TaxTMI 
TaxTMI 
2016 (9) TMI 10
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.... of the project right from the review of drawing, project management till the final commissioning of the project. Thus it is evident that the assessee company's role is much more than simply providing technical services thereby the receipts were treated as business income. (iii) The Ld. CIT(A) has erred in law and on facts in directing to treat the income as Fees for Technical Services and tax the same as such." 3. This assessee is a Russian Company. It constructs oil pipeline projects of IOC, BPCL & GAIL. It declared loss of Rs. 7,36,071/-. The assessee further offered tax @ 10% on the sum in question of Rs. 94,14,297/- over and above the above stated business loss. The Assessing Officer in course of scrutiny noticed the assessee's gross income figure as Rs. 94,14,297/-. It had offered the same for being taxed @10% under Article 12 of the Indo-Russia Double Taxation Avoidance Agreement (DTAA) along with the above stated business loss taxable @ 14% amounting to Rs. 7,36,071/-. There is no dispute that assessee's receipts in the impugned assessment year have been derived from IOCL Dadri-Panipat Pipeline Project (DPPL) and GAIL's Vijaipur-Dadri-Bawana Pipeline Project (VDPL). I....
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....sessee preferred appeal. The CIT(A) reverses Assessing Officer's action as follows :- "4. I have gone through the facts of the case, assessment order, CIT(A)'s order for A.Y. 2009-10 and the decision of Hon'ble ITAT, Ahmedabad for A.Y. 2007-08. 4.1 I agree with the appellant that between VDPL project and MMPL project there is no change in the facts. The MMPL project was also executed for BPCL and on the same lines as done for the VDPL project. 4.2 In the case, all the objections of the A.O. are based on the consortium agreements and agreements of the consortium with GAIL and it has been contended that since the appellant is the leader of consortium and as per the terms of contract with GAIL, the appellant was the leading partner of the consortium, the entire construction work of the project in the hands was done by the appellant and the appellant's activities are not confined to mere providing of FTS. 4.3 The same issue has been decided by Hon'ble ITAT, Ahmedabad for A.Y. 2007-08 in the case of the appellant on essentially same facts. Following Voith Siemens Hydro Kraftwerkstechnik GMBH & Co. vs. ADIT in ITA No.2353/Del/2008 dated 05/03/2010 and also on the ....
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....8. This case file reveals that a co-ordinate bench in assessee's appeal ITA No.3399/Ahd/2010 for assessment year 2007-08 decided on 19.08.2011 adjudicated the very issue against the Revenue by observing as under :- "8. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. It is by now a settled position of law that if the provisions of Income tax Act, 1961 are more favourable as compared to the provisions of DTAA then the assessee can always opt for assessment as per the provisions of Income tax Act, 1961. The provisions of Income tax Act, 1961 with regard to the issue in dispute before us are contained in Section 9(1)(vii) and also in Section 115A and the provisions of Section 44DA are also relevant. We, therefore, reproduce the provisions of Section 9(1)(vii), Section 44DA and section 115A of the Act: "Section 9(1) : The following incomes shall be deemed to accrue or arise in India:- (vii): Income by way of fees for technical services payable by - (a) the Government ; or (b) a person who is a resident except where the fees are payable in respect of services utilized in a business or profession c....
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....or the business of such permanent establishment or fixed place of profession in India; or (if) in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent, establishment to its head office or to any of its other offices:" "115. [Omitted by She Finance Act, 1987, w.e.f. 1-4-1988.] [Tax on dividends, royalty and technical service fees In the case of foreign companies. 115A. [( 1) Where the total income of- (b) [a non-resident (not being a company) or a foreign company, includes any income by way of royalty or fees for technical services *other than income referred to in sub-section (I) of section 44DA] received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976, and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to a matter included in the industrial policy, for the time being in force, of the Government of India, the agreement is in accordance with that policy, then, subject to the provisions of sub-sections (1 A) and (2), the income....
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....ing common expenses of the consortium. The responsibility of the assessee as described in Annexure 1 to the cooperation agreement is available on page 218-219 of the paper book and hence, it is very relevant to reproduce the same here in below: "ACTIVITIES UNDER THE SCOPE OF WORK OF ZANGASUNDER I'ANVELDABHOL GAS PIPE LINE PROJECT OF GAIL (INDIA) LIMITED The activities included in the scope of work of Zangas are as follows - 1. Design & Engineering: a) Civil & Structural Zangas Shall provide (he following design & engineering services under civil & structural head, based on the topographical and soil investigation data collected by KPTL (through an experienced & competent agency)- i) Review of Layout plan to enable finalization of Plot plan for - > Sectionalizing Valve Station - 9 Nos. > Intermediate Pigging Station - 1 Nos. ii) Review of Structural & Architectural design of Control Room for a typical > Sectionalizing Valve Station > Sectionalizing Valve Station with CP > Terminals iii) Review of Detailed Engineering of Building Construction of Control Rooms giving Foundat....
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....as i.e. the assessee in respect of PDPL project of GAIL, it is seen that the activities included in the scope of work of the assessee is regarding design and engineering for various aspects i.e. (a) Civil, & structural (b) Electrical, (c) Cathodic protection, (d) equipment Design & Engineering, (e) Pipeline Crossing and (f) Instrumentation. The 2nd item of activities included in the scope of work of the assessee company was preparation of welding procedure and welder qualification procedure, 3rd item is review of work procedure for pipeline laying and 4th responsibility is for deputation of experts for site review of implementation by KPTL and technical services provided by Zangas. Some objections raised by DRP, A.O. and the Ld. D.R. that when the assessee company was required to depute expert for site review of implementation by KPTL and technical services provided by Zangas, the assessee company was very much engaged in the entire construction project. These objections of the authorities below and the Ld. D.R. of the revenue are not valid in the light of these two Tribunal decisions cited by the Ld. A.R. of the assessee. 11. In the case of Voith Siemens Hydro Kraftwerkstechnik....
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....he welding procedure and is also required to review the work procedure for pipeline laying and in addition to this, the assessee is required to depute experts for site review and implementation by KPTL and technical supervision provided by the assessee. As per the scope of work, the assessee is required to provide technical services and is also required to depute expert for site review of implementation by KPTL and technical services provided by Zangas. Hence, it is seen that deputing expert was for a limited purpose for site review of implementation by KPTL and technical services provided by the assessee and the entire construction work was to be undertaken by the KPTL. As per these activities included in the scope of work of the assessee company, we are of the considered opinion that on the basis of these facts, it cannot be said that the assessee is doing the construction work and the consideration received by the assessee is from doing the construction work. Nothing has been brought on record by the A. O. to show that anything extra was done by the assessee in addition to the responsibility specified in the co operation agreement. In fact, this is not even an allegation of the ....
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.... if extra responsibility of the assessee is there as per the consortium agreement and as per the terms of contract awarded by GAIL to the consortium, the assessee has not done those extra activities and the consideration received by the assessee is as per the co operation agreement for the activities provided in the co operation agreement and having accepted by the A. O. the amount of consideration received by the assessee at 3% of gross receipts of the consortium, it has to be accepted that the same is for providing FTS as per the co operation agreement. 15. Regarding the applicability of Section 115A of ht Income tax Act, 1961, we find that only exception is regarding of an income which are referred to in subsection (1) of Section 44DA. Section 44DA is applicable where the contract in respect of which FTS had been paid to the assessee is effectively connected with a permanent establishment (PE) where such foreign company is carrying on its business in India. In the present case, this is not the case of the A.O. that Section 44DA is applicable with regard to the receipt in dispute. Moreover, we also find that the receipt in question was in relation to PDPL project cannot be sai....