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January 2024

Appeal to High Court — Deduction of tax at source — Payment to non-resident — Fees for technical services — Agreement entered into by assessee with USA company for testing and certification of diamonds — Execution of work by laboratory in Hong Kong and payment made in its name as instructed by USA company — Payment to non-resident entity which had no permanent establishment in India — No technical knowledge made available to assessee — Assessee not liable to deduct tax — No question of law arose.

By K. B. Bhujle | Ritu Punjabi, Advocates
Reading Time 3 mins

66 CIT(IT & TP) vs. Star Rays

[2023] 457 ITR 1 (Guj)

A.Y.: 2015–16

Date of Order: 31st July, 2023

Ss. 9(1)(vii)(b), 201(1), 201(1A) and 260A of ITA 1961; DTAA between India and USA

Appeal to High Court — Deduction of tax at source — Payment to non-resident — Fees for technical services — Agreement entered into by assessee with USA company for testing and certification of diamonds — Execution of work by laboratory in Hong Kong and payment made in its name as instructed by USA company — Payment to non-resident entity which had no permanent establishment in India — No technical knowledge made available to assessee — Assessee not liable to deduct tax — No question of law arose.

The assessee was in the business of cutting, polishing and export of diamonds. For purposes of testing and certification services, the assessee entered into a customer services agreement with GIA, USA, which set up a laboratory in Hong Kong. The invoices were raised by GIA, USA, instructing the assessee to make payment to the offshore bank accounts of GIA, Hong Kong with which the assessee had no direct relationship or any agreement.

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