Law:

Section:

Section 9 of the Income-tax Act, 1961, read with article 12 of DTAA between India and Sri Lanka - Income - Deemed to accrue or arise in India - Royalties - Applicant is a company incorporated under laws of Sri Lanka and is a tax resident of Sri Lanka - It provides technical feasibility studies, preparation of coastal zone management plan, port and other water related engineering projects, etc. - Kolkata Port Trust awarded a contract to Water and Power Consultant Ltd. (WAPCOS), Public Sector Undertaking under Union Ministry of Water Resources - WAPCOS further sub-contracted work to applicant - Applicant does not have any office or place of business in India and, thus, for rendering services in India, engineers are deputed at short intervals on project site at Hoogly river basin - As per terms of agreement WAPCOS remitted a sum of US$6,66,750 to applicant and withheld taxes under section 195 by treating receipts as taxable under section 9(1)(vii) - On these facts, applicant desires to know whether payments received from WAPCOS are liable to tax in India as per provisions of India and Sri Lanka Tax Treaty (Treaty) - It is noted that objective for which tender is invited is to obtain best possible studies to improve channel depth and restrict quantity of dredging - It is also apparent that studies conducted by applicant would result in providing know-how to WAPCOS on long term basis - Further, consideration received by applicant is for use of scientific work, model, plan, and for use of scientific equipment and scientific experience - Whether in view of aforesaid, it is to be ruled that entire consideration received by applicant under contract with WAPCOS is in nature of 'royalties' to be taxed under article 12 of India-Sri-Lanka Treaty - Held, yes FACTS The applicant, is a company incorporated under the laws of Sri Lanka and is a tax resident of Sri Lanka. It provides technical feasibility studies, preparation of coastal zone management plan, port and other water related engineering projects etc. The applicant submits that it does not have any office or place of business in India. The Kolkata Port Trust awarded a contract to Water and Power Consultant Ltd.…

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