TaxTMI 
TaxTMI 
2019 (12) TMI 1212
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....-Deductor) and for issuance of a writ of mandamus directing the Assessing Officer to grant a certificate authorizing the aforesaid deductor to make payments to the petitioner without deducting tax at source. Brief facts 2. Briefly stated, the facts leading to the filing of the instant writ petition are that the petitioner- National Petroleum Construction Company is incorporated and existing under the laws of United Arab Emirates (UAE). Therefore, the provisions of the agreement for avoidance of double tax between India and UAE (DTAA) apply in determining the taxable income of the petitioner. The principal activities of the Petitioner comprise of fabrication and installation of onshore and offshore oil facilities and submarine pipelines and pipelines coating. 3. Petitioner entered into a Contract No. MR/ES/MM/LEWPP (TENDER3)/01/P85 1 C 1600 1/20 16 dated September 30, 20 16 ('LEWPP Contract') and Contract No. MR/ES/MM/R-SERIES (Tender No. 07P85 1 C 17005120 1719030008323) dated February 07, 201 8 ('the R -Series Contract') , with ONGC for carrying out work of project management, survey, design, engineering, procurement, fabrication, transportation, removal/r....
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....hat the decision in the appeal of the Revenue for AY-2009-10, follows the aforesaid judgment. 6. Petitioner also contends that both the R-series and LEWPP are similar to the aforementioned 4WPP and C-Series contracts, and has given comparative analysis to depict the similarities in the scope of work and bifurcation of the price for each platform viz. inside and outside India. 7. Petitioner also draws strength from the order passed by this Court dated 09.05.2017 for AY- 2017-18, whereby a direction was issued to Tax Department to issue a fresh certificate under Section 197 (1) of the Act, accepting the alternative plea of the petitioner, without prejudice to its right to contest the said deduction in accordance with law. In the said order, the Court directed that ONGC would deduct tax @4% + surcharge + education cess of the revenues in respect of only inside India activities. The Tax department has since issued the certificate under Section 197 of the Act @ 4% on activities inside India, and 'NIL' on outside India, for LEWPP contracts as well as R- series contracts for AY-2019-2020. 8. Petitioner argues that considering that R-series and LEWPP contracts, relevant to the Ass....
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....e. form onshore and offshore activities." 7. The Hon'ble High Court, for A.Y. 2007-08 to 2010-11, held that there is no PE in the case of assessee. The departmental appeals for these years are pending before Hon'ble Apex Court. 7. Accordingly, following the decision of Hon'ble Delhi High Court order dated 09.05.2017 in W.P.(C) 2117/2017 & CM No. 9268/2017, certificate u/s 197 for F.Y. 2016-17 was issued @ 4% (excluding surcharge and cess) for inside India Revenue and @ 0% for outside India Revenue. Further for F.Y. 2017-18 as well as F.Y. 2018-19, certificate was issued accordance with order of Hon'ble Delhi High Court dated 09.05.2017 for both the contracts under consideration i.e. for LEWPP and R-Series contracts. In view of the above, if approved, certificate u/s 197 may be issued to @ 2.65 % on the payment mentioned above i.e. INR 5562942700. Such certificate would be provisional in nature and subject to final assessment. File is put up for kind perusal and approval please. Sd/- ITI 16/05/2019 DCIT, Circle-2(2)(2), (Intl. Tax.), New Delhi Pl. verify what is the basis of offshore & on....
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.... Sd/- 06/06/19 ITI As per direction, status of demands & Assessment history is being submitted for year kind perusal & directions please. Sd/- 11/06/2019 DCIT, Cir-2(2)(2), IT-2, New Delhi: The issue involved in past few years is the taxability of the income. In case of 2015-16 & 16-17 assessment, it was held that activities of applicant comes Section 44BB & taxed accordingly. The outstanding demand of Rs. 35.88 cr. is currently reduced to Rs. 2,67 crores out of which Rs. 2.63 crores pertains to AY 2017-18, which is under scrutiny for assessment. Submitted for kind perusal & necessary directions. Sd/- 11/06/2019 Addtl. CIT Range 2(2)IT Delhi n/5 National Petroleum Construction Co.(197) Applicant preferred WP(C) 2117/2017 against 197 certificated dtd. 30th Sept, 2016 31st Jan, 2017 cost ---- with ONGC dated 30th September, 2016. The certificate u/s 197 dtd. 31st Jan, 2017 was issued @ 4% plus education cess and surcharge. Hon'ble Delhi High Court while deciding writ petition ruled upon its judgment in applicant's case for AY 2007-08 and 2008-09 wherein wrt simi....
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....sed on Traces. Reply the same has been furnished by the applicant through offline on 18.06.2019. The same is being forwarded to you for your kind perusal and direction please. Sd/- 19.06.19 DCIT, cir - 2 (2) (2), IT-2, New Delhi The applicant has furnished activity wise dates for each platform under both contracts. For R-Series contract, the applicant has not mentioned commissioning period and period of as built documentation (which is mentioned for LEWPP contract and relevant for installation). Also, the transportation period is considered at India location for R-Series contract while for LEWPP contract, it transportation is considered at UAE location. Pl verify above from client through TRACES. Sd/- 20.06.19 DCIT circle 2(2)(2) IT-2 The applicant has furnished its reply. In its reply dated 13/06/2016, the it has stated in its comparative analysis that commissioning activities were undertaken. While in its reply dated 22/06/2016 it has stated that the commissioning work was not applicable for R-Series contract thus making contradictory statements. The LEWPP contract is dated Sep'2016 & R-Series contract is dated Feb'2018 and si....
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.... untenable. Though contracts in question may be turnkey contracts, yet value of work done outside India is ascertainable. The reasons given by the respondent are misplaced as, for AY 2015-16, the first appellate authority followed this Court's decision in petitioner's own case and has held that the petitioner has no PE in India. Accordingly, outside India revenues will not be chargeable to tax under Section 44BB of the Act. Respondents are wrongly assuming that the subject contracts constitute installation PE under India-UAE DTAA. In each of the contracts, installation activities were completed in less than 9 months and hence, installation PE is not triggered. Respondents are wrongly distinguishing Rseries contract, alleging it to be not identical to the contracts undertaken by the petitioner in prior years. Petitioner carried out commissioning activities under each of the prior ONGC contracts, including LEWPP contracts, and the appellate forums have ruled in favour of the petitioner that outside India revenues are not taxable in India. Thus, if lesser activities are undertaken in R-series contracts, in comparison to previous contracts, it is beyond imagination as to how Respondent....
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....as opposed to @2.65% and thus petitioner has no right to challenge the same. Analysis and Findings 15. We have learned counsels for the parties at length. 16. Having regard to history of litigation involving the petitioner-referred to above, we consider it necessary to examine the record of the Revenue to satisfy ourselves as to the manner in which the respondents have approached the present matter. Consequently, the original record of the respondents was summoned. We have carefully perused same and the relevant provisions extracted in the earlier part of the judgment. The reasons indicate that Respondents have exercised jurisdiction under Section 197 with due application of mind. It is the cardinal principle of administrative law that, under Article 226 of the Constitution of India, judicial review is directed not against the decision, but the decision making process, as reiterated in the recent judgment of the Supreme Court in Sarvepalli Ramaiah (dead) as per legal representatives and Ors. v. District Collector, Chittor District and Ors. (2019) 4 Supreme Court Cases 500, relevant portion whereof is reproduced as under: "40. Administrative decisions are subject t....
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....eduction of income-tax, as the case may be, he shall on an application made by the Assessee, give to him such certificate as may be appropriate. Sub-Section (2) of Section 197 provides that where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the Assessing Officer, deduct income-tax at the rates specified in such certificates or deduct no tax, as the case may be. 20. Thus, on a conjoint reading of the aforesaid provisions, it emerges that in absence of a certificate of deduction of tax at source at a lower rate or nil rate, a payer-whose liability it is to deduct tax at source under Section 195 of the Act, is likely to incur a risk of being declared a defaulter. However, if a certificate under Section 197 of the Act is in operation, such a consequence would not arise. At the same time, the certificate under Section 197 of the Act for deduction of tax at lower rate or nil rate, also benefits the Assessee, who would be entitled to receive full payment from the payer without deduction. 21. Explanation 2 to Section 195, inserted vide Finance Act 2012 clarifies that the obligation to comply with Sub-Section....
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....t commissioning work is not undertaken by them for the R-series contracts, and the same is to be performed by ONGC. Without going into the question as to whether the petitioner's stand is contradictory, we may note that the Assessing Officer while exercising its power under Section 197, during the course of the enquiry, cannot undertake an exhaustive exercise to determine this issue conclusively. We find force in the submissions of Mr. Raghvendra Kumar Singh that the question as to whether the petitioner has constituted a PE, cannot possibly be undertaken in the enquiry having regard to the time frame permissible under law for deciding the application under Section 197 of the Act. The reasons shown to us also take note of the fact that in the immediate preceding years i.e., AY-2016-17 and AY- 2017-18, for which regular assessment has been completed, petitioner has been held to have a Permanent Establishment (PE) in India, and its total income from the contracts with ONGC have been held to be taxable under the IT Act. Section 44BB of the Act is applied, and 10% of the contractual receipts were considered as business profits. The rate of tax being 40%, a certificate was, accordingly,....
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....esent case. In the said case, the issue arose whether the assessee is a charitable trust, and this position had not been contested by the income tax department from AY- 1367-38 to AY 1963 -64. In these circumstances, the Court held as under: "where a fundamental aspect permeating through the different assess ment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. " 27. In the present case, there cannot be any dispute that existence of PE is required to be determined by law for each year separately on the basis of the scope, extent, nature and duration of activities in each year. In this regard, the contracts in question i.e. R-series contracts dated 07.02.2018 and LEWPP series contracts dated 30.09.2016 would have to be taken into consideration. Concededly, this Court in its decision dated 09.05.2017 did not have the occasion to consider the R-series contract dated 07.02.2018. The Court only considered the contract dated 30.09.2016 as noted in para -1 of the said decision. There is thus, a dist....
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....d to either explain the meaning of certain phrases and expressions contained in a statutory provision or depending upon its language it might supply or take away something from the contents of a provision and at times even to, by way of abundant caution, clear any mental cobwebs surrounding the meaning of a statutory provision spun by interpretative process to make the position beyond controversy or doubt." 29. Further, the petitioner's contention that under each of the contracts, the installation activities were completed in less than 9 months, and that the scope of R-series contracts, did not include commissioning activities, are all factual aspects which cannot be examined while exercising judicial review over the decision of the respondent under Section 197 of the Act. 30. The petitioner has relied upon the judgments in Ishikawajima-Harima Heavy Industries: [2007] 288 ITR 408 (SC) and Hyundai Heavy Industries: [2007] 291 ITR 482 (SC), which do not appear to be applicable to the facts of the present case. In Ishikawajima (supra), the Supreme Court held that for a non-resident entity to be taxed in India, it should carry on business through a permanent establishment in Indi....
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.... shall not be taxable in India, the Applicant, in the alternative (without admitting), humbly submits that even if your good-self consider that Applicant may constitute PE in India, only inside India revenues (i.e., revenues towards installation and commissioning activities) can at best be held to be taxable in India as per section 44RB of the Act as held by the Hon'ble Suprenle Court in the case of Hyundui Heuvy Industries Ltd. (291 ITR 482). Your goodself would also appreciate that in Applicant's own case, Hon'ble Delhi High Court held that even in case of PE, outside India revenues cannot be held to be attributable to PE in India. The Applicant humbly submits that since it is facing financial hardship as the first quarter of FY 2019-20 has come to an end and it is yet to have the lower withholding tax certificate, the Applicant (without prejudice to its legal position), is willing to offer a concession to have the certificate at the tax rate of 4% plus applicable surcharge and cess for the entire contractual revenues, which is in line with the recently concluded assessment proceedings for AY 2016-17 in Applicant's own case, where pour goodself concluded ....