TaxTMI 
TaxTMI 
2019 (10) TMI 1224
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 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) The ld. CIT(A) has erred in law and on facts in relying on information available in public doma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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 appellant also remitted amount of Rs. 2,55,886/- for obtaining inspection report from non-resident inspecting agency viz. PT Arth Buana, Indonesia. For the purpose of ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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) 1. PT Bara Jaya, 9,86,01,190 98,60,119 1,64,33,532 67,70,615 17.06.14 18,95,772 2. PT Bara Jaya 8,68,94,500 86,89,450 1,44,82,417 59,66,756 19.11.14 13,72,354 3. PT ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re 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 mainly or wholly on behalf of a nonresident thereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non-residents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal non-resident, he shall not be de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 rule of law of evidence codified in section 106 of the Evidence Act, 1872, as per which the authority of the agent is a matter in the exclusive knowledge of the assessee which he has to prove and demonstrate. As per the provisions of the Act, the onus is on the appellant to prove that the agents are independent agent and the Principal negotiated the contract. The burden of proving the same always lies on the appellant. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 work carried out; 4. Reliance on the special skill and knowledge of the agent by the principal; 11. In this regard, BEPS concerns arising from artificial avoidance of PE status through commissionaire arrangement stand similar strategies need to be highlighted. It was observed by OECD that Commissionaire arrangement and similar strategies were put in place primarily in order to erode the taxable base of the state where sales took place. These strategies seek to avoid the application of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ker 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 negotiated price for the assessee, assisted to smooth execution of agreement and channelize communication between both ends. On the basis of this information the undersigned issued show cause notice dated 27.04.16, to treat the broker as business connection of non-residents in India. The reply of the assessee along-with other documents was received on 03.06.2016. The assessee has also submitted the copy of mail conversation with the broker M/s Southern Pacific Energy Pvt. Ltd., Gurgaon. The assessee has described the process of transaction in his reply as under: The proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shment 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 behalf of the above mentioned 4non-residents? Ans. Our step by step conversation 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 recei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aya 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 Indonesia, is not acceptable as the mail conversation between the assessee and broker for this nonresident is available on record.) Broker M/s. Southern Pacific Energy Pvt. Ltd Gurgaon has submitted the copy of agreement no. SPEKBAA-4458 with M/s. Suek: AG Switzerland. The following points of the agreement are important and reproduce hereunder: SUEK seats to expand coal sales to India and would like to appoint Agent for the purpose of expanding its coal sales having quality parameters of not less than 4500kcall kg As received Basis as guaranteed point value (hereinafter referred to as Specified Coal) and promote company profile to the Indian market. (NOTE- Suek AG Switzerland appointed MIs Southern Pacific Energy Pvt Ltd Gurgaon as an agent in India to expand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nted 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 to manage by the broker only.) As per the above discussion, it may be concluded that the agent was fully involved during the transactions and parts an important role while making discussion, negotiation, communication and finalizing the deal. In this way the agent is deemed authorized to conclude the contract on behalf of nonresidents. As the agent has the authority to negotiate the terms, conditions and making discussion on behalf of non-resident and also doing communication on behalf of non-resident, it can be genuinely said that he has authority to conclude the contracts on behalf of nonresident. Hence, he is working as a business connection of nonresident in India." The participation of agents or Indian representatives in phases of the negotiation or conclusion of contracts, formally executed by other nonresident companies, should be consi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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' postulates a real and intimate relation between the trading activity curried on outside the taxable territories and the trading activities within the territories, the relation between the two contributing to the earning of income by the non-resident in his trading activity". Hon'ble Mr . Justice Shah (as he then wa:,), for the purpose of Section 42 of the IT Act, J 922, laid down, "business connection' contemplated by Section 42 involves a relation between a business curried on by a non-resident which yields profits and gains and some activity in the taxable territories which contributes directly or indirectly to the earning of those profits or gains. It predicates an element of continuity between the business of nonresident and the activity in the taxable territories, a stray or isolated transaction not being normally regarded as a business connection. " The requirement of continuity of transacti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gned 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 justified. Accordingly, this ground is dismissed." 10. Now the assessee is in appeal before the Tribunal raising various grounds of appeal. Ground No. 1(a) to 1(f) challenges the finding of Ld. CIT(A) confirming the action of the Ld. A.O of treating assessee in default u/s 201(1) of the Act thereby raising demand of Rs. 7,15,88,395/- (Tax Rs. 5,91,01,804/- + Int. Rs. 1,24,86,591/-) for non deduction of tax at source u/s 195 of the Act for the payment for import of coal to the non-resident suppliers. Ground No.2 challenges the finding of Ld. CIT(A) for upholding the action of the Ld. A.O raising demand of Rs. 1,12,453/- ( Tax Rs. 87,854/- + Interest Rs. 24,599/-) for non deduction of tax at source u/s 195 of the Act for payment of inspection charges top non-resident treated it as fees for technical services. 11. During the course of hearing Ld. Counsel for the assessee made application under Rule 29 of the I.T. Act 1963 for submission of additional evidence a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 taking additional Evidence & the following 3 documents : i) CA certificate about the parties and the amount of commission received by M/s Southern Pacific Energy Pvt. Ltd ii) copy of intimation u/s 143(1) for FY 2014-15 (AY 2015-16) in the case of M/s Southern Pacific Energy Pvt. Ltd. and iii) MCA portal information about SUEK AG may kindly be allowed to be taken on record as additional evidences in the larger interest of justice. The reasons for filing these documents at this stage have been enumerated in the preceding paragraphs and are not being stated again for the sake of brevity. 12. The above stated additional evidence mainly includes the intimation u/s 143(1) of the Act for Assessment Year 2015-16 in the case of SPEPL, MC portal information about SUEKAG showing that it has a liaison office in India, email dated 19.3.2019 received from SPEPL about certificate of Chartered Accountant about the amount of commission received by SPEPL from various parties. Same were....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tity of coal and then forwards the requirement received from the appellant to the suppliers. c) On receiving the offer from the suppliers, Southern Pacific forwards the same to the appellant for acceptance. d) The appellant accepts the offer if the price and the other terms are acceptable and communicates the same to Southern Pacific for further forwarding to suppliers. e) If the terms and conditions are not acceptable, then the appellant communicates the same to Southern Pacific, who in turn coveys the same to the suppliers for revised offer. The supplier provides revised offer through Southern Pacific for acceptance of the appellant. f) After the price and other terms are agreed between the appellant and the supplier, a contract is entered between the supplier and the appellant for the supply of coal as per the agreed price, grade and quantity. g) Thereafter, the appellant opens a Letter of Credit ('LC') in favour of the respective supplier as per the terms of the contract. h) The supplier dispatches the coal directly to the appellant. i) The supplier sends the shipping and other relevant documents through their local bank to the bank of the appellant in Indi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dents?" Vide reply dt. 5 August 2016 against the aforesaid notice u/s 133(6) issued by the AO (refer Exhibit-32 pg. no. 387-391 of PB), Southern Pacific has clarified as under: Query No. 5 "We are not authorised by M/s Brooklyn Enterprises Pte. Ltd., M/s Avani Resources Pte. Ltd. and M/s Suek AG to negotiate any business dealings on behalf of them." Query No. 6 "We have no authority to conclude contract on behalf of M/s Brooklyn Enterprises Pte. Ltd., M/s Avani Resources Pte. Ltd. and M/s Suek AG." Further, Southern Pacific has not provided any other services such as, shipping, custom clearance activities and cargo handling activities etc. For availing such other services, the appellant engaged various other service providers to complete the import transaction. Clause 2.4 of the agreement between Southern Pacific and Suek AG specifically provide that Southern Pacific has no authority to conclude contracts on behalf of Suek AG. In view of the above, it is submitted that Southern Pacific has no authority to conclude contracts on behalf of non-residents suppliers. As per OECD commentary, an independent agent acts in the ordinary course of business and is not su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any supplier. d) Southern Pacific is merely facilitating in bringing the purchaser and seller of coal together. Based on the above, Southern Pacific has clarified its position that it is not working as "Business Connection" of any non-resident in India. E-mail communications [refer Exhibit-16 to 18, pg. no. 208 to 308 of PB] between Southern Pacific and appellant substantiate that Southern Pacific is merely acting as a facilitator between the appellant and the non-resident suppliers. Further, Southern Pacific does not maintain or keep stock of coal on behalf of non-resident supplier and provide delivery out of the same to the customers in India. The same is evident from the financial statements of Southern Pacific for the year ended 31 March 2015 (refer Exhibit-22, pg. no. 316-349 of PB) wherein no inventory is appearing under the current assets. Apart from procurement of orders, Southern Pacific neither performed nor undertaken to perform any service directly or indirectly in respect of direct sales of coal by non-resident suppliers to the appellant. Activities of Southern Pacific cannot lead to establishment of "business connection" of non-resident suppliers since ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....suppliers which constitutes permanent establishment in India and therefore the estimated income embebbed in the transaction for import of coal @10% is subject to deduction of tax at sources. Reliance placed on following judgments; (i) G V K Industries Ltd. v. ITO [1997] (228 ITR 564) (AP-HC) (ii) Abdullabhai Abdul Kadar v. CIT [1952] (22 ITR 241) (iii) TVM Limited vs. CIT [1999] 102 Taxman 578 (AAR- New Delhi) (iv) ACIT vs. DHL Operations B.V [2005] 142 Taxmann 1 (Mum) (v) Booz & Company (Australia) (P.) Ltd. In re [2014] 42 taxmann.com 288 (AAR - New Delhi) 16. We have heard rival contentions and perused the records placed before us. The issue raised by the assessee in Ground No. 1(a) to 1(f) challenges the findings of Ld. CIT(A) confirming the action of the Ld. A.O of treating the assessee in default u/s 201(1) & 201(1a) r.w.s. 195 of the Act for non deduction of tax at source on the profit element in the value of import of the coal totaling to Rs. 8,60,70,58,733/- purchased by the assessee from four nonresident suppliers namely PT Bara Jaya Utama, Indonesia ('PT Bara Jaya'), Brooklyn Enterprise Pte. Ltd., Singapore ('Brooklyn Enterprise'), Avani ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in India, or through the transfer of a capital asset situate in India. Explanation 1.-For the purposes of this clause- (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India ; (b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ; (c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India ; (d) in the case of a non-resident, being- (1) an individual who is not a citizen of India ; or (2) a firm which does not have any partner who is a citizen of India or who is resident in India ; or (3) a company which does not have any shar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng in the ordinary course of his business : Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non-residents which are controlled by the principal nonresident or have a controlling interest in the principal nonresident or are subject to the same common control as the principal non-resident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status. 17. The above stated four non-resident suppliers are from Indonesia, Singapore and Switzerland. It is worthwhile also to go through Article 5 of the Double Taxation Avoidance Agreement (DTAA) between India and Indonesia, India and Singapore and India and Switzerland and the relevant extract of the article relating to permanent establishment is reproduced below; A. Article -5 of India - Indonesia DTAA: "1... to 4.... 5. Notwithstanding the provisions of paragraphs 1 and 2, where a person- other than an agent of an independent status to whom paragraph 7 applies-is acting in a Contracting ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isions of paragraphs 1 and 2, where a person - other than an agent of an independent status to whom paragraph 9 applies - is acting in a Contracting State on behalf of an enterprise of the other Contracting State that enterprise shall be deemed to have a permanent establishment in the first-mentioned State, if - (a) he has and habitually exercises in that State an authority to conclude contracts on behalf of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise ; (b) he has no such authority, but habitually maintains in the first-mentioned State a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise ; or (c) he habitually secures orders in the first-mentioned State, wholly or almost wholly for the enterprise itself or for the enterprise and other enterprises controlling, controlled by, or subject to the same common control, as that enterprise. 9. 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 State through a broker, gen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....other enterprises which are controlled by it or have a controlling interest in it, he would not be considered an agent of an independent status within the meaning of this paragraph. 7. The fact that a company, which is a resident of a Contracting State controls or is controlled by a company which is a resident 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 for either company a permanent establishment of the other." 18. From going through the above Section 195, Section 5(1), Section 9(1) of the Act and Article 5 of DTAA between India and Indonesia, India and Switzerland and India and Singapore and in context to the facts and issues raised before us can be summarized in following steps:- (i) Section 195 comes into action when any sum chargeable to tax under the provisions of this Act is paid to non-resident, which in this case is the payment made by the assessee to the non-resident exporters of coal. (ii) The sum chargeable under Section 195 of the Act takes its color from Section 5(1) of the Act which refers to the scope of total....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that deal. Ld. Counsel for the assessee also submitted that the case of the assessee falls under the proviso to explanation 2 of Section 9(1) of the Act which says "that the business connection shall not includes business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent have an independent status is acting in its ordinary course of business". 21. Therefore now we are confined to adjudicate the issue "as to whether the agent SPEPL and its activities as agent constitute the "business connection" for the non-resident suppliers or not". 22. Before proceeding to examine the facts of the case as to whether the "business connection" of the non-resident suppliers is established in India or not, we would like to go through the facts and the judgment of Hon'ble Apex Court in the case of CIT v. R.D. Aggarwal & Co. [1965] 56 ITR 20 which in our view seems to be quite relevant to adjudicate the issue before us:- "Assessee is a registered firm having their place of business at Amritsar in the State of Punjab. The assessees carry on business as importers and as co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... agent in India without giving an authority to such agent to conclude the contract would not lead to creation of business connection of non-resident in india. The relevant extract of the decision is reproduced as under: Turning to the facts of the present case, as found by the revenue authorities, contracts for the sale of goods took place outside the taxable territories, price was received by the nonresidents outside the taxable territories, and delivery was also given outside, the taxable territories. . No operation such as procuring raw materials, manufacture of finished goods, sale of good or delivery of goods against price took place within the taxable territories : the assessees merely procured orders from merchants in Amritsar for purchase of goods from the non-resident companies. The orders were offers which the assessees had no authority to accept on behalf of the non-residents. Some commercial activity was undoubtedly carried on by the assessees in the matter of procuring orders which resulted in contracts for sale by the nonresidents of goods to merchants at Amritsar. But on this account no business connection of the assessees with the non-residents within the taxable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not the other way round. The perspective should be from the angle of the agent and not of the non-resident." . 26. Now to examine the issue we need to go through the process adopted by the assessee in completing the contract of import in coal from various non-resident suppliers. The process of procurement of import of coal as explained by the assessee before the lower authorities is summarized in the following steps; Step. Step Process for procurement of import of coal 1 The Appellant approaches the Broker viz. Southern Pacific with requirement of grade and quantity of coal 2 The 'broker identify the supplier having requisite grade and quantity of coal and then forward the requirement received from the appellant to the suppliers 3 The broker on receiving the offer from the suppliers forward the same to the appellant for acceptance 4 The appellant accepts the offer if the price and the other terms are acceptable and communicate the same to the broker for further forwarding to suppliers 5 If the terms and conditions are not acceptable, then the appellant communicate the same to the broker, who in tum covey the same to the suppliers for revised offer. The supplier p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....med the Southern Pacific a lay caon (Laydays Cancelling) as 9-19 February 2014 and Further asked to confirm this with PT Bara Jaya. 9 31.01.14 Southern Pacific Informed Hing Energy that PT Bara Jaya confirmed a laycan as 11-20 February 2014. 28. With reference to above e-mail correspondences, Ld. Counsel for the Assessee contended that the whole transaction has taken place between PT Bara Jaya and the appellant and the broker/agent Southern Pacific has played the role of intermediary between the appellant and PT Bara Jaya and that also only at the time of negotiating price. Further, it is pertinent to note that southern pacific has forwarded price quotation as it is received from PT Bara Jaya with the text heading 'Quote' and 'Unquote'. Thus, it is proved beyond the doubt that Southern pacific has merely acted as broker between the appellant and PT Bara Jaya and not concluded price at their end. 29. It was further contended by Ld. Counsel for the assessee that the appellant has directly entered into contract with PT Bara Jaya for import of 54,850 MTs coal. Further, PT Bara Jaya raised invoice on the appellant. It is submitted that PT Bara Jaya has shipped coal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....PTE Ltd. Singapore 0.52 14 KCT Global PTE Ltd., Singapore 0.25 15 Knowledge International Stratgic Systems PTE Ltd. Singapore 0.89 16 Noble Resources International PTE Ltd. Singapore 2.90 17 Swiss Singapore Overseas Enterprises PTE Ltd. Singapore 0.72 18 Suek AG, Switzerland 4.71 19 Seacons Trading Ltd, British Virgin Islands 2.69 20 PT AntangGunungMeratus, Indonesia 0.16 21 PT Astri Mining Resources, Indonesia 1.22 22 PT Bayan resources TBK, Indonesia 0.65 23 PT ProlindoCipta Nusantara, Indonesia 1.22 24 Samtan Co. Ltd. Korea 0.85 25 J. Aron&Compnay, USA 1.31 Total 27.29 32. The above table mentions the names of 25 parties which also includes the assessee as well as three alleged non-resident suppliers (excluding PT Bara Jaya). What figures from the above table is that the agent SPEPL is not confined to provide its agency services to the non-resident suppliers but it provides its services to various other parties within India and outside India. So it cannot be said that SPEPL is an exclusive agent for any of the non-resident supplier of India. 33. During the course of hearing lower authorities the statement of the agent SPEPL was ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned in the Le, the seller sends the documents directly to buyer's bank and within the due date, the seller gets payment direct from bank against the said Letter of 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 and required no formal agreement exists with other 2 mentioned parties. The question of having any agreement with PT Bara Jaya Uttama Indonesia does not and cannot arises since we have never provided any services to the said non-resident. 34. It was further contended by the Ld. Counsel for the assessee that the agent SPEPL has stated that it provides services to various non-resident suppliers in it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en the assessee and non-resident on principal to principal basis. The contracts were executed outside India. Non-resident suppliers directly delivered coal from outside India to the appellant without routing through the agent SPEPL. That apart from procurement of order there is no role of SPEPL directly or indirectly in respect of sales, coal shipment services, collection of money and import documentation. 37. It is also an undisputed fact that the Ld. A.O has not doubted the amount of arm's length and nature of commission income earned by SPEPL in India from these non-residents. 38. Since we have enumerated the facts extensively in the preceding paras, before coming to the conclusion we will first like to compare the facts of the instant appeal with the facts adjudicated by Hon'ble Apex Court in the case of R.D. Aggarwal & Co (supra). Sl. No. Fact of the case of RD Aggarwal& Co. Facts of the appellant's case 1 The non-resident suppliers have appointed the assessee as their agent in India for procurement of order from customer in India In the present case, southern Pacific assists non-resident suppliers for procurement of orders from Indian customers. 2 The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is controlled by principal non-resident, we find that the agent SPEPL is not controlled by the Principal non-resident. Principal non-resident have no control of interest. Broker SPEPL has no authority to conclude the contract on behalf of the non-resident suppliers nor it has any role leading to conclusion of contracts. SPEPL does not maintain any stock of goods or merchandize information to deliver on behalf of the non-residents. The fact which enumerates from the records are that the SPEPL works as an independent broker for buyers and sellers of coal within and outside India. 41. It is quite practical that when a person want to import coal at the lowest price and best quality from around the world it is not easy nor viable for it to contact respective suppliers scattered across the globe. The services of broker/agent are required who has the desired expertise and information available with him in his capacity as a service provider. Similarly the suppliers sitting across the globe, in order to make exports are in search of good buyers and therefore they also try to contact such broker/agents working in this field. SPEPL is one of such broker/agent who has a data base of buyer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....perspective should be from the angle of the agent and not that of the non-resident principal. Therefore if an agent exclusively works for one principal he may be said to be dependent agent resulting in Agency PE but where the principal has a sole agent who also undertakes work and undertake such work extensively for other principals the agency agent cannot be said to be "dependent" and there can be no question of creation of Agency." 45. Ld. Departmental Representative who was relied on the detailed finding of Ld. CIT(A) and have also placed reliance on judicial pronouncements will not find any favour with respect to the instant ground under adjudication since the main basis of the revenue treating the assessee in default for non deduction of tax u/s 195 of the Act is that the alleged four Non-resident suppliers of coal has a "business connection" in India through the agent SPEPL which in the view of the revenue was wholly and exclusively working for the non-resident coal suppliers. However as per our above detailed finding in preceding paras we have came to the conclusion that the agent SPEPL was working as an independent agent and was not wholly and exclusively associated with t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to submit the same to shipping agent at the time of shipment. PT Arth Buana was engaged to carry out inspection to verify the quantity and measurement of various ingredients such as ash, sulphur, fixed carbon etc. Total amount of Rs. 2,55,586/- was remitted by the assessee. Ld. A.O treated this amount as fees for "technical services" liable to deduction of tax at source u/s 195 of the Act. Ld. A.O grossed that amount to Rs. 3,41,181/- and calculated the TDS @ 25.75% at Rs. 87,854/-and also levied interest at Rs. 24,599/-. 49. Against the order of the Ld. A.O treating the assessee in default for non deduction of TDS of payment of inspection charges by treating them as fees technical services, assessee preferred appeal before Ld. CIT(A) but failed to succeed. Ld. CIT(A) referring to Article 13(b)of the India Indonesia Tax Treaty held that from perusal of the inspection report it transmits that it is technical in nature and therefore the amount paid is fees of technical services. 50. Now the assessee is in appeal before the Tribunal. 51. Ld. Counsel for the assessee submitted that PT Arth Buana has only provided inspection report and no technical knowledge has been provided to th....