Case Details: Aircon Beibars (FZE) v. DCIT - [2023] 153 taxmann.com 41 (Delhi-Trib.)
Judiciary and Counsel Details
- G.S. Pannu, President & Saktijit Dey, Vice-president
- K. Sampath, V. Rajkumar, Advs. & Vishal Sehgal, FCA for the Appellant.
- Vizay B. Vasanta, CIT(DR) for the Respondent.
Facts of the Case
Assessee is a non-resident corporate entity incorporated under the laws of the United Arab Emirates (UAE), engaged in leasing helicopters to clients worldwide.
During the assessment proceedings, the Assessing Officer (AO) observed that the assessee had leased one helicopter to an Indian Entity through a dry lease agreement. The assessee transferred the right to use/operate the helicopter in India per the agreement. The Indian entity deducted tax on royalty payable to the assessee, which was reflected in Form 26AS of the assessee. The AO treated such income as royalty and added it to the assessee’s income.
Considering that no payment was actually received from the Indian entity, the aggrieved assessee filed an appeal to the CIT(A). CIT(A) upheld the additions made by AO.
The matter reached the Delhi Tribunal.
ITAT Held
The Tribunal held that the assessee had raised only four invoices during the relevant year. It is an undisputed fact that due to a serious dispute between the parties regarding the lease terms and other issues, the assessee did not receive any payment towards leasing the helicopter from the lessee.
Further, it was noted that Form 26AS reflected the income paid/credited to the assessee since the lessee deducted tax on the said amount. However, in reality, the assessee did not receive even a single rupee towards lease income.
In addition, a reference was made to the condition in paragraph 3 of Article 12 of India – UAE DTAA. Article 12 states that the royalty income has to be received for the use or right to use of any copyright, trademark, patent etc. It was held that the expression ‘received’ used in Article 12 would mean ‘actual receipt’ of royalty and not any receipt on accrual or deemed basis. Therefore, the condition under Article 12 of the India-UAE DTAA is not fulfilled. Accordingly, the AO was directed to delete all the additions.
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