Consideration paid for testing ability of candidates doesn’t qualify as royalty hence TDS not deductible

CAE Simulation Training P. Ltd. Vs DCIT (ITAT Delhi)

ITAT Delhi held that consideration paid for testing the ability of candidates do not fall within the purview of royalty under Article 13 of India-UK DTAA. Hence, there is no obligation withholding of tax u/s 195 of the Income Tax Act.

Facts- The assessee is a private limited company engaged in the business of training pilots and also providing services in relation to assessment of pilot candidates for its customers. The case of the assessee was selected for complete scrutiny through CASS.

AO made disallowance of Rs. 1,03,45,058/- under section 40(a)(i) of the Income Tax Act, 1961 on account of failure to deduct tax at source u/s. 195 of the Act out of payments made by the assessee outside India to Symbiotics Ltd., UK holding such payments to be in the nature of royalty under the Act as well as India-UK DTAA.

CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.

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