TaxTMI 
TaxTMI 
2023 (1) TMI 170
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...."1. Whether, on the facts and in the circumstances of the case, the Ld.CIT(A) erred in deleting the addition of Rs.3,38,96,437/- (50% of Rs.6,77,92,874/-) made under section-44DA of the Income Tax Act, 1961, thereby dismissing the AO's stand that the income of Rs.6,77,92,874/- disclosed by the assessee as "Oversea Consultancy 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 of the case are that, the Aecom Asia Company Ltd. is a tax resident of Hongkong having its registered office at Hongkong. The Company is a provider of technical and Management Services for Engineering Solutions throughout the ....
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.... read with Section 144C (3) of the Act on 25/05/2015 making an addition of Rs. 33,896,437/- to the return of income treating 50% of the income earned as OCI the chargeable to tax at 40% on net income basis in following manners:- " In the case of the assessee, since the entire contracts are effectively connected to the PE/Business Connection, any services rendered under these contracts even though rendered from outside India are 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 In....
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....itted any reply regarding filing of objection before Hon'ble DRP. Therefore, the assessment is completed in this case on the basis of the draft order itself." 5. Aggrieved by the assessment order dated 25/05/2015, the assessee has preferred an appeal before the Ld.CIT(A) and the Ld.CIT(A) vide order dated 06/02/2017 allowed the appeal filed by the assessee by deleting the addition of Rs. 3,38,96,437/- (50% of Rs. 6,77,92,874/-) made u/s 44DA of the Act whereby negated the stand of the A.O that income of Rs. 6,77,92,874/- disclosed by the assessee as "Overseas Consultancy Income" and offered on gross basis of FTS income is normal business and profession income u/s 44DA being effectively connect to the PE/ business collection of the assess....
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....ject CMRL/KMRL are not effectively connected to PO/PE in India and, therefore, addition made under section 44DA of the Act is liable to be deleted observing as under:- "6.1 I have carefully considered the facts of the case in the light of submissions filed by the appellant. The assessing officer observed that there is a little reference to the offshore services in the contract with CMRL and KMRL and therefore, questioned the delivery of services remotely from overseas. The Appellant submitted that reference of a little or elaborate reference in the contract with the customers cannot be any basis for holding that the OCI (Overseas Consultancy Income) is effectively connected with the PE. The appellant contended that the contract act....
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....e 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 India t....
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.... Commissioner of income-tax(114 ITD 61) wherein it has been held that merely because an entity has a PE in India, all the income accruing or arising to the non-resident shall not be taxable in India and only such income which is attributable to the PE shall be chargeable to tax in India. Further, the income producing activity should be closely connected to the PE. It may be noted that effective connection is required to tax the income as business income whereas the services are chargeable to tax on gross basis in the absence of effective connection. So, with relation to project office, the tax authority of source country is entitled to tax on gross basis. However, once the effective connection is established, it entitles the tax authority t....