TaxTMI 
TaxTMI 
2023 (4) TMI 986
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....ntract with Jaypee Karcham Hydro Corporation Limited ('JKHCL') as per the provisions of Article 5 of the Double Taxation Avoidance Agreement between India and Germany (India - Germany Tax Treaty') and taxing the revenues earned under the JKHCL contract under the provisions of Section 44DA of the Act. 2. Invoking the provisions of Section 44DA of the Act for taxing the revenues earned by the Appellant under its contract with Jaypee Ventures Limited (JVL') without any specific allegation that the Appellant constitutes a PE in respect of the said contract. 3. Without prejudice, attributing the revenues earned by the assessee from contracts entered with JVL and JKHCL to the PE constituted under the contract with Jammu and Kashmir State Power Development Corporation - Baglihar Construction Services by applying the rule of 'Force of Attraction' envisaged under the provisions of India-Germany Tax Treaty. 4. Levying interest under Section 234B and section 234C of the Act. 5. Initiating penalty proceedings under section 271(1)(c) of the Act for Assessment Year 2008-09, which is inappropriate. 6. Not granting credits for wi....
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....ng or not, since, the assessee had a PE in India in the form of JKSPDC-Baglihar Project, applying the Force of Attraction Rule all receipts earned in India would be connected to the said PE. Hence, taxable under Section 44DA. Accordingly, he brought to tax the receipts by applying the provisions of section 44D/44DA of the Act. The assessee contested the aforesaid decision of the Assessing Officer by filing objections before learned DRP. However, learned DRP sustained the additions made by the Assessing Officer. 5. Before us, learned counsel appearing for the assessee submitted that insofar as contract with JKHCL is concerned, the assessee provided services in relation to review of design and duration of the contract was only for 3 months. He submitted, assessee's employees were in India only for 21 days. Thus, he submitted, there is no PE of the assessee under Article 5(2) read with Article 5(1) of India-Germany treaty. In this context, he submitted, the Assessing Officer has made a fundamental error by referring to the definition of PE in some other treaty, rather than India-Germany DTAA. He submitted, assessee's role in the contract is only advisory and nothing else. I....
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....to be completed within a period of 3 months from the date of commencement of work. Thus, from the scope of work entrusted to the assessee, it is very much clear that services rendered are of purely technical/consultancy nature, hence, the receipts from such work has to be treated as FTS. As discussed earlier, the departmental authorities have not brought on record any material to suggest that the work undertaken by the assessee was not completed within the period of 3 months. In such a scenario, it cannot be said that the so called office space provided by JKHCL to the assessee in its premises would constitute a PE under Article 5(2) of India - Germany DTAA. Further, we do not find any substance in the allegation of the Assessing Officer that assessee's PE in respect of JKSPDC- Baglihar project would constitute a PE in respect of JKHCL and JVL project. When the department is alleging involvement of the JKSPDC's PE to be actively involved in the other two projects, it is for the department to establish such fact on record through cogent evidence. However, on analysis of facts, we are convinced that the Assessing Officer has miserably failed to do so, as, no material has been....
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.... the client' s location or at i ts home office in Germany, wherein the assessee provided contract- wise, the location wherein the activities were undertaken. The above fact as per the assessee clearly demonstrates that owing to geographical region, the PE on account of JKSPDC Phase- II projects (executed in the state of Jammu & Kashmir) could not play a part or be involved in any project in India. These contracts have been carried out by the assessee by using different teams at a given point of time. In this regard, the details of the project managers/ project engineers who visited India in connection with the execution of different contracts clearly shows that distinct PE of technician were involved in the execution of various projects in India. The teams of the project managers/ project engineers, in relation to various projects, visited India in connection with the execution of these projects at different points of time. The scope of work, liabilities and risk involved in each of the contracts are independent of those stated in the other contracts executed with the different parties. Owing to Reserve Bank of India' s stipulation, a separate project office is to be set up....
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.... in India. The regional existence of place of PE and the article 5 (1) in the form of JKSPDC- BCS as well as there is existence of supervisory PE under article 5 (2) (i) in the form of JKSPDC- BCS was not established by the Revenue from any documentary evidence on record. Similarly, the nature of business of the assessee remains unchanged and the assessee is engaged in the business of providing consultancy services to various projects in India. The assessee is an engineering consultancy services that offers wide range of planning, designing and consultancy services etc. in relation to complex infrastructure projects in. India. The assessee rendered engineering consultancy services mainly in relation to power projects. 7.1 From the perusal of the records and contradictory aspect pointed out by the Ld. DR, it can be seen that the PE in respect of JKSPDC- Baglihar Phase - I I Project has rightly been offered to tax at 20 % by the assessee as i t is the only project which has PE. The Force of Attraction rule will not be applicable in other projects as the same do not constitute either PE or does not come under the purview of the DTAA. The contradictions pointed out by the Reve....