The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount paid to a foreign lawyer as the fee for representing before a Foreign Court cannot be treated as Fee for Technical Services.
The assessee, Oil and Natural Gas Corporation Limited (ONGC) had engaged Dewey and LeBoeuf International Company LLC, USA (non-resident), for representing ONGC before Russian courts in regard to the litigation between ONGC and Amur Shipbuilding Yard. The non-resident is a tax resident of the United States of America (USA). ONGC filed a return of income as representative assessee of the non-resident on 28.09.2012 claiming that the receipts of the non-resident under the aforesaid letter are not taxable in India.
The Assessing Officer held that the income of the non-resident should be treated as “fees for technical services”. While concluding the proceedings, the AO treated the gross receipts of the non-residents as “Fee for technical services” and brought to tax the receipts as per provisions of Section 115A of the Act to be taxed on a gross basis.
On second appeal, the Tribunal held that “the assessee provided of professional legal services before a foreign court, which cannot be brought to tax as FIS under Article 12 of the India-USA DTAA, because there is no make available of any particular knowledge or skill to ONGC before the courts which can enable ONGC to represent its case in future. Under Section 9(1)(vii) legal services cannot be treated as FTS as it is a professional service which is outside the scope of Section 9(1)(vii) of the Act. In A.Y. 2009-10, the Tribunal held that the said legal services are not taxable as FTS u/s 9(1)(vii) of the Act.”
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