Profit from transport of air passengers is covered under Article 8 of Indo-Bhutan DTAA: ITAT

Case Details: DCIT v. Tashi Air (P.) Ltd. - [2022] 145 taxmann.com 511 (Kolkata-Trib.)

Judiciary and Counsel Details

• • Sanjay Garg, Judicial Member & Dr Manish Borad, Accountant Member
  • Manish Kanojia, CIT & Smt Ranu Biswas, Addl. CIT for the Appellant.
  • Dipayan Basu, AR for the Respondent.

Facts of the Case

The assessee was an Airline having its establishment in Bhutan. It claimed that income from the sale of tickets to air passengers, insurance and fuel charges, etc. in India was taxable in Bhutan only. However, Assessing Officer (AO) held that as the assessee was having a permanent establishment in India, income was taxable in India as per provisions of section 9.

The Commissioner (Appeals) had accepted the contention of the assessee that since its place of effective management (POEM) had been in Bhutan, as per article 8 of Indo Bhutan Double Taxation Avoidance Agreement [DTAA] its income from air transport was taxable in Bhutan only.

Aggrieved-AO filed the instant appeal before the Tribunal.

ITAT Held

The Kolkata Tribunal held that article 8 of the Indo Bhutan DTAA is more beneficial to the assessee. Thus, the profits derived by the assessee from the operation of ships or aircraft in international traffic are liable to be taxed in the contracting state in which its place of effective management of the enterprise is situated, which undisputedly is Bhutan.

The term “Profits derived from the operation of ships or aircraft in international traffic”, in DTAA is exhaustive enough not only to include air passengers but also mail, livestock, or goods.

There was nothing mentioned in the India-Singapore DTAA to make an inference that the profits from the transport of air passengers should not be covered under Article 8 of the Indo-Bhutan DTAA.

List of Cases Reviewed

• • Union of India v. Azadi Bachao Andolan [2003] 132 Taxman 373/263 ITR 706/184 CTR 450 (SC) (para 5) followed.

List of Cases Referred to

• • Union of India v. Azadi Bachao Andolan [2003] 132 Taxman 373/263 ITR 706/184 CTR 450 (SC) (para 5).