Code-sharing air transport receipts fall within Article 8 DTAA and remain exempt from tax in India.

Receipts from passenger and cargo transportation under code-sharing arrangements were treated as falling within Article 8 of the India-USA DTAA because they form part of the airline's "operation of aircrafts" in international traffic. The Tribunal accepted that journeys performed wholly or partly through third-party carriers remained inextricably linked to the assessee's air transport business and were carried on on a principal-to-principal basis. It also relied on the earlier year's identical ruling and noted no material change in facts or law was shown to depart from that view. The receipts were therefore held not taxable in India.

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Issues: Whether receipts from transportation of passengers and cargo under code-sharing arrangements, including journeys undertaken wholly or partly through third-party carriers, are covered by Article 8 of the India-USA Double Taxation Avoidance Agreement and therefore exempt from tax in India.

Analysis: The same issue had already been decided in the assessee's favour for a later year on materially identical facts. The Tribunal applied that reasoning to the present years, holding that code-sharing receipts fall within the scope of "operation of aircrafts" in international traffic. It treated the third-party carriage as part of the assessee's business on a principal-to-principal basis, and accepted that the transportation under code-sharing is inextricably linked with the assessee's international air transport operations. The Tribunal also noted that the revenue had not shown any material change in facts or law to depart from the earlier view.

Conclusion: Receipts from code-sharing arrangements are covered by Article 8 of the India-USA Double Taxation Avoidance Agreement and are not taxable in India.

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