9911796707
TMI Blog2023 (8) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... income from royalty. 3. Briefly the facts are, the 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. For the assessment year under dispute, the assessee filed its return on 28.03.2017, declaring total income of Rs. 5,28,58,080/-. However, the 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). In course of assessment proceedings, the Assessing Officer called for the necessary details relating to the lease charges. After examining the details furnished by the assessee, he observed that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing 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 additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arose to the assessee during the year through the said transaction. He submitted, as per the provisions of the Act as well as India - UAE Treaty, royalty income can be taxed purely on receipt basis. In support of such contention, he relied upon the following decisions: 1. DIT (IT) Vs. Seimens in ITA No. 124 of 2010 (Bom.), order dated 22.10.2012 2. ADIT (IT-3) Vs. Johnson & Johnson [2013] 32 taxmann.com 102 (Mumbai) 8. He submitted, the first appellate authority has completely misconceived the provisions of section 279 of the Companies Act, 2013 while concluding that as per the said provision, the assessee should have accounted for its income on accrual basis. He submitted, the first appellate authority has completely overlooked the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee had leased a helicopter to an Indian entity M/s. Heligo Charters Pvt. Ltd. for a period of 3 years. It is also an undisputed fact that in the financial year relevant to the assessment year under dispute, the assessee had raised only four invoices for the months of April, 2014 to July, 2014 for an amount of Rs. 1,43,59,792/-. It is established on record, due to serious dispute between the parties regarding the terms of lease and other issues, the assessee did not receive any payment towards leasing of the helicopter from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable at the hands of the assessee on notional basis. Article 12 of India - UAE DTAA deals with taxability of royalty. As per paragraph 1 of Article 12, royalty income paid to a resident of another contracting State is taxable in that State. However, paragraph 2 provides that such royalty income arising in the source State can also be taxed in the source state in accordance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - as royalty income of the assessee during the year purely based on the amount shown in Form 26AS, however, learned Commissioner (Appeals) has restricted the addition to Rs. 1,43,59,792/- 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 Assessing Officer to delete the addition of Rs. 1,43,59,792/- sustained by learned Commissioner (Appeals). 14. Since, we have deleted the addition holding that the amount is not taxable under Article 12(3) of India - UAE DTAA as no royalty income was actually received by the assessee in this year, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
