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2023 (8) TMI 146 - AT - Income TaxIncome deemed to accrue or arise in India - Royalty Income - assessee is a non-resident corporate entity incorporated under the laws of United Arab Emirates (UAE) and stated to be engaged in the business of leasing of helicopter to the clients across the world - assessee claimed that the amount received, being in the nature of business income, is not taxable in India, in absence of a Permanent Establishment (PE) - HELD THAT:- 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. The receipt of lease income is fraught with uncertainties as parties are in dispute and litigations are pending for past so many years. Even, there is no likelihood of end of the litigation in near future. In the aforesaid scenario, it cannot be said that 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.
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