Foreign warehouse income not taxable in India

A Delhi High Court ruling means that income from letting out warehousing space by overseas cargo airlines at an airport to another firm appointed for handling the airline’s cargo is not taxable.

In a case involving KLM, the court dismissed an appeal against the order of a tax tribunal which had said “the assessee did not derive any income other than the profits from the operation of aircraft in international traffic and, hence, in terms of Article 8, the same was not subject to tax in India but was subject to tax in the Netherlands”.

KLM had gained licence from the Airports Authority of India (AAI) for cargo space but later outsourced the cargo-handling job to another company, CSC, for commission.

The airline paid CSC after adjusting the rent payable to the AAI. The tax department wanted the adjusted rent to be treated as income and said it was taxable.