Case Law Details
Computer Modelling Group Ltd. Vs ACIT (ITAT Delhi)
The case of Computer Modelling Group Ltd. vs. ACIT, adjudicated by the ITAT Delhi, revolves around the taxability of receipts from Indian customers by a non-resident assessee, which in this instance, is a Canadian company. The crux of the matter lies in whether Section 44BB of the Income Tax Act, which prescribes a special provision for the computation of profits for non-residents engaged in certain businesses, applies in the absence of a Permanent Establishment (PE) in India.
The tribunal examined whether Section 44BB overrides other provisions such as Section 90, which deals with Double Taxation Avoidance Agreements (DTAA). It was established that Section 44BB does not supersede the provisions related to PE or DTAA benefits. Hence, a non-resident assessee can choose to be governed by the more favorable provisions of the DTAA if applicable, even if Section 44BB might seem to apply.
The case references previous judgments, notably OHM Ltd. and PGS Exploration (Norway) AS vs. ADIT, where the courts upheld that the existence of a PE is crucial for the application of Section 44BB. These decisions emphasize the importance of the nature of the business in determining which computation provision prevails.
Additionally, the tribunal considered the decision in Baker Hughes Energy Technologies UK Ltd., which rejected the applicability of Section 44BB due to the absence of a PE in India. It highlighted that Section 44BB provides a presumptive taxation rate for computation of profits but does not override other provisions such as Sections 5, 9, or 90 of the Income Tax Act.
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