IN THE INCOME TAX APPELLATE TRIBUNAL, ‘I‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER &

MS PADMAVATHY S, ACCOUNTANT MEMBER ITA No.1107/Mum/2025 (Assessment Year :2022-23 &

SA 35/Mum/2025 (Arising out of ITA No.1107/Mum/2025 (Assessment Year :2022-23 M/s. Sunflower Aircraft Vs. Assistant Leasing Limited Commissioner of Aviation House Income Tax Circle Shannon Country Clare 4(2)(2), V14 AN 29 International Tax, C/o. DMD Advocates Mumbai

30, Nizamuddin East, New Delhi-110 013 PAN/GIR No.ABDCS5779F (Appellant) .. (Respondent Assessee by Shri Sachit Jolly, Sr. Advocate Revenue by Shri Krishna Kumar, Sr. DR Date of Hearing 11/08/2025 Date of Pronouncement 13/08/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M):

The aforesaid appeal has been filled by the assessee against the final assessment order dated 19 January 2025, passed under The Aircraft performs 2 functions: Lease income for Applicant, and operational income for Indian Aircraft Operator. It is at the disposal of the Applicant for its lease business.

The lease rental earning activity played by the Aircraft is the function of the applicant and not of Indian lessor. Thus, this function performed by Aircraft from vantage point of Applicant is that of lease rental, which is the function of the applicant and not the function of Indian operator (which is performs different activity of Airlines operations via the same equipment).‖

26. From reading of the aforesaid, it is noticed that the thrust of the case of the ld.DRP is that the aircraft is the place of business which is at the disposal of the Applicant in India for its lease business. This finding of the LD.DRP has been assailed by the assessee on the ground that both factually and legally the aircraft cannot and is not at the disposal of the assessee and that in any case the leasing business is carried from outside India.

27. Further, certain important clauses from ALA need to be noted:-

a. Clause 21.2.1 of the ALA, provides that the lessee/IndiGo had the right to the quiet use, possession and enjoyment of the Aircraft and, provided that IndiGo was not in breach of the ALA, the assessee had a corresponding obligation to ensure the same without interfering with IndiGo‘s right to use the aircraft in its commercial wisdom. Therefore, the aircraft was under operational control of the lessee/IndiGo b. Similarly, clause 12.1 obligated IndiGo to maintain the aircraft and clause 12.3.2 required IndiGo to comply with all airworthiness directives in India.

c. Clause 20.2 obligated IndiGo to maintain the requisite licences, certificates and permits for use of aircraft in India.

d. Clauses 12.13.1 and 23.7.1 permitted the assessee a limited right to inspect the aircraft once a year, or before the return of the aircraft upon expiry of the lease period, or at any time while an event of default was subsisting, to ensure that the aircraft was functional and operational. This did not give operational control over the aircraft to the assessee.

Therefore, contractually, the aircraft was under the control and disposal of the lessee/IndiGo. Even the LD.DRP accepts that the aircraft is under the operational control of the lessee/IndiGo at page 132 of its directions wherein it is held that ―The aircraft, while operationally controlled by the lessee, forms the core of the Applicant's leasing business.‖

28. Further, even as per the DGCA Rules and Manuals, the aircraft was required to be under the operational control of the lessee/IndiGo. This has never been doubted by the AO or Ld. DRP or that the DGCA, which is the regulator of aviation in India ever alleged that the assessee or IndiGo have violated these rules and regulations. The decision of coordinate bench in Carbijet (supra) is relevant in this regard since it takes judicial notice of the manner in which aviation sector is regulated and commercially run:

―in the present case, all the flights were flown by the assessee under the banner of Air India. They are known as flights of Air India. The schedules