ONGC as representative assessee of Dewey & Le Boeuf International Company LLC Vs DCIT International Taxation) (ITAT Delhi)
Conclusion: Amount paid to foreign lawyer by assessee for representing its case before foreign court was not taxable as fees for technical services (FTS) in India as legal services could not be treated as FTS as it was a professional services which was outside the scope of Section 9(1)(vii).
Held: Assessee-ONGC had engaged foreign lawyer for representing before Foreign Court. Assessee filed a return of income as representative assessee of the non-resident lawyer claiming that the receipts were not taxable in India. AO held that the income of foreign lawyer should be treated as “fees for technical services”and he brought to tax the receipts as per provisions of Section 115A to be taxed on a gross basis. It was held assessee provided professional legal services before a foreign court, which could not be brought to tax as FIS under Article 12 of the India-USA DTAA, because there was no make available of any particular knowledge or skill to ONGC before the courts which could enable ONGC to represent its case in future. Under Section 9(1)(vii) legal services could not be treated as FTS as it was a professional services which was outside the scope of Section 9(1)(vii).
FULL TEXT OF THE ITAT JUDGEMENT
These two appeals are filed by the respective assessees against the orders dated 19/04/2016 passed by CIT(A)-2, New Delhi for Assessment Year 2012- 13.
2. The grounds of appeal are as under:-
ITA No. 3524/DEL/2016 (A.Y. 2012-13)
“1. The Ld. Commissioner of Income Tax ((Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in upholding the order passed by the Assessing Officer wherein it was held that the receipts of Dewey & LeBoeuf International Company LLC, USA, are taxable as “fees for technical services.”
2. The Ld. Commissioner of Income Tax ((Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in not holding that the receipts of Dewey & LeBeouf International Company LLC, USA, were not taxable in India as per the India-USA Double Taxation Avoidance Agreement.”
ITA No. 3526/DEL/2016 (A.Y. 2012-13)
1. “The Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in holding that the receipts of University of New South Wales, Australia, from ONGC were taxable u/s. 44DA of the Income-tax Act, 1961, and in not holding that the same were taxable u/s. 44BB of the Income-tax Act, 1961.
2. Without prejudice to the preceding ground, the Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in applying a deemed profit rate of 25% for computing taxable income u/s 44DA of the Income-tax Act, 1961.
3. Without prejudice to the preceding grounds, the Ld. Commissioner of Income Tax (Appeals)-2, Noida, has erred in law and in the facts and circumstances of the case in upholding the Assessing Officer’s action of charging surcharge and education cess on the amount of tax payable computed as per the maximum rate prescribed in India-Australia Double Taxation Avoidance Agreement, both for the purpose of grossing-up receipts and for computing the final tax liability.”
3. The facts of ITA No. 3524/Del/2016 are as under:
3.1 Oil and Natural Gas Corporation Limited (ONGC) had vide letter dated 16.06.2008 engaged Dewey and LeBoeuf International Company LLC, USA (non-resident), for representing ONGC before Russian courts in regard to the litigation between ONGC and Amur Shipbuilding Yard. The non-resident is a tax resident of the United States of America (USA). ONGC filed a return of income as representative assessee of the non-resident on 28.09.2012 claiming that the receipts of the non-resident under the aforesaid letter are not taxable in India. Draft assessment order was passed by Assessing Officer u/s 143(3)/144C (1) of the Act on 21/01/2015 at a total income of Rs. 87,78,960/-against income of NIL shown by the assessee in return of income as representative assessee of the nonresident. The Assessing Officer considered gross receipts of the non taxable as “Fee for technical services” and brought to tax the receipts as per provisions of Section 115A of the Act to be taxed on gross basis. Since, the assessee did not file any objection before the Dispute Resolution Panel, the assessment was finalized u/s 143(3)/144C (3) (B) of the Act.
3.2 The facts of ITA No. 3526/Del/2016 are as under:
ONGC had vide Agreement dated 11.01.2005 engaged University of New South Wales, Australia (non-resident) for construction, installation and maintenance of High Resolution CT Scanning Facility at Institute of Reservoir Studies, ONGC, Ahmadabad. The said Agreement was valid for 78 months, 18 months for installation, testing and commissioning of CT Scanning Facility and remaining 60 months for maintenance thereof on annual basis. The CT Scanner is under maintenance contract w.e.f. 11th March 2008. During the relevant previous year, payments were made for annual maintenance of the CT Scanner. The non-resident is a tax resident of Australia. ONGC filed return of income as representative assessee of the non-resident on 31.07.2012 claiming that the receipts of the non-resident against the aforesaid Agreement are not taxable in India. Alternatively, the assessee submitted that the receipts of the non-resident were claimed to be taxable under Section 44BB of the Act. The Assessing Officer issued notices under Sections 142(1) and 143(2) of the Act. The Assessing Officer asked the assessee to explain as to why the income of the non-resident should not be treated as “fees for technical services”. In response, ONGC’s authorized representatives appeared before the Assessing Officer and filed written submissions furnishing all requisite information and contended that the receipts of the non-resident were not taxable in India and, alternatively, the same could only be taxed u/s 44BB of the Act. The Assessing Officer brought the receipts of the non-resident to tax as “fees for technical services” under Section 115A of the Act and round off the tax thereon @ 15% as per India-Australia Double Taxation Avoidance Agreement. The Assessing Officer further applied surcharge @ 2% and education cess @ 3% both for the purpose of grossing up of the actual receipts and for computing the total tax payable on the grossed-up amount.
4. Being aggrieved by the assessment orders, the respective assessees filed appeals before the CIT(A). The CIT(A) dismissed the appeals of the assessees.
5. The Ld. AR submitted that the Tribunal in both the assessee’s own case for Assessment Year 2011-12 has decided the issues contested herein vide order dated 25th April 2018 (ITA No. 1329/Del/2016) and ITA No. 1335/Del/2016).
6. The Ld. DR relied upon the assessment orders and the orders of the CIT(A), but could not distinguish the decision relied upon by the Ld. AR in assessee’s own case for Assessment Year 2011-12.
7. We have heard both the parties and perused the material available on record. It is pertinent to note that the facts in the present assessment year i.e. for Assessment Year 2012-13 are identical to the facts emerge from the Assessment Year 2011-12 being ITA No. 1326/Del/2016. The Tribunal held as under:
“8. Pursuant to the agreement between the Directorate General of Hydrocarbons (‘DGH’) and the non-resident (‘GX, USA’), GX, USA which was under a program titled “India Span”, the US Company was permitted to carry out seismic surveys and acquire, process, interpret seismic gravity and magnetic data and thereafter, assist DGH in preparing data packages for 12,000 km of seismic data acquired from Eastern and Western shore of India. In order to meet part of the funding requirements for the “India Span” Program, GX, USA was entitled to sell the dataset on non-exclusive basis to both national and international exploration & production companies. A Letter of Commitment dated 03.11.2005 was executed between GX, USA and ONGC for participation of ONGC in the non-resident’s India Span program. Further an agreement dated 03.11.2005 was entered between ONGC and GX, USA, whereby ONGC was granted a license to use the seismic data subject to terms and conditions specified therein. In the terms of the agreement, ONGC had obtained a license to use the product ‘India Span’ for a period of 40 years from GX, USA. ‘India Span’, which is a regional 2D seismic data programme and geological and geophysical study covering all the major prospective basins off-shore east and west India, was providing both, the fundamental basis for evaluation of India’s vast off- shore margins as well as the regional framework in depth domain. The data/deliverable under the agreement and the payment details thereof are as under:-
