Case nº AAR No. 660 of 2005 of Authority for Advance Rulings, September 09, 2005 (case In Re: South West Mining Ltd. Vs)

JudgeFor Appellant: Sanjay Verma, Adv.
PresidentSyed Shah Mohammed Quadri, J. (Chairman) and A.S. Narang, Member
Resolution DateSeptember 09, 2005


Syed Shah Mohammed Quadri, J. (Chairman)

  1. The applicant, a company registered under the Indian Companies Act, 1956, and a tax resident of India, filed this application under Section 245Q(1) of the IT Act, 1961 (for short the "Act"). The applicant is the owner of mines. It is engaged in prospecting and extraction of minerals, metals, ores, etc. It is carrying on business of exporting minerals. For the purpose of its business, the applicant gets the analysis of samples and ores conducted from technical lab of the consultant-Met-Chem, Canada Inc. Under the agreement between the applicant and the consultant, the material required to be analyzed and tested in the laboratory in Canada in respect of specific contents has to be sent to the consultant who will send reports to the applicant from time-to-time. For technical services rendered outside India the consultant and the lab fees are required to be paid by the applicant in dollars in Canada. However, the technical consultants will also visit India at different intervals for collecting random samples at the mining head of the proposed mining areas of the company for which the applicant has to bear all necessary expenses and to provide assistance and facilities of travel, etc., free of cost. On these facts, the applicant seeks advance rulings of the Authority on the following reframed questions:

    (1) Whether the services rendered by a non-resident company Met-Chem Canada Inc. is considered to be in India or outside India as per the facts already given in Annex. 1 para 2 and Annex. II para 3 of the Form No. 34D.

    (2) If services rendered by a non-resident company Met-Chem Canada Inc. considered to be in India what is applicable rate of TDS.

  2. The Government of Republic of India and the Government of Canada entered into an agreement for the avoidance of double taxation and prevention of fiscal evasion with reference to taxes and income and on capital on 6th May, 1997, which was notified on 15th Jan., 1998.

  3. The CIT submitted the following comments:

    Fees for technical services payable by the applicant to the consultant in Canada would be income deemed to accrue or arise in India in view of provisions of Section 9(1)(vii)(b) of the Act. However, where the services for which the fees is payable, are utilized by the applicant in a business or profession carried on outside India, it would not be the deemed income of the consultant. Though the analysis of samples and ore and lab tests are done outside India and the technical fee is paid outside India in dollar, it is important to note that the samples are collected in India and the lab reports for which the payment is made is being used in the applicant's business in India. The report is not used for the purpose of making or earning any income from any source outside India. As the income is deemed...

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