TaxTMI 
TaxTMI 
2005 (10) TMI 230
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....the expatriate employees who work on the ONGC jack up rigs were chargeable to tax in India and consequently was there an obligation on the part of the appellant to deduct tax at source in the case of Boudier Christian v. ITO [1993] 46 ITD 114 (Delhi) which was a case of expatriate employee employed with the appellant. The Tribunal held that the appellant herein did not have a fixed place of business in India or had any permanent establishment in India. The Tribunal also held that the payment which the appellant receives from ONGC was in the nature of fees for rendering technical services and was not in the nature of an industry or commercial profits. As a natural corollary to the aforesaid conclusion the Tribunal also concluded that salary which the appellant paid to the expatriate employees were not chargeable to tax in India as per Article XIV(2) of the DTAA between India and France. In the case of several other expatriate employees of the appellant the Tribunal had followed the order in the case of Boudier Christian. The Allahabad High Court had also confirmed these orders of the Tribunal. 3. In the income-tax proceedings of the appellant for the assessment year 1984-85, whic....
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....an individual who is a resident of the other Contracting State may be taxed only in the Contracting State in which his service is rendered. (ii) Notwithstanding the provisions of paragraph (1) of this Article, salaries, wages or other similar remuneration paid to an individual who is a resident of one of the Contracting States for services performed in that other Contracting State shall not be subjected to tax in that other Contracting State and may be subjected to tax in the former Contracting State, if: (a) He is present in that other Contracting State for a period or periods not exceeding in the aggregate 183 days in the taxable year concerned, and (b) The remuneration is paid by or on behalf of an employer who is not a resident of that other Contracting State, and (c) The remuneration is not deducted in computing the profits of a permanent establishment chargeable to tax in that other Contracting State. 7. The assessee while filing the return of income for the assessment year 1988-89 specifically made a distinction between drilling operation through its own rig lie D'Amsterdam which was considered by it as business operation carried on in India and chargeable to ....
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....p; ---------------- Net Loss/Depreciation carried forward Rs. 6,06,02,193 ---------------- Note: 1. The Company is a non-resident French Company. During the year ended 31st March, 1987, the Company's activities consisted of -(a) Drilling operations performed through its own rig, Ile D'Amsterdam, under contract dated 17th October, 1986 with ONGC; and (b) Manning and Management of Drillship of ONGC - Sagar Vijay - under contract dated 24th March, 1987, (c) Manning and Management of ONGC drillship Sagar under Contract dated 23-3-1987. 2. The company being a French Company, the provisions of Agreement for Avoidance of Double Taxation between India and France are applica....
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....of the DTAA with France. And, therefore, the condition laid down in Article XIV(2)(c) was not fulfilled and, therefore, the salaries paid to expatriates were chargeable to tax and, therefore, the appellant was obliged, to deduct tax at source on such salaries paid to expatriates. 11. The Tribunal after hearing the parties came to the conclusion that since section 44BB is a deeming provision and, therefore, expenditure on account of salaries is deemed to have claimed by the assessee and consequently the exemption of taxation of salary of expatriate employees under Article XIV(2)(e) was held not applicable and, consequently, the salaries paid to expatriates were held to be income chargeable to tax in India and consequently appellant was considered as an assessee in default in not deducting tax at source. The Tribunal has also further concluded that the deeming fiction is to assume all facts and circumstances which are incidental or inevitable corollaries to give effect to the legal fiction. 12. In this M.A. the assessee has pointed out as many as 15 mistakes which were mistakes of facts as per the record of the case. 13. We have considered the arguments of the learned counse....
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....p its Profit and Loss a/c. A copy of the combined Profit & Loss a/c. for the year ending 31-3-1988 had been filed in the paper book which is at page 36. Perusal of the same reveals that the receipts from carrying out manning and management contracts rendered on ONGC rigs Sagar Vijay and Sagar Bhushan have been shown at Rs. 2,90,45,875 and 1,57,12,576 respectively. The total of receipts from these two services were Rs. 4,47,58,451. As against these receipts certain expenses have been claimed in the Profit and Loss a/c. under the head "Salaries of expatriates" nothing has been claimed as a deduction. In respect of the salaries of expatriates who had worked on the appellant's own rig viz., Ili D'Amsterdam, the assessee had claimed salaries of expatriate. There is no dispute that tax at source has been deducted in respect of these salaries. It is further seen from the order of assessment passed in the case of the appellant for the assessment year 1988-89 that 10 per cent rate of profit has been applied on the total receipts from Sagar Vijay and Sagar Bhushan totalling to Rs. 4,47,58,457 and a taxable profit of Rs. 44,75,845 has been determined. From these documents it is apparent that ....