9911796707
TMI Blog1997 (10) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... erground mining of TISCO's chromite ore mines at Sukinda in Orissa. According to the applicant, the operations under the agreement are divided into different stages and some of the work will be carried out at the Johannesburg office of SRK and some in India. The aggregate consideration to be paid by TISCO to SRK under the agreement is US $ 203,090 (sic) but, it is stated, separate costs/fees are provided for each stage of work, broadly classified as follows : US $ 1. Engineering services rendered in India 59,500 2. Engineering services rendered in Johannesburg 108,500 3. Daily allowances and travelling costs 35,090 203,090 The applicant desires to have a ruling regarding the taxability, under the Act, of the sums received or to be received by it under the agreement and hence this application. The applicant has formulated as many as six questions for the ruling of this authority. These questions read as follows : (a) Whether charges payable by TISCO to the applicant for work carried out by the applicant under the agreement in its office at Johannesburg, South Africa, including preparatory studies before each field visit, detailed under seri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch taxes, assessment or charges, if any, shall be borne and paid by TISCO." This clause makes it clear that all responsibility regarding Indian taxes relating to the payments to be made will be borne by TISCO. SRK is in no way concerned therewith and will not be affected in any manner financially by the provisions of the Indian income-tax law in this regard. Whether the whole or any part of the payments will be liable to tax in India or not and whether TISCO is bound to deduct tax at source therefrom or not and if so, at what rate, are really questions that do not concern SRK for, so far as it is concerned, it has to receive US $ 203,090 from TISCO in full with no liabilities attached thereto. The authority was prima facie of the opinion that in view of the above clause of the agreement, this application has to be dismissed as academic and hence non-maintainable. It is true that section 245N does not restrict or qualify the nature of the question on which the advance ruling can be sought by an applicant. It reads : "245N. (a) 'advance ruling' means the determination, by the authority, of a question of law or fact specified in the application in relation to a transaction which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a party to these proceedings. The Act permits only a non-resident to agitate questions affecting him in proceedings before the authority. If TISCO cannot be permitted to file an application under section 245Q(1) it cannot be allowed to agitate the matter before the authority either. However, the authority has come to the conclusion that the application filed by SRK cannot be rejected as non-maintainable. It is true that the agreement between the parties casts on TISCO the liability to any tax which may have to be paid by SRK but all the same it cannot be said that SRK is not at all affected by any view that may be taken regarding the taxability of the amounts received under the agreement. SRK is no doubt a non-resident but it is still bound to discharge its obligations under the Act for payment of advance tax as well as for filing a return of income before the income-tax authorities in India on its Indian income liable to tax. If TISCO makes the payments without any deduction of tax at source and eventually it is held that the whole or any portion of the profits of SRK are liable to tax in India, then the failure of SRK to pay advance tax or file a return under an impression that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation.-For the removal of doubts, it is hereby declared that income of the nature referred to in this clause payable for service rendered in India shall be regarded as income earned in India ; . . . (vi) income by way of royalty payable by- (a) the Government ; or (b) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such persons outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India . . . Explanation 2.-For the purposes of this clause, 'royalty' means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head 'Capital gains') for- (i) the transfer of all or any rights (including the granting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services, for which the payments are being made, are rendered but the place where those services are utilised. If they are paid for services which are utilised in a business or profession carried on by the payer in India or for the purposes of making any income from a source in India, they will be deemed to accrue or arise in India. It may be that some of the services in this case are rendered abroad by the personnel employed or deputed by SRK but the fees paid are for services utilised by TISCO in the mining business which is being carried on by it in India. Therefore, irrespective of the place where the services are rendered, the amounts should be deemed to accrue or arise in India. The result will be that fees paid in respect of preparatory studies carried out in South Africa, fees paid in respect of information and technical know-how, whether provided in South Africa or in India, irrespective of whether these payments are made in India or abroad, will all be liable to tax as income accruing or arising in India. The applicant seeks to draw a distinction between the fees paid so far as they relate to "engineering services" and those towards meeting the living allowances or trav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, apparently in view of the provisions of section 115A(1)(b) of the Act. But that rate would be applicable only if the conditions specified in that section are satisfied. These are :- (i) that the agreement is one entered into after March 31, 1976 ; and (ii) that the agreement should be either one approved by the Government of India, or where it relates to a matter included in the industrial policy of the Government, one which is in accordance with such policy ; While the first of these conditions is fulfilled, there is no information placed on record regarding the second. So, the only way in which the Authority can answer this question is by saying that the TDS rate will be 30 per cent. if the second condition is also shown to be satisfied and 55 per cent. or 48 per cent. otherwise, depending respectively upon whether the payments are made in the financial year 1996-97 or the financial year 1997-98. In the light of the discussions above, the questions raised by the applicant are answered as follows : RULINGS Questions Answers 1. Whether charges payable by TISCO to the applicant for work carried out by the applicant under the agreement in its office at Johannesburg, South ..... X X X X Extracts X X X X X X X X Extracts X X X X
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