TaxTMI 
TaxTMI 
2016 (6) TMI 1441
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.... supplies made, despite the fact, no such income accrued to the assessee or could be brought to tax under the provisions of section 9(1) read with Explanation-1 of the Income Tax Act, 1961 or under Article 7(2) of the DTAA between India and UAE. 2.1 That the aforesaid addition thus has been made on complete misconception of fact and law and by failing to appreciate that, functions performed by the project office were merely auxiliary in character and as such, there no PE in respect of the off shore supplies made, no income could be brought to tax either under the provisions of Income Tax Act or under the Double Taxation Avoidance Agreement as has been held by the Hon'ble Tribunal. for the immediately two preceding assessment years i.e. 2007-2008 and 2008-2009. 2.2 That, even otherwise in respect of the offshore supplies in respect of which no income was taxable, even on the assumption that, it could be held that the assessee was to be assessed then too, the margin of profit as computed in TP Attribution was 2.31% and any adjustment made in the said margin of profit by adopting 3.61% is not only arbitrary but is wholly unjustified. 3. That, further the....
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.... the return of income, thus the addition of Rs. 1,07,12,284/- in respect of offshore supplies and addition of Rs. 37,32,56,566/- in respect of onshore activities is wholly unsustainable in law. 7. That the learned DDIT has failed to appreciate that the determination of ALP by the learned Assessing Officer was entirely erroneous as the provisions of section 92 of the Act were inapplicable as no international transactions had been entered by the assessee with any of AE and that the TP attribution report was furnished only to justify the estimate of the income declared by the assessee at arm's length. 8. In any case and without prejudice the learned TPO has erred in holding by citing non- comparable cases that the estimate of profit from offshore and onshore activities was under estimated. 9. On the facts and in the circumstances of the case and in law, the Ld. AO erred in levying the interest u/s 234B of the Act while computing the total demand of Rs. 26,29,55,960/-. 9.1 Without prejudice to aforesaid, and without admitting that interest under section 234B is leviable, the Ld. AO erred in not granting credit of TDS of Rs. 10,71,44,001/- before ....
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....ties. 2.3 The controversy involved in the present appeal principally relates to the taxability of income earned by the assessee in respect of the contract entered into with ONGC. According to the revenue, the income from the said contract is liable to be taxed in India as the assessee is stated to have a PE in India. 3. On the contrary as per the assessee the income from the contract in question is not taxable under the act by virtue of the double taxation avoidance agreement (DTAA) between India and UAE. 4. It has been submitted by the Ld.AR that the issue now stands settled by the decision of Hon'ble jurisdictional High Court in assessee's own case for assessment year's 2007-08 and 2008-09 wide order dated 29/01/2016 in ITA No. 143, 144 & 533/2013 and 795/2014. The decision of Hon'ble jurisdictional High Court is also reported in (2016) 66 Taxman.com 16. The Ld. A.R. submitted that ground No. 1 is general in nature and therefore does not require to be adjudicated upon. He submitted that this issue raised in ground numbers 2,3,4,5,6,7 and 8 have been adjudicated by the Hon'ble jurisdictional High Court in assessee's own case. 5. On the contrary the Ld.DR submitted that....
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..... . 5. Whether the order of the Income Tax Appellate Tribunal violates and is contrary to Article 7(6) of the Double Taxation Avoidance Agreement between India and UAE." It has been submitted by the Ld. ARs that the Hon'ble court wide the above said judgment has held as under: "24. It is the Assessee's case that its office at Mumbai was opened only to comply with contractual requirements and the exchange control regulations and was used only as a communication channel and not for the execution of the Contracts. The Project Office was only used for the purposes of correspondence and as a communication channel; apart from that, the Project Office had no role to play in the execution of the activities under the Contracts and no other business of the Assessee was carried on through the Project Office. The Project Office was manned by three employees; (i) Ravi K. Prabhakar; (ii) Pavithran; (iii) Vijayan. While Ravi K. Prabhakar was designated as a Logistics Coordinator, Pavithran and Vijayan were employed as Office Assistants. The said persons were only engaged in collecting information from ONGC or ASL and transmitting the same to the Assessee's offic....
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....he services it performs are so remote from the actual realisation of profits that it is difficult to allocate any profit to the fixed place of business in question. Examples are fixed places of business solely for the purpose of advertising or for the supply of information or for scientific research or for the servicing of a patent or a know-how contract, if such activities have a preparatory or auxiliary character". 29. In view of the above, the activity of the assessee's project office in Mumbai would clearly fall within the exclusionary clause of article 5 (3) (e) of the DTAA and, therefore cannot be construed as the assessee is PE in India. 30. We are also unable to accept Mr Sahni's contention that in view of the decision in the case of Goetze (India) Ltd. (supra), the Assessee was not entitled to contend that it had no PE in India for several reasons. First and foremost, in the present case, the Assessee's return was not accepted and the AO questioned the attribution of income to the Assessee's PE. In such circumstances, it would be open for the Assessee to point out that its office in India did not carry out any activities to which any inc....
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.... construed as a PE as it would not comply with the essential conditions as stated in paragraph 1 of Article 5 of the DTAA. It is necessary to understand that a building site or a construction assembly project does not necessarily require an attendant office; the site or the attendant office in respect of the site/project itself would constitute a fixed place of business once an Assessee commences its work at site. Thus, for clause (h) of paragraph 2 of Article 5 to be applicable, it is essential that the work at site or the project commences - it is not relevant whether the work relates to planning or actual execution -of construction works or assembly activities. Preparatory work at site such as construction of a site office, a planning office or preparing the site itself would also be counted towards the minimum duration of a PE under Article 5(2)(h) of DTAA. In a given case, establishment of an office or any work which directly serves the operations at site may also be construed as a part of the building site, or construction or assembly project. The essence of a PE under Article 5(2)(h) is a building site or a construction or assembly project and the activities of an enterprise....
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....ee's appeal is answered in favour of the Assessee and against the Revenue. ............. 60. In the present case, the consideration of various activities has been specified in the contract in question. Annexure C (contract price schedule and rental rates schedule) specifically assigns value to various activities. It is also not disputed that the invoices raised by the assessee specifically mentioned the work done outside India as well as in India. Thus, even though the contracts in question may be turnkey contracts the value of the work done outside India is a ascertainable. There is also no material to indicate that the work done outside India included any input from the assessee is PE in India. The ITAT had considered the contract and in view of the fact that the consideration for various activities such as design and engineering, material procurement, fabrication, transportation, installation and commissioning had been separately specified, the Tribunal rightly held that the consideration for the activities carried on overseas could not be at attributable to assessee is PE in India." 6.2 From the above extracts of the relevant Paras of the judgment passe....