Service PE under Article 5(6)(a): physical rendition needed to meet 90-day threshold; no PE, receipts not taxable

Whether a service PE/virtual service PE existed: applying Article 5(6)(a) of the India-Singapore DTAA and treating "fiscal year" as previous year, the Tribunal held physical rendition of services in India is essential to compute the 90-day threshold; days spent on vacation, business-development and aggregated common days are excluded. Result: no service PE for the relevant AYs and receipts are business profits not taxable in India under Art.7 read with Art.5(6)(a). Interest u/s 234A: assessee claims returns filed within the extended due date; issue remitted to AO for verification of filing dates. Interest u/s 234B: deleted. Additions based solely on Form 26AS: unsustainable; matter remitted to AO for verification; deletions ordered for statistical purposes.

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Issues Involved:
1. Validity of assessment proceedings/order.
2. Constitution of Service PE/Virtual Service PE in India.
3. Attribution to alleged service PE.
4. Alleged addition of income received from ICICI Bank.
5. Alleged addition of interest on income tax refund yet to be received.
6. Levy of interest under section 234A and 234B.
7. Initiation of penalty proceedings under section 270A.

Summary:

Validity of Assessment Proceedings/Order:
The assessee challenged the validity of the assessment orders on the grounds of being barred by limitation and the absence of Document Identification Number (DIN) on the directions/order of the DRP. These grounds were not argued and hence not adjudicated upon.

Constitution of Service PE/Virtual Service PE in India:
The main grievance was the finding that the assessee constituted a Service PE/Virtual Service PE in India. For AY 2020-21, the Tribunal held that the aggregate stay of employees in India was only 44 days, which is less than the 90-day threshold in Article 5(6)(a) of the India-Singapore DTAA. For AY 2021-22, no employees visited India. Therefore, the Tribunal concluded that the assessee did not constitute a Service PE in either AY. The Tribunal also rejected the AO's finding of a Virtual Service PE, stating that physical presence in India is required under the India-Singapore DTAA.

Attribution to Alleged Service PE:
The Tribunal found that the issue of attribution of business profits to the alleged Service PE/Virtual Service PE became academic due to the decision that no PE existed in India.

Alleged Addition of Income Received from ICICI Bank:
The AO added Rs. 10,87,258 to the total income based on Form 26AS. The Tribunal directed the AO to verify the claim that no invoice was raised or payment received from ICICI Bank and to grant corresponding TDS credit if the claim is found correct.

Alleged Addition of Interest on Income Tax Refund Yet to be Received:
The AO added Rs. 10,23,649 as interest on income tax refund. The Tribunal found that neither the refund nor the interest was received by the assessee and directed the AO to verify this claim. If verified, the addition should be deleted, and corresponding TDS credit should be granted.

Levy of Interest Under Section 234A and 234B:
The Tribunal restored the issue of levy of interest under section 234A to the AO for verification of the filing date of the return. Regarding section 234B, the Tribunal held that interest is not applicable as the income was received after deduction of tax at source.

Initiation of Penalty Proceedings Under Section 270A:
The Tribunal found the initiation of penalty proceedings under section 270A to be premature and did not adjudicate on this ground.

Conclusion:
The appeals for both AYs 2020-21 and 2021-22 were allowed for statistical purposes, and the Stay Application for AY 2021-22 was dismissed as infructuous.

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