TaxTMI 
TaxTMI 
2020 (2) TMI 791
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....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 received both in USO and TNR to tax of Rs. 1,69,93,127. The assessee....
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....n 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 hence taxable in India. AO found from the revised computation of income filed by the assessee that the assessee accepts that it has PE in In....
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....e 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 contractors at the site on behalf of GRSE. Therefore, from the above; that the claim of the assessee that its income from foreign services is not attributable to its PE in India is not correct. The details of work performed i....
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....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 the carrying on in a country of virtually any activity related to the business of the enterprise. The Hon'ble ITAT held that the availability of office space for use by the assessee at the premise of GRSE was for the limited purpose of rendering of services agreed between the assessee and GRSE. In the instan....
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....ment 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 gross receipts by way of fees for technical services are includable in the computation of business income/profits of PE in India. The following judgments where the Hon'ble ITATs have held the existence of assessee's PE are also relied upon by the Department: [2019] 103 taxmann.com 270 (Delhi - Trib.) IN THE ITAT DELHI BENCH 'G' Samsusng Heavy ....
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....ent 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 business, would not be confined to a place where top management of company was located and branch of an enterprises may well be its PE; only profit attributable to same being liable to be taxed in source State - Held, yes - Whether it was for assessee to specify place/s from where they had functioned over their continued stay in India - Held, yes - Whether some place at....
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....he 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 not exceed : (a)In the case of royalties within paragraph 3(a) of this Articles, and fees for technical services within paragraphs 4 (a) and (c) of this Article - (i)During the first five years for which this Convention has effect ; (aa) 15 per cent of the gross amount of such royalties or fees for technical services when the payer of the royalties or fees for technical services is the Government of the first mentioned Contracting S....
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.... 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 establishment", referred to in clause (iii), includes a fixed place of business through which the business of the enterprise is wholly or partly carried on;" We have in the earlier paragraphs already held that there was no PE in Indi in the form of fixed place of business through which the business of the Assessee was wholly or partly carried on in India. As such, the Assessee would be entitled to the benefit of the provisions of section 115A of the Act and be taxed at 20% of the Gross receipts. We also hold that tax liability borne by GRSE will ....
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....b-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 Appellate Tribunal may, at any time within six months from the end of the month in which the order was passed, 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: It can be seen from the aforesaid amendment that the time limit for filing Miscellaneous application u/s.254(2) has been curtailed to 6 months from the date of the passing of the order from a period of 4 years from the date of the order. 9. The admitted facts in the present ....
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....inion 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. The parties shall appear before the Tribunal on 30th of October, 2017." 11. Following the aforesaid decision, we have to hold that the present MA though filed after 1.6.2016 will continue to be governed by the law of limitation laid down u/s.254(2) on the date when the order against which the MA is sought to be filed was passed and not law as per the law as amended by the amendment w.e.f. 1.6.2016. The MA therefore has to be construed as one filed within the period of limitation and has to be accepted as validly presented within the period of limitation. The objection of the Registry is therefore held to be not in accordance with law. 12. Though ....
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.... 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 holding that a sum of Rs. 3,733,151 was to be added to the income on account of grossing up; IX For that the authorities below erred in holding that any interest could be charged under section 234B and/or 234C of the Act." 15. According to him the assessee has not raised any ground with regard to any rate of tax and therefore the assessee cannot be permitted to raise this plea in the miscellaneous application. In this regard our attention was drawn by the ld. DR to the following decision : i) Tokhem Enterprises v. Income-tax Officer, Ward 20(3)(1), Mumbai, reported in [2011] 132 ITD 375 (Mumbai )/[2012] 144 TTJ 256 (Mumbai) ii) Vyline Glass Works Ltd. V. Assistant Commissioner of Wealth-tax, Co. CircleIII(4), Chennai reported in [2015] 231 Taxman 535....
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....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 to have considered the aforesaid submission of the assessee. The fact that there is no specific ground taken by the assessee in this regard is immaterial because the rate of tax to be applied does not require any adjudication or finding to be given on facts. In other words, the applicability of tax could be decided on the basis of facts and material already available on record. In such circumstances, it cannot be said that the issue with regard to rate of tax was not the subject matter of the appeal at all, especially in the light of the specific contention put forth by the assessee on this aspect in the written submissions dated 12.12.2012. 20. In the present case there is an agreement between India and U.K. for avoidance of double taxation and therefore the assessee is entitled to plead that taxability has to be as per the provision of the A....