| The Tax Publishers2019 TaxPub(DT) 7424 (Bang-Trib) INCOME TAX ACT, 1961
Section 9(1)(vi)
Flight simulator is essential part of training imparted to pilots and crew of aircraft. The fact that charges for use of simulator were separately quantified on hourly basis, did not mean that assessee was hiring the same or making payment for a right to use the same. Without imparting of training by instructors, hiring of simulator on its own did not have any purpose. It could not, therefore, be said that assessee paid royalty for use of simulator and AO was not, therefore, justified in treating payments to non-residents as royalty.
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Income deemed to accrue or arise in India - Under section 9(1)(vi) - Royalty - Payment to non-resident by airline towards training of its pilots and cockpit crew --- AO holding the payment as royalty as charges for use of the simulator were separately quantified on hourly basis
Assessee company carrying on business of Airline made payment to M/s L, Germany as assessee had sent its personnel for training of pilots and cockpit crew to Germany. AO held that payment to non-resident constituted 'Royalty' because payment was for right to use simulator as charges for use of the simulator were separately quantified on hourly basis and was, therefore, in the nature of consideration for use or right to use any industrial, commercial or scientific equipment. Accordingly, AO denied deduction for want of TDS under section 195. Held: A flight simulator is a device that artificially re-creates aircraft flight and environment in which it flies, for pilot training, design, or other purposes. It includes replicating the equations that govern how aircraft fly, how they react to applications of flight controls, effects of other aircraft systems, and how the aircraft reacts to external factors such as air density, turbulence, wind shear, cloud, precipitation, etc. Flight simulation is used for a variety of reasons, including flight training (mainly of pilots), design and development of the aircraft itself, and research into aircraft characteristics and control handling qualities. Therefore, flight simulator is essential part of training imparted to pilots and crew of aircraft. The fact that charges for use of the simulator were separately quantified on hourly basis did not mean that assessee was hiring the same or making payment for a right to use the same. Without imparting of training by instructors, hiring of simulator on its own did not have any purpose. It could not, therefore, be said that assessee paid royalty for use of simulator and AO was not, therefore, justified in treating payments to non-residents as royalty.
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 2007-08 & 2008-09
INCOME TAX ACT, 1961
Section 9(1)(vii), 195, 90
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