JUDGMENT

PATHAK, CJI. :— Special Leave granted.

2. These appeals by Special Leave are directed against the dismissal by the Andhra Pradesh High Court of Writ Petitions filed by the appellant.

3. The appellant, Messrs Electronics Corporation of India Limited, entered into a memorandum of understanding with a Norwegian company at Paris. This was followed by an agreement dated 2 May, 1986 executed at Hyderabad. Under that agreement -the Norwegian company was to provide technical know-how and technical services, including facilities for the training of personnel, to the appellant in connection with the manufacture of computers. The consideration for the technical know-how and technical services was represented by Norwegian currency NOK 32 Millions equivalent to about Rs. 575 lakhs. Eighty five per cent of the consideration was to be paid from credit provided by Norwegian authorities and the balance fifteen per cent was to be paid out of free foreign exchange made available by the State Bank of India, London Branch. It is not in dispute that the agreement had received the careful consideration of the Reserve Bank of India and of the Central Government.

4. The appellant approached the Income-tax Officer for the grant of a No Objection Certificate as contemplated under S. 195(2) of the Income-tax Act, 1961, to enable it to remit the instalments due without any obligation to deduct any income tax at source, but the request was denied. On 23 December, 1986 the appellant made an application to the Commissioner of Income-tax for a direction to the Income-tax Officer, but the Commissioner rejected the application. The Commissioner took the view that having regard to Section 9(l)(vii) and Section 195 of the Income-tax Act, 1961, the payment constituted income which was deemed to accrue or arise in India and was liable to deduction of tax at source.

5. The appellant filed a Writ Petition against the order of the Commissioner, and assailed the constitutional validity of Section 9(l)(vii) of the Act. It was urged before the High Court that Parliament was not competent to enact Section 9(l)(vii) of the Act inasmuch as the provision possesses as extra territorial operation without any nexus between the person sought to be taxed and the country seeking to tax. It was further contended that even after the introduction of Section 9(l)(vii) by the Finance Act of 1976 with effect from I June, 1976, the requirement of a business connection of a foreign Company was required, and the case was governed by Carborandum Co. v. CIT., (1977) 108 ITR 335. It was also urged that after the introduction of the Explanation by the Finance Act of 1977 with effect from 1 April, 1977 Section 9(l)(vii) creates an invidious discrimination among companies which had entered into a foreign collaboration agreement prior to I April, 1976 and those who have done so after that date, and that therefore Article 14 was violated. The High Court repelled all the contentions of the appellant and dismissed the Writ Petition. A similar Writ Petition was filed by the appellant against an order of the Commissioner of Income-tax declining to direct the grant of a No Objection Certificate in relation to disbursement made under a licence agreement with Messrs Control Data Indo-Asia Company, U.S.A., and the Writ Petition was dismissed by the High Court for the reasons which had found favour with it in the earlier case.

6. It is contended by learned counsel for the appellant that S. 9(l)(vii) of the Income-, tax Act is ultra vires inasmuch as it enables the levy of income-tax on the Norwegian company in the one case and the American company in the other in circumstances which appear to show that the statute operates extra-territorially without the need for any nexus between anything done in India and the person sought to be taxed. S. 9(l)(vii) declares :

"9(1) The following income shall be deemed to accrue or arise in India -

(i) ......

(vii) income by way of fees for technical services payable by