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Issues involved: Determination of whether the payment made by Cochin Refineries Ltd. to Foster Wheeler Energy Corporation of U. S. A. constitutes 'fees for technical services' and is assessable to tax in India, and whether certain amounts should be excluded as reimbursement of expenses.
Judgment Summary: The High Court of Kerala addressed the reference sought by Cochin Refineries Ltd. regarding the nature of the payment made to Foster Wheeler Energy Corporation of U. S. A. The payment of Rs. 7,69,614 was made for technical services related to evaluating the suitability of a product for the aluminium industry. The Tribunal deemed this payment as 'fees for technical services' under section 9 of the Income-tax Act, 1961, necessitating tax deduction at the source. The dispute also involved two additional payments of Rs. 1,19,303 and Rs. 38,271, characterized as reimbursements for expenses incurred by personnel of Foster Wheeler Energy Corporation. These payments were considered part of the fees for technical services, as per the Explanation to clause (vii) of sub-section (1) of section 9 of the Act. The Tribunal's reliance on the Explanation led to the conclusion that all payments, including the initial Rs. 7,69,614 and the subsequent reimbursements, constituted 'fees for technical services.' The Court upheld this interpretation, stating that any consideration for technical services falls within this category. Therefore, both questions raised by the assessee were answered in favor of the Revenue, affirming the taxability of the payments as 'fees for technical services.' In conclusion, the Court directed the judgment to be sent to the Income-tax Appellate Tribunal, Cochin Bench, for further action in accordance with the decision.
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