Section 44DA not applicable when the amount received doesn’t qualify as royalty/ FTS

DCIT Vs Technip France SAS (ITAT Delhi)

Held that as the amount received by the assessee is not in the nature of royalty or FTS, section 44DA of the Income Tax Act will not apply.

Facts-

The assessee is a non-resident corporate entity incorporated under the laws of France and a tax resident of the said country. Assessee is primarily engaged in engineering, procurement, and construction business for oil production- off-shore and on-shore, refining petrochemicals, fertilizers, chemical fertilizers, non-conventional energy and submarine pipelines, etc. The assessee had entered into contracts with two Indian entities vis. ONGC and RIL. The assessee had earned income from both the contracts.

AO observed that the amount received by the assessee from the RIL contract can also qualify as FTS under Article 13 of India – France Double Taxation Avoidance Agreement (DTAA) and proceeded to compute the income of the assessee u/s. 44DA of the Act. The DRP while considering the objection raised by the assessee observed that the services rendered by the assessee are in connection with prospecting for mineral oil, such income of the assessee has to be taxed by applying the presumptive rate as per section 44BB of the Act.

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