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of <h1>Non-resident company's payments not taxable in India under DTAA</h1> <h3>Oil and Natural Gas Corporation Limited Versus ITO And Vice-Versa.</h3> Oil and Natural Gas Corporation Limited Versus ITO And Vice-Versa. - TMI Issues:1. Taxability of payments made to a non-resident company for certification services.2. Applicability of section 44BB of the Income Tax Act.3. Determination of whether the payments constitute fees for technical services.4. Tax liability under the India-USA Double Taxation Avoidance Agreement (DTAA).5. Refund of tax deposited on payments to the non-resident company.Analysis:Issue 1: Taxability of payments to non-resident companyThe case involved Oil and Natural Gas Corporation Limited (ONGC) making a payment to a non-resident company for certification of oil reserves. The non-resident company did not have a Permanent Establishment (PE) in India. The question was whether the payment could be taxed in India under the Indo-USA DTAA. The Tribunal held that since the non-resident did not have a PE in India, the payment could not be taxed in India under the DTAA. Therefore, the ground raised by the assessee on this issue was allowed.Issue 2: Applicability of section 44BBThe Assessing Officer (AO) had treated the payment as fees for technical services (FTS) and directed ONGC to deduct tax. However, the CIT(A) held that the services provided did not amount to FTS and that section 44BB of the Act applied. The Tribunal agreed with the CIT(A) that the services fell under section 44BB, which deals with taxation of income from exploration of mineral oils. This decision was based on the nature of the services provided by the non-resident company.Issue 3: Fees for Technical ServicesThe Tribunal analyzed whether the services provided by the non-resident company constituted fees for technical services. It was established that the services were for independent certification of oil reserves and did not involve the transfer of technical knowledge or skills. Therefore, the Tribunal concluded that the payment made by ONGC to the non-resident company could not be construed as fees for technical services under the India-USA DTAA.Issue 4: Tax liability under the India-USA DTAAThe Tribunal determined that the payment to the non-resident company could only be taxed under article 7 of the Indo-USA DTAA as business profit if the non-resident had a PE in India. Since the non-resident did not have a PE in India, the Tribunal held that the receipt of the non-resident could not be taxed in India under the DTAA.Issue 5: Refund of tax depositedThe Tribunal directed that the tax deposited by ONGC on the payments to the non-resident company should be refunded, considering the decision on taxability under the DTAA and section 44BB of the Act.In conclusion, the Tribunal allowed the appeal of the assessee, stating that the payment to the non-resident company could not be taxed under the DTAA and that the tax deposited should be refunded. As a result, the revenue's appeal became infructuous and was dismissed.This detailed analysis of the judgment provides insights into the various legal issues involved and the Tribunal's reasoning behind its decision on each issue.
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