TaxTMI 
TaxTMI 
2023 (2) TMI 1107
X X X X Extracts X X X X
X X X X Extracts X X X X
....issue raised in ground nos. 2 to 7 is, whether the assessee had a Permanent Establishment (PE) in India under Article 5 of Indian- Japan Double Taxation Avoidance Agreement (DTAA) and the consequent attribution of profit to the PE. 3. Briefly the facts relating to this issue are, the assessee is a non-resident corporate entity incorporated in Japan and a tax resident of Japan. As stated by the Assessing Officer, the assessee is engaged in the business of manufacturing of clutch systems and facings for cars, motorcycles, utility vehicles and other engines. It also undertakes moulding and machining of plastics and manufacturing of various specialized tools and dyes. Initially, the assessee had entered into a joint venture in the name and sty....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssed for assessment year 2015-16. Thus, following the decision taken in the preceding assessment year, the Assessing Officer ultimately held that 50% of the amount received towards sale of raw materials and capital goods is attributable to the PE in India as business income. Accordingly, he added back an amount of Rs.2,77,42,494/-. 4. Against the draft assessment order so passed, the assessee raised objections before learned DRP. Though, learned DRP was conscious of the decision of the Tribunal in assessment years 2014-15 and 2015-16 holding that the assessee had no PE in India, however, following the direction of DRP in assessment year 2017-18, learned DRP observed that the earlier view of DRP has to be followed. However, the learned DRP ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g to the Fixed Place PE as provided under the India-Japan DTAA. 12.1 Article 5(1) of the India-Japan DTAA provides that a PE of a foreign enterprise may exist in India when a foreign enterprise has a Fixed Place in India through which the business of the foreign enterprise is wholly or partly carried out. 12.2 In order to constitute a Fixed Place PE under Article 5(1), the following conditions needs to be satisfied: (i) the existence of a 'place of business', i.e. a facility such as premises; (ii) the place of business must be at the disposal of the enterprise; (iii) this place of business must be 'fixed', i.e. it must be established at a distinct place with a certain degree of permanence; and (iv) the 'carrying on of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....technical assistance as required by it. The business of the assesee is not being carried out from the alleged Fixed Place PE. The Ld. DR in support of his contention that FRL constitutes Fixed Place PE of the assessee has placed reliance on certain clauses of the Licence Agreement and argued that title of goods supplied by the assessee to FRL passed in India and hence the assessee is carrying on business in India. In our opinion, reference to these clauses is irrelevant to conclude that the title of goods passed in India and thus Fixed Place PE of the assessee is created in India in view of the judgment of the Hon'ble Supreme Court in Mahabir Commercial Co. Ltd (supra). Since the goods were manufactured outside India, sale of goods took pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nexure 1 and Annexure 2 are on record. 13.2 Perusal of the above documents show that the employees of the assessee visited India to assist FRL in relation to supplies made by FRL/FCC Clutch to its customers; resolving problems relating to production, fixing of machines, maintenance of machines; checking safety status at the premises and suggesting ways for enhancing safety; support in quality control; IT related services; support for launch of new segment line; etc. In our considered opinion, none of these activities performed by the employees are in the nature of supervisory functions, supervision being the act of overseeing or watching over someone or something which is not reflected in the work done by the engineers in India for FRL. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessment year is identical to the preceding assessment years. Thus, respectfully following the decision of the Coordinate Bench, as discussed above, we hold that the assessee had no PE in India in any form whatsoever. Therefore, the addition made by attributing a part of the income of the assessee to the alleged PE has to be deleted. Accordingly, we do so. Grounds are allowed. 8. In ground no. 8, the assessee has raised a legal issue as to whether surcharge and cess can be levied over and above tax computed at the rate of 10% as per treaty provisions. 9. Having considered rival submissions, in principle, we accept assessee's contention that levy of surcharge and cess cannot exceed the tax rate of 10% as per India - Japan DTAA. Article ....