TaxTMI 
TaxTMI 
2023 (7) TMI 220
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...., they have been clubbed together and disposed of in a consolidated order, for the sake of convenience. 2. We propose to take up the appeal relating to assessment year 2007-08 being ITA No. 3257/Del/2014 as lead appeal as the decision taken by us qua the grounds raised therein would apply to rest of the appeals. ITA No. 3257/Del/2014 Assessment Year: 2007-08 3. At the outset, learned counsel appearing for the assessee did not press ground nos. 1, 2, 4, 8 and 9. Accordingly, these grounds are dismissed as not pressed. 4. In ground No. 3, the assessee has challenged taxability of Rs. 1,46,52,283/- representing receipts from services rendered by head office in Germany 5. Briefly the facts are, the assessee is non-resident corporate entity and a tax resident of Germany. As stated, the assessee is a global airport operator offering comprehensive airport management services, including terminal and traffic management, aviation ground handling, baggage and cargo handling, aviation security and consulting etc. The assessee entered into a contract with Delhi International Airport Limited (DIAL) relating to development, modernization, expansion, upgradation, operation and ma....
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....ad office regarding planning, information, data-base and know-how. He submitted, head office provides technical advice to DIAL as well as PE and fully supports PE. He submitted, additionally, head office does all tasks of human resources including payroll, invoicing, legal and administration etc. in relation to the PE in India. Thus, learned counsel submitted, the activity of the head office and PE are single and integrated activity of airport management and is complementary in nature as services cannot be exclusively rendered as both are supporting each other and dependent on each other. Accordingly, the receipts are taxable under Article 7 of the tax treaty, in view of exceptions provided under Article 12(5) of the treaty. He submitted, the PE is able to function because of Head Office. Hence, in relation to work performed by head office, both activity test and economic connection test are satisfied, since, the work has been done by Head Office through active participation of PE. He submitted, the entire activity of airport management services is a single integrated activity, hence, cannot be bifurcated between PE and the Head Office. He submitted, applying the dominant purpose t....
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....ct that some of the services rendered can fall in the category of managerial or technical or consultancy services falling within the definition of FTS under Article 12(4) of India - Germany DTAA, however, the treaty carves out an exception in paragraph 5 of Article 12 by providing that the receipts will not fall within the category of royalty or FTS, if the beneficial owner of royalty and FTS being resident of one contracting state carries on business in the other contracting state through a PE or fixed place of business in respect of which the royalty and FTS are paid. Article 12(5) further makes it clear, in such a situation, the provisions of Article 7 or Article 14 may apply. The receipts certainly cannot fall within the definition of independent personal services under Article 14 of the tax treaty. Therefore, the only provision under which the receipts can fall is business profits as provided under Article 7 of the tax treaty. Thus, since, the receipts are attributable to the PE, we have to examine whether such receipts are taxable in India. In this context, we have to refer to paragraph 1(b) under protocol appended to India - Germany tax treaty, which reads as under: ....
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....ssee has debited expenses of Rs. 1,92,91,585/- to the profit and loss account. While verifying the Audit Report, the Assessing Officer noticed that the Auditor has reported that the amount represents office and administrative overhead expenses charged by the head office on the basis of certification by the management and based on actual cost with no profit margin embedded therein. Alleging that the assessee neither furnished any evidence, nor justified the claim, the Assessing Officer disallowed the amount. The assessee contested the disallowance before the DRP. After examining assessee's claim in the context of facts and materials on record, learned DRP found that the amount, in reality, represents a markup of 19% on the expenses under various heads debited to the profit and loss account. However, learned DRP found that out of the deduction claimed, an amount of Rs. 45,96,723/- forms part of mobilization expenses, which has already been disallowed. Accordingly, learned DRP restricted the disallowance to Rs. 1,46,94,562/-. 13. As regards assessee's claim that the expenditure directly related to the PE is allowable under Article 7, learned DRP held that the amount charged by the ....
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....d DRP on the issue. Ground raised is dismissed. 17. In ground No. 6, the assessee has raised the issue of levy of interest under section 234A, 234B and 234D of the Act. 18. Insofar as levy of interest under section 234A and 234B is concerned, such levy being consequential in nature, there is no need to adjudicate the issue. Insofar as the levy of interest under section 234D is concerned, the same is consequential in nature, does not require adjudication. Ground is dismissed. 19. Ground No. 7, being consequential in nature, does not require adjudication. 20. In the result, the appeal is partly allowed. ITA No. 3869/Del/2015 Assessment Year: 2008-09 21. Ground nos. 1, 6 and 7 are not pressed, hence, dismissed. 22. Ground nos. 2 and 3 are identical to ground No. 3 of ITA No. 3257/Del/2014. Accordingly, we direct the Assessing Officer to compute income, if any, following our direction therein. 23. The issue raised in ground No. 4 is identical to the issue raised in ground No. 5 of ITA No. 3257/Del/2014. Following our decision therein, we uphold the disallowance. This ground is dismissed. 24. Ground No. 5, being consequential in nature, does not require adj....