Operating lease treatment for helicopter rentals supports Article 8 treaty protection under the India-Ireland DTAA.

Helicopter lease terms that did not transfer ownership and required return of the aircraft on expiry were treated as operating leases, not financial leases, because the arrangement matched earlier coordinate bench rulings and the revenue showed no distinguishing feature. The lease rentals received by non-resident lessors were also covered by Article 8 of the India-Ireland DTAA, as profits from the operation or rental of aircraft in international traffic. On that basis, the core additions were deleted on merits, and the remaining grounds were dealt with as consequential, premature, not pressed, or left open.

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Issues: (i) Whether the helicopter lease arrangements were operating leases or financial leases; (ii) whether the lease rentals received by the non-resident lessors were eligible for the benefit of Article 8 of the India-Ireland DTAA.

Issue (i): Whether the helicopter lease arrangements were operating leases or financial leases.

Analysis: The lease terms were found to be materially similar to those examined in earlier coordinate bench decisions. The arrangement did not provide for transfer of ownership to the lessee on expiry of the lease, and the helicopters were required to be returned to the lessor. On the record, the revenue authorities also had not shown any distinguishing feature that would justify treating the arrangement as a finance lease.

Conclusion: The lease arrangements were held to be operating leases and not financial leases, in favour of the assessee.

Issue (ii): Whether the lease rentals received by the non-resident lessors were eligible for the benefit of Article 8 of the India-Ireland DTAA.

Analysis: The lease rentals were held to fall within the treaty provision dealing with profits from the operation or rental of aircraft in international traffic. The tribunal followed its earlier view that the India-Ireland treaty language covered such receipts and rejected the revenue's contention that the provision was inapplicable to the lease model involved.

Conclusion: The lease rentals were held to be covered by Article 8 of the India-Ireland DTAA, in favour of the assessee.

Final Conclusion: The core additions were deleted on merits, while the remaining grounds were either not pressed, left open, or rejected as consequential or premature, resulting in allowance of the appeals.

Ratio Decidendi: Where the lease terms do not provide for transfer of ownership and the arrangement is consistent with a return of the aircraft to the lessor, the lease is to be treated as an operating lease; corresponding lease rentals of aircraft used in international traffic are entitled to treaty protection under Article 8 of the India-Ireland DTAA.

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