TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 512
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....brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused. 3. The appellant, M/s Siemens Mobile Communications [SMCS for short], is a company incorporated under the laws of Italy. The appellant was engaged in the business of manufacture and supply of microwave transmission equipment. During the years under consideration, SMCS supplied microwave transmission equipment (including both hardware and software components) to its customers in India, being independent telecom operators viz., BPL Mobile Communications Ltd., Usha Martin Telecom Ltd., Tata Communications Ltd., Modicom Network Pvt. Ltd. and Aircel Digilink Pvt. Ltd. 4. The quarrel is in respect of taxability of offshore supplies made by SMCS to the aforementioned telecom operators in India. The Revenue has taken the consistent position that some portion of the profit relating to these offshore supplies should be brought to tax in India. The basis for this position taken by the Revenue is the activities relating to installation, commissioning and maintenance, which would require the presence of SMCS in India and hence some portion of the profit wo....
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....ip Ltd. 394 ITR 80 and ADIT v. E-Funds IT Solution Inc. 399 ITR 34 has held that there triggers no taxability in respect of offshore supplies in the absence of a PE of the non-resident assessee in India. In so far as the attribution of profit is concerned, as enshrined in Article 7 of the DTAA, the same would be inapplicable in absence of any activity relating to the offshore supplies being carried out in India. 9. Interestingly, in 1998-99, the ld. CIT(A) has decided the issue involving the existence of a PE in favour of the appellant. However, in subsequent years, the successor ld. CIT(A) did not follow the order passed by his predecessor. 10. As mentioned elsewhere, the appellant has supplied items to independent telecom operators and such supplies have been made offshore. A perusal of the contracts with the telecom operators shows that supply was concluded with the title and risk in the components passing on to the concerned telecom operators offshore. 11. However, the ld. DR has analyzed the contracts in a Tabular Form as under: 12. It seems the ld. DR has misconstrued the relevant clauses of the contracts. Clause 15.1 of the agreement dated 26.02.1997 with BPL Mobile ....
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....es and since no expatriate employees visited in the subsequent years, issue of fixed PE in any case would not arise. For this proposition, we draw support from the decision of the Hon'ble High Court of Delhi in the case of DIT v. Ericsson A.B., New Delhi [2012] 343 ITR 470. 17. It would be pertinent to understand the role of SPCNL. The appellant had entered into an agreement dated 01.10.1997 with its sister concern, SPCNL, where under SPCNL was required to carry out marketing and promotional activities; inform SMCS about the programs and plans of various public bodies, corporations or private entities; call for tenders; enable commercial, technical, administrative and legal support; etc. For these services rendered, SPCNL was remunerated on arm's length basis. 18. On 01.10.1997, SPCNL also entered into independent contracts with the telecom operators in India for undertaking installation, testing and commissioning of the components supplied to them by the appellant. In addition to these activities, the scope of activities performed by SPCNL also encompassed manufacturing, sale and trading of a wide range of telecommunication equipment, such as switching equipment, optical trans....
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....Tribunal has held that the existence of the LO constituted a PE of Hitachi Hitech Technologies. 25. In our considered opinion, the decision in the case of Hitachi Hitech Technologies [supra] was delivered on different set of facts wherein pursuant to survey operation, certain facts were unearthed and on the basis of these facts, the Tribunal came to the conclusion that the LO constituted a PE of Hitachi Hitech Technologies. The case in hand is devoid of all those facts and hence the said decision of the Tribunal would do no good to the Revenue. 26. As mentioned elsewhere, the Revenue has strongly alleged that title in components passed to telecom operators in India onshore. SMCS had a significant role to play in the process of carrying out acceptance tests and the same was done by SPCNL on behalf of the appellant. 27. Another point raised by the ld. DR in support of the assessment order is that It is difficult to envisage that the appellant would have chosen to remain unrepresented either by itself or through a representative during a crucial test on which the functioning or non functioning of a component supplied by it was to be determined. According to the ld. DR, the appel....
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....torney, facts on record show that the PoA dated 13.09.1997 was not executed for signing of contract dated 26.02.1997 entered into between SPNCL and BPL Mobile Communications. The contract dated 26.02.1997 was signed by Shri Binotti under a separate PoA dated 16.02.1997. This is evident from the contract dated 26.02.1997, exhibited at page no. 2 of paper book no. 1, for which the PoA was executed on 16.02.1997. The said PoA has also been exhibited at page no. 1014 of paper book no. 4. Contract dated 17.09.1997, at page no. 61 of paper book no. 1, PoA was executed on 15.11.1997. This PoA has also been exhibited at page no. 1018 of paper book no. 4. In our considered view, signing of the contract is merely putting signature on a paper and does not, in any manner, lead to an inference of PE or business connection. 34. As mentioned elsewhere, the Revenue has alleged that the appellant has failed to provide information with respect to employees who visited India during the subject AYs which precluded the Revenue to analyse whether the appellant has a PE in India. We have already pointed out the dates of execution of contracts from which it can be seen that almost all the contracts were....
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....e activity of installation, commissioning and maintenance. In our understanding of the facts, since the offshore contract for supply of components cannot be read together with the onshore contract of rendering installation, commissioning and maintenance, and has to be seen in the light of the provisions of India- Italy DTAA and tests set out in the decision of the Hon'ble Supreme Court in the case of Formula [supra] and which are (a) Place of business (b) Disposal test and (c) Virtual projection. 40. Considering the facts on record, SPCNL should not be considered a fixed place from which business of the appellant was wholly or partly carried out. The business of SPCNL is not dependent on the appellant as the facts show the variance in the scope of activities nor it can be said that SPCNL is at the disposal of the appellant. 41. We will now address to the issue of installation PE. The allegation of the Assessing Officer is that since the appellant is engaged in the activity of manufacture and supply of components as well as had other obligations including delivery, acceptance test and installation, assembly or supervision on sites, which activities continued for over 6 month....
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....telecom operators show that the appellant was not even responsible for performing pre-network surveys or software updates. The appellant does not hold any equity capital in SPCNL and the sphere of activities performed by SPCNL was much broader than those envisaged under the agreement entered into between SMCS and SPCNL. 48. Assuming, yet not accepting that the installation activities were undertaken by SPCNL at the behest of the appellant, the same would still not render the income of the appellant to be taxable in India, since the supply of hardware components, i.e., the taxable activity, was completed before the installation activities. 49. The ld. DR had placed reliance on the decision of the co-ordinate bench in the case Daikin Industries Ltd., Gurgaon [2018 - TII- 165, which is distinguishable on facts, because in that case the Indian entity involved was identifying customers, approaching customers, negotiating prices, and finalizing products sold by it in the capacity of a distributor, as well by the non-resident entity therein. Moreover, in that case, the said Indian entity had failed to establish how it was economically and otherwise independent. 50. The ld. DR has re....
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....e consequences delineated in that provision will visit the payer. The appeal of the Revenue is accordingly dismissed without any order as to costs. " It may be pointed out that the Finance Act, 2012, w.e.f. 1.4.2012 added proviso below section 209(1)(d) of the Act. But the said proviso is applicable from assessment year 2013-14 and, therefore, prospective in operation. 28. In our understanding, the insertion of the proviso cannot be considered to have retrospective effect so as to expose a nonresident company to levy of interest u/s 234B of the Act for the assessment years prior to assessment year 2013-14. In the light of the above, we direct the Assessing Officer to not charge interest u/s 234B of the Act." Respectfully following the findings of the co-ordinate bench, we hold that no interest is leviable u/s 234B of the Act. Accordingly, we direct the Assessing Officer not to charge interest u/s 234B of the Act. 53. Considering the facts of the case in totality, the issues mentioned at para 7 hereinabove, are decided in favour of the assessee and against the revenue. Meaning thereby, that all the appeals by the assessee are allowed and that of the revenue is dismissed. ....
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.... Tax on above @ 48% 4,75,37,568/- Tax on supply of software 7,58,33,736/- 60. The assessee carried the matter before the ld. CIT(A) but without any success. 61. Before us, the ld. counsel for the assessee, at the very outset, stated that the impugned issue is directly covered in favour of the assessee and against the revenue by the decision of the Hon'ble High Court of Delhi in the case of ZTE Corporation 392 ITR 80. 62. The ld. DR could not bring any distinguishing decision in favour of the Revenue. 63. We have given thoughtful consideration to the orders of the authorities below and have also considered the decision of the Hon'ble High Court of Delhi [supra]. We find force in the contention of the ld. counsel for the assessee. Similar issue was considered and decided by the Hon'ble High Court of Delhi [supra]. The relevant findings of the Hon'ble High Court read as under: "20. The misconception that the revenue harbors stems from its flawed appreciation of a copyright license. True, "copyright" is not defined; yet what works are capable of copyright protection is spelt out in the Copyright Act. Sections 13 and 14 of the Copyright Act flesh out the e....
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....ecording- (i) to make any other sound recording embodying it; (ii) to sell or give on hire, or offer for sale or hire, any copy of the sound recording regardless of whether such copy has been sold or given on hire on earlier occasions; (iii) To communicate the sound recording to the public Explanation - For the purposes of this section, a copy which has been sold once shall be deemed to be a copy already in circulation." Thus, Section 14 categorically provides that copyright "means the exclusive right to do or authorizing the doing of any of the acts mentioned in Section 14 (a) to (e) or any ―substantial part thereof". The content of copyright in respect of computer programmes is spelt out in Section 14 (b). A joint reading of the controlling provisions of the earlier part of Section 14 with clause (b) implies that in the case of computer programs, copyright would mean the doing or authorizing the doing- in respect of work (i.e. the programme) or any substantial part thereof - (b) In the case of a computer programme,- (i) to do any of the acts specified in clause (a) (ii) to sell or give on commercial rental or offer for sale or for commercial rental any ....