The income from letting out warehousing space by overseas cargo airlines at the airport to another firm appointed for handling the airline's cargo is not taxable, according to a recent Delhi High Court ruling.

In a case concerning Netherlands-based KLM Royal Dutch Airline, the Delhi High court recently dismissed an appeal against the order of a tax tribunal and said that the tribunal had given a correct decision that the income from sub-letting warehousing space at the airport for cargo handling does not call for tax in India.

KLM Royal Dutch Airline carries passengers as well as cargo.

The court upheld the tribunal decision, which 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".

The case had arisen out of the fact that KLM had got licence from the Airports Authority of India (AAI) for cargo space. The airline 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.