Case Law Details
Spicejet Limited Vs Addl. CIT (ITAT Delhi)
ITAT Delhi held that payment towards leasing/ hiring of the equipment will not constitute a royalty under the provisions of the India – Netherlands Double Taxation Avoidance Agreement (DTAA).
Facts-
AO noticed an amount of Rs. 1,32,00,000/- was paid to KLM Engineering and Maintenance towards leasing of rotables and repair work. Being of the view that the payment made is in the nature of royalty, on which, assessee was required to withhold tax under section 195 of the Act, AO made disallowance under section 40(a)(i) of the Act.
The assessee contested the aforesaid disallowance before learned Commissioner (Appeals). After considering the submissions of the assessee, learned Commissioner (Appeals) found that the assessee had entered into a leasing agreement with M/s. KLM Engineering and Maintenance and had taken on lease rotables. He observed, as per the India – Netherlands Double Taxation Avoidance Agreement (DTAA) receipt from equipment leasing/hiring is not included within the definition of royalty, as applicable to the assessment year under dispute. He further found that even the income is not taxable as business profit at the hands of M/s. KLM Engineering and Maintenance, as, it did not have a PE in India. Thus, he held that the amount cannot be taxed under the Treaty Provisions. However, considering the fact that the Assessing Officer has not considered the issue in the aforesaid perspective, learned Commissioner (Appeals) directed the Assessing Officer to verify, whether the amount is exempt from taxation under the Tax Treaty and, if so, to delete the addition.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
