NEW DELHI, AUG 06, 2010: ABB Projects and Trade Finance (International) Ltd., Zurich, Switzerland, advised GVK industries about how to raise  finance for its power plant project in Andhra and was to be paid a ‘success fee’ of Rs 5.4 crores. The services were rendered from abroad. On being refused a no objection certificate for remitting the money without deduction of tax at source, a writ was filed in A.P High Court. The Court while holding that there was no business connection of the non-resident in India upheld the Revenue’s contention that the success fee represented ‘fees for technical services’ and was accordingly subject to deduction of tax at source. The main challenge of the assessee before the High Court was the absence of sufficient territorial nexus and the possibility of section 9(1) (vii) being unconstitutional.

The SLP filed in the SC was heard on 3.8.2010 and arguments were advanced at length. The Attorney General appearing for the Revenue argued for almost one hour. The SC reserved its Judgement and has granted one week’s time to file written submissions. Considering the recent amendments in section 9(1)(vii), it will be interesting to watch for the Judgement of the Supreme Court and reconcile the same with the Ishikawajima decision.