IN RE: SOUTH WEST MINING LTD. Vs. STATE

JUDGEMENT

(1.) THE applicant, a company registered under the Indian Companies Act, 1956, and a tax resident of India, filed this application under Section 245Q(1) of the IT Act, 1961 (for short the "Act"). The applicant is the owner of mines. It is engaged in prospecting and extraction of minerals, metals, ores, etc. It is carrying on business of exporting minerals. For the purpose of its business, the applicant gets the analysis of samples and ores conducted from technical lab of the consultant -Met -Chem, Canada Inc. Under the agreement between the applicant and the consultant, the material required to be analyzed and tested in the laboratory in Canada in respect of specific contents has to be sent to the consultant who will send reports to the applicant from time -to -time. For technical services rendered outside India the consultant and the lab fees are required to be paid by the applicant in dollars in Canada. However, the technical consultants will also visit India at different intervals for collecting random samples at the mining head of the proposed mining areas of the company for which the applicant has to bear all necessary expenses and to provide assistance and facilities of travel, etc., free of cost. On these facts, the applicant seeks advance rulings of the Authority on the following reframed questions :

(2.) THE Government of Republic of India and the Government of Canada entered into an agreement for the avoidance of double taxation and prevention of fiscal evasion with reference to taxes and income and on capital on 6th May, 1997, which was notified on 15th Jan., 1998.

(3.) MR . Sanjay Verma, learned Counsel appearing for the applicant, has argued that, as the consultant is carrying out necessary lab tests of iron ore in Canada and is preparing the reports in Canada, the fees would fall under exception mentioned in Sub -clause (b) of Clause (vii) of Sub -section (1) of Section 9 of the Act. Relying on the definition of the expression "fees for technical services" in Expln. 2 to Section 9(1)(vii) of the Act, it is contended that the fees payable to the consultant would be outside the scope of the expression. He has also relied upon CBDT , dt. 7th Feb., 2000 and Circular No. 23, dt. 23td July, 1969, to contend that no tax is deductible under Section 195 of the Act.