Hal Offshore Ltd. Vs ITO (ITAT Delhi)
AO treated the assessee as ‘assessee in default’ u/s 201(1)/201(1A) for not deducting TDS of ₹16,80,590 on payments made to Brunvoll AS, Norway for repair and replacement of ship parts.
Facts:
- Assessee paid ₹78,18,744 + ₹29,09,960 to Norwegian vendor for replacing defective parts of its ship.
- Vendor’s personnel came to India for only 29 days.
- Vendor had no PE in India.
- Assessee argued that it was a works contract / sale with incidental installation, therefore Article 7 (Business Profits) of India-Norway DTAA applies, not Article 12 (FTS).
Assessee relied on:
Lufthansa Cargo (Delhi ITAT) – repair & maintenance = NOT FTS.
BHEL-GE Gas Turbine (Hyderabad ITAT) – refurbishing abroad = NOT FTS.
Department’s stand:
Services were technical and used in India → liable to TDS u/s 195.
Tribunal’s Key Findings:
- Payments were for routine repair/replacement, not technical or consultancy services.
- No transfer of technical knowledge to the assessee.
- Vendor stayed less than 3 months, hence no PE under Article 5(3).
- Even if treated as installation, still not taxable in India.
- Covered by Article 7 (Business Profits), not Article 12 (FTS).
Held:
- Assessee not liable to deduct TDS u/s 195.
- AO wrongly treated assessee as ‘assessee in default’ u/s 201(1)/201(1A).
- TDS demand of ₹16.80 lakh deleted.
- Appeal allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
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