DIRECTOR OF INCOMET AX vs. SNC-LAVALIN INTERNATIONAL INC.

PDF · subscribers
ITA - 1026 / 2009HC Delhi22 September 20107 pages
For Petitioner: MR.SANJEEV SABHARWAL
AI SummaryAllowed

What did the High Court hold?

The High Court held in favour of the assessee. Regarding the first issue, the Court found that the services provided by the assessee, which involved the development and transfer of technical plans or designs for the NHAI projects, fell under Article 12(4)(b) of the India-Canada DTAA. The Court interpreted paragraph (b) of Article 12(4) to mean either making available technical knowledge, experience, skill, know-how or processes, OR services consisting of the development and transfer of a technical plan or technical design. The Court rejected the Revenue's argument that the term 'make available' qualified all services listed in paragraph (b), stating that this interpretation would render parts of the clause meaningless. The Court drew support from examples in the India-USA DTAA, which had similarly worded provisions, to clarify that 'development and transfer of technical plans or technical designs' was a distinct category. The Court clarified that 'transfer' in this context did not imply an absolute transfer of ownership rights but rather the provision of technical drawings or designs for use by the resident of the other contracting state. Therefore, the fees were taxable at the DTAA rate of 15%. The second issue was implicitly decided by the resolution of the first. The operative direction was to answer the question in favour of the assessee and against the Revenue.

What were the facts?

The assessee, M/s. SNC Lavalin International Inc., a non-resident company, entered into an agreement with the National Highway Authority of India (NHAI) to provide consultancy services for infrastructure projects, specifically detailed project reports for widening NH-2 and NH-5. These services involved investigating the viability of modern technologies for economical cost estimates without compromising quality, and studying environmental and resettlement needs. The assessee received fees for these services. The Assessing Officer opined that these fees were for technical services taxable under Section 9(1)(vii) read with Section 115A of the Income Tax Act at 20%. The assessee contended that the fees qualified as 'fees for included services' under Article 12(4) of the India-Canada Double Taxation Avoidance Agreement (DTAA), taxable at 15%. The Income Tax Appellate Tribunal (ITAT) ruled in favour of the assessee.

What were the issues?

1. Whether the amount received by the assessee for providing services was taxable under Section 9(1) of the Income Tax Act or Article 12 of the Indo-Canadian Treaty? (Question of law) Assessee's Contention: The fees received from NHAI constituted 'fees for included services' as defined in Article 12(4) of the India-Canada DTAA, making them taxable at a concessional rate of 15%. Revenue's Contention: The services provided did not fall under the definition of 'fees for included services' in Article 12(4) of the DTAA. Instead, they were technical services taxable under Section 9(1)(vii) read with Section 115A of the Income Tax Act at a higher rate of 20%. The Revenue argued that the phrase 'make available' in Article 12(4)(b) qualified all subsequent services, meaning the technical knowledge, experience, skill, know-how, processes, or technical plans/designs had to be made available to NHAI for general use, not just for the specific project. The Revenue relied on the interpretation of paragraph (b) of Article 12(4). 2. Whether the Income Tax Appellate Tribunal erred in holding that the services provided by the assessee were covered under Article 12(4) of the India-Canada DTAA? (Question of mixed law and fact)

Which sections of the Income-tax Act were involved?

Section 9(1),Section 9(1)(vii),Section 115A,Section 234B

AI-generated summary — verify with the full judgment below

2010:DHC:9843-DB

2010:DHC:9843-DB

2010:DHC:9843-DB

2010:DHC:9843-DB

2010:DHC:9843-DB

2010:DHC:9843-DB

2010:DHC:9843-DB

More judgments on Section 9(1)

All 168 judgments and leading authorities on Section 9(1) →

Recent GST High Court judgments

Search GST case law →