What are the changes brought about in respect of non-resident taxation?A major amendment under Sec. 9 would nullify the decision of the Supreme Court in Ishikawajima-Harima Heavy Industries Ltd. v Director of Income-tax, Mumbai (2007) 288 ITR 408 (SC), which has held, consistent with past precedents and international interpretation of double tax avoidance agreements, requiring not only utilisation, but also some activity for the non-resident in India to attract Indian tax. The amendment will now require adoption of what is claimed as source rule, so as to fasten liability on mere use in India irrespective of the fact whether the non-resident had a place of business or business connection or permanent establishment in India. This amendment is made retrospectively from June 1, 1976. The reasoning given in the Memorandum accompanying the Finance Bill is that the legislative intent was to follow the source rule. All that the decision required was nexus for the non-resident with India. This amendment, which nullifies the objective of the Double Tax Avoidance Agreement, would upset the established law and would make the objective of certainty even more remote, than what is presently certain prior to the amendment. The assessing officer has power or even duty, when required, to give certificates of deduction at nil or at lower rate under Sec.195. Instruction No. 8/2006 dated October 31, 2006, charges the assessing officers with having issued such certificate indiscriminately and says it would require administrative approval of the Joint Commissioner in future, thereby inhibiting application of mind on the part of authorities. In the context of disallowance of the payment itself, where revenue believes, that tax should have been deducted under Sec. 40(a)(i) and Sec. 40(a)(ia), this amendment will make the liability of non-resident as well as duty to deduct tax at source most uncertain. In these circumstances, the tax cost of foreign colloboration will be heavier by the apprehended liability making Indian enterprises less competitive in the international market. Definition of `India' in the newly inserted clause (25A) of Sec. 2 to include airspace above its territory and territorial waters was obviously intended to rope-in activities of non-resident on income from satellite trade. The reason for the amendment had not been indicated either on the Notes on Clauses or the Memorandum accompanying the Bill. The fact that this amendment has been made retrospectively from August 25, 1976, would make even decided cases vulnerable. Some explanation for this amendment was expected. S. RAJARATNAM