- (1.) This is an application under section 245Q(1) of the Income -tax Act, 1961 ('the Act'). The applicant, Steffen, Robertson and Kirsten ('SRK') is a company incorporated under the laws of South Africa having its Registered office at SRK House, Johannesburg, South Africa. It is, thus, a foreign company which is non -resident in India and as such, entitled to maintain the present application which has been filed in the following circumstances. The applicant has signed a technical consultancy agreement dated 20 -12 -1996 with Tata Iron & Steel Company Ltd. (TISCO) for providing engineering services to the latter in the form of validation of orebody model, optimisation of pit operations and feasibility study of under ground mining of TISCO's chromite ore mines at Sukinda in Orissa. According to the appellant, the operations under the agreement are divided into different stages and some of the work will be carried out at the Johannesburg office of SRK and some in India. The aggregate consideration to be paid by TISCO to SRK under the agreement is US $ 203,090 (sic) but, it is stated, separate costs/fees are provided for each stage of work, broadly classified as follows: JUDGEMENT_2_LAWS(AR)10_1997.htm The applicant desires to have a ruling regarding the taxability, under the Act, of the sums received or to be received by it under the agreement and, hence, this application.
(2.) The applicant has formulated as many as six questions for the ruling of this Authority. These questions read as follows: (a) Whether charges payable by TISCO to the applicant for work carried out by the applicant under the agreement in its office at Johannesburg, South Africa, including preparatory studies before each field visit, detailed under Serial No. 3 of Appendix 'B' of the agreement, are income liable to income -tax under the Income -tax Act, 1961? If so, at what rate? (b) Whether the consultancy fees to be received by the applicant from TISCO under the agreement as detailed under Serial No. 2 of Appendix 'B' of the agreement is income on which income -tax is payable under the Income -tax Act, 1961? If so, at what rate? (c) Is there any obligation on the part of TISCO to deduct at source, from the sums payable under the agreement to the applicant towards technical and consultancy fees, income -tax under the Income -tax Act, 1961 and, if so, to what extent and what rate? (d) Can TISCO make payment to the applicant of the technical fees/ charges in South Africa for the work to be done or services to be rendered in South Africa? Will that be considered as an income deemed to accrue or arise in India? Will tax be levied on such income? If yes, then whether income -tax has to be deducted at source on such payment made in South Africa, and at what rate? (e) A daily living allowance as detailed in Appendix 'B' of the draft agreement will be paid by TISCO to the foreign technicians of the applicant. Since the same do not fall within the purview of a perquisite, will tax be levied on such an allowance? (f) India does not have a Double Taxation Avoidance Agreement (DTAA) with South Africa. Hence, what rate of tax shall be applicable to the Technical and Consultancy Fees paid in India by TISCO to the applicant under the agreement?
(3.) Dr. Samir Chakraborty, appearing for the applicant, took us through the agreement between SRK and TISCO dated 20 -12 -1996. After setting out the preamble and the nature of services and information to be provided by SRK to TISCO, the agreement provides for the contract price and mode of payment thereof. This clause stipulates the stages at which the consideration is to be paid and also refers to the break -up, as per Appendix 'B', of the payments to be made. It, however, specifically excludes any liability whatsoever for SRK in respect of any taxes payable in India. It provides: Lump sum payments made hereunder by TISCO to SRK shall be made without deduction of any present or future tax assessment or other governmental charges, statutory levy or cess imposed on such payment by Government of India or any political sub -division or taxing authority hereof and such taxes, assessment or charges, if any, shall be borne and paid by TISCO. This clause makes it clear that all responsibility regarding Indian taxes relating to the payments to be made will be borne by TISCO. SRK is in no way concerned therewith and will not be affected in any manner financially by the provisions of the Indian income -tax law in this regard. Whether the whole or any part of the payments will be liable to tax in India or not and whether TISCO is bound to deduct tax at source therefrom or not and, if so, at what rate, are really questions that do not concern SRK, for, so far as it is concerned, it has to receive US $ 203,090 from TISCO in full with no liabilities attached thereto.;