9911796707
TMI Blog2004 (9) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... ia undertaking, engaged in the production of integrated circuits required by defence installations and products, had to temporarily suspend its production operations due to a massive fire in its premises. It was in this period of suspension of its production operations that SCL had to outsource certain products to meet its existing commitments. Accordingly, on 1st April, 1989, SCL floated global tenders, a copy of which was placed before us at Annex. E of the compilation of papers, for "fabrication and supply of mask sets, processed wafers/dies on carrier, assembled/packaged and/or tested integrated circuits of its designs based on its various technologies/processes. The appellant before us, i.e., Austria Micro Systems International AG (AMS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the course of the assessment proceedings, the AO observed that the assessee has received this sum under a composite contract which also provides for 'transfer of technology for user in India' and that 'it is the exploitation of this technology that has given rise to the income'. Learned AO went on to add that "the source (of income) is the user of technology or its exploitation and since the use or exploitation has taken place in India', the income is deemed to be accrued in India". The AO also placed his reliance on judgments in Performing Right Society Ltd. Ors. vs. CIT Ors. (1974) 93 ITR 44 (Cal) and Performing Right Society Ltd. Anr. vs. CIT 1976 CTR (SC) 429 : (1977) 106 ITR 11 (SC). It was thus concluded that the sum of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious aspects of the matter so strenuously argued by the distinguished representatives. It is sufficient to take note of the fact that there was a double taxation avoidance agreement entered into between India and Austria on 5th April, 1965 [(1965) 56 ITR (St) 15], which was in force at the relevant point of time. We find that it is an unambiguous legal position that by the virtue of s. 90(2) of the Act, where the Central Government has entered into an agreement with the Government of any country outside India under sub-s. (1) for granting relief to tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply only to the extent they are more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective country except where provisions to the contrary have been made in the agreement. Thus, where a double taxation avoidance agreement provided for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the IT Act. Where there is no specific provision in the agreement, it is the basic law, i.e., the IT Act, that will govern the taxation of income. In our view, the circular reflected the correct legal position inasmuch as the convention or agreement is arrived at by the two contracting Governments in deviation from the general principles of taxation applicable to the contracting States; otherwise, the double taxation avoidance agreement will have no meaning at all." This is also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g this exception, the fees for technical services were only taxable in the country of fiscal domicile. In view of the fact that there is not an iota of evidence to suggest leave aside establish, that technical services, even if any, were rendered in India, the very foundation of this case is wholly unsustainable in law. The question of taxability of fees for technical services in the country of which an enterprise is resident, in cases in which the old Indo Austrian DTAA [it is since replaced by the DTAA dt. 8th Nov., 1999; (1999) 170 CTR (St) 32] was applicable, could only arise when the services were actually performed in that country. A finding to that effect, in our considered view, was sine qua non to bring such fees for technical serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indo-Austrian DTAA. Learned counsel has explained to us at length the process involved in the entire exercise and has also sighted before us the process and the end products. On an appreciation of the facts of this case, we find that the receipt in question is in the nature of a export proceeds in the hands of the appellant. It is paid in consideration of import of goods, though made to order and as per specifications of the SCL, and just because the goods are made as per specifications, the character of transaction does not change. In this view of the matter, the profit embedded in the impugned receipts is in nature of "industrial or commercial profits". In terms of provisions of art. 3(1) of the applicable India Austrian DTAA, such pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
