9911796707
TMI Blog2010 (3) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... the same are being disposed of by this common order. 2. The Ld. counsel for the assessee submitted that the assessee is a division of Technical Resources (P.) Ltd., Australia, which had entered into a contract with Rio Tinto India (P.) Ltd. (for short, RTIPL ) on 4-3-1998 for evaluation of coal deposits in Maharashtra and corresponding feasibility studies for transporting the same to Bhadrawati Power Station; that the assessee had established a project office in India on 22-9-1998 pursuant an approval granted by RBI to render the services under the agreement; that the project with RTIPL was completed on 18-6-1999; that the assessee further entered into a contract with Resources of Orissa Mining Ltd. on 22-7-1999 for evaluation of iron ore deposits at Gadhanardhan Malangtoly in Orissa and the corresponding feasibility studies for transportation of iron ore by rail to Paradeep Port, Orissa; for this purpose, the RBI had granted the assessee an approval dated 2-9-1999 for the relevant assess-ment years 1999-2000, 2000-01 and 2001-02 that the assessee had filed its return of income, which was processed; that the course of the assessment proceedings, the Assessing Officer had he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since the assessee was rendering services which were in the nature of a fee for technical services, the provisions of section 44D of the Act applicable and the assessee would be subject to tax on gross basis, as per the provisions of sections 115A and 44D of the Act; that the payment for the services rendered was not fee for technical services, either under Article 12(3)( g ) of the India-Australia Treaty, or under section 9(1)( vii ) of the Act, insofar as the assessee had not rendered any services which made available technical knowledge, experience, skill, know-how or process or involve development and transfer of any techni-cal plan or design; that the assessee was engaged in the evaluation of iron ore deposits at Gandhamardan and Malangtoli in Orissa and the corre-sponding feasibility study for transportation of ore by rail to Paradeep Port, Orissa; that as per the contract, the services of the assessee did not make available any technical knowledge, experience, skill or know-how or process and also did not involve any development or transfer of a technical plan or design; that the provisions of section 55A were not applicable. It was the further submission that the activi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveniently, in the absence of supporting record and data. He contended that if the provisions of section 9(1)( vii ) are blindly applied; it would result in taxing a non-resident, who an opens office in India and carries on business operation in India to be taxed in the same line as a non-resident who is providing technical services sitting abroad. He averred that if sections 44D and 115A of the Act are applied, payment by an Indian concern to a non-resident would be denied the benefit on a net basis whereas payment by a non-resident to a non-resident would be allowed on a net basis; that if the interpretation taken by the Assessing Officer is applied to the treaty provisions, it would mean that a non-resident rendering technical services without coming to India would get a beneficial rate of tax at the rate of 10 per cent to 15 per cent, whereas a non-resident coming to India and doing business in India would pay tax at the rate of 20 per cent to 30 per cent on gross receipt; that the income of the assessee did arise in India and consequently, the deeming provisions of section 9 of the Act itself did not apply; that the assessee s case was not of a non-resident who rendered serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout giving any deduction of any expenses; that section 44D specifically provide for the taxation of fee for technical services and as per the provision of section 44D(6), no deduction is to be allowed in respect of any expenditure or allowance under the provisions of sections 28 to 44C of the Act; that even Article 7(3) only prevents deduction against the receipt sought to be assessed under Article 7 to the same extent as would be permissible if an assessment was made under the Act and in the case of a foreign company allowance of deduction is given by section 44D. The Ld. D.R. vehemently supported the impugned order. 4. We have considered the rival submissions and have perused the material on record. Even though the Assessing Officer has extracted a part of the agreement between RIPL RITS in page 2 of the assessment order for the assessment year 1999-2000, it is noticed that one portion of the agreement has remained missed out. It is noticed that the Assessing Officer has extracted Schedule 1 of the Agreement, wherein, he has extracted only para 1 of the objectives and then, has proceeded to extract the scope of the services. The portion which has remained so excluded is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee ought to have a liberty to choose whether it wishes to be taxed under the provisions of the Act or under the DTAA as per the provisions of section 90 of the Act. As per this provision, the assessee has chosen to be taxed under the DTAA between India and Australia, the latter being the country of registration/incorporation of the assessee-company. Here, it would be worthwhile to mention that when taxing a non-resident, it would first have to be seen whether the income of the non-resident arising in India falls within the provisions of section 9 or section 5 of the Income-tax Act. If it does not fall within section 5 and section 9 of the Act, the income itself would be specifically exempted. If it does fall within section 5 and section 9 of the Act, it is then that section 90 of the Act comes into operation and the liberty is given to the assessee to opt for being taxed either under the Indian Tax Law or under DTAA between India and the country of incorporation. 4.2 In the present case, the assessee, as mentioned earlier, is incorporated in Australia and it has, admittedly, a PE in India. Consequently, the DTAA between India Australia is to apply. The income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of those Articles shall not be affected by the provisions of Article 7 of the DTAA. 4.3 Thus, applying these provisions to the facts to the present case, it is noticed that the assessee having admitted that it has PE in India and the income of the assessee is taxable in India and the assessee having opted to be taxed as per the provisions of the DTAA it is Article 7 of the DTAA which applies to the assessee s case insofar as the assessee has a PE in India. Thus, as per Article 7(2) of the DTAA, the PE of the assessee would have to be treated as a wholly independent enterprise, which is liable to be taxed in India. Once it is held that the assessee is liable to be taxed as per Article 7 of the DTAA, clause (3) of Article 7 of the DTAA would come into play and deduction in accordance with the subject to the law relating to the tax in India would apply. Since it is held that Article 7 of the DTAA comes into play, section 9(1)( vii ) of the Act would no more be applicable as Article 7(2) of the DTAA specifies that the PE of the assessee is to be treated as a wholly independent enterprise and it is the profits of such PE in India which are to be taxed. Since Article 7 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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