Facts of the case
The assessee, Deepak Fertilizers and Petrochemicals Corporation Ltd., is engaged in the business of manufacture and sale of chemicals, fertilizers. The assessee embarked upon a project to produce Ammonium Nitrate Prill at its factory located at Taloja as a part of its expansion project of its existing business.
For this, the assessee had entered into an agreement with GPN Engineering & Process, France (GPN). The agreement was in two parts and was executed in France on January 1, 2009. Under Part I, GPN agreed to grant to the assessee, non-transferable and non-inclusive licence to use technical information. Whereas, under Part II GPN agreed for process for production of Ammonium Nitrate Prill.
The payment of consideration was agreed to be made on “net of tax” basis. Accordingly, the assessee remitted an amount of € 2,10,000 being 70% of the total € 3,00,000 as stated towards consideration for outright purchase of Process Book Package for Ammonium Nitrate Prill production.
The assessee paid tax of Rs. 15.20 lakhs on April 30, 2009. However, the assessee contended that the amount remitted by it for outright purchase of Process Book Package was not taxable and requested AO to refund the tax already deducted and deposited.
Issue before the Tribunal
Whether the payment had to be recognised as ‘fees for technical services’ and ‘consultancy services’ u/s 9(1)(vii) and is liable to deduction of tax at source in India?
Held
ITAT observed that the facts of the present case and that of the Royal Extrusion were similar. Therefore, following the same ratio, ITAT held that assessee was not liable to deduct tax on the amount remitted to GPN for acquisition of process, design, documentation called Basic Engineering Package on outright purchase basis for Ammonium Nitrate Prill production.
ITAT held that the amount could not be considered as fees for technical services liable to withhold tax in India. ITAT had accepted the assessee’s contention.
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