The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the Oil and Natural Gas Corporation ( ONGC ) is not liable to deduct tax on making payments to a US Company towards third-party certification of Reserves as the same cannot be deemed as Fee for technical services.
The assessee- Company credited a sum of USD 5,62,500/-to the account of DeGolyer and MacNaughton, USA (non-resident) towards third-party certification of Ultimate Reserves and Reserves of 68 fields of ONGC. When the assessee applied for an order under section 195(2) of the Act to the Assessing Officer for allowing it to release payments to the non-resident i.e. DeGolyer and MacNaughton, the USA without deduction of tax at source, the Officer directed them to deduct 15 percent tax on the gross contractual payment as per the India-USA Double Tax Voidance Agreement (DTAA).
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Before the appellate authorities, the assessee claimed that the services availed were not in the nature of technical services as defined under the India-USA DTAA.
According to the assessee, no technical knowledge was made available by way of the services and therefore, the conditions of article 12(4)(b) of the Indian USA DTAA are not fulfilled.
On the second appeal, the Tribunal relied on the orders of the Tribunal in the case of the assessee itself for the assessment year 2012-13 and assessment year 2011-12 on the issue of deduction of tax at source in the case of the same non-resident.
Relying on the above orders, the Tribunal held that no technical knowledge, skill, know-how etc was made available to the assessee and thus the payment in question cannot be termed as a fee for included services under India USA DTAA.
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