Oil and Natural Gas Corporation Ltd. & Ors. v. ITO & Ors.

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The Tax Publishers2016 TaxPub(DT) 2457 (Del-Trib) Oil and Natural Gas Corporation Ltd. & Ors. v. ITO & Ors. INCOME TAX ACT, 1961 --Tax deduction at source--Under section 195Commission to non-resident for services outside India----Commission paid to non-residents for service rendered outside India could not be brought to tax in India in view of non-residents having no PE in India.--ONGC, against contract with one non-resident-company, made payment of certain amount. Non-resident was tax resident of USA and had no permanent establishment in India in terms of DTAA between India and USA. Payment made was towards third party certification of ultimate reserve and reserves of 62 fields of ONGC. The certification services were rendered by non-resident from outside India. ONGC applied for an order under section 195(2) to ITO (International Taxation) Dehradun, who directed ONGC to deduct tax at the rate of 10 per cent plus surcharge and education cess on gross contractual payments considering payments made under contract as “fees for technical services:. The Indian tax liability of non-resident had been borne by ONGC as per contract. Accordingly certain payment of tax was deposited by ONGC in government account. Thereafter ONGC filed an appeal before CIT(A) regarding non-taxability of commission paid to non-resident. *Held:* It was not in dispute that the services in question were rendered outside India. The payment in question could not be construed as fees for technical services under India-USA DTAA, as no technical knowledge, skill, know-how, etc., was made available to the assessee. The issue in question was no more res integra in view of certain judgments. Thus, the amount paid by ONGC to the non-resident could be brought to tax only under article 7 of the Indo-USA DTAA as business profit, provided the non-resident has a Permanent Establishment (PE) in India and the profit in question was attributable to such PE. Admittedly non-resident did not have PE in India. Under these circumstances, the receipt of the non-resident could not be brought to tax in India under the Indo-USA DTAA. Hence, this ground of the assessee had to be allowed. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2016 TaxPub(DT) 2457 (Del-Trib)

Oil and Natural Gas Corporation Ltd. & Ors. v. ITO & Ors.

INCOME TAX ACT, 1961

--Tax deduction at source--Under section 195Commission to non-resident for services outside India----Commission paid to non-residents for service rendered outside India could not be brought to tax in India in view of non-residents having no PE in India.--ONGC, against contract with one non-resident-company, made payment of certain amount. Non-resident was tax resident of USA and had no permanent establishment in India in terms of DTAA between India and USA. Payment made was towards third party certification of ultimate reserve and reserves of 62 fields of ONGC. The certification services were rendered by non-resident from outside India. ONGC applied for an order under section 195(2) to ITO (International Taxation) Dehradun, who directed ONGC to deduct tax at the rate of 10 per cent plus surcharge and education cess on gross contractual payments considering payments made under contract as “fees for technical services:. The Indian tax liability of non-resident had been borne by ONGC as per contract. Accordingly certain payment of tax was deposited by ONGC in government account. Thereafter ONGC filed an appeal before CIT(A) regarding non-taxability of commission paid to non-resident. Held: It was not in dispute that the services in question were rendered outside India. The payment in question could not be construed as fees for technical services under India-USA DTAA, as no technical knowledge, skill, know-how, etc., was made available to the assessee. The issue in question was no more res integra in view of certain judgments. Thus, the amount paid by ONGC to the non-resident could be brought to tax only under article 7 of the Indo-USA DTAA as business profit, provided the non-resident has a Permanent Establishment (PE) in India and the profit in question was attributable to such PE. Admittedly non-resident did not have PE in India. Under these circumstances, the receipt of the non-resident could not be brought to tax in India under the Indo-USA DTAA. Hence, this ground of the assessee had to be allowed.