Receipts of NRI for contract executed outside India cannot be taxed under the special provisions if the same is not taxable under the general provisions of the Indian Tax Law

This Tax Alert summarizes a recent ruling of the Mumbai Income Tax Appellate Tribunal (ITAT) [2010- TII-41-ITAT-MUM-INTL] in the case of J Ray Mc Dermott Eastern Hemisphere Ltd. (Taxpayer). The ITAT held that receipts pertaining to transportation and installation contract executed by the Taxpayer outside India cannot be taxed under the special provisions, which provide for taxation of certain income of a non-resident on presumptive basis, if the income is not chargeable to tax under the general provisions of the Indian Tax Law (ITL).

Background and facts of the case

• The Taxpayer, a company tax resident of Mauritius, was engaged in the business of designing, fabrication, construction and installation of platforms, docks, pipelines, jackets and other similar activities which are used in the exploration and production of mineral oil.
• The Taxpayer undertook and executed a contract for transportation and installation work under certain well platforms projects to be used in mineral oil exploration viz. N-11 and N­12.

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