The court affirmed that applicants demonstrated a prima facie strong case for stay of tax demand based on prior ITAT rulings regarding the non-taxability of lease income under the India-Ireland DTAA.

ORDER

Per Annapurna Gupta, Accountant Member:

These four applications by different assessees seeking stay of outstanding demand of tax for the impugned years, were pointed out by the Ld. Counsel for the assessee Sh. Sachit Jolly, Sr. Advocate,to have come up before us in the background of identical facts and circumstances. It was also pointed out that the ITAT in a group of 44 stay applications of different assessees had deal with the grant of stay in facts and circumstances identical to the present assessees before us, granting complete stay of demand in all the cases and listing all the appeals for hearing on 08.05.2025.

The Ld. Counsel for the assessee pointed out that the impugned applicants before usare all based in Ireland and are engaged in the business of leasing aircraft,and all the applicants had leased their aircrafts to a single entity in India i.e. Inter Globe Aviation limited (INDIGO) on dry operating lease basis. The applicants had received income on account of lease agreement entered into with Indigo which was treated as lease rental income and since the same is not taxable in India under India- Ireland Double Taxation Avoidance Agreement (DTAA), all the applicants had filed return of income for the impugned assessment year declaring nil taxable income. In effect the assessee had characterised the lease as operating lease. THE AO however, Ld. Counsel for the assessees pointed out ,re- characterised the lease as finance lease, holding that all the applicants had earned interest income as opposed to rental income claimed by them. Further he pointed out that the AO applied the principal purpose test holding that after insertion of MLI, tax residency certificate (TRC) cannot be considered as sufficient basis to claim treaty benefits and accordingly denied the benefit of the same to the assessee. Thus interest income allegedly earned on the lease was subjected to tax in the hands of the assessees as opposed to rental income returned by the assessees and claimed as not taxable by virtue of India Ireland DTAA

2. Drawing our attention to the order passed by ITAT in the case of 44 other applicants seeking stay , in SA No.104 /Del/2025 & Others ,dated 07.03.2025 placed before us at paper book page No. 82-103, Ld. Counsel for the assessee pointed out that in identical facts and circumstances the ITAT found the applicants to prima facie have a strong case in their favour,noting the contention of the applicants before it that in the case of Indigo itself the Special Bench of the Tribunal had held the lease agreement to be in the nature of operating lease and further on theissue of MLI noting that since no amendment had been made in Indian- Ireland DTAA to that effect and unless necessary amendment is made under Section 90 of the Act the assessees cannot be denied treaty benefit the ITAT . That accordingly therefore, the recovery of the entire demand was stayed for a period of 180 days and all the appeals directed to be listed for hearing on 08.05.2025.

3. Ld. Counsel for the assessee contended that the facts and circumstances raising demand in the case of present applicants being identical to that in the case of 44 applicants in the case before ITAT,he would seek a similar relief from us in the present applications.

4. The Ld. DR fairly admitted that in identical facts and circumstances other applicants had been granted complete stay by the ITAT.

5. In the light of theabove,theapplicants having reasonably demonstrated before us of having a prima facie good case ,We direct stay of recovery of outstanding demand in the case of all the four applicants before us for a period of 180 days from the date of this order or till the disposal of the appeal whichever is earlier.

The registry is directed to list the appeals of the ap