{"id":56208,"date":"2025-08-22T10:56:07","date_gmt":"2025-08-22T05:26:07","guid":{"rendered":"https:\/\/itatonline.org\/digest\/sky-high-leasing-company-ltd-v-acit-intl-tax-mum-trib-www-itatonline-org\/"},"modified":"2025-08-22T10:56:07","modified_gmt":"2025-08-22T05:26:07","slug":"sky-high-leasing-company-ltd-v-acit-intl-tax-mum-trib-www-itatonline-org","status":"publish","type":"post","link":"https:\/\/itatonline.org\/digest\/sky-high-leasing-company-ltd-v-acit-intl-tax-mum-trib-www-itatonline-org\/","title":{"rendered":"Sky High Leasing Company Ltd. v. ACIT (Intl. Tax) (Mum)( Trib ) www.itatonline org ."},"content":{"rendered":"<p>The assessee, an Irish tax resident engaged in aircraft leasing, leased three aircraft to Inter Globe Aviation Ltd. (IndiGo) under dry operating lease agreements. It claimed that lease rentals were not \u201croyalty\u201d under Art. 12(3)(a) of the India\u2013Ireland DTAA, that no Permanent Establishment (\u201cPE\u201d) existed in India under Art. 5, and alternatively that income was exempt under Art. 8(1) as income from international traffic. The AO, invoking the Principal Purpose Test (PPT) under Arts. 6 &amp; 7 of the MLI, denied treaty benefits, re-characterised the leases as finance leases, and held that a fixed place PE existed in India. The DRP upheld the AO, attributing 25% of gross rentals to PE at 40% tax, effectively taxing 10% of receipts. On appeal, the Tribunal held that as per <strong>\u00a0<\/strong>ruling in Assessing Officer (IT) v.\u00a0 Nestl\u00e9 SA (2023) 458 ITR 756( SC) \u00a0MLI provisions cannot be enforced unless separately notified under Sec. 90(1). Since no notification incorporating Arts. 6 &amp; 7 of the MLI into the India\u2013Ireland DTAA exists, the PPT could not be invoked. Lease rentals from dry operating leases are excluded from \u201croyalty\u201d under the DTAA, and outsourcing management functions in Ireland did not create a PE in India. Article 8 exemption for international traffic was also applicable. Hence, the lease income was not taxable in India. (AY 2022\u201323) ( ITA No. 1198\/Mum\/2025 dt . 13-8 -2025 ) \u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>S. 9(1)(vi): Income deemed to accrue or arise in India \u2013   Aircraft leasing \u2013 Multilateral Instrument (MLI) &#8211; Principal Purpose Test (PPT) cannot be applied in absence of specific Sec. 90(1) notification \u2013 Lease rentals not taxable as royalty \u2013 No Permanent establishment in India- Entitle to treaty benefit &#8211; DTAA -India Ireland .[  S. 9(1)(i) ,  90(1) , 143(3) 144C(13), 234A, 234B, 270A, Art . 5, 6, 7 , 8(1) , 12(3)(a) ]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-56208","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-eCA","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/56208","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=56208"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/56208\/revisions"}],"predecessor-version":[{"id":56209,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/56208\/revisions\/56209"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=56208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=56208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=56208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}