Case Law Details
Limitation on deduction of expenses under Section 44D of the Act cannot be invoked if the consideration received by the foreign company is not Fees for Technical Services as defined in India-USA tax treaty
Delhi bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Cray Research India Ltd v. JCIT [2010-TII-156-ITAT-DEL-INTL] (Judgement date 29 October 2010 Assessment Years 1989-90, 1993-94 & 1994-95)held that limitation on deduction of expenses under Section 44D of the Income-tax Act, 1961 (the Act) cannot be invoked if the consideration received by the foreign company is not Fees for Technical Services (FTS) as defined in India-USA tax treaty (tax treaty).
Further, the Tribunal held that the maintenance charges received by the taxpayer from Department of Science & Technology for maintaining the super computer are not in the nature of FTS as per the tax treaty.
Facts of the case
• Cray Research Inc, a tax resident of the USA, entered into agreement with the Department of Science and Technology, for supplying a computer system and its peripherals. The taxpayer, a company incorporated in USA, was assigned a service contract for maintaining the computers in good operative condition.
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