Ireland has come in support of the multi-billion aircraft leasing industry as three of its companies allegedly face accusation of tax avoidance on income earned from India.

“There is no substance to the accusation that Irish aircraft leasing companies are shell entities. Irish aircraft leasing companies have not faced such disputes in any other jurisdiction in the world in which they do business,” Raymond Mullen, Ireland’s deputy ambassador to India said.

Claims contested

Mullen’s reaction came in response to a media report which said three Ireland-based lessors have been served notices for the year FY21 by the income tax department. The lessors have contested the claims before the income tax dispute resolution panel.

The dispute between tax authorities and Ireland based lessors has come into the spotlight as India tries to encourage leasing of aircraft and ships through Gift City in Gujarat. Airlines including Air India, IndiGo and Akasa Air have executed leases or set up leasing units in Gift city giving impetus to the central government’s push.

When contacted an income tax official said he would not comment on individual cases.

Ireland is home for global aircraft leasing on account of low corporate income tax rate, favourable policies and double tax avoidance treaties with over 70 countries including India.

The treaty lays down conditions on how both the countries will levy tax on profits, royalties, income earned from lease of aircraft and ships among others.

According to a tax expert,  benefits of the tax treaty can be withdrawn if it is concluded that one of the principal purposes of setting up the Irish entity was to obtain tax benefits: that is, if it is a shell company with no “commercial substance” and rationale for its location in Ireland.

The Irish embassy said lessors make important contribution to its economy and employment. “One of the many groups headquartered in Ireland has several office premises at annual rental expense of more than $5 million and over 500 employees with total annual payroll costs of over $200 million,” Mullen said.

“Ireland has played a major role in the financing and leasing of aircraft and aircraft engines to airlines over the world for many decades and has amassed a wealth of technical experience and expertise over this time,” he added.

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