ITAT Mumbai Grants Delta Air Lines Tax Exemption: Code-Sharing Revenues Covered Under India-USA DTAA Article 8
Tribunal rules codesharing counts as aircraft operation, exempts Delta from Indian tax on international traffic income.
Decision sets precedent for aviation industry, clarifies tax treatment of collaborative airline models.
By Our Legal Reporter
New Delhi: November 15, 2025:
In a landmark ruling with far-reaching implications for the aviation industry, the Income Tax Appellate Tribunal (ITAT) Mumbai has granted Delta Air Lines Inc., a US-based carrier, exemption under Article 8 of the India-USA DTAA for revenues earned through code-sharing transportation arrangements.
The tribunal’s decision, delivered in late 2024 and reported widely in 2025, clarifies that code-sharing revenues qualify as income from the “operation of aircraft in international traffic,” thereby exempting them from Indian taxation.
Background of the Case
Delta Air Lines, a tax resident of the United States, operates flights in international traffic, including India routes. In addition to its own flights, Delta engages in code-sharing arrangements with partner airlines, allowing passengers to book tickets under Delta’s code while traveling on another airline’s aircraft.
The Indian tax authorities argued that revenues from such codesharing did not qualify as “operation of aircraft” under Article 8 of the DTAA and should therefore be taxed in India. Delta countered that codesharing is an integral part of modern aviation operations and should be treated as equivalent to chartering or leasing under the treaty.
Tribunal’s Observations
The ITAT Mumbai bench sided with Delta, noting that:
- Code-sharing is a recognized global aviation practice, essential for airlines to expand networks and serve passengers efficiently.
- Article 8 of the DTAA exempts profits from the operation of aircraft in international traffic, including cases where the airline acts as an owner, lessee, or charterer.
- Code-sharing arrangements are akin to slot chartering, where airlines share capacity on aircraft operated by partners.
- International guidelines, including those from the OECD, support a broad interpretation of “operation of aircraft.”
The tribunal concluded that Delta’s revenues from code-sharing fall squarely within Article 8 and are therefore exempt from Indian taxation.
Partial Relief and Clarifications
While granting exemption, the tribunal clarified that:
- The exemption applies only to revenues directly linked to international traffic operations.
- Ancillary revenues not connected to aircraft operations may still be subject to taxation.
- The ruling is consistent with earlier ITAT decisions involving other foreign airlines.
Also Read: Delhi High Court Protects ITC’s Iconic ‘Bukhara’ Trademark: Hotel Bukhara Inn Barred from Using Name
Broader Context: Aviation Taxation and DTAA
The ruling comes at a time when global aviation is increasingly reliant on alliances and code-sharing models. Airlines often collaborate to expand reach without operating additional aircraft, making taxation of such arrangements a complex issue.
Under the India-USA DTAA, Article 8 provides that profits from the operation of aircraft in international traffic are taxable only in the airline’s country of residence. This ensures that airlines are not taxed twice on the same income.
The ITAT’s interpretation aligns with international practice, where code-sharing is treated as part of aircraft operations.
Importance of the Ruling
The ITAT’s decision is significant for several reasons:
- Clarity for Airlines: It provides certainty on tax treatment of code-sharing revenues.
- Boost for Aviation Alliances: Encourages airlines to expand partnerships without fear of tax disputes.
- Legal Precedent: Sets a benchmark for future cases involving collaborative airline models.
- Investor Confidence: Strengthens India’s reputation as a jurisdiction aligned with global tax norms.
Also Read: Supreme Court to Hear Sahara Employees’ Plea for Pending Salaries Amid SEBI Refund Case
Expert Opinions
Tax experts welcomed the ruling. “The ITAT has rightly recognized that code-sharing is integral to modern aviation. Treating it as aircraft operation under Article 8 ensures fairness and consistency,” said a Mumbai-based chartered accountant.
Aviation analysts added that the ruling could encourage more airlines to expand code-sharing in India. “This decision reduces tax uncertainty and supports the growth of international aviation partnerships,” said an industry consultant.
Implications for Businesses
The ruling has several practical implications:
- Foreign Airlines: Can claim exemption for code-sharing revenues under DTAA provisions.
- Indian Tax Authorities: Must align assessments with the tribunal’s interpretation.
- Aviation Industry: Gains clarity on taxation of collaborative models, boosting alliances.
- Global Precedent: May influence similar disputes in other jurisdictions.
Conclusion
The ITAT Mumbai’s ruling in favour of Delta Air Lines Inc. marks a turning point in aviation taxation in India. By holding that code-sharing revenues qualify as aircraft operation under Article 8 of the India-USA DTAA, the tribunal has reinforced the principle of fair taxation and international consistency.
For Delta, the ruling provides relief and validates its business model. For the aviation industry, it sets a precedent that could shape future disputes. For India’s tax system, it is a reminder that global practices must guide domestic interpretations of international treaties.
Also Read: Legal & Regulatory Challenges: India vs USA
🔑 Keywords for Faster Searches (Google + ChatGPT)
- ITAT Delta Air Lines ruling 2025
- India-USA DTAA Article 8 aviation taxation
- Code-sharing tax exemption India
- Delta Air Lines ITAT Mumbai case
- International traffic aircraft operation DTAA
- Aviation alliances tax treatment India
- OECD guidelines code-sharing taxation
- ITAT ruling foreign airlines India
- Double taxation avoidance agreement aviation
- Delta Air Lines DTAA exemption India