AI Drafter 
TaxTMI 
TaxTMI 
2023 (8) TMI 1372
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....he assessment year 2016-17 is concerned, Bombardier Transportation Signal (Thailand) Limited (BTTH) the assessee is a foreign company incorporated in Thailand. It is the subsidiary of Bombardier Transportation Holdings (Thailand) Limited. The assessee is a tax resident of Thailand in terms of Article 4 of Indo Thailand Double Taxation Avoidance Agreement (DTAA). As the assessee is a tax resident of Thailand as per section 90(2) of the Act it is eligible to be governed as per provisions of the I.T. Act or the DTAA whichever is more beneficial to the assessee. For the assessment year under consideration i.e. assessment year 2016-17 the assessee filed its return of income on 25.11.2016 declaring NIL income. The assessment was completed under section 143(3) of the Act on 15.12.2018 accepting the income returned. Subsequently, the Commissioner of Income Tax (International Taxation-1) (CIT) New Delhi issued show cause notice dated 12.03.2021 under section 263 of the Act stating that the engineering services provided by the assessee to Bombardier Transportation India Limited (BTIN) falls under the definition of 'royalty' and, therefore, the assessment order passed by the Assessing Officer....
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....n that the scope of services mentioned by you in the said notice relates to contract "CS03" with DMRC. Further, the engineering services provided to BTIN have nothing to do with contract CS03 It is again reiterated that both of these transactions relate to completely different and independent arrangements. Regarding the taxability of the revenue earned by the assessee from BTIN we would like to draw your kind attention to our submission dated 04 December, 2018 placed on record during assessment proceedings, enclosed as Annexure 3 Further, the sample copy of invoices issued by the assessee to BTIN are enclosed as Annexure 4 It is reiterated that the services provided by the assessee were towards a separate contract/project and thus has no relationship with the CS03 contract On perusal of the invoices, it is quite clear that the scope set out in the invoices can at best be considered technical in nature and not royalty. It is submitted that engineering related services being technical in nature would fall within the ambit of FTS as per the provisions of the Act. Further, the position of law is that, in the absence of a specific article in the Treaty dealing....
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....r the Assessment Years 2018-19 and 2019-20 as the facts are identical. Pursuant to the direction the Assessing Officer passed order under section 143(3) r.w.s. 263 of the Act dated 18.01.2023 confirming the addition of Rs.1,80,89,192/- being the amount received by the assessee from BTIN towards engineering services as royalty income under section 9(1)(vi) read with Explanation (2)(iva) of the Act. The Assessing Officer also brought to tax 10% of the value of off shore supply of equipment and services made by the assessee to DMRC. 4. Before us the ld. Counsel for the assessee submits that in the assessment years 2013-14, 2014-15, 2015-16 and 2017-18 on identical facts the Assessing Officer on examining the contracts entered into by the assessee for off shore supplies to DMRC and the contract for providing engineering services to BTIN and also the provisions of DTAA between India and Thailand concluded that the income received by the assessee from off shore supplies and also for providing engineering services is not chargeable to tax in India. The ld. Counsel submits that the Assessing Officer has departed the consistent approach for the assessment year 2016-17 based on the revisi....
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....o DMRC. It is the contention of assessee that the receipts from BTIN amounting to INR 1,80,89,192/-, being technical services were not taxable in India in the absence of a specific Article to this effect in the India-Thailand DTAA and accordingly the same was not offered to tax by the assessee in its return of income. 9. It is noticed from the assessment orders for the assessment years 2013-14, 2014-15, 2015-16 and assessment year 2017-18 that this issue of as to whether the off shore supplies of equipment and providing engineering services qualify to tax with reference to the DTAA with Thailand has also been examined in the proceedings under section 143(3) r.w.s. 144C of the Act and the Assessing Officer accepted that these incomes are not liable to tax. The relevant observations of the Assessing Officer in these assessment years are as under:- Assessment Year : 2013-14 : "M/s Bombardier Transportation Signal (Thailand) Ltd. (hereinafter referred to as "assessee") e-filed its return of income on 29.11.2013 declaring total income of Rs.5,62,36,850/The assessee filed a revised return on 31.03.2015 declaring Nil income. The case was selected for scrutiny under CA....
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....n India Limited (BTIN). Assessee's receipts from services provided by it in India and its taxability is examined in the light of provisions of the Act and India-Thalland DTAA. After considering replies and documents filed by the assessee, its income as shown in the return of income is accepted. 3. Assessment is, accordingly, made on Nil Income. Credit for prepaid taxes is allowed after due verification. Detail of computation of tax and interest charged as provisions of law is given In the enclosed ITNS-150 which is part of this order. Issue necessary forms." Assessment Year : 2015-16 : "M/s Bombardier Transportation Signal (Thailand) Ltd. (hereinafter referred to as the assessee and BT-Thailand') e-filed its return of income on 29.11.2015 declaring Nil income. The case was selected for scrutiny under CASS and a notice u/s 143(2) of the Income Tax Act, 1961 ("the Act") was issued to the assessee on 04.04.2016. Further a notice u/s 142(1) of the Act along with detailed questionnaire was issued to the assessee on 01.07.2016. In response to various notices. Sh. Aditya Gupta and Ms. Chinu Bhasin, CAs, Authorized Representatives of the assessee attended....
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....d into an agreement namely "CS03" with Delhi Metro Rail Corporation (DMRC) wherein BT Thailand along with the other member of the consortium would design, manufacture supply etc train control & signaling system. During the year under consideration assessee received payment from DMRC towards offshore supplies and offshore services incidental and inextricably linked to these supplies. Further during the year under consideration assessee had provided engineering services to Bombardier Transportation India Pvt. Ltd. (BTIN). 3. Correctness of assessee's income from various sources is verified in respect of DTAA provisions of India Thailand during the assessment proceedings. After considering the facts and circumstances of the case assessee's income as shown in the return is accepted. 4. Assessment is accordingly made at NIL income. Detailed computation of tax and interest charged as per provision of law is given in the enclosed ITNS-150 which is part of this order. Necessary forms are issued." 10. Therefore, it is noticed that while completing assessment of the assessee for the assessment years 2013-14 to 2015-16 and also for the immediately succeeding ....
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....el for the assessee that the DRP has further erred in observing that the contract between DMRC and Consortium consisting of the appellant and BTIN is interlinked, intervened and indivisible. 31. The learned counsel for the assessee further pointed out that for holding BTIN as PE in India, the DRP concluded that the PE was instrumental since the stage of bidding, negotiations, signing of contract, preparation of designs and plans, management, delivery of train signalling systems and final delivery to DMRC and the warranty of equipment etc. 32. The learned counsel vehemently stated that the entire findings of the DRP are based upon incorrect facts, in as much as, the DRP has considered Rs.-02 contract whereas the correct contract was BS-02 12 which was design, manufacture, supply, installation testing and commission of train control and signalling systems. The learned counsel for the assessee concluded by stating that the disposal test has not been satisfied as no place of disposal was available to the appellant in India and for this proposition, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Formula One World Championship Ltd 80....
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....in India up to the site of DMRC in Delhi and there after carry out the entire testing of the equipment in the depot of DMRC. 9. The cost enters show that the entire activities from preliminary planning till transfer, of technology is an integrated activity. 10. The role of BTIN in overall functioning and execution of the contract from bidding to supplies and post supply activities is definitely significant for the BT Sweden. 11. The activities relating to delivery of offshore manufacture equipment at the nominated sites and there after testing and commissioning are activities which are completed with active and coherent participation by BT Sweden and BTIN and utilization of the premises of BTIN by BT Sweden 12. For the same contract in respect of RS2 project there-is a project office existing in India. 13. The cases of Ishikawajima and Hyundai heavy industries are not applicable as the contract in the Case of the assessee is a composite indivisible contract. 14. As per the terms and conditions of the contract, it is clear that the assessee is working with DMRC on a composite contract." 35. We have given thoughtful consi....
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.... * Main Line Point machines etc. 2.3 BT Sweden will undertake offshore training. Parts of Scope to be undertaken by BT India , 2.4 BT India shall be responsible for all on-shore activities. 2.5 BT India will procure and supply other equipment available locally such as Cables, ATS work stations, servers, Mimic Panel, LEO Signals, Depot Point Machines, Audio Frequency Track Circuits for depot, Parts of coded Audio Frequency Track Circuits, wayside hardware directly to DMRC. 2.6 BT India will provide major local support for application/ adaptation for Signaling & Train Control System. 2.7 BT India will be responsible for installation, testing and commissioning under the guidance/ instruction of BT Sweden. 2.8 BT India will arrange for Incidental services like Insurance, local & overseas transportation, clearance at port, unloading at port, unloading at DMRC, salting up a local site office in Delhi. 2.9 BT India will manage project sites, Warranty /Maintenance service sites in Delhi. 2.10 BT India will be responsible for providing onshore Training to the officials of DMRC. 2.11 The percentage participatio....
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.... also gone through the agreement between BTIN and Conny Linusson which fortifies the fact that Conny Linusson for Rs. 02 contract with DMRC. 40. In our considered opinion, the entire findings of the DRP are based on erroneous appreciation of wrong facts and on such erroneous appreciation of wrong facts, the DRP held that BTIN is the PE of the appellant in India without appreciating the true facts that the appellant has no place of disposal in India in the office of BTIN from where the appellant could have conducted its business in India." 12. The decision squarely applies to the assessee's case. Thus, even on merits the addition made towards off shore supplies is liable to be deleted. 13. The facts are similar/identical for the assessment years 2018-19 and 2019-20. Therefore, the decision taken for the assessment year 2016-17 applies to mutatis mutandis for these two assessment years also. We order accordingly. 14. In the result, three appeals of the assessee are partly allowed as indicated above. Order pronounced in the open court on : 31/08/2023. ============= Document 1API Error processing document Document 2 BEFORE THE HON'BLE INCOME TAX APPELLATE T....
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....iland and ever since has been employed with BT- Thailand with effect from August 01, 2015. 4. In this regard, it is submitted that the timelines as mentioned above relating to the employment of Claudio Tiraferri with BTIN is not relevant for the captioned AYS i.e., AY 2018-19 & 2019-20. The Ld. AO has without due application of mind, merely reiterated its conclusion drawn in AY 2016-17 while alleging supervisory PE and has failed to analyse the issue of PE afresh in light of the present facts of the case. In this regard, the Appellant would like to place reliance on the order of this Hon'ble Tribunal in the case of M/s Bentley Nevada Inc. vs. DCIT (ITA no. 743/Del/2017, ITA no. 6304/Del/2017 and ITA no. 484/Del/2019) wherein on the issue of existence of a PE. the Hon'ble ITAT has held that "whether an assessee has PE in a particular Assessment Year has to be decided on facts of that Assessment Year and not by the facts of earlier Assessment Years." 5. The contention of the Appellant is further fortified by placing reliance on the recent order of this Hon'ble Tribunal in the case of Nuovo Pignone International vs. DCIT (ITA No. 999/Del/2022) wh....