DIRECTOR OF INCOME TAX vs. SNC-LAVALIN INTERNATIONAL INC.

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ITA - 1027 / 2009HC Delhi22 September 20107 pages
For Petitioner: MR.SANJEEV SABAHRWAL
AI SummaryAllowed

What did the High Court hold?

The High Court held that the services provided by the assessee 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 development and transfer of a technical plan or technical design'. The Court rejected the Revenue's argument that 'make available' qualified all subsequent services and that the paragraph should be segregated differently. The Court found that the development and transfer of technical plans or designs by the assessee to NHAI constituted 'fees for included services' under the treaty. The term 'transfer' was held not to imply an absolute transfer of ownership but rather the provision of technical drawings or designs for use or benefit by the resident of the other contracting state. Therefore, the tax chargeable was at the rate of 15% as per the DTAA. The Court answered the question in favour of the assessee and against the Revenue. The issue relating to interest under Section 234B was not to arise in view of a prior judgment of the Court.

What were the facts?

The assessee, M/s. SNC Lavalin International Inc., is a non-resident company providing consultancy for infrastructure projects. It entered into an agreement with the National Highway Authority of India (NHAI) to provide technical drawings and reports for widening NH-2 and NH-5. 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. The Director of Income Tax (Revenue) appealed this decision.

What were the issues?

1. Whether the amount received by the assessee from 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 constitute '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 fees charged for the project did not fall under 'fees for included services' and were therefore taxable as fees for technical services 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) of the DTAA qualified all subsequent services, and the technical designs provided were for specific projects only, not 'made available' for general use. The Revenue also sought to segregate paragraph (b) of Article 12(4) in a specific manner. 2. Whether the Income Tax Appellate Tribunal erred in its decision? (This is a procedural question arising from the first substantive issue).

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:9846-DB

2010:DHC:9846-DB

2010:DHC:9846-DB

2010:DHC:9846-DB

2010:DHC:9846-DB

2010:DHC:9846-DB

2010:DHC:9846-DB

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