Actual receipt required for treaty royalty tax on disputed helicopter lease income; notional taxation was rejected.

Royalty under Article 12 of the India-UAE DTAA was taxable only on actual receipt of consideration, not on a notional or deemed basis. In a dry lease of a helicopter, the lease rental could not be brought to tax where the parties were in dispute and no payment was actually received during the relevant year, even though invoices were raised and tax was reflected in Form 26AS. On that factual footing, the proposed addition was unsustainable and was deleted for the year under consideration.

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Issues: Whether lease rental from leasing of a helicopter could be taxed as royalty on a notional basis when no amount was actually received during the relevant year.

Analysis: The assessee had leased a helicopter under a dry lease arrangement, but the parties were in dispute and no lease payment was actually received during the year, despite invoices being raised and tax being reflected in Form 26AS. Under Article 12 of the India - UAE Double Taxation Avoidance Agreement, royalty is taxable when it is received as consideration, and the expression "received" was read in the context of actual receipt rather than deemed or accrued receipt. Since the admitted factual position was that no money was received from the lessee, the amount could not be brought to tax merely on a notional basis.

Conclusion: The addition was unsustainable and was deleted; the levy of royalty tax on the disputed amount was held to be not justified for the year under consideration.

Final Conclusion: The appeal succeeded because taxability as royalty could not be fastened in the absence of actual receipt of the lease income during the relevant year.

Ratio Decidendi: For royalty under the treaty, actual receipt of consideration is required, and a disputed lease amount that has not been received cannot be taxed on a notional or deemed basis.

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