{"id":901,"date":"2009-08-29T11:13:17","date_gmt":"2009-08-29T11:13:17","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=901"},"modified":"2009-08-29T11:13:17","modified_gmt":"2009-08-29T11:13:17","slug":"jindal-thermal-power-vs-dcit-karnataka-high-court","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/jindal-thermal-power-vs-dcit-karnataka-high-court\/","title":{"rendered":"Jindal Thermal Power vs. DCIT (Karnataka High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (jindal_thermal_power_ishikawajima.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n

Ishikawajima-Harima<\/a> is still good law despite retrospective amendment<\/strong><\/p>\n

The assessee entered into a contract with Raytheon \u2013 Ebasco, a foreign company, and two of its\u2019 foreign subsidiaries, for commissioning of a power plant. The assessee made payments to Raytheon for rendering technical services, providing \u2018start-up\u2019 services and taking \u2018overall responsibility\u2019 for the Project. The two foreign subsidiaries of Raytheon carried on onshore services. The technical services were rendered by Raytheon wholly outside India<\/strong> and it supervised the carrying on of the \u2018start up\u2019 services by its subsidiaries. The assessee did not deduct tax at source on payments to Raytheon and the AO held it to be liable u\/s 195 r.w.s 201. <\/p>\n

The Court had to decide: (i) Whether the assessee as payer had locus standi to argue that the payments to the foreign company were not liable to tax and (ii) Whether Ishikawajima-Harima<\/a><\/strong> 288 ITR 408 (SC) was still good law in view of the retrospective amendment to s. 9 by the Finance Act 2007 w.r.e.f 1-6-1976. HELD:<\/p>\n

(i) It cannot be said that the person obliged to effect TDS u\/s 195 has no right to question the assessment of tax liability since in law, if TDS is not effected by the payer, the payer would be responsible to pay the tax liability of the payee. The payer has every right to question the tax liability of the payee to avoid vicarious consequences<\/strong>;<\/p>\n

(ii) In Ishikawakima-Harima<\/strong> it was held that fees for technical services was not assessable to tax u\/s 9(1)(vii) if the twin conditions of it being rendered in India and utilized in India were not satified<\/em>. The amendment to s. 9 suggests that the criterion of residence, place of business or business connection of a non-resident in India have been done away with for fastening the tax liability. However, the criteria of rendering service in India and the utilization of the service in India as laid down in Ishikawajma-Harima to attract tax liability u\/s 9(1)(vii) remains untouched and unaffected by the Explanation to s. 9 <\/strong>;<\/p>\n

(iii) As the purport of the Explanation to s. 9 is plain in its meaning, it is unnecessary and impermissible to refer to the Memorandum explaining the Finance Bill 2007. It is explicit from s. 9(1)(vii)(c) and the Explanation to s. 9 that the ratio of Ishikawajma – Harima still holds the field<\/strong>; <\/p>\n

(iv) On facts, as the “technical services” were rendered outside India, the fees thereof were not chargeable to tax in India<\/strong>. As regards, the “start up services and over all responsibility”, the work was done partly in India by Raytheon\u2019s two subsidiaries under its\u2019 direct supervision. Though the subsidiaries held an independent contract with Jindal, they virtually constituted the agents of Raytheon and accordingly the fees for the said services were taxable in India. <\/p>\n

\nSee Also: In Re WorleyParsons Services Pty. Ltd<\/strong><\/a> (AAR) (where Ishikawajima – Harima<\/strong> was doubted<\/em>), Clifford Chance<\/strong><\/a> 176 Taxman 458 (Bom.) (where Ishikawajima – Harima<\/strong> was applied<\/em>), Siemens AG<\/strong><\/a> 310 ITR 320 (Bom) and Taxability of royalties and fees<\/strong><\/a>.\n<\/div>\n","protected":false},"excerpt":{"rendered":"

In Ishikawakima-Harima<\/strong> it was held that fees for technical services was not assessable to tax u\/s 9(1)(vii) if the twin conditions of it being rendered in India and utilized in India were not satified. The amendment to s. 9 (1) suggests that the criterion of residence, place of business or business connection of a non-resident in India have been done away with for fastening the tax liability. However, the criteria of rendering service in India and the utilization of the service in India as laid down in Ishikawajma-Harima to attract tax liability u\/s 9(1)(vii) remains untouched and unaffected by the Explanation to s. 9(1)<\/strong>.<\/p>\n

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