February 2023
Income — Income deemed to accrue or arise in India — Fees for technical services — Technical services do not include construction, assembly and design — Contract for design, manufacture and supply of passengers rolling stock including training of personnel — Dominant purpose of contract was supply of passenger rolling stock — Training of personnel ancillary — Amount received under contract could not be deemed to accrue or arise in India:
By K. B. Bhujle, Advocate
76 CIT vs. Bangalore Metro Rail Corporation Ltd [2022] 449 ITR 431 (Karn)
A. Y.: 2011-12
Date of order: 30th June, 2022
Section: 9(1)(vii) of ITA 1961:
Income — Income deemed to accrue or arise in India — Fees for technical services — Technical services do not include construction, assembly and design — Contract for design, manufacture and supply of passengers rolling stock including training of personnel — Dominant purpose of contract was supply of passenger rolling stock — Training of personnel ancillary — Amount received under contract could not be deemed to accrue or arise in India:The assessee entered into a contract with a consortium consisting of BEML, H, MC and ME, of which, BEML was the consortium leader, for design manufacture, supply, testing and commissioning of passenger rolling stock, including training of personnel and supply of spares and operation. The total cost of the contract was Rs. 1672.50 crores. The Department conducted a survey under section 133A of the Income-tax Act, 1961 and observed that a sum of Rs. 182 crores had been paid by the assessee to the consortium. The Department was of the view that the assessee ought to have deducted tax at source before making the payment. Accordingly, a show-cause notice dated 27th December, 2011was issued calling upon the assessee to show cause why it should not be treated “as an assessee-in-default” under section 201(1) of the Act for not deduct
