AI Drafter 
TaxTMI 
TaxTMI 
2025 (9) TMI 1494
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....TBA/APL/S/250/2024-25/1075162277(1), dated 28.03.2025 passed against the assessment order by DCIT (IT) - 2(1)(2), Mumbai, u/s. 143(3) r.w.s 144C(3) of the Act, dated 08.02.2019 for Assessment Year 2016-17. 2. All the three appeals by the Revenue have identical set of grounds with common issue involved therein. Accordingly, we take up all the three appeals together by passing this consolidated order. Since common issue is involved on identical set of facts, we take appeal for AY 2014-15 as the lead year to draw the facts of the case. Our observations and findings for this year shall apply mutatis mutandis to the appeals for other two years. 3. Brief facts of the case are that assessee is a foreign airline and a tax resident of USA and was engaged in the business of operation of aircrafts in international traffic during the year under consideration. Assessee had obtained approval from Director General of Civil Aviation (DGCA) to undertake scheduled air services in India on routes specified under the India-US Air Transport Agreement (ATA). Assessee established a branch office in India, with the approval of the Reserve Bank of India, to undertake activities related to the booking....
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....ortation under code-sharing is on a principal to principal basis and falls within the ambit of 'operation of aircrafts' in international traffic. Relevant extract of the decision of the Coordinate Bench is as under: i. the transportation of passengers either fully or party in third party aircrafts in a specific journey by way of a code sharing arrangement, would fall within the ambit of the word "charterer" and, accordingly would be within the scope of "operation of aircrafts as defined in Article- 8(2) of the India US DTAA ii. The passengers under code sharing arrangements are transported on behalf of the assessee by the third party airlines under the code sharing arrangement on a principal to principal basis where the ticket for the entire journey is issued by the assessee bearing specific code. Hence the same would fall within the scope of "operation of aircrafts" the ticket for the entire journey is issued by the assessee bearing specific code. Hence the same would fall within the scope of "operation of aircrafts" iii. The transportation of passengers by the assessee under code sharing arrangement either fully or partly in a third party aircrafts is i....
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....charterer'. 5.2. Even though the linkage is not a pre-requisite, the assessee has furnished requisite documents, during the assessment proceedings for the year under consideration before the Ld. AO, to demonstrate linkage of transportation undertaken by the assessee through its own aircrafts and through the usage of third-party aircrafts. It is submitted by the assessee that the said documents are same as what were furnished before the Assessing Officer and Coordinate Bench in appeal for AY 2018-19, and were found to be establishing the linkage. 6. We have perused the order of Coordinate Bench for Assessment Year 2018-19 in detail as well as the order of ld. CIT(A) who has elaborately dealt with the same, on every aspect of the merits of the case. Decision of the Coordinate Bench in assessee's own case for Assessment Year 2018-19 is squarely applicable to the year under consideration, there being no material change in factual matrix and the applicable law, as nothing cogent was brought on record by the revenue to demonstrate any variation to this effect. The observations and findings of the Coordinate Bench for appeal for Assessment Year 2018-19 are reproduced below for ready....
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.... Bombay High Court in Balaji Shipping's case is not applicable to assessee. However the Hon'ble Bombay High Court in the case DIT(IT) vs APL Co. Pte. Ltd [2016] 75 taxmann.com 32 (Bombay) while considering similar issue under India-Singapore DTAA has followed its own decision in the case of Balaji Shipping (supra) and held no substantial question of law arose. The Article 8 of India-Singapore DTAA is similarly worded as India-US DTAA with respect to the definition of profits from operation of Ship or Aircrafts in international traffic and that the decision is rendered post the decision of the coordinate bench in assessee's own case. Therefore in our view, the decision of the jurisdictional High Court in the case of APL Co. Pte. Ltd (supra) will have a binding precedence while considering assessee's case. Further it is noticed that the coordinate bench in various other cases including those rendered in the context of DTAAs which are similarly worded as India-US DTAA have followed the ratio laid down by the Hon'ble Bombay High Court in the decision of Balaji Shipping (supra). 18. In view of the legal position with regard to slot-chartering arrangement in ....
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....e earned through transporting passengers using third party airlines either entirely or part of the journey under the code sharing arrangement, has a direct nexus / inextricably linked to the main business of the assessee of operation of aircrafts. When we consider these facts and apply the ratio laid down by the jurisdictional High Court there is merit in the submission that the receipts of the assessee through code sharing arrangements are eligible for the benefit under Article 8 of India US DTAA. 21. The ld DR during the course hearing vehemently argued that receipts under code sharing arrangement does not fall within the definition of "profits from operation of Ship or Aircrafts in international traffic" since under the said agreement the assessee neither owns / leases / charters the aircrafts. In this regard we notice from the relevant observations of the coordinate bench in the case of MISC Bernard (supra) as extracted in the earlier part of this order that the coordinate bench has given a categorical finding that the operation of ship can be done as a charterer, which includes part of a ship or particular space in a ship and that even a part of a space in the vessels....
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....that under slot chartering the arrangement is on a principle to principle basis i.e. the transportation of goods by third party vessels is done on behalf of operator of the ship. In assessee's case under the code sharing arrangements, the tickets are issued by the assessee for the entire journey including journey through third party airlines and accordingly the passengers are carried in third party aircrafts on behalf of the assessee. Therefore on this count also it is to be held that the operation of aircrafts in international traffic by the assessee would include code sharing arrangements. 23. We notice that the coordinate bench for AY 2010-11 has rejected the reliance placed by the assessee in the case of MISC Bernard mainly for the reason that the link is not established between the transportation by third party aircrafts and assessee's own aircraft (though the assessee through MA contended that the AO did not call for the same). However for the year under consideration the assessee submitted paper books containing the details (page 198 to 443) submitted before the lower authorities where in the entire journey whether by own or third party aircrafts is linked t....
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....re that the DTAA between US and other countries follow the US Model of DTA conventions. Therefore in our considered view it is essential to examine if what is stated in the OECD Model Convention commentaries can be applied to assessee's case. In this regard we notice that the India-US Treaty is not entirely following the US Model of DTA conventions but also has incorporated certain specific items (refer Para 6, & 8 of the OECD model commentary) in to Article 8(2) of India US DTAA. In other words definition of profits from the operation of ships or aircraft in international traffic is an inclusive definition as per US Model whereas it is not so in Article 8(2) of India US DTAA. For reference Article 8 under US Model is extracted below Article 8 SHIPPING AND AIR TRANSPORT 1. Profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that Contracting State. 2. For purposes of this Article, profits from the operation of ships or aircraft include, but are not limited to: a) profits from the rental of ships or aircraft on a full (time or voyage) basis; b) profits from the rental on ....
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....e entering into Treaty, the Model Tax Convention on Income and on Capital, published by the Organisation for Economic Cooperation and Development (the "OECD Model"), and recent tax treaties concluded by both countries would be taken into account. Since the terms of Treaty are negotiated between the two countries it is clear that the terms agreed between India and US while entering into the agreement, that India-US DTAA, generally follows the pattern of the US model tax convention but is different in a number of respects to reflect India's status as a developing country. This is supported by the fact that a combined reading of the above Article 8 as per US Model and Article 8 of India US DTAA, and accordingly leads to us to see the merit in the argument that the OECD commentaries have to be read into Article 8 while considering the applicability of the same to code-sharing arrangement. 28. One of the reasons for the coordinate bench to decide the issue against the assessee in AY 2010-11, is that there is no agreement to substantiate the terms under which code-sharing arrangement have been entered into by the assessee. For the year under consideration the assessee during....