Law: Income Tax Act, 1961

Section: 9,256,256(2)

Income-tax--Reference---Income deemed to accrue or arise in India---Non-resident engaged as consultant---Amount paid for field study in India and preparation of report in a foreign country---Amount whether taxable under S.9--­Question of law---Indian Income Tax Act, 1961, Ss.9 & 256(2). The assessee was M a non-resident based in Finland. It was approached by Nepa Mills, a resident, for consultancy services to solve its production and operation problems. An agreement was executed between the two and pursuant thereto, the non-resident assessee sent its consultants for field study who were paid on daily basis, a total amount of $ 35,198. The results of their study were later finalised and prepared in Finland for which $ 24,000 were paid to the assessee under the agreement. The amount was taxed as income by the Income-tax Officer but the Tribunal held that it was not taxable. On an application to direct reference: Held, that the question whether, on the facts and circumstances of the case, the Tribunal was justified in holding that payment of $ 59,198 had not accrued or arisen in India as fees for technical consultancy in terms of section 9 of the Income Tax Act, 1961, was a question of law. JUDGMENT B.A. KHAN, J.---The Revenue has filed this application under section 256(2) of the Income Tax Act, 1961, praying for calling for the statement of the case from the Income-tax Appellate Tribunal on the following two questions: "(i) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that no service has been rendered by the ass6ssee who is a non-resident to a resident in terms of section 9 of the Income-tax Act? (ii) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that payment of $ 69,198 has not accrued or arisen in India as fees for technical consultancy in terms of section 9 of the Income-tax?" It transpires that the assessee is a non-resident based in Finland. It was approached by Nepa Mills, a resident, for consultancy services to solve its production and operation problems. An agreement was executed between the two and pursuant thereto, the non-resident assessee sent it…

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