9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (8) TMI 443 - AT - Income TaxFees for technical services - Fees received for consulting and engineering services - Article 12 - DTAA with USA - Held that - Technical services provided by the assessee in the shape of technical plans, designs, projects, etc. are nothing but blueprints of the technical side of mega power projects. Admittedly such services are rendered at a pre-bid stage. It is quite natural that such technical plans etc. are meant for use in future alone if and when L&T takes up the bid for the installation of the power project. When the otherwise technical services provided by the assessee are of such a nature which are capable of use in future alone - there is no infirmity in the impugned order holding that the assessee received consideration for making available technical services within the meaning of Article 12 of the DTAA. - Decided against assessee. Interest u/s 234B - Held that - assessee is tax resident of USA. Its entire income is liable for deduction of tax at source in India. In that view of the matter, it is obvious that there can be no chargeability of interest u/s 234B of the Act - Following decision of D.I (International Taxation) VS. NGC Network Asia Ltd 2009 (1) TMI 174 - BOMBAY HIGH COURT - Decided against assessee.
Issues Involved:
1. Taxability of consulting and engineering services under Article 12 of the Double Taxation Avoidance Agreement (DTAA) between India and USA. 2. Levy of interest under Section 234B of the Income-tax Act, 1961. 3. Initiation of penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Taxability of Consulting and Engineering Services under Article 12 of the DTAA: The primary issue revolves around whether the services rendered by the assessee to Larsen and Toubro Limited (L&T) fall within the scope of 'fees for included services' under Article 12 of the DTAA between India and USA. The assessee, a USA-based consulting firm, received Rs. 2,22,16,154/- from L&T for consulting and engineering services related to Ultra Mega Power projects in Mundra and Sasan. The Assessing Officer (AO) held that these services were taxable under Section 9(i)(vii) of the Income-tax Act as 'fees for technical services' and also under Article 12 of the DTAA. The Dispute Resolution Panel (DRP) upheld this view. The assessee contended that the services did not 'make available' any technical knowledge to L&T, which is a requirement under Article 12(4) of the DTAA. The tribunal examined the agreements between the assessee and L&T, which indicated that the services included consulting and engineering services in the preparation of technical design bases for power projects. The tribunal noted that the services were technical in nature and involved several thousand man-hours by technical personnel. The tribunal referenced the Karnataka High Court's judgment in CIT & Ors. Vs. De Beers India Minerals Pvt. Ltd., which clarified that 'make available' means the recipient of the service should be able to use the technical knowledge or know-how in future independently. The tribunal concluded that the technical plans, designs, and projects provided by the assessee were meant for future use by L&T, thereby 'making available' the technical services. Hence, the tribunal upheld the AO's decision that the services fell within the scope of Article 12 of the DTAA. 2. Levy of Interest under Section 234B: The second issue pertains to the levy of interest amounting to Rs. 9,10,458/- under Section 234B of the Income-tax Act. The tribunal noted that the assessee, being a tax resident of the USA, is subject to tax deduction at source on its entire income in India. Citing the Bombay High Court's decision in D.I (International Taxation) VS. NGC Network Asia Ltd., the tribunal held that non-residents are not liable to pay interest under Section 234B as their income is subject to tax deduction at source. Therefore, this ground was allowed in favor of the assessee. 3. Initiation of Penalty Proceedings under Section 271(1)(c): The last issue concerns the initiation of penalty proceedings under Section 271(1)(c) of the Income-tax Act. The tribunal deemed this ground as premature and did not require adjudication at this stage. Conclusion: The appeal was partly allowed. The tribunal upheld the taxability of the consulting and engineering services under Article 12 of the DTAA, allowed the ground regarding the non-levy of interest under Section 234B, and found the issue of penalty proceedings premature for adjudication. The order was pronounced on July 24, 2013.
|
