TaxTMI 
TaxTMI 
2022 (10) TMI 905
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....cy Income" and offered on gross basis as FTS Income, is normal business and professional income u/s 44DA being effectively connected to the PE/Business Connection of the assessee." 3. Brief facts are that the Appellant is a tax resident of Hong Kong having its registered office at Hong Kong. The Appellant is a provider of technical and management services for engineering solutions throughout the world. It provides fully integrated engineering, design and program management services for a broad range of markets including infrastructure, buildings etc. The Appellant, along with a consortium of members was awarded two projects namely, Chennai Metro Rail Project ('CMRL') and Kolkata East West Metro Rail Project ('KMRL'). Under the CMRL project, two corridors with a combined length of 45 Kms. (partly underground and partly elevated) was planned to be constructed. In the first phase itself, CMRL aimed at linking important passenger hubs and terminals like Chennai Central, Chennai Egmore, Central Moffussil Bus Terminal (CMBT), Chennai Air Port, St. Thomas Mount, Govt. Estate and High Court. Further, the KMRL project was to undertake the Kolkata East West Metro Rail Projec....
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.... for remuneration having only overseas input are being attached for all other months. In case you desire, we can submit the complete invoices for the whole year. For Chennai Metro Project invoices kindly refer pages no. 2 to 45 and for Kolkata Metro Project Invoices, kindly refer pages no. 47 to 82). Invoices where work is performed outside India are those invoices, where work is not related to Project Office in India as none of these services are performed in India in terms of Contract Agreements (already on records). The assessee has shown this income under section 115A of the Act as Fees for Technical Services other than income referred to in section 44DA of the Act. 2. Show Cause as to why the consultancy income of Rs, 131142506/- claimed as exempt may not be treated as business income being effectively connected with PE/PO: In this regard, it is respectfully submitted that the consultancy income aforesaid is not claimed as exempt by the assessee. It is treated as Fees for Technical Services (FTS) u/s 115A not connected with PE in India and taxed at 10% on gross basis u/s 115(l)(b)(BB) of the Act. The assessee got projects in India as an overseas entity. Certain work ....
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....e effectively connected to such PE/Business Connection. In the present case, since AECOM Asia Company Limited is receiving FTS from India for carrying out services in relation to agreements for which PO has been established, it can be said that such FTS are effectively connected to PE/business connection in India and therefore, should be taxed as per section 44DA of the Act. It is also Important to note that in the present case, such PE/ business connection fl.e.P.O.l was already in existence prior to current assessment year and therefore, it has an active role in earning such PTS. 4. The income of Rs. 13,11,42,506/- disclosed as FTS in the return is now assessed as income from business and profession u/s 44DA being effectively connected to the PE/Business Connection. This is the income that has been offered to tax as FTS @10% u/s ll5A in the return of-income. Since the assessee has itself disclosed the amount of Rs. 13,11,42,506/- as FTS from India , the whole of this amount is found attributable to the operations carried out in India for the purposes of assessing income u/s 44DA. The assessee has not provided the details of the expenditure incurred in connection with FTS and ....
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....93 for the assessment year 2017- 18 and at pages 231 to 233 for the assessment year 2016-17. 10. The ld. Counsel further submits that the co-ordinate bench of the Tribunal in the case of Iveco Spa Vs. ADIT [72 taxmann.com 195 (Delhi-Trib.)] relying upon JCB decision has held that the royalty income arising not from the activities of the employees of the branch office i.e. PE in India cannot be effectively connected with PE in India. The ld. Counsel for the assessee submits that in assessee's case the OCI has arisen because of services rendered by the employees of the assessee at Hong Kong and not from the activities and operations carried out by the PE in India. Therefore, it is submitted that the OCI cannot be said to be effectively connected with the PE in India as per the provisions of section 44DA of the Act. 11. The ld. Counsel further submits that it is the averment of the Revenue that there is no separate agreement or contract in accordance with which the receipts have been offered to tax as FTS and in this connection the ld. Counsel placing reliance on the decision of the Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Ltd. Vs. DIT [(2007) 288 IT....
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.... appellant visited India in connection with the OCI and accordingly when the employees of the appellant home office in Hong Kong never travelled to India it cannot be held that work has been rendered from India so as to attract the provisions of section 44DA of the Act. 14. The ld. Counsel further submits that assessee derived OCI on account of off shore services rendered from Hong Kong and such services do not have any link with the services which are rendered with PE/PO in India. Further neither the services rendered from overseas required any inputs from the PE in India nor does it provide any imputs to the Indian PE. It is submitted that the deliveries from the activities performed by the overseas employees from outside India are transferred to CMRL/KMRL on an as is basis and is not reviewed, edited or amended. The ld. Counsel, therefore, based upon the decision of the Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Ltd. (supra) submits that the allegation made by the Assessing Officer that all the services rendered under a contract are effectively connected to the PE and should be taxable in India are vague and without any understanding of the law. T....
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....ppellant has received some inputs or services from outside India, these are also related to the project office in India as the same are performed in terms of the contract agreements. This particular observation highlights that the assessing officer has put aside doubt regarding actual performance of services from overseas and held that the receipts against the offshore services are chargeable to tax under section 44DA since the offshore services are related to the project office in India. - 6.4 Appellant submitted that offshore services rendered from the Hong Kong do not have any link with the services which are rendered by the PE/PO in India. Further, neither the services rendered from overseas required any inputs from the PE in India nor does it provide any inputs to the Indian PE. The deliverables from the activities performed by the overseas employees from outside India are transferred to CMRL / KMRL on an as-is basis and is not reviewed, edited or amended. 6.5 With the above background of facts in mind, it may be relevant to examine the application of the provisions of section 44DA in this context.' As per section 44DA, where a foreign company carries on business in In....