In ITA No.5181/Del/2016 -ITAT- 'Supplementary Rent' paid by Spice Jet to foreign lessors not taxable in India, rules ITAT (Delhi)
Members Narendra Kumar Billaiya (Accountant) & Challa Nagendra Prasad (Judicial) [05-07-2023]

Read Order: Spice Jet Limited v. Addl. CIT Range-9, New Delhi

Chahat Varma

New Delhi, July 10, 2023: In a recent decision, the Delhi bench of the Income Tax Appellate Tribunal has upheld the order of the Commissioner of Income Tax (Appeals) [CIT(Appeals)], stating that 'supplementary rent' paid by Spice Jet Limited (assessee) to foreign companies/entities, from whom the assessee acquired aircraft on lease after April 1, 2007, was not taxable in India.

The case involved a dispute regarding the disallowance of supplemental lease rent made by the Assessing Officer (AO) under Section 40(a)(i) of the Income Tax Act. The AO contended that the supplementary rent paid by the assessee to lessors was for the replacement of parts and services related to the operation of the leased aircraft. Therefore, the AO had concluded that the exemption under Section 10(15A) did not apply, and the assessee was required to deduct tax at source. However, the CIT(Appeals) deleted the disallowance.

The Revenue conceded that the issue had already been decided in favour of the assessee by the Tribunal for lease agreements executed before April 1, 2007. However, it was argued that the treatment of supplemental lease rentals as royalty for agreements executed after April 1, 2007, had not been decided by the Tribunal.

The two-member bench of Narendra Kumar Billaiya (Accountant) & Challa Nagendra Prasad (Judicial) referred to the Special Bench decision in the case of Inter Globe Aviation Ltd. (Indigo) vs. Addl. CIT [LQ/ITAT/2021/2610], where it was held that supplemental rent paid for lease agreements executed after April 1, 2007, was not chargeable to tax in India.

Thus, the grounds raised by the Revenue were rejected.