TaxTMI 
TaxTMI 
2020 (2) TMI 791
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.... adding Rs.1,72,36,802/-, Rs.2,71,38,058/- & Rs.2,15,62,990/-; assessment year-wise respectively as taxable in the taxpayer hands on the ground that the assessee had set up its permanent establishment in India. Learned departmental representative has taken pains to file Revenue's identical submissions as follows:- "The brief facts are that:- * The assessee i.e Gifford & Partners Ltd (since merged with Gifford LLP) entered into a contract with, a foreign company incorporated in the UK, entered into a contract dated 29.09.2004 with Garden Reach Shipbuilding Engineers [GRSE] in India for rendering engineering! supervisory services with regard to modernization of the shipyard of GRSE. These services were to be performed by the assessee in 3 phases and fees for the same were received by the assessee in UOS and partly in Indian rupees. The assessee also engaged the services of third party subcontractors in India and in the UK for execution of the above contract i.s T.K.Roy and Associates and Intercon Maritime Consultants Pvt Ltd in India and Appledore International Ltd in UK. * The assessee filed original return on 23.07.2009 offering total receipts i.e amounts....
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.... * Also AO found that the submission by the assessee that the issue of attribution of profits to the PE in India had been taken up in the A Ys 2007-08 and 2005-06 before the AO and Ld DRP was not correct as in none of the orders of both the AO and the Ld DRP, Kolkata has the issue of attribution of profits to the PE in India been mentioned and total profits for the project work been brought to tax in India in both the AYs 2007-08 and 2005-06. REMARKS/SUBMISSIONS: On this issue, it is humble submitted in support of the AO's action, that the additions have been made based on evidences examined by AO during assessment stage and considering the submissions of the assessee. 1. The Ld CIT(A) erred in merely relying on the order of the Hon'ble ITAT in earlier years in the case of the assessee and holding that the assessee has no PE in India without appreciating that the facts and claims of the assessee are different from the earlier years decided by Hon'ble ITAT. The Ld CIT(A) completely ignored that fact that the assessee itself has submitted that 10% of the total profit has been considered attributable to the work carried out by the PE in India and hen....
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....nted wrong facts to the Ld CIT(A). 3. Article 1.8 of the agreement between the Assessee and GRSE provides for the place in which the services are to be rendered and the same reads as follows: "1.8. LOCATION The services shall be performed at the premises of Garden Reach Shipyard, Kolkata and where the location of a particular task is not so specified, at such locations, as GRSE may approve." Therefore it is clear that services were to be performed only at the premises of Garden Reach Shipyard, Kolkata and where the location of a particular task is not so specified, at such locations, as GRSE may approve. In this regard, no approval letter of GRSE is mentioned in the submissions of the assessee to the effect that GRSE approved for services to be performed from UK. From the submissions of made by the assessee before the Ld CIT(A) as seen in page 21 point 1.3 of CIT(A) Order, The details of work performed in UK and India are as follows:- * In India- Attending meeting with GRSE and interviewing the potential staffs for the site supervision work. * In UK- review of the construction methods being undertaken by the Indian cont....
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.... 4) Even the use of the premises for providing services under the contract is restricted a the assessee and its personnel had to observe GRSE's Rules and regulations and required special permission to use such office premises beyond normal working hours. The Hon'ble ITAT in its order for the A.Y 2007-08 and 2005-06 held that the presence of assessee in India during the previous year was only in connection with the agreement for modernisation of shipyard of GRSE. The assessee had not carried on any business in India. The provision of office space inside the Garden Reach Shipyard therefore cannot be said to be a fixed place of business through which the business of the assessee is carried on in India. The Hon'ble ITAT held that it can be said that there was some physical presence of the assessee in India through it was restricted to rendering of services under the agreement with GRSE. It is not enough that the assessee has a fixed place of business in India but the assessee should carry on business in India through that fixed place of business. This requirement of Article 5(1) of the DTAA is no satisfied in the present case. Carrying on of business involves t....
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....e. No material evidences have been brought on record such as in the form of contract or renewed/revised contract to suggest that the nature of work performed by the assessee for the project in India i.e consultancy services for modernization of GRSE during the relevant year under consideration is different from that of earlier assessment years. Also AO found that the submission by the assessee that the issue of attribution of profits to the PE in India had been taken up in the A.Ys 2007-08 and 2005-06 before the AO and Ld DRP was not correct as in none of the orders of both the AO and the Ld DRP, Kolkata has the issue of attribution of profits to the PE in India been mentioned and total profits for the project work been brought to tax in India in both the A.Ys 2007-08 and 2005-06. 6. The services rendered by the assessee to GRSE were of technical nature in terms of provisions of section 9(i)(vii) of the IT. Act 916 I read with article 13 of the India-UK DTAA and the contract as a whole in respect of which the fees for technical services arose and that such payment was effectively connected with the PE in India. Therefore Article 13(6) would apply and the ....
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....registered in Mauritius or its employees during entire period of stay in India for rendering extensive services to Indian company, it constituted PE in India under India-Mauritius DTAA Section 9 of the Income-tax Act, 1961, read with article 5 of the Double Taxation Avoidance Agreement between India and Mauritius - Income - Deemed to accrue or arise in India (Permanent Establishment) - Assessment years 1997-98 and 1999-2000 - Assessee was a non-resident company registered in Mauritius - Assessment was made which included income received from, an Indian company, on contracts executed in India, as business income - Assessee contended that it did not have a permanent establishment in India so income qua said business with Indian Company, though admittedly carried on by it, could not be brought to tax in India - Whether regular interaction between parties requiring assessee's continued presence in India over indefinite contract period was needed for implementation of project - Held, yes - Whether execution of project appeared to be a regular business function, carried out in ordinary course, requiring little intervention by top management - Held, yes - Whether a fixed place of b....
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....ing tax returns in India for incomes earned from the said contract. 2. The issues that arose for consideration in the aforesaid appeals was regarding taxability in India of the sums received from GRSE for services rendered under the contract referred to in the earlier paragraph. 3. By a common order dated 6.4.2016 the Tribunal held that the sums received from GRSE accrued and arose in India and that the same is taxable in India as Fees for Technical Services (FTS). The Tribunal further held that FTS has to be taxed under Article 13(2) of the DTAA between India and UK. The relevant clauses of the DTAA provides as follows: "ARTICLE 13 ROYALTIES AND FEES FOR TECHNICAL SERVICES 1. Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the law of that State; but if the beneficial owner of the royalties or fees for technical services is a resident of the other Contracting State, the tax so charged shall....
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....of section 115A of the Act, needs to be looked into. We have already reproduced the provisions of Sec.115A of the Act and Sec.44AD of the Act in the earlier part of this order. U/S.115A of the Act, Income by way of FTS received by a non resident would be taxed at 20% on gross basis only if all the following conditions are satisfied:- i) the income is received from Government or an Indian concern in pursuance of an agreement; ii) Such agreement was made after 31st day of May, 1997 but before the 1st day of June, 2005; and iii) such income does not fall within the purview of sub-section (1) of section 44DA of the Act. 73. We have already seen that the Assessee in the present case instant case, there is no doubt that the Assessee fulfills condition (i) and condition (ii) as mentioned above. As regards condition no. (iii), the provisions of sub-section (1) of section 44DA of the Act, FTS would fall within the purview of section 44DA(1) of the Act, only if it is actively connected to the PE of the nonresident in India. PE for the purpose of this section has been defined in section 92F(iiia) of the Act which reads as under:- "(iiia) "permanent....
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....ter the aforesaid statutory amendment by the Finance Act, 2016, a question that was raised was as to whether the MA's would be barred by time under the amended provision of law. 8. On this aspect after considering the rival submissions we conclude as follows:- Section 254(2) of the Act of 1961 prior to the amendment by the Finance Act, 2016 w.e.f.1.6.2016 reads as under:- "254(2) The Appellate Tribunal may, at any time within four years from the date of the order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under sub-section (1), and shall make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer: Provided that an amendment which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this sub-section unless the Appellate Tribunal has given notice to the assessee of its intention to do so and has allowed the assessee a reasonable opportunity of being heard After the Amendment by the Finance Act, 2016, w.e.f. 1.6.2016, Sec.254(2) read as under: "254(2) The Appella....
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.... certainly extinguish a vested right of action. 09. The amendment has been made effective virtually in case of assessee with retrospective effect though the amendment does not show that it is applicable with retrospective effect, however, the existing right has been extinguished with retrospective effect in case of the assessee. 10. In the considered opinion of this Court, the legislature should have granted some time to the assessees who could have filed an appeal within a period of four years and the same has not been done till the amendment came into force extinguishing the right to file an appeal. 11. In the considered opinion of this Court, application preferred by the assessee should not have been dismissed by the Tribunal on account of the amendment which has reduced the period of limitation of four years to six months. 12- Resultantly, the impugned order passed by the respondent on 23/12/2016 is hereby quashed and the writ petition stands allowed. The Income Tax Appellate Tribunal is directed to decide the application preferred under Section 254(2) on merits within a period of three months from the date of receipt of certified copy of this order. ....
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.... ( 'USD '}was attributable to the alleged PE in India and taxable under section 44DA of the Income Tax Act, 1961. (the 'Act').; III For that the authorities below erred that any income not attributable to the activities performed in India can be charged to tax in India or for any reason alleged or at all; IV For that the authorities below erred in holding that the Appellant's claims that that it did not have any PE in India or that the Income earned in respect of activities outside India in USD was not assessable in India, could not be entertained without filing a revised return. V For that the authorities below erred in disallowing Rs. 3,136,682 paid to M/s Appledore International Ltd for works carried out by them in the United Kingdom on the ground that the same was taxable in India and tax was required to be deducted thereon under section 195 of the Act. The reasons given for such disallowance are not sustainable on facts and law; VII For that the authorities below erred in disallowing a sum of Rs. 2,858,996 on the ground of delayed deposit of tax deducted at source; VIII For that the authorities below erred in hol....
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....e DRP as well as before the tribunal and in all these submissions made by the assessee, the issue with regard to the taxability of FTS at a concessional rate of 15% as per Article 13(2) or DTAA as against the higher rate of 20% of gross receipts u/s 115A of the Act was never raised by the assessee. It was the contention of the ld. DR that in the garb of the miscellaneous application, the assessee seeks to review of the order of the tribunal. For the above reasons the ld. DR prayed that the miscellaneous applications are without any merits and the same should be dismissed." 19. We have given a very careful consideration to the rival submission. At the outset, we notice that in the synopsis of the arguments filed by the assessee on 12.12.2012 in para 2.5 , the assessee has taken a specific plea that FTS has to be taxed at a concessional rate of 15% of the gross receipts as per the provision of Article 13(2) of the DTAA as against higher rate of tax provided at 20% of gross receipts u/s 115A of the Act. The law is well settled that the powers of the tribunal u/s 254(1) of the Act are very wide and therefore in an appeal before the tribunal, the tribunal could have and ought t....
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.... is taxable @ 15% on gross receipts. Whereas as per section 115A of the Act, FTS is taxable @ 20% on gross receipts. 73. Since, the provisions of the India-UK DTAA is more beneficial, the Assessee is entitled to the benefit of the provisions of section 90(2) of the Act. Accordingly, FTS in the given case would be taxed at the beneficial rate of 15% on gross receipts as provided in Article 13(2) of the India-UK DTAA. We also hold that the tax liability borne by GRSE will also ne d to be grossed up for arriving at gross receipts of the Assessee and after such grossing up such receipts have to be taxed @ 15%. We hold accordingly." 4. It is therefore sufficiently clear that the assessee has succeeded on the very issue involving identical Revenue's pleadings in said earlier assessment year(s). Learned departmental representative vehemently argues at this stage that the Revenue's appeals against the same stand admitted in honble jurisdictional high court after framing substantial question of law therein. We adopt judicial consistency in these circumstances to hold that the CIT(A) has rightly followed his earlier order(s) in assessee's cases qua the permanent estab....