TaxTMI 
TaxTMI 
2018 (7) TMI 1808
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....iary of HITT N.V.. It is a company incorporated as per the laws of Netherlands operating in the international market for safety, security and efficiency of nautical and air traffic. It operates in the specialized market for traffic control, navigation and port management systems. The assessee has entered into contracts with Oil and Natural Gas Corporation of India (ONGC) . Director General of Lighthouse and Lightships (DGLL) and Airports Authority of India (AAI) for supply of equipment and services. During the year under consideration, the assessee received payments in respect of performance of services and supply of equipment under the following contracts in India :- a) Supply, Installation, testing and commissioning of Advances Surfaces Movement Guidance Control System (ASMGCS) at Chennai, Mumbai and Kolkata Airports by AAI [ AAI (Mumbai, Chennai and Kolkata) Project ]. b) Establishment of Vessel Traffic Service (VTS) system in the Gulf of Kuchchh (GOK Project) c) Contract to provide Annual Maintenance of the Vessel and Air Traffic Management System (VATMS) system for ONGC (ONGC VATMS - AMC Project). The transactions of the assessee are covered under the Double Taxation Av....
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....shore to the alleged PE. Without prejudice to earlier grounds, the assessee had raised Ground 2.3. that no part of the income from offshore activities can be attributed to the alleged PE. 3.3. We find that these grounds had been adjudicated by this tribunal in assessee's own case for the Asst Year 2011-12 in ITA No. 390/Kol/2015 dated 4.4.2018 wherein it was held that the assessee herein constituted Installation PE in India. Further it was held that no attribution can be done on receipts from Offshore supply of equipment and Offshore provision of services. Only the profits attributed to the activities carried out in India shall be taxable and accordingly, only the onshore supply of equipment and onshore services rendered by the assessee, would have to be considered for taxing the onshore receipts at 10%. The relevant operative portion of the said order is reproduced hereunder:- 3.2. We have heard the rival submissions. The ld AR before us fairly stated that the assessee be treated as an 'Installation PE' but pleaded for treating only the onshore provision of services and onshore supply of equipments at 10% on gross basis as profits attributable to the Installation PE in India as....
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....e were carried on by the assessee directly from Netherlands. Hence the profits from such offshore supply of equipment and services cannot be attributed to the Installation PE of the assessee in India. In this regard, we would like to place reliance on the decision of the Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Limited vs DIT reported in 288 ITR 408 (SC) wherein it was clearly stated that in case the PE of a foreign company is not involved in any transaction carried out in India or outside India, no part of income earned from such transactions can be attributed to the PE in India. The Hon'ble Supreme Court held there has to be some activity through PE for attracting the taxing statute and , if income arises without any activity of PE, even under DTAA, taxation liability in respect of overseas services would not arise in India. In the case before the Hon'ble Supreme Court, the foreign enterprise was to develop, design , engineer and procure equipment, materials and supplies to erect and construct storage tanks in India. The Hon'ble Supreme Court held that the off-shore supply and off-shore services under the contract were not taxable in India since a....
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....sessee was awarded a contract in 2006 by ONGC for supply, installation, testing and commissioning of Vessel and Air Traffic Management System (VATMS) along with the provision of maintenance services. This contract envisaged a warranty period of 1 year after handing over of the project site and provision of Annual Maintenance Services (AMC services) for 6 years post such warranty period. The assessee started providing AMC services in relation to the VATMS system for a total period of 6 years, commencing from 1st October 2008, just after the completion of main contract for supply, installation , testing and commissioning of VATMS system (Page 327 of the paper book for Asst Year 2012-13 contains the AMC schedule ). Accordingly, the assessee provided only AMC services for the VATMS system installed by it in the earlier years. The activity was subcontracted to a local independent contractor viz Elcome Marine Services Private Limited (in short Elcome) and included regular maintenance activities such as visiting the sites for cleaning, checks, local fault repair etc. In general, there were all activities of a service nature. The assessee submitted that it did not perform any installation ....
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....bution of profits could be done in India. The relevant operative portion of the said order is reproduced hereunder:- 4.9. We have heard the rival submissions and perused the materials available on record. We find that similar arguments were advanced by both ld AR and ld DR in the earlier year in assessee's own case for the Asst Year 2010-11. This tribunal for the Asst Year 2010-11 with regard to the impugned issue had held as under:- 47. We have given a very careful consideration to the rival submissions. Our conclusions in para-36 with regard to existence of an installation PE in respect of GOK Project will equally apply to this project also. Admittedly, no installation activity was carried out during the previous year and therefore the question of an installation PE of the Assessee existing during the previous year does not arise for consideration at all. We are in complete agreement with the contentions put forth by the learned counsel for the Assessee on this aspect. Accordingly, we hold that since the VATMS equipment was already accepted and handedover to the customer in the year 2007 and no installation activity was carried out in India during the subject year, it cannot....
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....le 12(5) of the India- Netherlands DTAA. Hence the Grounds 3.1., 3.2., 3.3. and 3.4. (for Asst Year 2012- 13) and Grounds 3.1. and 3.2. (for Asst Year 2013-14) are disposed off accordingly. 5. AIRPORTS AUTHORITY OF INDIA (Mumbai, Chennai and Kolkata Project) The brief facts of this issue is that the assessee was awarded a contract for supply, installation, testing and commissioning of Advanced Surface Movement Guidance Control System (ASMGCS) at Chennai, Mumbai and Kolkata Airports by the Airports Authority of India (AAI in short) in the year 2008. With respect to the services to be provided, as per the contract , the assessee would provide two kinds of services i.e (i) services which are in the nature of installation, commissioning and testing services for Chennai, Kolkata and Mumbai Airport and (ii) training to the personnel of AAI . During the year under consideration relevant to Asst Year 2012-13, the assessee received the following payments :- a) For Off shore supply of equipment - Rs. 20,91,920/- b) For On shore provision of services - Rs. 10,53,85,547/- c) Training Income - Rs 72,28,150/- 5.1. The assessee in its return of income for the Ass....
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....DR vehemently argued that the assessee constitutes Installation PE in India for both the assessment years under consideration in as much as the assessee had also not provided any details regarding the time duration of each site so as to conclude whether the project was completed within 6 months or not. 5.5. We have heard the rival submissions. We find that for the Asst Year 2012-13, the assessee had earned receipts out of onshore provision of services. For the Asst Year 2013-14, it had earned receipts out of onshore supply of equipment/tools. We are inclined to accept the arguments of the ld DR that the number of days taken by the assessee for executing the installation work is not on records and even before this tribunal, no details whatsoever in that regard were filed by the assessee. Hence we dismiss the plea of the ld AR that the assessee cannot be treated as an Installation PE. We hold that the assessee is to be treated as an 'Installation PE' in as much as there is no evidence produced by the assessee to prove the time duration taken for each of the project sites carried out by the assessee for executing the installation work. However, we hold that only the onshore provision....
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....ed out by the permanent establishment in the State where the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the State of which the enterprise is a resident. (underlining provided by us) 2. ......... 3........... We hold that even as per the Protocol clause in the Indo-Netherlands Treaty, only the profits attributable to the activities carried out in India shall be taxable and accordingly only the onshore services rendered by the assessee would have to be considered by the ld AO for taxing the onshore receipts at 10% . Accordingly, the Grounds 3.1 to 3.3 raised by the assessee are dismissed as not pressed and Ground No. 3.4. is allowed. Accordingly, by respectfully following the aforesaid decision of this tribunal in assessee's own case for the Asst Year 2011-12, we uphold the action of the ld AO in treating the assessee as an Installation PE in respect of AAI Project but however restrict the profit attribution thereon to 10% of gross receipts. Hence the Grounds 4.1. , 4.2. and 4.3. (for Asst Year 2012-13) and Grounds 2.1., 2.2. and 2.3. (for Asst Y....
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....rgued that the ld AO erroneously concluded on the basis of agreements between the assessee and ONGC, that the duration test of 6 months as per Article 5(3) of India-Netherlands DTAA is fully satisfied, without bringing any material evidence on record to hold that the project of the assessee existed in India for a period of more than 6 months. He prayed for deletion of the profits attributed towards the alleged Installation PE. 6.2. The ld DR vehemently argued that the assessee constitutes Installation PE in India for the Asst Year 2013-14 in as much as the assessee had also not provided any details regarding the time duration of this project so as to conclude whether the project was completed within 6 months or not. 6.3. We have heard the rival submissions. We find that for the Asst Year 2013-14, the assessee had earned receipts out of both off shore and onshore supply of equipment and provision of services. We are inclined to accept the arguments of the ld DR that the number of days taken by the assessee for executing the installation work is not on records and even before this tribunal, no details whatsoever in that regard were filed by the assessee. Hence we dismiss the plea o....
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....f contracts for the survey, supply, installation or construction of industrial, commercial or scientific equipment or premises, or of public works, when the enterprise has a permanent establishment, the profits of such permanent establishment shall not be determined on the basis of the total amount of the contract, but shall be determined only on the basis of that part of the contract which is effectively carried out by the permanent establishment in the State where the permanent establishment is situated. The profits related to that part of the contract which is carried out by the head office of the enterprise shall be taxable only in the State of which the enterprise is a resident. (underlining provided by us) 2. ......... 3........... We hold that even as per the Protocol clause in the Indo-Netherlands Treaty, only the profits attributable to the activities carried out in India shall be taxable and accordingly only the onshore services rendered by the assessee would have to be considered by the ld AO for taxing the onshore receipts at 10% . Accordingly, the Grounds 3.1 to 3.3 raised by the assessee are dismissed as not pressed and Ground No. 3.4. is allowed. Accord....
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....of the Hon'ble DRP ignored the directions of the ld DRP and proceeded to charge interest u/s 234B of the Act for the Asst Year 2012-13. 7.2. Similarly the ld DRP had also directed the ld AO that surcharge and education cess is not leviable under the provisions of India-Netherlands DTAA and hence these are not leviable under beneficial provisions of DTAA. The ld AO however , while passing the final assessment order pursuant to directions of Hon'ble DRP ignored the directions of the ld DRP and proceeded to charge surcharge and cess along with the tax on the relevant income brought to tax for the Asst Year 2012-13. 7.3. We have heard the rival submissions. We find that the income of the foreign enterprise is to be governed by the provisions of section 195 of the Act wherein any payment made to foreign enterprise would be subjected to full deduction of tax at source. The ld DRP by placing reliance on the decision of Hon'ble Delhi High Court in the case of GE Packaged Power supra and by observing that the proviso to section 209(1) of the Act is applicable only from Asst Year 2013-14 onwards, had directed the ld AO not to charge interest u/s 234B of the Act. Similarly the ld DRP had al....