TaxTMI 
TaxTMI 
2005 (7) TMI 81
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....or brevity hereinafter SFIDI). Both the companies are incorporated in the Republic of Panama. Both these companies have entered into a contract with Oil and Natural Gas Corporation Ltd. (ONGC) for drilling operations in offshore areas of India within its exclusive economic zone. The appellants are residents of France, U.K., etc. These countries have entered into international treaties with India, known as Agreement for Avoidance of Double Taxation (AADT) which have a clause for avoidance of double taxation, the appellants are nonresidents of Republic of India. All these appellants are residents of France, the U.K. and other States with which India has entered into international treaties which contain a clause for avoidance of double taxation. In similar terms and conditions we take up the treaty of India with the U.K. However, a short point involved in all the aforementioned appeals relates to interpretation of article 16 of the Agreement for Avoidance of Double Taxation between India and the U.K. and article 16 of the France agreement. It also involves the question of presumptive taxation under section 44BB of the Income-tax Act. The assessee is a non-resident. In the circumstance....
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....of, mineral oils in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India." The following sub-section (3) shall be inserted after sub-section (2) of section 44BB by the Finance Act, 2003, with effect from April 1, 2004: "(3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee. Explanation.- For the purposes of this section,- (i) 'plant' includes ships, aircrafts, vehicles, ....
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....e United Kingdom of Great Britain and Northern Ireland, the Government of Canada, the Government of the USA and the Government of Italy, of which the appellants are residents, which have been notified under section 90. A perusal of the entire agreements shows that provision has been made in terms of the language of section 90. There are separate agreements with the aforesaid countries. There is also no doubt that the Agreement for Avoidance of Double Taxation (the AADT), which is an international treaty, overrides the provisions of the Income-tax Act, 1961. The relevant article in the agreements relating to "dependent personal services" is almost common in both the agreements (in the agreement with the United Kingdom it is article 16, in the agreement with France it is article 16). Clause 2 of the article relating to dependent personal services mentioned in the aforesaid agreements is being reproduced below: "2. Notwithstanding the provisions of paragraph 1 of this article, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall not be taxed in that other State, if: (a) he is present in that other....
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....ployment exercised in the other Contracting State shall not be taxed in that other State only if, he further establishes that the remuneration is not deductible in computing the profits chargeable to tax in his State. The simple meaning of the said condition is that the assessee has to show in India that the remuneration received by him is chargeable to tax in the other Contracting State of which he is a resident. The assessing authorities and the appellate authority have found that the appellants failed to show that the remuneration received by them for services rendered in India was chargeable to tax in their State (the other Contracting State of which they are resident). Even before this court, on behalf of the appellants, it could not be shown if the amount received by them was chargeable to tax in their State (i.e., the other Contracting State in the agreement). As such, we see no error of law in the impugned assessment orders and the orders passed by the appellate authority or the Income-tax Appellate Tribunal that the assessee did not fulfil the third condition as required under sub-clause (c) of the aforesaid article under the AADT and, therefore, was not entitled to the be....
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....nder the said section, in the case of an assessee being non-resident engaged in the business of providing services or facilities in connection with or supplying plant and machines on hire for use or to be used in the prospecting of or extraction or production of mineral oils, a sum equal to 10% of the aggregate of the amounts specified shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession". Under the said section, deemed profits to the tune of 10 per cent. are taxed and it overrides the other charging sections in this regard. It is also clear that it applies to the non-resident assessee and the tax authorities appear to have rightly assessed the appellant's income under the aforesaid section. However, Mr. Porus Kaka, learned counsel appearing on behalf of appellants, drew the attention of this court to article III in the aforesaid AADT with France and argued that the appellants cannot be subjected to tax as they have no permanent establishment in India. Article III of the AADT with France, reads as under: "The industrial or commercial profits (excluding the profits derived from the operation of ....