Law: Income Tax Act, 1961

Section: 9,9(1)(vii),44,44D

(a) Income-tax----Income deemed to accrue or arise in India---Non-resident---Business connection--Agreement with resident for rendering technical services--­Amount paid by resident to non-resident treated by assessing authority as royalty and technical fees taxable under S.9(1)(vii) read with S.44D without allowing any deduction ---Assessee claiming that services rendered by it fall, under excluded category specified in Expln. 2 to S.9(1)(vii) being construction, assembly or like project---Agreement for rectifying defects in plant of resident--Tribunal not considering agreement as a whole and actual work done by non-resident---Finding of Tribunal that there was no construction or assembly work undertaken by assessee by relying on' preamble to agreement was not reasonable---Matter remanded---Indian Income Tax Act, 1961, Ss.9 & 44-D. In case of an agreement between a resident and a non-resident pursuant to which amounts were paid to the non-resident, if the contract provides that tax liability, if any, in respect of the amounts so paid to the non-resident is to be borne by the resident company the amount of tax payable by the non-resident has to be added to the income remitted to the non-resident and the tax liability of the non-resident should be determined with reference to the gross figure arrived at. CIT v. Superintending Engineer (1985) 152 ITR 753 (AP) fol. The assessee was a non-resident company engaged in the business of undertaking rectification of fertiliser plants throughout the world. It received certain amounts from. FACT Ltd. Cochin Division, under a contract. The assessee was to render technical and management assistance in bringing the plant to its full designed capacity, to provide expert assistance in the form of day-to-day operational and maintenance guidance and also to give guidance for granulation and to provide specific engineering know-how in de­ bottlenecking and upgrading the performance of the plant. The Assessing Officer held that the payment made by FACT Ltd. to the non-resident assessee was by way of royalty and technical services fees which was taxable under section 9(1)(vii) of the Income Tax Act, 1961 read with section 44-D…

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