Law:

Section:

Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India - Assessment year 1984-85 - Whether supply of design, and drawing cannot, in all circumstances, be treated as cost of plant and machinery; where manufacturing process is involved through machinery, supply of necessary designs and drawings, which would enable working of machinery, can be considered as technical services rendered - Held, yes - Whether if object of preparation of designs and drawings is to bring home point as to how the manufactured equipments is required to be erected, same should also be considered as technical advise rendered - Held, yes - Assessee, a non-resident company, incorporated in Federal Republic of Germany, had no permanent establishment of doing business in India - It had undertaken electrical contract for Light and Medium Merchant Mills (LMMM) and in that connection it had prepared certain documents and drawings, which were handed over to Indian company 'M' - In agreement, consideration for such services had been termed as engineering fees - Whether engineering fees received/receivable by assessee could be considered as falling within definition of 'fees for technical services' even in terms of provisions of section 9(1)(vii) and restrictive clause in Explanation 2 to said clause (vii) of section 9(1) would not apply to instant case - Held, yes Section 90 of the Income-tax Act, 1961, read with DTA with Federal Republic of Germany - Double taxation relief - Where agreement exists - Whether in view of facts stated under heading 'Income-Deemed to accrue or arise in india' payments made to assessee would be covered by article VIII-A of amended DTA Agreement which is specifically applicable to 'royalties' and 'fees for technical services', and not by article III of said agreement, which deals with 'business profits' - Held yes - Whether, therefore, payment made to assessee were taxable in India - Held, yes FACTS The assessee, a non-resident company incorporated in the Federal Republic of Germany, had no permanent establishment of doing business in India. One 'R', which was the parent company of Vishakapatnam Steel Plant (V), wanted to set up a Light and…

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