Taxability of leasing income as royalty from helicopter given on dry lease under Indo-UAE DTAA Article - 12

Facts:

Assessee a UAE resident dry leased a helicopter to one Heligo Charter Pvt. Ltd. for a period of 3 years. AO alleged that the said equipment lease income was royalty income as per Indo-UAE DTAA Article 12 read with Section 9(1)(vi) of the Income tax act, 1961. Assessee's plea was that there was no intellectual property which arose for calling it as royalty under the DTAA. Additional plea was also raised by the assessee that to tax it as royalty under the DTAA the assessee must have received the income. In this case there were disputes which arose in the lease contract which went into arbitration/litigation on account of which no monies were paid by the lessee to the assessee (lessor). However the lessee reported the lease income and the TDS on the same also was reflecting in the 26AS of the assessee. Basing this the revenue wanted to tax the same. CIT(A) after hearing the case went partly in favour of the assessee by taxing the 4 month invoiced amount alone which were raised by the assessee on accrual basis. On higher appeal by the assessee -

Held in favour of the assessee that under DTAA only if the non-resident receives income it can be taxed. There was no income which was received by the assessee. Accordingly the legal question of whether helicopter leasing is royalty taxable under Indo-UAE DTAA is not being addressed and assessee will get relief from taxation due to non-accrual/receipt of income in India.

Case: Aircon Beibars (FZE) v. DCIT 2023 TaxPub(DT) 4624 (Del-Trib)