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India: Application of principal purpose test in MLI requires separate notification under India-Ireland treaty (tribunal decision)

Rental income qualified as profits derived from operation of aircraft in international traffic not taxable in India.

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October 6, 2025

The Delhi Bench of the Income-tax Appellate Tribunal held that application of the principal purpose test in the OECD multilateral instrument (MLI) requires separate notification under the India-Ireland income tax treaty, even though India and Ireland both ratified the MIL in 2019 and both designated the India-Ireland treaty as a covered tax agreement.

The tribunal also held that rental income under the taxpayer’s lease qualified as profits derived from the operation of aircraft in international traffic under the treaty and thus was not taxable in India.

The case is: Kosi Aviation Leasing Ltd v. ACIT

Read an October 2025 report prepared by the KPMG member firm in India

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