Section 195 - DTAA between India and Singapore

Court :
IN THE ITAT MUMBAI BENCH ‘D’

Brief :
Section 195 of the Income-tax Act, 1961, read with article 12 of DTAA between India and Singapore - Deduction of tax at source - Payment to non-resident - Assessment year 2002-03 – Assessee, a public sector undertaking, was engaged in business of refining of crude oil and marketing of petroleum products - It had engaged one ‘P’ of Singapore for carrying out market study for updating its assessment of out look for domestic refining capacity throughout India - Assessee applied for issue of no objection certificate (NOC) for making payment to ‘P’ based on proposal agreed upon by assessee contending that scope of services rendered by ‘P’ fell out side ambit of article 12 of the DTAA between Indian and Singapore- Assessing Officer treated amount payable for services rendered by ‘P’ as fees for technical service and passed an order under section 195 authorising assessee to make payment to ‘P’ after deduction of income tax at source - He held that consultancy fees paid by assessee to P was chargeable to tax in India as per provision of article 12(4) of DTAA between India and Singapore - Whether since consultancy services or report submitted by ‘P’ to assessee did not contain an element of technical knowledge or any technology which could have been applied by assessee, remuneration paid by assessee to ‘P’ would not fall within definition of fees for technical services and as such, provisions of article 12(4) could not be attracted to tax payment of consultancy charges to ‘P’ - Held, yes - Whether therefore, assessee was not liable for any payment of taxes and was entitled to refund of TDS deducted and paid – Held, yes FACTS The assessee, a public sector undertaking, was engaged in the business of refining of crude oil and marketing of petroleum products. During the previous year, the assessee had engaged one ‘P’ of Singapore for carrying out market study for updating its assessment of the out look for domestic refining capacity throughout India. The assessee applied for issue of no-objection certificate (NOC) for making the payment to ‘P’ based on the proposal agreed upon by the assessee. In the application for NOC, the assessee contended that the scope of services rendered by ‘P’ fell out side the ambit of article 12 of the DTAA between India and Singapore. The Assessing Officer passed and order under section 195 authorising the assessee to make the payment to ‘P’ after deduction of income tax at source. The Assessing Officer treated the amount payable for the services rendered by ‘P’ as fees for technical service. The assessee, therefore, made the payment to ‘P’ after deducing tax at source and deposited the TDS with the department. On appeal, the Commissioner (Appeals) confirmed the impugned order. He held that the consultancy fees paid by the assessee to ‘P’ was chargeable to tax in India, as per the provisions of article 12 of DTAA between India and Singapore. On second appeal:

Citation :
BHARAT PETROLEUM CORPN. LTD v JOINT DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) - 1 (1), MUMBAI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND PRAMOD KUMAR, ACCOUNTANT MEMBER IT APPEAL NOS. 8323 AND 8324 (MUM) OF 2003