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New Page 1Part C : Tribunal & AAR
International Tax Decisions
12 Rio Tinto Technical Services v.
DCIT [Unreported]
[ITA No. 3399/Del./2002, 5372/Del./2003& 4742/Del./2004]
Article 7, India-Australia DTAA; S. 5, S. 9(1)(vii), S. 44D, S. 115A, Dated :
19-3-2010
Counsels : Salil Kapoor & Ors. (for taxpayer)
Y. S. Kakkar & Other (for Revenue)
Fees received by
non-resident for performing services in India through a PE are taxable in
accordance with Article 7 of DTAA. If Article 7 applies, S. 9(1)(vii), S. 44D
and S. 115A would not apply.
Facts :
The taxpayer was
PE in India of an Australian Company (‘AusCo’). AusCo had entered in to contract
with an Indian Company for evaluation of coal deposit and feasibility study for
transportation of extracted coal. The taxpayer received approval of RBI for
establishing a project office in India. After completion of that project, AusCo
entered into another contract with another Indian company for evaluation of iron
ore deposit and feasibility study for transportation of iron ore. The taxpayer
received approval of RBI for establishing project office for this contract.
The PE received
consideration for performing the services under the contracts. The AO held that
the consideration was in nature of fees for technical services. The AO
considered it to be subject to S. 9(1)(vii) and accordingly, he taxed it @20% of
the gross receipts of the PE. In appeal, the CIT(A) upheld the order of the AO.
The Tribunal
perused the agreement between AusCo and Indian Company and noted that the
services to be provided were not simple technical and consultancy services, but
specific activities required to be done on site. Hence, AusCo had established a
PE in India.
Held :
When taxing a
non-resident, it should be first ascertained whether income is taxable u/s.5 or
9. If it is so taxable, and if the taxpayer qualifies to access DTAA, the option
would be with the taxpayer whether to prefer to be governed by provisions of
DTAA or the Income-tax Act.
Income of the PE
was taxable u/s.5(2) and AusCo had opted to be taxed as per India-Australia DTAA.
Income of the PE was ‘Business Profits’. Hence, Article 7 would apply. Article
7(2) provides that the PE should be treated as a distinct and independent
enterprise, and Article 7(3) provides that deductions in accordance with the
Income-tax Act shall be allowed. Since Articles 7 applies, S. 9(1)(vii), S. 44D,
S. 115A would not apply.
