TaxTMI 
TaxTMI 
TaxTMI 
2016 (10) TMI 426
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....amanian himself treated as P.E rendering income of M/s.Carpi Tech SA liable to Indian income tax. 3. The facts of the case are that M/s.Carpi Tech SA is a foreign company, resident in Switzerland, specialized in Geo composite membrane water proofing and drainage systems. During the course of assessment proceedings, the assessee submitted that the project receipt from Tanakpur Power Project of National Hydro Electric Power Corporation Ltd.(NHPC) work is exempt from tax in India for the reason that the assessee does not have "continuous presence" or 'business connection' or a "permanent establishment" in India. During the assessment proceedings, the assessee further pointed out that the duration of the Tanakpur project was 40 days only i.e. not more than 6 months and stands excluded from the scope of Article 5 of the DTAA between India and the Swiss Confederation. 3.1 The ld. Assessing Officer was of the view that as stated earlier the assessee is engaged globally in geo composite membrane water proofing and drainage systems for dams, canals, tunnels and other hydraulic structures. During the period under consideration the assessee commenced the work awarded by National Hydro Power....
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....'agent of independent status' in terms of Article 5.5. & 5.6 of the DTAA. To buttress the assertion that Sri V.Subramanian was not an agent of independent status, the AO has observed that the companies claimed to have been represented by Sri V. Subramanian such as Litostroj Power and M/s Koncar were at different point in time i.e. between 2002 & 2006 while the Tanakpur project referred to the period 2007-2008 and not during the same period when Sri V. Subramanian was involved in undertaking the project work of the assessee. Further that in the data sheet presented before the Principal i.e. NHPC Sri V. Subramanian has been represented as the Indian representative of the assessee. CIWSPL was also the Indian face of Carpi Tech SA, Switzerland representing the company in all practical matters, financially compensated by the assessee. To that extent the company represented by Sri V. Subramanian was dependent agent of Carpi Tech SA, the assessee, and therefore can be treated as PE. Finally the AO also drew attention to the fact that at the time of issuing an order u/s 195(2) on an application made by the assessee for NIL deduction certificate, all these facts could not be gone through. I....
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....credible or otherwise was led in this regard. Also, to refute and rebut the assertion made by the AO that Sri V. Subramanian primarily represented the assessee company almost exclusively during the period when these contracts were executed. In this case, the activities of the assessee and the Indian entity are intertwined and the Indian entity participates in the economic activities of the assessee, the activities of the Indian entity therefore necessarily are to be analysed to determine whether there is a fixed place P.E. In fact, the name of the company itself is the same as the non-resident company but for calling it Carpi Waterproofing Specialties Private Limited. Both carrying out identical nature of jobs in India. 4.2 Further, DRP observed that Sri V. Subramanian, the Managing Director of the Indian entity is the technical head with qualifications of being a graduate, Engineer and Marketing Management having experience in handling Hydro Power projects for various foreign and domestic companies. The role played by him as an agent of the non-resident company and the. Indian company who render similar services cannot be easily discerned or separated. There being a unison of int....
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....l presence for its activity in India. The DRP confirmed the view of the AO on this issue. 4.4 According to the DRP, the attribution of profits to PE must be governed in tune with Article 7(1) which lays down the basic rule of taxation of a PE. The country of source is given right to tax only that much of the profits of the enterprise which is attributable to the PE. In this case the AC needs to bring to tax such profits attributable to the operations carried out in India as also contemplated in the provisions of Explanation to Section. 9(1) of the Act. Hence, the DRP directed the AO to finalise the order keeping in view the directions as contained above. Against this direction of DRP and final assessment order, the assessee is in appeal before us. 5. Before us, ld.A.R submitted the following pointed for our consideration. (i) Sri V. Subramanian, besides being a Director in CIWSPL was also representing foreign enterprise such .as M/s Liitostroj Power and M/s Koncar apart from an Indian company M/s VA Tech Hydro; (ii) the periodicity when the assessee did Geomembrane fixing for TNEB was executed within duration of project which was for 105 days for the F.Ys. 2004-05 & 2005-06. ....
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....ing prejudice to the above, the AC has not allowed expenses towards cost of material, customs duty thereon in relation, to transport, installation cost, etc; . 5.1 Further, the ld.A.R placed reliance on the following cases. 1. Motorola Inc. Vs. DCIT in (2005) 95 ITD 269 (Delhi)(SB) 2. Sutron Corporation in (2004) 268 ITR 156(AAR) wherein held that collecting information submitting tenders and signing contracts on behalf of the non-resident amounts to business connection. 3. Horizontal Drilling international S.A Vs. CIT in (1999) 237 ITR 142(AAR) 4. DIT Vs. Paper Products Ltd., in [2005] 257 ITR 1(Delhi) 5. Aditya Birla Nuro Ltd. Vs. ADIT in 11 ITR (Trib) 812(Mum.) 6. Tiong Woon Project and Contracting Pte Ltd., in (2011) 338 ITR 386(AAR). 6. On the other hand, ld.D.R relied on the order of the lower authorities. 7. We have heard both the parties and perused the material on record. In this case, the ld. AR made a plea that the assessee has executed the project of NHPC at Tanakpur between 27.01.2008 to 05.03.2008, so that the number of days is only 40 days. Hence, as per provisions, time may be containing in Article 5.2(j) of the DTAA between India and Swiss. According....
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....uments. The contract documents were signed by Sri V. Subramanian on behalf of the assessee; vi) the company in its reply dated 15-11-2010 before the AO had specifically mentioned its date of incorporation as 216-12-2005 with share holders and Directors including the name of Sr V. Subramanian as a Director with two others; vii) the letter heads of both the assesses i.e. CIWSPL and M/s. Carpl Tech SA were similar and to that extent CIWSPL - Sri V. Subramanian was the India face of the assessee; viii) the domestic company CIWSPL was the authorized representative for the project taken by the assessee and further all expenses in India to execute the project were incurred by CIWSPL which were reimbursed by the assessee by remittance from Switzerland as well as from local account - as confirmed by the assessee vide its letter dated 15-11-2010; ix) M/s. Shakira Enterprises Pvt. Ltd., a vendor was appointed by CIWSPL to render services locally at New Delhi and the payments to the said company was made from the account of CIWSPL through their bank account. 7.1 On the basis of the above factual findings, a show cause dated 21- 10-2010 was issued by AO requiring the assessee to explai....
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....e Mrs. V. Thenmozhi and Mrs. S. Devaki with Sri V. Subramanian & Mrs. V. Thenmozhi being the only shareholders, In the web site of the assessee company, the address for correspondence for all official transactions is the office cum residential address of Sri V. Subramanian. But for the feeble assertion that Sri V. Subramanian is an independent agent also acting for and on behalf of M/s. Koncar, Croatia and M/s. Litostroj Power, Slovenia, no evidence, credible or otherwise was led in this regard. As also, to refute and rebut the assertion made by the AO that Sri V. Subramanian primarily represented the assessee company almost exclusively during the period when these contracts were executed. In a case as this before us, the activities of the assessee and the Indian entity are intertwined and the Indian entity participates in the economic activities of the assessee, the activities of the Indian entity therefore necessarily are to be analysed to determine whether there is a fixed place P.E. In fact, the name of the company itself is the same as the non-resident company but for calling it Carpi Waterproofing Specialities Private Limited. Both carrying out identical nature of jobs in Ind....
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....tity by the same name and rendering similar functions. Sri V. Subramanian was acting exclusively or almost exclusively for and on behalf of the assessee during the currency of the contracts in question. To that extent it was not in furtherance of his ordinary course of business. Finally the refuge taken of Article 5(2)(j) on the short period of contracts and the interregnum does not offer any solace to the assessee either. The assessee has not demonstrated it was a mere passing, transient or casual presence for its activity in India. In view of this, we confirm the order of the lower authorities This ground is therefore dismissed. 8. The next ground is that the consideration for the Tanakpur Project had two components, namely, Euro component (Euro 1427977.00) paid by NHPC to Carpi Tech SA, Switzerland by bank transfer and Rupee component of which the INR component was Rs. 2,89,22,585/- only (out of the total contract value of Rs. 11,95,56,285/-) which alone was payable and received in India for payment of customs duty on imports (amount paid Rs. 1,21,12,541/-), Service Tax and Sales Tax and towards sub-contractors payment/labour charges and site expenses; the AO has allowed only s....