Law:

Section:

Section 9 of the Income-tax Act, 1961 read with articles 5 and 12 of the Double Taxation Avoidance Agreement between India and Australia - Income - Deemed to accrue or arise in India - Applicant, which is a company incorporated in Australia, provides professional services to energy and resource industries - It entered into a contract on 1-8-2003 with an Indian company 'S' in connection with setting up of an alumina refinery in India - Under contract, applicant is responsible for development of a set of basic engineering documents which involves preparation of various diagrams, designs, drawings and layout plans - It has its design centres in Australia from where design services were performed - However, for purpose of gathering input for preparation of designs and documents, its personnel came to India for collecting data and information from 'S' which was done at 'ground level' - Its staff also visited India to 'explain deliverables to officers/engineers of 'S' and to help 'S' to test same - On these facts, applicant has moved instant application seeking advance ruling in respect of taxability of its receipts under contract - According to applicant, amounts received by it under contract are in nature of royalties as defined in article 12 of DTAA; and that it does not have a PE in India in respect of this contract and, therefore, receipts from this contract are taxable only to extent of services utilized as well as rendered in India and amount received for services rendered outside India is not to be taxed - Whether having regard to nature of services involving preparation and transfer of various plans, designs and drawings connected to conceptual and basic engineering services, it can be said that most of work and services could be done from applicant's office abroad and deemed provision in article 5.3(c ) of DTAA is not applicable - Held, yes - Whether, therefore, contention of applicant that no permanent establishment was set-up by it in India to perform services under contract with 'S', was to be accepted - Held, yes - Whether, however, since not only services rendered by applicant had been utilized in India, for work done in India, and for benefit of a…

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