Law:

Section:

Section 90 of the Income-tax Act, 1961, read with article 16(2) of the Double Taxation Avoidance Agreement between India and Italy - Double taxation relief - Where agreement exists - Assessment year 1987-88 - Contractor, an Italian company, entered into an agreement with charterer, ONGC, for providing helicopter services, for operations of exploration and exploitation of oil and natural gas in off-shore and on-shore areas in India - In terms of agreement, one helicopter with pilots and engineers (assessees) to operate and maintain helicopter was provided by contractor to charterer - Assessees claimed total exemption from tax on perquisites under DTAA between India and Italy - Tribunal held that expenditure in question on payment of salaries was not borne by permanent establishment in India and, so assessees would not be exigible under Indian taxation laws in view of article 16(2) of DTAA - Whether finding of Tribunal was to be upheld - Held, yes ORDER P. Krishna, J. - The Income-tax Appellate Tribunal, New Delhi has referred the following identical question of law involved in all the above cases under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') for opinion to this Court:- "Whether on the facts and in the circumstances of the case, the ITAT was right to hold that the expenditure in question on payment of salaries was not borne by the permanent establishment in India and so the employee in question would not be exigible to Indian Taxation Laws in terms of Article 16(2)(c) of the Double Taxation Avoidance Agreement?" 2. Briefly stated the facts giving rise to the present reference is as under:- The reference relates to the assessment year 1987-88. The assessee- respondent claimed total exemption from tax on the perquisites under the Double Taxation Avoidance Agreement between India and Italy. There was an agreement dated 25-4-1985 between the Oil & Natural Gas Commissioner (ONGC), (the Charterer) and M/s. Elitos S.P.A., the Italian Company (the Contractor). The agreement was to take effect from 14-3-1985. The agreement was for providing helicopter services to ONGC for operations of exploration and exploitation of oil and…

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