TaxTMI 
TaxTMI 
2014 (1) TMI 1300
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....nd devoid of reasoning. 4. That on the facts and circumstances of the case and in law, the Ld. AO/DRP have I erred in not following the judgment of the Hon'ble Income Tax Appellate Tribunal (' IT A T') rendered in appellant's own case for A Y 2007-08 in ITA no. 5231/D/20 I0 which had dealt with exactly the same facts of the same contracts as were the subject matter of assessment in the impugned assessment order. 5. That on facts and circumstances of the case and in law the Ld. DRP has erred in disregarding the order dated 29.5.2012 passed by the Hon'ble Tribunal in ITA no. 5231/D/2010 for A Y 2007-08. 5.1 That by not following the order of the ITAT for A Y 2007-08 pertaining to the .same contracts as are subject matter of the impugned assessment order, the Ld. DRP/ AO have violated the judicial discipline which is not permissible. 5.2 That. on the facts and circumstances of the case and in law, the Ld. AO/DRP have erred in not following the judgments of the Hon'ble Supreme Court on the similar facts in the appellant's own case for the Assessment Years 1987-88 to 1988-89 (291 ITR 482), and the Tribunal's order in assessee's own cases for A Y's 1995-96 to 1996-97 (in ITA ....
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....ng fabrication and supply) were carried out outside India much before the date of arrival of structure in India. 9. That on the facts and circumstances of the case and in law, the Ld. AO/DRP grossly erred in holding that the Mumbai Office constitutes a Fixed Place PE under Article 5(1) of the DTAA, ignoring the decisions of Hon'ble Supreme Court in appellant's own case (reported in the 291 ITR 482) and the decision of Hon'ble ITA T, Delhi in the preceding years. 9.1 The Ld. AO/DRP erred in applying Article 5(1) to the facts of the case as against the specific provisions of Article 5(3) which applies to the case of the appellant. 9.2 That the Ld. AO/DRP erred in holding t!1at the PE stood constituted from the date of the notification of the award and not from the date when the installation 'activities commenced: 10. That on the facts and circumstances of the case and in law, the Ld. AO/DRP erred in not following the principles of consistency and also by ignoring Article 7(5) of the India-Korean DTAA by adopting a new formula for estimating the income of the appellant for operations carried inside India. . 11. That on facts and circumstances of the case the Ld. AO/DRP ....
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....ission of the Ld. AR, this ground is rejected. 3. For the assistance of the Bench, the Ld. AR has furnished a chart demonstrating similarities in the grounds raised in assessee's appeals before the Tribunal in asstt. Years 2007-08 and 2008-09. 4. The Ld. DR on the other hand placed reliance on the orders of the authorities while opposing the appeal. 5. The relevant facts are that the assessee is engaged in the business of offshore construction of the power projects. During the year under consideration the assessee had received revenues from the 4 projects. It bifurcated its revenue into two categories firstly inside India's revenue and secondly outside India revenue. The assessee admitted that during the year under consideration it has Permanent Establishment (PE) in India. It was submitted that Mumbai South Process Platform (MSP) and Mumbai Uran Trunkine (MUT) contracts are with ONGC, whereas HMI project is with Hyundai Motors India Ltd. and GMR projects is with GMR Vasavi Power Corporation Ltd. In the original return of income for the year the assessee declared total income at Rs. 7,57,28,588/-. The case was selected for scrutiny. Subsequently the assessee filed a revise....
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....8) and assessment years 2006- 07 (in ITA Nos. 2086 & 2087/D/2009) respectively. This ground is also general in nature hence does not need independent adjudication. Ground No. 6, 6.1, 6.2 & 6.3 10. In these grounds the actions of the authorities below have been questioned in taxing the receipts of consideration under the various contracts for the work carried out outside India. The contention of Ld. AR remained that the authorities below have erred in not appreciating that the consideration for onshore/offshore services have been identified in the contracts which are entered into between two unrelated parties, one of them being public sector undertaking. They have also erred in relying upon the letter issued by the ONGC dated 11.12.2009 signed by GM (F&A) in the context of an assessment year without appreciating and taking the cognigence of the point wise reply/comments filed by the assessee during the course of assessment proceedings. He contended further that the authorities below have failed to provide an opportunity to the assesee to cross examine GM (F & A) of ONGC on the basis of whose letter the inferences having been drawn that the contracts with ONGC were not divisibl....
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....,011,039 GMR (Operation and Maintenance Contract) GMR Power Corporation 15th May, 1997 130,667,433 42,407,199 HMI (Substation) Hyundai Motors India Limited 30th November, 2005 4,166,114 13. It was pointed out by the assessee that all the aforementioned contracts except for HMI (substation), which commenced in financial year2006-07 have continued since period relevant to asstt. year 2006-07 or earlier years during which similar issues on taxability of revenues therefrom have been a subject matter of dispute before various appellate authorities and have been considered and decided in assessee's favour. It was contended that being a tax recipient of South Korea the assessee is governed by the provisions of the agreements for avoidance of double taxation and prevention of fiscal evasion entered into between the governments of the Republic of India and the Republic of South Korea (hereinafter tobe referred as DTAA). As per provisions of section 19(2) of the Act, the provisions of the DTAA or the Act whichever is more beneficial will govern the taxability of HMI in India. It was accepted that the assessee has an installation permanent establishment....
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....sment year 2005-06 and 2006-07 with the submission that assessments in these asstt. years were completed by the then AO u/s 143 (3) of the Act on the same lines adopted by the assessee in is return of income for asstt. year 2008-09 under consideration. It was submitted that the said assessment was cancelled by the then Director of Income Tax International Taxation and jurisdiction u/s 263 of the Act was invoked. In the assessee's appeal questioning validity of the jurisdiction u/s 263 of the Act, the Tribunal vide its order dated 31.5.2011 held that the then AO had duly applied his mind on both the issues i.e. taxability of inside India income and outside India income and there was no justified cause for invoking jurisdiction u/s 263 of the Act. It was submitted that since the Tribunal has not found any fault with the orders of the then AO in relation to taxability of revenue's for the three main contracts i.e. MUT, MSP and GMR. i.e. the subject matter of Assessment Year 2008-09. In view of the judicial discipline the income of the assessee for asstt. year 2008-09, is to taxed on the same lines as has been done in asstt. years 2005-06 and 2006-07. 17. The AO alleged that the ass....
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.... has upheld the action of the AO. 19. In support of the grounds Ld. AR has basically placed reliance on the order of the Tribunal for the assessment year 2007-08(supra) with this submission that under similar set of facts in that year an identical issue has been decided by the Tribunal in favour of the assessee. Ld. DR on the other hand tired to justify the orders of the authorities below on the issue. 20. On perusal of order of the Tribunal for the assessment year 2007- 08 (supra) on the issue in the case of assessee itself, we find that during the year also MUT pipeline project, MSP platform project of ONGC and GMR (operation and maintenance contract) of GMR power Corporation were continuing since the period relevant to the assessment years 2004-05 or earlier years whereas the project HMI (sub station) of Hyundai Motors India Ltd. has continued from the assessment year 2006-07. In the assessment year 2007-08, the Tribunal has dealt with the issue relating to MUT pipeline project, MSP platform project, of ONGC, and GMR (operation and maintenance contract) projects which are also under consideration in the assessment year in question. After discussing the issue in detail the ....
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.... The ONGC has accepted the work on design, engineering, procurement, fabrication, loading and transportation at the site abroad though its representative CEIL who has issued the certificate to this aspect; f) The lump sum break up of the price for each identifiable discrete segment of work after duly taking into location of work and expenditure has to be filled in the prescribed bidding form of the tender which suggests all the milestones and the payments are settled in advance. (g) There is a force in the contentions of the assesee that Assessing Officer has misconstrued the expression "provision" used for milestones payment in clause 3.2.1 of the contract. According to the Assessing Officer, payment was provisional, thus, it was tentative or an advance which would be refundable, if the work is not performed satisfactorily. He made reference to clause No. 3.2.1 in the assessment order. As per the assessee, milestone payment, as per break up of price becomes payable only on satisfactory completion of milestone work after it is duly confirmed by representative of ONGC. The clause 3.2.4 of the contract makes it clear that on, non-payment of "undisputed amount of invoices", asse....
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....ent is applicable regardless of the place of the delivery. The Assessing Officer ought to have examined what are the operations carried out by the assessee within India; The profit of the PE are to be calculated as if the PE is hypothetically independent of the enterprise of which it is a PE. (k) All receipts for operation inside India have been offered to tax as income in earlier years as well as this year. The entire receipts from the installation work carried out in the offshore site since the arrival of material has been offered to tax." 21. The Tribunal accordingly held that the contracts are divisible. The receipts pertaining to designing, fabrication and supply of material, the activities carried out outside India is not taxable in India. Respectfully following this decision on identical issue in the assessment year under consideration we decide the issue raised in the grounds Nos. 6, 6.1 to 6.3 relating to MUT pipeline project, MSP platform project, of ONGC and GMR (operation and maintenance contract) projects in favour of the assessee with this finding that the outside receipts pertaining to designing, fabrication and supply of material, activities carried out outsid....
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....ples of consistency also by Article 7(5) of the India Korea DTAA by adopting the new formula for estimating the income of the assessee for operation carried inside India, has been questioned. 23. We find that the isuses raised in these grounds have been covered by the Tribunal in the case of assesee itself for the assessment year 2007- 08 (supra) relevant para No. 32 of the order of the Tribunal has been reproduced hereinabove. 24. Respectfully following the decision taken therein in para 32 of the said order, we hold that the receipts pertaining to designing, fabrication and supply of material, the activities carried out outside India is not taxable in India. Other issues raised in these grounds have become infructuous. These grounds are accordingly disposed of. Ground Nos. 11,11.1 ? & 11.2 25. In these grounds the assessee has questioned action of the authorities below whereby they have disallowed the expenses as claimed by the assessee in respect of the various projects inside India. It has been contended that the authorities below have erred by not computing the income chargeable to tax in India @ 10% of the revenue from inside India operations as reduced by sub con....
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....e assesee has contended that the authorities below at the best could have taxed the inside India revenue @ 10% in view of the provisions of section 44BB of the Act. In view of above finding on ground Nos. 11,11.1 & 11.2, this alternative ground has become infructuous. It is rejected as such. Ground No.13 30. It is also an alternative ground to the above ground Nos. 11 to 12. In this ground the assessee has taken an alternative argument that determination of total income by the authorities below is arbitrary and capricious. In view of the above finding on ground Nos. 11 & 12 the present alternative ground does not stand. It is accordingly rejected. 23 Ground No. 14 31. In this ground the assessee has questioned action of the authorities below in bringing to tax interests earned from Citi Bank, Chennai amounting to Rs. 25,58,731/- at the maximum marginal rate under Article 12(5) of the DTAA. 32. At the outset of hearing the Ld. AR failrly conceded that the assessee has no case on this issue. 33. Having gone through the orders of the authorities below we find that the decision of the authorities below on this issue remained that interest on Citi Bank deposit was out ....