Clifford Chance UK vs. DCIT (Bombay High Court)

Fees for technical/professional fees of a NR is not taxable in India if it is not rendered in India and utilized in India.

Where the assessee was a UK based firm of solicitors without an office or fixed base in India and it was appointed as English law legal advisers for projects in India and the question arose whether it was assessable to tax in respect of the entire fees or only that portion which was attributable to its operations in India, HELD, accepting the assessee’s claim:

(1) Under Article 15 of the India-UK DTAA, fees from professional services may be taxed in India only if the services are performed in India and the assessee is present in India for more than 90 days in the relevant fiscal year;

(2) If the presence in India is for more than 90 days, the taxability of the income will have to be determined u/s 9(1) (i);

(3) The fiction of s. 9 is subject to the territorial nexus doctrine and income that arises out of a transaction requires to be apportioned to each of the territories. Whatever is payable by a resident to a non-resident by way of fees for services would not always come within the purview of section 9(1)(vii) of the Act. It must have sufficient territorial nexus with India so as to furnish a basis for imposition of tax.

(4) In accordance with the judgement of the SC in Ishikawama Harima 288 ITR 408 a non-resident is taxable on income for services only if the services are rendered within India and are part of a business or profession carried on by such person in India. Both the above conditions have to be satisfied simultaneously.

Accordingly, only the income charged on hourly basis in India and utilized in India is chargeable to tax.

Also See CIT vs. Siemens AG (Bombay High Court) and Royalties and Fees for Technical Services in International Trade