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II. Direct Taxes Case Laws:
1. Technip Singapore Pte Ltd. Vs. DIT & ANR, W.P (C) No. 7416/2012, Date of Judgment: 02.06.2016, High Court of Delhi
Issue:
Whether the income earned from the contract towards mobilization /
demobilisation charges should be treated as royalty / fees for
technical services?
Held-No
Brief Facts
The Petitioner, TECHNIP SINGAPORE PTE LTD. a resident of Singapore,
is a leading solutions provider of offshore construction, engineering,
project management and support services to the oil and gas industry
worldwide. Indian Oil Corporation Ltd (‘IOCL’) had invited tenders for
the "Residual Offshore Construction work". The work mainly involved
installation of IOCL’s supplied SPM in 3 stages and paid for each of the
items of work separately although the work was a composite one. AAR put
reliance on, Ishikawajima-Harima Heavy Industries Ltd. v. DIT (2007)
288 ITR 408 & held that the consideration for each portion of the
contract, if separately specified, can be separated from the whole and
thus the mobilisation/demobilisation charges which constituted 68% of
the total consideration could be treated as royalty within the meaning
of Section 9 (1) (vi) of the Act read with Article 12 (3) (b) of the
DTAA.
The
Petitioner contended that the mere fact that the equipments were used
for rendering services to IOCL cannot alter the nature of the contract,
from a ‘contract for services’, to a ‘contract for hiring of vessel and
equipment’. Also, under the contract, IOCL had no right to use or
control over the movement or operation of any equipments, vessels etc.
belonging to the Petitioner and the very purpose of the mobilisation of
the equipment was to install the IOCL supplied SPM. Therefore, the AAR
erred in concluding that the installation activity was ancillary and
subsidiary to the use of the equipment.
Held
The contract was in fact for installation, erection of equipment.
Mobilisation/demobilisation constituted an integral part of the
contract. Further the dominion and control of the equipment was with
IOCL. It was erroneously concluded that the payment for such
mobilisation/demobilisation constitutes royalty. In that view of the
matter, the consideration for installation cannot not be characterized
as Fees for Technical services (FTS) and brought within the ambit of
Article 12.4(a) of the DTAA. The resultant position is that no part of
the income earned by the Petitioner from the contract with IOCL can be
taxed in India.
(Please click here for judgment)
2. ITO Vs. Moradabad Development Authority, I.T.A. NO. 3005/Del/2013, Date of Pronouncement: 10.06.2016, ITAT - Delhi
Issue:
Whether a charitable institution registered u/s 12AA of the Income
Tax Act,1961 can be denied exemption in the light of the provisions of
Section 2(15) even when its activities during the year in the nature of
trade,commerce or business?
Held_No
Brief Facts:
The assessee was granted registration u/s 12AA of the income Tax Act,
1961. As per the observations of the AO, the income of the assessee
does not fall u/s 11(1) (a) (b) or (c). AO also observed that the
activities of the assessee were not in conformity with its objectives
for the year under consideration. The assessee had purchased land and
had constructed house/flats/shops on such land and thereafter had sold
the same at competitive market prices. Therefore, AO contented that
these activities do not fall under the definition of charitable
activities of the assessee. The assessee appealed before the CIT (A).
The CIT (A) held that the registration under section 12A has been
granted to the assessee and as per law that the charitable institution
may carry on incidental business for the attainment of its objectives.
Therefore, the construction activities are incidental to the charitable
purpose of town planning and assessee is entitled to the deduction u/s
11. Aggrieved by which, the revenue made an appeal before ITAT.
Held:
The fact that assessee is registered u/s 12AA of the Income Tax Act
has never been denied. Also, the objects of the assessee were not
changed anytime during the year under consideration. The main objectives
of the assessee that of town planning had been held as charitable at
the time of registration under section 12A. In the light of the judgment
of the Allahabad High Court in the case of CIT vs. Lucknow Development
Authority wherein it had been held that the development authorities will
not be affected by the provisions to Sec 2(15). The reliance on the
Board Circular is also not applicable in the present case as there was
no change in the charitable purpose while doing the activity of
development by the assessee. Hence, the assessee will be allowed the
deduction.
The appeal of the revenue is dismissed.
(Please click here for judgment)
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