2014 (11) TMI 725

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.... before the AO that it does not have a permanent establishment in India as defined in Article 5 of the Double Taxation Avoidance Agreement entered between India and United Kingdom and accordingly claimed that no part of its income is chargeable to tax in India. Without prejudice to the above contention, the assessee also prepared a Profit and Loss account showing revenues which could be reasonably attributed to the work performed in India. However, while doing so, the assessee had computed the revenues by adopting fee rates estimated on the basis of amount that could have been paid to corresponding professionals working in India for availing similar kind of services. Thus, alternatively, the assessee seems to have contended that the profit declared in the above said profit and loss account is chargeable to tax in India. 3. The assessing officer noticed that the total stay of its partners and staffs exceeded 90 days in India during the financial year 1.4.1996 to 31.3.1997. Hence, the AO held that the assessee is having Permanent Establishment in India. In the immediately preceding year, the AO had rejected the alternative contention of the assessee, i.e., the claim to assess the pr....

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....aters LLP Vs. ITO, the above said issue is discussed in paragraphs 80 to 107 of the order. The final conclusion is given in paragraphs 106 to 107 of the order and these two paragraphs are extracted below (pgs.35 and 36):- "106. We are in considered agreement with this analysis in the UN Model Convention Commentary. We are thus of the considered view that, in a situation like the one that we are in seisin of, i.e., in which specific provisions for professional services or independent personal services or included services exist under article 15, when services are rendered by the enterprise, article 5(2)(k) will come into play, and when services are rendered by an individual, article 15 will find application. Therefore, while we agree with the learned counsel that article 15 will not be applicable on the facts of the present case, this finding does not really come to the rescue of the assessee since, as we have already held, the assessee did have a PE in India under article 5(2)(k) of the India-UK tax treaty, and, accordingly, profits attributable to the PE are taxable under article 7 of the India-UK tax treaty. 107. In view of the above discussions, we are unable to uphold the ple....

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.... assessee. The Ld CIT(A), by following the decisions cited above, upheld the action of the AO. (a) Elkem Technology Vs. DCIT (250 ITR 164)(AP) (b) Cochin Refineries Ltd (222 ITR 354)(Kerala) However, the Ld CIT(A), in principle, accepted the claim of the assessee that the said receipts relate to the expenses actually incurred and hence the said of expenses are eligible for deduction. However, the Ld CIT(A) noticed that the assessee was not able to produce all supporting in respect of the expenditure incurred and accordingly opined that some disallowance is called for. In the preceding years, the Ld CIT(A) had disallowed 15% of the claim. Accordingly, the Ld CIT(A) disallowed 25% of the expenses (termed as disbursement claim) proportionate to the fee relating to services rendered in India as compared to the total fees. 9. Both the parties admitted that this issue is decided in favour of the assessee and against the revenue by the Tribunal in AY 1995-96 [(2010) 40 SOT 51 (Mum)]. The discussions relating to this issue finds place in paragraphs 131-133 of the order passed by the Tribunal has held as under (para 133, pg.40):- "133. Having heard the rival submissions and having peru....

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....the methods. In view of the foregoing discussions, we set aside the order of Ld CIT(A) on this issue and irect the assessing officer to delete the amounts relating to reimbursement of expenses from the total income of the assessee. 11. The Ground number 9 relates to the difference in the amounts relating to reimbursement of expenses assessed by the assessing officer. The Ld A.R submitted that consideration of this issue would arise only if the issue relating to the assessment of reimbursement of expenses is decided against the assessee. In the earlier paragraphs, we have decided the issue relating to the assessment of reimbursement of expenses in favour of the assessee. Hence, there arises no necessity to adjudicate this issue. 12. We shall now take up the appeal filed by the revenue. The grounds numbered as 1 & 4 relate to the assessment of Professional receipts. The Ld CIT(A) had held that, only that portion of the income relating to the services performed in India is assessable. Both the parties admitted that the Tribunal has considered identical issue in AY 1995-96 and has held that the entire profits directly or indirectly attributable to the Permanent Establishment is asses....