P.V. Reddi, J. (Chairman) - (1.) THE applicant is a statutory authority sot up under the Airports Authority of India Act, 1994, and a public sector enterprise. It has filed this application in Form No. 34D applicable to resident applicants seeking an advance ruling in respect of a matter falling within the purview of Sub -clause (ii) of Clause (a) of Section 245N of the Income -tax Act, 1961.
(2.) THE advance ruling is sought primarily on the issue whether the applicant is under an obligation to deduct tax at source under Section 195 of the Income -tax Act in connection with two contracts (i) hardware repair support contract; and (ii) software maintenance support contract, which the applicant entered into on April 26, 2006, (in continuation of previous contracts of 2003) with Raytheon Company, USA, which is a non -resident foreign company (hereinafter referred to as "Raytheon"). In fact, this is the second round of proceedings initiated by the applicant before this authority. The applicant approached the AAR earlier for giving a ruling on similar issues arising out of similar contracts entered into between the applicant and Raytheon on February 4, 2003. In fact, the contracts of 2003 were extended in 2006 on substantially similar terms and conditions for a period of three years pursuant to Clause 11 contained in the previous contracts of 2003. The applicant has perceived the need to obtain the ruling afresh probably for the reason that the transaction evidenced by the contract is technically a fresh one and, secondly, for the reason that the concerned income -tax authority had taken a different view in the course of assessment proceedings of Raytheon which might have repercussions on the applicant as well. The scope of work under the first contract relating to repair of hardware is discernible from the preamble and Article 3 to the agreement which read as under: Whereas Raytheon had supplied to the AAI the MATS -BD System and the AAI is in possession of the said system since March, 1998, for the Delhi site and June, 1999, for the Mumbai site. And whereas the AAI has been operating and maintaining the said system independently. And whereas the hardware supplied by Raytheon under the said system needs repair from time to time. And whereas Raytheon has proposed to repair the hardware outside India. And whereas the AAI shall make arrangements to send the various parts/components of hardware to Raytheon outside India. And whereas the AAI shall also make arrangements to take delivery of parts/components of hardware duly repaired by Raytheon outside India. Now, this contract sets forth the terms and conditions for Raytheon to repair the hardware of the MATS -BD system of the AAI. Article 3.0 Scope 3.1. Raytheon shall provide the AAI hardware repair support to be carried out in accordance with the statement of work (SOW), annexure A, attached hereto and incorporated herein by reference.... 3.1. Thus, under the terms of the contract, the applicant has to send the defective hardware parts/components to Raytheon outside India and to take delivery of the repaired items 'outside India'. Clause 2.2 of annexure A stipulates that Raytheon will return the repaired part from whichever point (Delhi or Mumbai) the re -export originated within India. The repaired part shall include the shipping documents for customs purposes to be provided to AAI within 48 hours of shipment. The systems and equipment in respect of which the Hardware Repair Support will be provided by Raytheon are specified in paragraph 2.1 of annexure A to the contract and the quantities that fall within the scope of the contract are specified in attachments 1 to 3 of annexure A. The contract price is specified in Article 4 and the payment has to be made in US dollars. The price specified in Article 4 is exclusive of all taxes and duties including the taxes required to be withheld and paid to the Government of India and all such taxes and duties shall be paid by the applicant (vide Article 5.1).
(3.) THE scope of work under the contract for software maintenance support broadly is to resolve anomalies and modify the software supplied by Raytheon under the MATS -BD Agreement of 1993.;