Facts
- The assessee, a division of Technical Resources Prt. Ltd. Australia, had entered into contracts with Rio Tinto India Pvt. Ltd. (“RTIPL”) for evaluation of coal deposits in Maharashtra and Orissa and for corresponding feasibility studies for transporting the same.
- For this purpose, the assessee had established a project office in India pursuant to approvals granted by the Reserve Bank of India (“RBI”).The project office of the assessee in India constituted a PE of the assessee in India as per Article 5 (See note-1 below) of the India-Australia Double Taxation Avoidance Agreement (“DTAA”).
- The assessee filed its returns of income for the relevant assessment years which were duly processed.
- In the course of assessment proceedings, the Assessing Officer (AO) held that the amounts received from RTIPL were fees for technical services.
– The AO also accepted that the assessee was covered by Article 7 (See note-2 below) of the India-Australia Double Taxation Avoidance Agreement (“DTAA”).
– However, he held that Article 7 did not prescribe any rate of tax, therefore reference was made to the Income tax Act, 1961 (“the Act”). Since the nature of the receipt was fee for technical services, the AO applied the provisions of section 11 5A (See note-3 below) and section 44D (See note-4 below) of the Act and taxed the gross receipts at 20%.
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