA No. 163/Del/2025 be taken up as a lead case, hence, the facts are narrated from said Stay Application. The ld. Counsel submits that all the applicants/assessees are based in Ireland and are engaged in the business of leasing Aircrafts. Thus, the assessee(s)/applicant(s) are tax residents of Ireland. The applicants in the instant set of applications have leased aircrafts to a single entity in India i.e. Inter Globe Aviation Ltd. (in short ‘Indigo’) on Dry Operating Lease Basis. The lease rental income of the applicant is not taxable in India under India- Ireland Direct Tax Avoidance Agreement (in short DTAA). Accordingly, the assessee/applicant filed return of income for the impugned assessment year declaring taxable income as NIL. The assessee/applicant in the return of income filed in Ireland has claimed depreciation on asset i.e. Aircraft and has also offered to tax its income from lease rental. The ld. Counsel submitted that the facts in the present set of Stay Applications are identical to bunch of 44 stay applications lead case being SA No.104/Del/2025 titled Subria Five Ltd. vs ACIT decided vide common order dated 07/3/2025. In the instant case also, the Assessing Officer (AO) has made addition in the hands of the assessee/applicant on two counts;

(i) Re-characterization of Dry Operating Lease between the assessee and Indigo as Finance Lease,

(ii) Applying Principal Purpose Test (PPT) holding that after insertion of Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI), TRC cannot be considered as sufficient basis to claim treaty benefits.

3. Reiterating the arguments, the ld. Counsel stated that the first issue relating to recharacterization of nature of lease, is covered by the decision of Special Bench of Tribunal in the case of Inter Globe Aviation Ltd. vs. Additional Commissioner of Income Tax reported as 131 taxmann.com 98 (Delhi), wherein lease is held to be in nature of Operating Lease As regards the issue of Treaty Benefit to the applicants, the ld. Counsel again relied on the submissions made in SA No. 104/Del/2025.

4. Per contra, Shri Amit Katoch representing the department vehemently opposed the Stay Applications and prayed for dismissing the same. The ld. DR contended that if at all Stay Application is to be allowed, the same may be allowed subject to assessee(s)/applicant(s) paying tax equal to 20% of the outstanding demand. However, in so far as the facts narrated by ld. Counsel are concerned, the ld. DR endorsed that facts in the case of all the assessee(s)/applicant(s) are identical. The ld. DR fairly stated that the Co-ordinate Bench in the case of similarly situated applicants have considered the submissions in their respective Stay Applications.

5. We have heard the submissions made by rival sides. Both sides are unanimous in stating that facts germane to the issues raised in all appeals resulting in demand in assessment year 2022-23 are identical. Thus, the Stay Applications in respect of all the assessee(s)/applicant(s) are decided by this common order.

6. The additions in the case of respective assessees is primarily on two counts:

(i) re-characterization of nature of lease i.e. from operating to financial