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TMI Blog2023 (8) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has received any royalty income, either under the domestic law or under the treaty provisions.The expression received used in paragraph 3 of Article 12 of India UAE DTAA read in conjunction with paragraph 1 2 of Article 12 would mean actual receipt of royalty and not any receipt on accrual or deemed basis. AO had treated an amount as royalty income of the assessee during the year purely based on the amount shown in Form 26AS, however, CIT (Appeals) has restricted the addition purely based on the four invoices raised by the assessee. When the admitted factual position is that the assessee has not even received any amount against those four invoices, in our view, the royalty income cannot be added on notional basis. Thus, we direct the AO to delete the addition - Decided in favour of assessee. - ITA No. 4721/Del/2019 - - - Dated:- 31-7-2023 - Shri G.S. Pannu, Hon ble President And Shri Saktijit Dey, Vice President For the Assessee : Sh. K. Sampath, Advocate, Sh. V. Rajkumar, Advocate And Sh. Vishal Sehgal, FCA For the Department : Sh. Vizay B. Vasanta, CIT(DR) ORDER The present appeal of the assessee arises out of order dated 29.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rring to the dictionary meaning of the word, the Assessing Officer concluded that lease of helicopter would fall under the definition of royalty as per section 9(1)(vi) of the Act. Without prejudice, he held that even as per Article 12(3) of India UAE DTAA, the income from leasing of helicopter is taxable in India. While doing so, he observed that some other tax treaties, such as, India Ireland and India Netherlands tax treaties specifically exclude use of aircraft from the definition of royalty. Whereas, it is not so in case of India UAE DTAA. Thus, ultimately, he held that the lease amount of Rs. 5,28,58,080/- is taxable as royalty in India. 5. Though, the assessee contested the aforesaid addition by filing appeal before learned Commissioner (Appeals), however, he upheld the addition made by the Assessing Officer. 6. Before us, learned counsel appearing for the assessee submitted that, though, the word equipment is used in clause (iva) of Explanation to section 9(1)(vi) and as well as under Article 12(3) of India UAE DTAA, however, the expression equipment used therein is qualified by the phrase the use or right to use industrial, commercial and scientific . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the learned Departmental Representative submitted, section 9(1)(vi) of the Act clearly provides for taxability of income from use or right to use of equipment as royalty. He submitted, identical provision is contained under Article 12(3) of India UAE DTAA. He submitted, unlike some other treaties, India UAE DTAA does not provide for exclusion of aircraft/helicopter from being treated as equipment. Thus, he submitted, in view of such clear provision, both under the Act and the treaty, the income from leasing of the helicopter has to be treated as royalty. As regards assessee s claim that no lease income was received during the year, learned Departmental Representative submitted that the royalty income can also be taxed on accrual basis. 10. We have considered rival submissions in the light of the decisions relied upon and perused the materials on record. The short issue arising for consideration is whether the alleged lease income received by the assessee towards leasing of a helicopter is taxable as royalty income under the provisions of Act as well as under the treaty provisions. Undisputed facts are, by virtue of a dry lease agreement executed on 03.07.2012, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with domestic law of that State. However, if the recipient of royalty income is a beneficial owner, the tax chargeable shall not exceed 10% of the gross royalty income. Paragraph 3 of Article 12 defines the term royalty to mean, payment of any kind received as a consideration for the use of or the right to use of copy right, patent, trademark, secret formula, processes, industrial, commercial or scientific equipment, etc. Thus, as per the definition of royalty in paragraph 3 of Article 12, the royalty income has to be received for use or right to use of any copyright, trademark, patent etc. In the facts of the present appeal, admittedly, no income was actually received by the assessee from the lessee. This factual position has been accepted by the departmental authorities. 13. That being the case, the condition in paragraph 3 of Article 12 of India UAE DTAA is not fulfilled. In this context, we may refer to the decision of the Coordinate Bench in case of ADIT (IT- 3) Vs. Johnson Johnson (supra), wherein, the Hon ble Bench dealt with pari materia provision contained in India USA DTAA. In any case of the matter, the receipt of lease income is fraught with uncer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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