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IN THE SUPREME COURT OF INDIA

CIVIL APPEAL NO. 7796 OF 1997

GVK Industries Ltd.
vs.
Income Tax Officer

Facts & Summary -
1) GVK Industries Ltd. entered into an agreement with ABB Projects & Trade Finance International Ltd.  (Non Resident Company incorporated in Zurich, Switzerland) to prepare a scheme for raising the required finance and tie up the required finance. 


2) For providing these services, the NRC was to be paid, what is termed as, "SUCESS FEE" at the rate of 0.75% of the total debt financing.
 

3) The NRC rendered professional services from Zurich by correspondence as to how to execute the documents for sanction of loan by the financial institutions within and outside the country. With advice of NRC the appellant-company approached the Indian Financial Institutions with the Industrial Development Bank of India (IDBI) acting as the Lead Financier for its Rupee loan requirement and for a part of its foreign currency loan requirement it approached International Finance Corporation (IFC), Washington DC, USA. After successful rendering of services the NRC sent invoice to the appellant-company for payment of success fee amount i.e., US $.17,15,476.16 (Rs.5.4 Crores).

 

4) Appellant-company approached the concerned income tax officer, the first respondent herein, for issuing a ‘No Objection Certificate’ to remit the said sum duly pointing out that the NRC had no place of business in India; that all the services rendered by it were from outside India; and that no part of success fee could be said to arise or accrue or deemed to arise or accrue in India attracting the liability under the Income-tax Act, 1961 (for brevity, ‘the Act’) by the NRC. It was also stated as the NRC had no business connection Section 9(1)(i) is not attracted and further as NRC had rendered no technical services Section 9(1)(vii) is also no attracted. 

5) The first respondent scanning the application filed by the company refused to issue ‘No Objection Certificate’ by his order dated September 27, 1994. 


Held by Supreme Court -
As the factual matrix in the case at hand, would exposit the NRC had acted as a consultant. It had the skill, acumen and knowledge in the specialized field i.e. preparation of a scheme for required finances and to tie-up required loans. The nature of activities undertaken by the NRC has earlier been referred to by us. The nature of service referred by the NRC, can be said with certainty would come within the ambit and sweep of the term ‘consultancy service’ and, therefore, it has been rightly held that the tax at source should have been deducted as the amount paid as fee could be taxable under the head ‘fee for technical service’. Once the tax is payable paid the grant of ‘No Objection Certificate’ was not legally permissible. Ergo, the judgment and order passed by the High Court are absolutely impregnable.

To download full judgement click here 

 

ID: 327 | Views: 1724 | Date: 27-02-2015| Posted By:

CA Mohit Jain



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