2023:BHC-OS:9537-DB 216-oswp-2505-2012-J.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2505 OF 2012 Grasim Industries Ltd., Aditya Birla Centre, ‘A’ Wing, 2nd Fllor, S. K. Ahire Marg, Worli, Mumbai-400 030. … Petitioner Versus

1. Assistant Commissioner of Income Tax, 6(3), Room No.523, 5th floor, Ayakar Bhavan, M. K. Marg, Mumbai – 400

020.

2. Additional Commissioner of Income-

tax, Range 6(3), Room NO.505, Ayakar Bhavan, Mumbai-400 020.

3. Commissioner of Income-tax-6, Room No.501, Ayakar Bhavan, M. K. Road, Mumbai-400 020.

4. Assistant Commissioner of Income-tax, Circle – 12(2), Room No. 123A, Ayakar Bhavan, M. K. Marg, Mumbai.

5. Commissioner of Income-tax-12, Room No.122, Ayakar Bhavan, M. K. Marg, Mumbai-400 020. … Respondents Mr. J. D. Mistri, Senior Advocate, with Madhur Agrawal &

Fenil Bhatt, i/b. Atul K. Jasani, Advocate for Petitioner.

Mr. Akhileshwar Sharma, with Shipla Goel, Advocate for Respondents-Revenue.

CORAM : K. R. SHRIRAM &

DR. N. K.

GOKHALE, JJ.

DATED : 1st September 2023 ORAL JUDGMENT: (Per K. R. SHRIRAM, J)

1. Petitioner had set up a Gas-based Sponge Iron Plant in India for which it entered into a Foreign Technical Collaboration Agreement dated 22nd October 1989 (“agreement”) with one M/s. Davy Mckee Corporation (“DAVY”) and another party. Under the agreement, DAVY agreed to render to Petitioner outside India certain engineering and other related services in relation to the project. Petitioner also entered into another agreement (Supervisory Agreement) with DAVY to provide certain supervisory services to Petitioner in India. Under the agreement DAVY was to deliver to Petitioner the necessary design, drawing and data with respect to the Sponge Iron Plant outside India. DAVY also agreed to train outside India, certain number of employees of Petitioner in order to make available to such employees technical information, scientific knowledge, expertise, etc. for commissioning, operation and maintenance of the Plant.

2. Petitioner agreed to pay a sum of US $ 16,231,000/- net of Indian Income-tax, if any, leviable. In other words, it was agreed that if any withholding tax was required to be deducted, it will be borne by Petitioner and DAVY would be paid the net amount of US $ 16.23 millions.

3. Petitioner, by a letter dated 5th December 1989, sought from Assistant Commissioner of Income Tax (“ACIT”), Central Circle-I a ‘No Objection Certificate’ to facilitate remittance of the amount to DAVY without deduction of tax at source. Petitioner in its application informed the ACIT that the technical services specified in the agreement, having been rendered outside India and the fees required also to be paid outside India in foreign currency, the income embedded in the said fees accrues and arises to DAVY outside India. It was also stated that no operation involved in the execution of the said contract is to take place within India and no activity is to be carried on by DAVY for rendering the technical services in India. It was submitted that as the fees being received by DAVY are not taxable in India and no tax at source was required to be deducted out of the fees payable to DAVY, Petitioner, therefore, Petitioner was entitled to a No Objection Certificate for remittance of the fees payable to DAVY under the agreement. ACIT, Central Circle-I vide order dated 5th December 1989 held that the amount payable to DAVY was taxable as income in India and Petitioner was required to deduct tax at source and deposit the tax so deducted with the Income Tax Department. The ACIT in fact recorded that “I have no objection for remitting the amount provided you pay 30% tax in accordance with the provisions of Section 115A of the Income Tax (I.T.) Act, 1961” Therefore, on 6th December 1989, Petitioner paid under protest a sum of Rs.2,73,73,084/- as withholding tax for the first instalment of payments to be made to DAVY. Petitioner made a further payment on 5th September 1990 of Rs.2,81,83,272/- u