IN RE: HESS ACC SYSTEMS B.V, ALUMINIUMSTEDEN 10, 7547 TN ENSCHEDE POSTBOX 10063, 7504 PB ENSCHEDE THE NETHERLANDS Vs. STATE

JUDGEMENT

(1.) THE applicant, a company, claiming to be a resident of The Netherlands has approached this Authority with the present application under section 245Q of the Income -tax Act, seeking advance rulings on the questions formulated in the application. According to the applicant, it entered into a contract with Grasim Industries Ltd., Mumbai on 7.8.2008 for supply of machinery, spare and wearing parts and technical documentation for the production of Autoclared Areated Concrete. On the same day, it entered into another contract with Grasim Industries Ltd for the supply of project service for erection and installation of the machinery supplied as against the first contract. The contract for supply of machinery has been fulfilled by 5.12.2009. According to the applicant, for payments received by it from Grasim thereunder, the liability under section 195 of the Act did not arise. The fulfillment of the second contract on which now ruling is sought is to commence from March 2011. According to the applicant, for receipt by it of the consideration thereunder, the withholding provision under section 195 of the Act will have no application as what it renders under the contract, though technical services, is really services that are ancillary and subsidiary as well as inextricably and essentially linked to the sale of property. Hence it is excluded under from taxation. It is in this context that the applicant approached this Authority with the present application.

(2.) AFTER hearing the applicant and the Revenue, this Authority allowed the application under section 245R(2) of the Act to render a ruling on the following question even while reserving for consideration the question whether the transaction is one designed for avoidance of tax in India when considering the application under section 245R(4) of the Act for a ruling.

(3.) IT is not disputed by the applicant that what is payable under the transaction involved herein is fees for technical services. The only contention raised is that under the DTAC the consideration received is "for services that are ancillary and subsidiary as well as inextricably and essentially linked to the sale of property" in terms of paragraph 6(a) of Article 12 of the DTAC.