IndiGo Faces Rs 1,666 Crore Tax Demand Confirmation; Plans Contest Against CIT-Appeals Orders

23 Nov 2023 , 12:47 PM

Commissioner of Income Tax-Appeals confirms tax demand of approximately Rs 1,666 crore on Interglobe Aviation, the parent company of IndiGo airlines. IndiGo plans to contest the order, which seeks Rs 740 crore recovery for Assessment Year (AY) 2016-17 and Rs 927 crore recovery for AY 2017-18.

The airline alleges it was not granted an opportunity for a personal hearing by the Commissioner and that the matter was not adjudicated on merit. The tax demand relates to the revision of taxable income due to the tax treatment of incentives received from manufacturers during the acquisition of aircraft and engines, as well as the disallowance of certain expenses.

This marks the second time the Commissioner of Income Tax-Appeals has confirmed tax demand on IndiGo, with a similar order passed in 2015. In 2015, the Commissioner had raised concerns about treating discounts received by Indian airlines on aircraft purchases as commission when computing taxable income.

IndiGo had presented these discounts as capital receipts exempt from income tax, but the Commissioner rejected the plea and issued notices of enhancement.

The recent orders confirm the revision to taxable income without granting an opportunity for a personal hearing, according to IndiGo. The airline believes, based on legal advice, that the views taken by the authority are not sustainable.

The tax dispute revolves around the tax treatment of incentives received by the company from aircraft and engine manufacturers, as well as the disallowance of certain expenses. The Commissioner of Income Tax asserts that the lessee (airline) is not entitled to claim depreciation on assets obtained with discounts from manufacturers.

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