TaxTMI 
TaxTMI 
2019 (10) TMI 1224
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....Tax (Appeals) -13, Ahmedabad ['ld. CIT (A)'] has erred in law and on facts in upholding the action of the learned Assessing officer ('AO') in treating the appellant as an assessee in default u/s 201 (1) of the Income Tax Act, 1961 ('the Act') and raising demand of Rs. 7,15,88,395/- [including interest of Rs. 1,24,86,591/- u/s 201 (1 )(1A) of the Act] for non-deduction of tax at source u/s 195 of the Act on payments made to the following non-resident suppliers towards import of coal. (i) PT Bara Jaya Utama, Indonesia ('PT Bara Jaya') (ii) Brooklyn Enterprise Pte. Ltd., Singapore ('Brooklyn Enterprise') (iii) Avani Resources Pte. Ltd., Singapore ('Avani Resources') (iv) Suek AG, Switzerland ('Suek AG') 1 (b) The ld. CIT (A) has erred in law and on facts in holding that the non-resident suppliers of coal had business connection in India by virtue of Explanation 2 to section 9(1 )(i) of the Act as well as Permanent Establishment ('PE') as per Article 5 of the respective Double Taxation Avoidance Agreement ('DTAA') applicable to such non-resident suppliers. 1 (c)....
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....contrary to the material information available on record rendering his findings to be such which no reasonable person duly briefed in the matter could have ever reached. The appellant craves leave to add, amend, modify, rescind, supplement or alter the grounds taken hereinabove either before or at the time of hearing of this appeal 3. Briefly stated facts as culled out from the records are that the assessee is a Limited Company engaged in the business of trading in coal. The assessee is responsible for deducting tax a source under Chapter 15 of I.T. Rules, 1961. During the Financial Year 2014-15 assessee imported coal from following four non-resident suppliers; 1.PT Bara Jaya Utama, Indonesia ('PT Bara Jaya') 2. Brooklyn Enterprise Pte. Ltd., Singapore ('Brooklyn Enterprise') 3. Avani Resources Pte. Ltd. Singapore ('Avani Resources') and 4. Suek AG, Switzerland. ('Suek AG') 4. From the above referred four parties coal valued at Rs. 86,07,05,873/- was imported through the common broker namely Southern Pacific Energy Pvt. Ltd.( in short 'SPEPL'), Gurgaon, Haryana. During the year under appeal the appel....
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....eduction of tax at source u/s 195 of the Act. 7. Ld. Assessing officer however was not convinced and he while passing order dated 01.09.2016 u/s 201(1)/201(1A) r. w. s. 195 of the Income Tax Act, 1961 ('the Act'), held that import of coal by the appellant through broker viz. SPEPL constitutes business connection and non-residents sellers in India and accordingly estimated 10% income on the alleged purchases from Non-resident sellers as taxable income in India. He further held that inspection charges paid by the appellant falls within the definition of Fees for Technical Services ('FTS') and accordingly liable to deduction of tax at source u/s 195 of the Act. 8. Accordingly Ld. A.O calculated the TDS and interest liability on the alleged payment for import of coal and technical service charges paid to non-resident suppliers/agency totaling to Rs. 7,17,00,848/-in the following manner; Import of Coal Sl. No. Name of non-resident Total amount remitted Profit-Estimated at 10% of amount remitted Grossed up-Amount as per section 195A of the Act Default of TDS act 41.20% (a) Date of Payment Interest u/s 201(1)/201(1A) of the Act. (b) ....
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.... Explanation 2- For the removal of doubts, it is hereby declared that "business connection" shall include any business activity carried out through a person who, acting on behalfofthe non-resident,- (a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or (b) has no authority , but luzbitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or (c) habitually secures orders in India, mainly or wholly for the non resident or for that non-resident or that nonresident and other nonresidents controlling, controlled by or subjectto the same common control, as that o(non- resident: Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status is acting in the ordinary course of the business. Provided further that where such broker, general commission agent or any other agent works ....
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....en if the contract is signed by another person in state in which the enterprise is situated or if the first person has not formally be given the power to representation. (see OECD Commentary, article 5, paragraph 33)" Accordingly, it is important to ascertain as to whether the agent has authority to conclude the contract particularly in view of OECD commentary which says that authority to negotiate may be treated as deemed authority to conclude contract in certain circumstances. I have gone through the assessment order and written submission of the appellant in this regard. For existence of a dependent agency permanent establishment, the agent must be authorized to conclude contracts on behalf of the foreign enterprise. But, that authority need not be explicit - it could be even implied. The assessing officer has also substantiated existence of authority by the agents to negotiate the contract in its order. The appellant could not submit any cogent evidence as to nonexistence of authority by the agents to negotiate all aspects of a contract in a manner that effectively bind the principal. The argument derives support from the general rul....
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....which is determined by consideration of the extent to which the agent exercises freedom in the conduct of business on behalf of the principal within the scope of the authority conferred by the agreement. » Further, the relevant extract of US Model Commentary on Article 5 is as under: "Whether the agent and the enterprise are independent is a factual determination. Among the questions to be considered are the extent to which the agent operates on the basis of instructions from the enterprise. An agent that is subject to detailed instructions regarding the conduct of its operations or comprehensive control by the enterprise is not legally independent." 10. Based on above, criterion for determination of legal independence of the agent with its principal can be summarized as under: 1. Significance of control by the principal on the agent with respect to the manner in which the work is carried out; 2. Extent of the obligations which the agent has vis-a-vis the principal with respect to the work carried out; 3. Extent to which the activities of the agent are subject to detailed instructions of the principal with respect to the w....
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....er, there is additional one is quotation from M/s. Artha Buana, Indonesia for conducting quality analysis at load port in Indonesia. 2. All above coal purchase contract has been placed vide email and facilitated by a broker based in India. Assignment to Artha Buana was given through business reference. 3. As per our information and knowledge none of the above has office in India. We have exclusively communicated dealt with their respective account office. 4. All above Coal selling Non-residents have been contacted through Broker M/s Southern Pacific Energy Pvt. Ltd. Gurgaon. 5. Yes, as above. M/s Southern Pacific Energy Pvt. Ltd., Gurgaon, Haryana. PAN: AARCS6495J 6. Broker has facilitated the transaction e.g. get well negotiated price for us smooth execution of agreement channelizing communication between both ends. The assessee itself accepted that all the transactions has been made through a broker named M/s Southern Pacific Energy Pvt. Ltd., Gurgaon and contract has been placed by email facilitated by a broker based in India. All Coal selling Non-residents have been contacted through Broker and the broker well negot....
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....nd negotiated the price through the broker only. All the terms and conditions have been finalized through the broker only. The assessee did all the conversation regarding finalizing the order and concluding the contract through broker only. When all the terms and conditions are finalized and price of the product has been negotiated through the broker, the assessee entered into contract with the non- resident. The assessee itself accepted that communication is done through the broker, since the offer comes through him. To confirm the role of the broker M/s. Southern Pacific Energy Put. Ltd. Gurqaon and to establish him as a business connection and permanent establishment of non-resident in India, the undersigned issued a notice u/ s. 133(6) of the Act to the broker on 12/07/2016 and raised various queries. The broker has furnished some important information in his reply by which it may be easily established that he is working as business connection and permanent establishment of non-resident in India. The relevant portion of the reply is reproduced as under: Q. What was your role while procuring orders for Hind energy &Coal Beneficiation (India) Pvt Ltd Bhopal on b....
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....f Credit. x) Once the transaction is complete, we raise our bill for our brokerage on our client and the brokerage is released by the client as agreed between us. (NOTE- From above submission of the broker it is clear that all the procedure of finalizing the contract is done by assessee and broker. Issuing offer, price negotiation and finalization of terms and conditions are done between the assessee and broker.] Q. Please submit the copy of agreement executed between you and the above mentioned 4 non-residents. Ans.We have a written agreement only with M/ s. Suek AG Switzerland and the agreement is enclosed required. No formal agreement exist with other 2 mentioned parties. The question of having any agreement with PT Bara Jaya Utama Indonesia does not and cannot arise since we have never provided any services to the said non-resident. (Note - the broker has submitted the copy of agreement with only one nonresident. The assessee has submitted his common reply regarding all the non-residents and submitted a similar procedure followed by him in all cases. The statement that the broker did not provided any services to PT Bara Jaya Utama In....
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....d Gurgaon as an exclusive agent in India and he authorizes the broker to negotiate between SUEK and the relevant parties. He also gave the various responsibility to the broker related with Indian Market.) EXCLUSIVTY, CONFLICT OF INTEREST 2.1 The Agent represents and warrants to SUEK that it is able to act as SUEK's exclusive Agent in India for the specified coal and is not currently acting nor will it act in future for any competitor of SUEK in relation to specified coal during the term of this Agreement, except as otherwise agreed herein. 2.2 SUEK represents and warrants to the agent that in it has not appointed not will it appoint any other agent for marking and promotion of the specified coat in India during the term of this Agreement, except as otherwise agreed herein (NOTEK Suek AG Switzerland appointed M/s Southern Pacific Energy Pvt Ltd Gurgaon as an exclusive agent in India and he accepted that he will not appoint any other agent for marking and promotion of the specified coal in India means the broker is exclusively and wholly working for the non. resident. Whole affairs related with Indian market for the nonK resident have ....
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....strued in substance and not in form. Thus, if an agent has the authority to negotiate all parts of the contract in a manner, which is binding on the principal but the contract is signed outside the Source Country, the agent could be said to have the authority to conclude contract. Accordingly, proviso to Explanation (2) of Section 9( l)(i) of the IT Act would not be applicable and accordingly, contention of the appellant that agents are working in independent status is not accepted. 12. In the AAR's ruling in case of 8002 & Company (Australia) Pvt., In re [14th February 2014 [2014J 42 taxmann.com 288 (AAR New Delhi); [2014J 265 CTR 449 (AAR - New Delhi) is a good example wherein the agent was found to be dependent upon the foreign principal. It has made reference to the case of CIT v. R.D. Aggarwal& Co. [1965J 56 ITR 20 (SC) which has been relied upon by the AR in his contentions. The relevant para of the said decision is reproduced herein under- "In Cl'T v. R.D. Aggarwal S: Co. [19651 56 ITR 20 (SC), the essence of the expression is brought out in the following observation of the Supreme Court: "The expression 'business connection....
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..... Section 182 of the Indian Contract Act, defines the term "agent" and "principal". However, while defining these terms, it is no where provided in section 182 of Indian Contract Act, that the Agent cannot act for both buyer and seller. Arrangement of agent with both buyer and seller are independent of each other and cannot be used to interpret business arrangement with other party. 17. Having taken note of the AO's order and the observations made in his order, I am completely in agreement with the AO's finding that Indian agent is working as an exclusive agent for non-residents in India and has authority/deemed authority to conclude/negotiate the terms and conditions with the customers in India on behalf of non-residents. Further, as mentioned above the existence of presence of the overseas parties in India and their business connection in India cannot be ruled out. Accordingly, I consider it proper and appropriate to hold that the reasoning assigned by the AO for concluding that non-residents has business connection in India by virtue of Explanation 2(a) of section 9(1)(i) of the Act as well as permanent establishment as per Article 5(1) and 5(4)(a) of the DTAA is justifi....
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....ate about the parties and the amount of commission received by M/s Southern Pacific Energy Pvt. Ltd and iii) copy of intimation u/s 143(1) for FY 2014-15 (AY 2015-16) are annexed herewith as annexure A/1, A/2 and A/3 respectively. 3. That another issue raised by the Ld. CIT(A) was that one of the exporter based in Switzerland SUEK AG has an office in India. The appellant has downloaded a copy of master data of SUEK AG from the MCA portal which categorically shows the said India office to be a liaison office. This information is available in public domain and since this issue was raised for the first time by the Ld..CIT(A) therefore the appellant could not get any opportunity to rebut the same and this document is thus now being filed as additional evidence (although since the same is available in public domain therefore in true spirit it is not additional evidence) but nevertheless in order to comply with the technicalities the said document is also being filed as a part of this application. True copy of the aforesaid MCA portal information about SUEK AG is annexure A/4. 4. It is, therefore, prayed that this Hon'ble Tribunal be please to allow this application for....
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....Jaya. CA certificate certifying party-wise break-up of revenue earned by Southern Pacific during FY 2014-15 (refer Annexure A/2 of application for submission of additional evidence) substantiates the fact that no revenue was earned by Southern Pacific from PT Bara Jaya. Further, payment of commission by the appellant to Southern Pacific proves that Southern Pacific has provided brokerage services to the appellant and not to PT Bara Jaya. In view of the above, treating Southern Pacific as an agent of PT Bara Jaya thereby considering Southern Pacific as 'business connection' of PT Bara Jaya is factually incorrect. Therefore, TDS demand of Rs. 2,29,70,660/- in respect of import from PT Bara Jaya should be deleted. Ground No.1(b), 1(d) & 3 Step-by-step process carried out for import of coal through Southern Pacific is summarized below: a) The appellant approaches Southern Pacific with requirement of grade and quantity of coal. b) Southern Pacific identifies the supplier having requisite grade and quantity of coal and then forwards the requirement received from the appellant to the suppliers. c) On receiving the off....
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....rms and conditions are agreed upon by the appellant and the non-resident suppliers. It is worth noting that when Southern Pacific forwarded offer of the supplier to the appellant, it distinguished communication from supplier with separate para marked as "Quote" reproducing extract of e-mail, which it received from the supplier. Then Southern Pacific marked next para as "Unquote" and wrote whatever it wanted to communicate from its side. This clearly demonstrates that Southern Pacific was not giving any offer from its side but just forwarded what was received from the supplier and accordingly, had no authority to conclude contracts. In view of the above, it is submitted that Southern Pacific had no authority to conclude contracts on behalf of the non-resident suppliers. Vide notice u/s 133(6), the AO asked Southern Pacific to furnish reply to various queries including inter-alia the following: "5. Have you authorized by anyone of the above mentioned 4 nonresidents to negotiate the business dealings with Indian companies? 6. Have you an authority to conclude contracts on behalf of the above mentioned 4 non-residents?" Vide reply d....
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.... has only one principal for whom the agent works exclusively. The fact that the principal has only one agent in India who undertakes all the activities for the principal is not relevant. The decision relied on by the AO in the case of DHL Operations (supra) was distinguished by DIT (International Taxation) v. Morgan Stanley & Co. Inc. [2007] 292 ITR 416/ 162 taxman 165 (SC). Further, in the case of DIT v. B4U International Holdings Ltd. [2012] 23 taxmann.com 372 (Mum.) Mumbai ITAT has held that the wordings of Article 5.5 viz "when the activities of such an agent are devoted exclusively or almost exclusively on behalf of the assessee enterprises" referred to the activities of an agent and its devotion to the non-resident and not the other way round. The perspective should be from the angle of the agent and not of the non-resident. Ground No.1(b), 1(c) 1(d) & 3 Vide letter dt. 20 May 2016 filed before the AO, Southern Pacific has confirmed the following: a) Southern Pacific is not controlled by any of the non-resident suppliers. b) Southern Pacific has no authority to conclude contracts on behalf of any seller or buyer. c) Southe....
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..... The Hon'ble Bombay High Court in DIT(IT) v. Delmas France (232 Taxman 401) dismissed the revenue's appeal against the said order of the Hon'ble ITAT. The AO as well as the CIT(A) have not at all dealt with the aforesaid aspect. 14. Ld. Counsel for the assessee relied and referred following judgments; 1. Varian India Pvt. Ltd vs ADIT(IT), Mumbai (AY 2002-03 to AY 2006-07) ITA no. 4672/ Mum. / 2011, order dt. 27 February 2013. 2. ADIT(IT) vs Bay Lines [2018] 91 taxmann.com 110 (Mumbai- Trib) 3. DDIT(IT) vs B4U International Holdings Ltd. [2012] 137 ITD 346 (Mumbai) 4. DIT(IT) vs B4U International Holdings Ltd. [2015] 374 ITR 453 (Bom HC) 5. Speciality Magazines (P) Ltd [2005] 144 Taxman 153 (AARNew Delhi) 6. International Global Networks BV vs ADIT (IT) [2017] 84 Taxmann.com 188 (Mumbai- Trib) 7. Al Nisr Publishing vs CIT [1999] 105 Taxman 308 (AAR-New Delhi) 8. Western Union Financial Services Incvs ADIT (IT) [2007] 104 ITD 34 (Delhi-Trib) 9. Delmas vs ADIT(IT) [2012] 49 SOT 719 (Mum- Trib) 10. DIT(IT) vs Delmas [2015] 232Taxmann401 (Bombay HC) 11. Hira Mills Ltd. Vs ITO ....
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....bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode : Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. Section 5(1) (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year: Provided that, in the case of a person not ordinarily resident in India within the meaning of sub- section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India. Section 9(1) Income deemed to accru....
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....ually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or Following clause (a) shall be substituted for the existing clause (a) of Explanation 2 to clause (i) of sub-section (1) of section 9 by the Finance Act, 2018, w.e.f. 1-4-2019 : (a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident or habitually concludes contracts or habitually plays the principal role leading to conclusion of contracts by that nonresident and the contracts are- (i) in the name of the non-resident; or (ii) for the transfer of the ownership of, or for the granting of the right to use, property owned by that non-resident or that non-resident has the right to use; or (iii) for the provision of services by the non-resident; or (b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the nonresident; or (c) habitually secures orders in India, mainly or wholly for the non-resi....
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....ed State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise. (c) habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself. 6. Notwithstanding the preceding provisions of this Article, an insurance enterprise of a Contracting State shall, except in regard to re-insurance, be deemed to have a permanent establishment in the other Contracting State if it collects premiums in the territory of that other State or insures risks situated therein through a person other than an agent of an independent status to whom paragraph 7 applies. 7. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other Contracting State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise, he will not be considered an agent of an indepe....
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....ent of the other Contracting State, or which carries on business in that other Contracting State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. C. Article -5 of India - Switzerland DTAA: "1.. to 4... 5. A person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State other than an agent of an independent status to whom paragraph 6 applies shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if: (i) he has and habitually exercises in that State, an authority to negotiate and enter into contracts for or on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise; or (ii) he habitually maintains in the first-mentioned Contracting State a stock of goods or merchandise from which he regularly delivers goods or merchandise for or on behalf of the enterprise; or (iii) in so acting, he manufactures or processes in that State for the enterprise goods or merchandise belonging....
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....SPEPL on behalf of the non-resident suppliers can be termed as a "business connection" in India as provided in explanation 2 to Section 9(1) of the Act. (iv) Explanation 2 to Section 9(1) of the Act mainly focus on the phrase " that the agent works mainly or wholly on behalf of a non-resident". (v) Similarly in respect of Clause 7, Clause-9 and Clause-6 of Article 5 DTAA between India Indonesia, Singapore and Switzerland again the stress is on the phrase "activity of such an agent are devoted wholly or almost wholly on behalf of that Enterprise". 19. Now the revenue's contention is that the alleged agent namely SPEPL is working mainly and wholly on behalf of the non-resident suppliers and therefore it constitutes the "business connection" of the four non-resident coal suppliers namely PT Bara Jaya Utama, Indonesia,Brooklyn Enterprises Pte. Ltd, Singapore,Avani Resources Pte. Ltd, Singapore and SuekAG, Switzerland. The revenue's further contention is that since the above referred four non-resident suppliers of coal have "business connection" in India through their agent SPEPL, the income element in the export of coal needs to be taxed i....
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....resident exporter, the assessees become entitled to commission varying between 1 1/2 and 2 1/2 % of the price. By letter dated March 24, 1951 the assessees were appointed "sole agents" for the Italian Company "for sale" of worsted woollen yarns in the Indian territories terminable by one month's notice. The assessees had to "maintain the existing customers" and to secure new customers "conforming to their general terms of sales", and were to receive 21 per cent commission on the net cash amounts arising from the accepted business "concluded by the mediation" of the assessees or directly by the Italian Company with the customers. The Belgian Company appointed the assessees their representatives for the whole of India on condition that the latter did not represent any other Belgian Mill or yarn producer and did not sell Belgian yam in India on their own account. In proceedings for assessment of tax in the assessment year 1952-53 the Income-tax Officer, 'C' Ward, Amritsar computed the income of the assasees by adding Rs. 54,558 being 5% of net total value of yam sold by the non-resident companies to Indian merchants in the previous year, because in his vi....
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....n "business connection" postulates a real and intimate relation between trading activity carried on outside the taxable territories and trading activity within the territories, the relation between the two contributing to the earning of income by the non- resident in his trading activity. In this case such a relation is absent". 23. Hon'ble Andhra Pradesh High Court in the case of GVK Industries Ltd (supra) laid down the following principles of "business connection":- "whether there is a business connection between an Indian company and a non-resident (company) is a mixed question of fact and law which has to be determined on the facts and circumstances of each case; (ii) the expression "business connection" is too wide to admit of any precise definition; however it has some well-known attributes; (iii) the essence of "business connection" is the existence of close, real, intimate relationship and commonness of interest between the NRC and the Indian person; (iv) where there is control of management or finances or substantial holding of equity shares or sharing of profits by the NRC of the Indian person, the requirement of principle (iii) ....
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....ier as per the terms of the contract. 8 Supplier dispatches the coal directly to the appellant 9 Supplier sends the shipping and other relevant documents through their local bank to the bank of the appellant in India for claiming payment against the said LC. 10 The supplicer shipped goods on FOB basis wherein all risk passes to the buyer i.e. the appellant immediately after goods sent through ship at foreign port. Further, the title of the goods passes on to the appellant once the payment is received by the supplier. 11 The goods are received by the appellant directly from the supplier 12 On receipt of said goods by the appellant, the contract is complete. 27. We have also gone through the process and raising invoices and correspondences between the assessee and non-resident suppliers through the agent SPEPL. Details of e-mails exchanged between the three parties i.e. buyers, sellers and the agent in one of the purchases from PT Bara Jaya vide invoice dated 22.2.2014 for supply of 54850 MT of Indonesian steam coal is reproduced below; Sr. No. Date Particulars 1 25.01.14 Hind Energy sent a bid to southern pacific with detailed requi....
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....elated to import of coal from PT Bara Jaya. 30. The above steps and the e-mail correspondences shows the assessee's two way communication between the assessee and the coal suppliers through the agent SPEPL. Prices have been negotiated but in such negotiation the non-resident supplier has a vital and final role. It is not coming out from the steps mentioned above and the e-mail that the agent SPEPL has full authority to negotiate and finalize the rate of coal. Another important fact brought to our notice is that the agent SPEPL is not having any stock in hand and there is no direct sales made by it. SPEPL has charged commission of Rs. 43,56,703/- from the assessee for providing assistance in procurement of coal from the two non-resident parties namely PT Bara Jaya Utama, Indonesia and Brooklyn Enterprise Pte. Ltd, Singapore. The shareholding pattern of SPEPL as on 31.3.2015 shows that Mr. Vivek Jindal and Mr. Tijo Job are only two share holders having 5000 equity shares each. Names of the non-resident suppliers or their representatives are not appearing in the share holding pattern nor any person authorized by the non-resident suppliers are on the panel of Directors of the ag....
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....eneficiation (India) Pvt. Ltd Bhopal on behalf of the above mentioned -l non-residents? Ans. Our step by step procurement details as below: i. Any entity, whether resident or non-resident having any requirement of coal/consignment of coal to offer, approaches us for our services. We discuss and send the requirement with various probable suitors of such requirements based on our knowledge about the supplier and buyers. Our commission is finalized for the particular consignment with the parties at the time of our initial discussions with them, ii. Once finalized, we try to identify the counter party/parties who may be interested in the ,deal and then we forward the said offer to the said identified party/parties as received from the offering party if over mail or simply communicate verbally in the event of a verbal intimation from the offering party. iii. The interested counter party sends/intimates us their counter offer specifying their price and preferred terms and condition which is again forwarded/intimated by us to the buyer or seller as the case may be iv. The process continues until the final price and other....
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....independent service are provided for facilitating international trade of coal. That SPEPL has provided services to more than one party and charged brokerage from all of them. That SPEPL is not controlled by any of the alleged non-resident suppliers. That SPEPL merely renders coal order procurement services in India and has not provided any other services in relation to import of coal. That SPEPL is not engaged in trading of coal. 35. Ld. Counsel for the assessee also referred to Circular No.23 dated 23.7.69 relating to sales by non-resident to Indian customers or through agent and the content of the circular is mentioned below; Sales by a non-resident to Indian customers either directly or through agents.- (a) Where a non-resident allows an Indian customer, facilities of extended credit for payment, there would be no assessment merely for this reason provided that (i) the contracts to sell were made outside India and (ii) the sales were made on a principal-to-principal basis. (b) Where a non-resident's sales to Indian customers are secured through the services of an agent in India, the assessment in India of the income arising out of th....
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....mers. 2 The non-resident supplier have appointed the assessee as their agent in India for procurement of order from customers in India In the present case, Southern pacific assists non-resident suppliers for procurement of orders from Indian customers 3 The assessee communicate orders canvassed by them form dealers in India to be non-residents for acceptance.Further, non-residents were not obliged to accept the offer tendered by customers in India through the assessee Southern Pacific is only acting as communicator between non-resident supplier and the appellant. Sothern Pacific is not having any authority to concluded contract on behalf of non-resident suppliers. Further, non-resident suppliers were not obliged to accept the offer tendered by customers in India through southern pacific 3 The assessee provides agency services to various non-residents. In the present case, southern pacific is providing procurement services to many non-residents located various part of the world and not acting as exclusive agent supplier. Kindly refer list of overseas clientele of southern pacific in the attached letter marked as Annexure-J 4 If the contract is result....
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....f such broker/agent who has a data base of buyers and sellers. Whenever any enquiry is communicated to it by either side the process starts. Concluding such deals is always in the interest of the agent, since his commission is linked to such deals. 42. We also find that the agent SPEPL did not act as an agent of PT Bara Jaya for the purpose of import of coal by the appellant. SPEPL has categorically clarified in its reply to Notice u/s 133(6) of the Act that it had never provided any services to PT Bara Jaya, Indonesia. As regards the remaining three non-resident suppliers SPEPL has no authority to engage in any business dealings on behalf of them or to conclude contracts on their behalf. Other than providing the agency services SPEPL has not provided any other services to import/export of coal such as shipping, customs clearance and cargo handling activities. It is also not disputed that SPEPL has no authority to take possession of the goods on behalf of any supplier and its role is confined to facilitating in bringing the purchaser and seller of the coal together. The Ld. A.O nowhere doubted the arm's length nature of the commission income earned by SPEPL from the non-resi....
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....ent and was not wholly and exclusively associated with the non-resident suppliers and therefore no "business connections" of the non-resident suppliers is established in India. Since no business connection is established income cannot be deemed to have accrued or arises in India in the transaction of export of coal to the assessee in India. Judicial pronouncements relied on by the Ld. Departmental Representative are found to have been rendered in altogether different, legal and factual context and hence are distinguishable therefore will not find any favour. 46. Since in our view there is no "business connection" between the non-resident and SPEPL therefore there will be no "income deemed to have accrued or arises in India of the alleged non-resident suppliers in relation to the role of coal purchased by the assessee during the year totaling to Rs. 86,07,05,873/-. Since no "business connection" is established of the non-resident suppliers in India for the purpose of computing income as per Section 9(1) of the Act there is no permanent establishment (PE) of the alleged four non resident suppliers in India. Also we are of the considered view that the agent SPEPL is an independent ....
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....inspection report and no technical knowledge has been provided to the appellant. Such inspection is processed and is conducted at the end of PT Arth Buana and only the final report containing the conclusion is given to the appellant. Since the services provided are not of technical in nature no tax was liable to be deducted. 52. Per contra Ld. Departmental Representative vehemently argued and supported the orders of lower authorities. 53. We have heard rival contentions and perused the records placed before us. Assessee's grievance in Ground No.2 is against the finding of Ld. CIT(A) confirming the action of the Ld. A.O treating the inspection report charges paid to PT Arth Buana as "fees of technical services". Assessee before importing the coal obtained the inspection report of inspection of grade of coal at the time of shipment. Assessee has not received any technical services in India. In the assessment order at page-62 the bill of PT Arth Buana is scanned. In the quotation it has been mentioned that "As per Teleco discussion with you we are pleased to offer our inspection for your vessel at Muara Pantai and out service charges for inspection and certificate will be 0.....