India: Leased aircraft does not create PE in India under India-Ireland treaty (tribunal decision)
Lessor had no operational control over aircraft
The Mumbai Bench of the Income-tax Appellate Tribunal held that the mere presence of leased aircraft in India does not constitute a taxpayer’s permanent establishment (PE) under the India-Ireland income tax treaty in the case of a dry lease under which the lessor does not have any operational control over the aircraft.
The tribunal further found that simply owning an asset or exercising protective rights associated with ownership does not, by itself, satisfy the disposal test to establish a PE in India.
Furthermore, even if an Indian PE is assumed, the tribunal concluded that considering the specific provisions under the treaty governing taxation of profits derived from operations of aircraft in international traffic, the lease rentals received by the taxpayer from the Indian lessee are not taxable in India.
The case is: Sunflower Aircraft Leasing Limited v. ACIT
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