LANKA HYDRAULIC INSTITUTE LIMITED Vs. DIRECTOR OF INCOME TAX

JUDGEMENT

(1.) THE applicant, Lanka Hydraulic Institute Limited (LHI), is a company incorporated under the laws of Sri Lanka and is a tax resident of Sri Lanka. It provides technical feasibility studies, preparation of coastal zone management plan, port and other water related engineering projects, etc. The applicant submits that it does not have any office or place of business in India.

(2.) THE Kolkata Port Trust awarded a contract to Water and Power Consultant Limited (WAPCOS), a Public Sector Undertaking under the Union Ministry of Water Resources. WAPCOS further sub -contracted the work to the applicant through an agreement dated 10.2.2009. The applicant submits that the services under the contract are to be performed within a period of 42 weeks from the commencement of the contract. On the basis of man hours, substantial part of the services has been performed in Sri Lanka and only about 20% of the services are rendered in India. For rendering services in India, engineers are deputed at short intervals on the project site at Hoogly river basin. The applicant also outsourced part of the services relating to investigative assessment to another independent contractor, Indomer Coastal Hydraulic (P) Ltd (ICHPL).

(3.) WAPCOS remitted a sum of US$ 6,66,750 to the applicant and withheld taxes under Section 195 of the Income Tax Act, 1961 (Act) by treating the receipts as under Section 9(1)(vii) of the Act. The applicant had approached the assessing officer for a "nil' withholding tax certificate under Section 197 of the Act, but decided to withdraw it.