TaxTMI 
TaxTMI 
2017 (2) TMI 1318
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....n Province, P.R. China and 'is an enterprise, engaged mainly in development and consultation for power equipment technology, manufacturing and sale of power equipment, turnkey contracting for power projects, turnkey contracting for machinery, electrical machinery, electronic equipment and related projects etc.' The assessee has its sufficient presence in India, in order to carry on its business in India, through the project office referred to as "Dongfang Electric Corporation Kolkata Project Office". Admittedly, since the year 2004 i.e. on October 1, 2004, this Kolkata Project Office has served as the Permanent Establishment (PE) in India in the context of taxation under the Indian Income-tax Act, l96l and the India-China Double Taxation Avoidance Agreement [hereafter referred to as 'DTAA']. In the year 2004, the assessee entered into two separate contracts; one with the "The West Bengal Power Development Corporation Limited (WBPDCL)' for setting up Units 1 & 2 (2 X 300 M) for the Sagardighi Power Projects at Murshidabad, West Bengal and the other with "The Durgapur Projects Limited (DPL) for setting up units 7(1x300 MW) for the Durgapur Project Power Station....
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....ower plant in India. In both the cases, the original tender was for setting up of turnkey thermal power projects. The entire scope of work was split up in to two contracts on mutual arrangement. However, a 'cross-fall' breach clause features very prominently in both cases by virtue of which performance of the entire contract was treated as a single point responsibility of DEC, China and non-performance of any part or portion of the contract was to deemed as a breach of the whole contract. In February, 2005 the assessee made separate applications u/s 197 of the income tax Act, 1961 (the Act) in respect of the aforesaid two projects in which the following submissions were made. (i) Supply of equipment from overseas is not taxable in India both under the Domestic Law as well under the Indo-China DTAA and hence should not be subjected to tax deduction at source and (ii) Local supply and services portion should be subjected to tax deduction of source at Nil rate since the company expected to incur substantial loss on such services. Section 44BBB of the Act will be applicable to the company's case and company will opt for taxation on net income basis under sub-sec....
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.... the permanent establishment or have no relation with permanent establishment, then no income from offshore supply contract is taxable in India. * Otherwise, only such part of profit as is reasonably attributable to the operation relating offshore supply is carried out by the PE in India is taxable in India. There would be no deduction of tax in respect of receipts from offshore supply, but the petitioner shall maintain a separate account of receipt and expenditure in respect of operation relating to offshore supply contract carried out by the PE in India (with proper documentation and supporting evidence), the profit, from which shall be clubbed with the profits from local supply and services portion and if there is only tax liability, after giving credit for TDS from local supply and services contract, the same shall be paid by the petitioner by way of advance tax. b) Local supply and Services:- The order of the Assessing Officer is confirmed. The tax shall continue to be deducted @ 4.182% of the receipts for local suppliers & services till the completion the contract, even if there is actual loss/lesser income, after exercising option u/s 44BB....
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....er pricing order for AY2011-12 leading to the impugned order. 4a. On the facts and in the circumstances of the case, the DRP completely misinterpreted the directions of courts in earlier year, failed to consider all relevant aspects and routinely upheld draft assessment order and transfer pricing order passed on identical lines as in earlier years. DRP completely failed to appreciate that the whole purpose of de novo assessment as already directed by the higher courts in earlier years, would be lost by merely repeating the earlier orders. 4b. On the facts and in the circumstances of the case, DRP erred in not considering the fact that routine and predetermined repetition of the very same grounds for reaching same conclusions as in earlier years has led to serious miscarriage of justice and in a way made mockery of directions from Higher Courts in earlier years to carry out 'de novo assessment considering all aspects'. 5. On the facts and in the circumstances of the case, DRP erred in not considering the fact that the TPO has chosen to selectively ignore critical facts or consciously chosen to apply irrelevant provisions to reach predetermined conc....
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....ces in the comparables; (iv) By adopting the cost base without appreciation of the scope of activities undertaken by the Project Office; (v) Without appreciating that the appellant is making overall loss on the said project; (vi) By incorrectly computing the operating revenue and operating expense of the Project Office for AY 2011-12; (vii) By not taking into consideration the fact that while computing operating expense of the Project Office, the sub-contractor and supply expenses has already been considered by the TPO while computing the operating margin of the Project Office in Financial Year ('FY') 2009-10 and considering the same again while computing the operating margin of the Project Office in the FY 2010-11 is explicitly bad in law. 12. On the facts and in the circumstances of the case, DRP erred in not considering the fact that the TPO has not given an opportunity of being heard to the assessee and in not providing the details/ documents on which the TPO has relied in its order. DRP did not consider the fact that the TPO has not provided to the company in respect of the materials/ information gathered and used against th....
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....the Assessing Officer to the TPO as required by law and hence, the order of the TPO is of no consequence and consequently the assessment is barred by limitation as the Assessing Officer is not entitled to an extended time for completion of assessment as per the Act. He further submitted that the Act mandates the Assessing Officer may refer to the TPO "international transactions" for determination of "Arm's Length Price", u/s 92CA of the Act. He submitted that, no international transaction has been referred to the TPO by the Assessing Officer as required u/s 92CA of the Act and what was referred is the entire assessment itself. Thus, he submits that the reference is bad in law and subsequently the assessment is barred by limitation. On merits, the contentions of the assessee is that CUP method is the Most Appropriate Method (MAM), and that the Assessing Officer has erred in adopting TNMM method. Detailed arguments were made in support of the contentions. Alternatively, he made arguments on the exclusions/inclusions of certain such comparables. We do not repeat all these submissions in details as we would first take up the preliminary issue of limitation for consideration. 4.1.....
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.... does not get extended. He submitted that the assessment is barred by limitation. 6. After considering rival contentions, perusing the papers on record, orders of the authorities below and case-law cited, we hold as follows:- 6.1. Though the TPO stated that a reference u/s 92CA(1) of the Act, was received in the case of the assessee, for Assessment Year 2011-12, from the Assessing Officer for the determination of ALP for its international transaction. No specific letter/ communications referring the international transaction, by the Assessing Officer to the TPO, could be produced before us. The letter dt. 14/03/2014, relied upon by the ld. D/R, is extracted for ready reference:- 6.1.1. A perusal of the above letter demonstrates that the approval granted by the DIT(TP), was communicated to the TPO. Section 92CA(1) of the Act, reads as follows:- "92CA. (1) Where any person, being the assessee, has entered into an international transaction [or specified domestic transaction] in any previous year, and the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the [Principal Commissioner or] Commissioner, refer the computa....