TaxTMI 
TaxTMI 
2023 (8) TMI 1372
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....mbardier 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 was erroneous and prejudicial to the inter....
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....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 with taxation of FTS the consideration would be taxed as 'Business profits Since the India Thailand Tax Treaty does not have ....
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....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 revision by the CIT under section 263 of the Act, which position was also applied for the assessment years 2018-19 and 2019-20. The ld. Counsel submits that the Assessing Offi....
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....c 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 CASS and a notice u/s 143(2) of the Income Tax Act1961 ("the Act") was issued to the assessee on 31.08.2015. Further, a notice u/s 142(1) of the Act along with detailed questionnaire was issued to....
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.... 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 the assessment proceedings from time to time and filed necessary information and details. Written submissions and documents are considered. The case was discussed with the authorised representatives of the assessee. 2. The assessee company is re....
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....ent 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 assessment year to the assessment year under consideration i.e. 2017-18 the Assessing Officer thoroughly examined the taxability of the income received by the assessee on off shore supplies made to DMRC and the engineering services provided to BTIN with reference to the DTAA between India a....
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.... 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 Taxmann.com 347. 33. Per contra, the ld. DR strongly supported the findings of the DRP. It is the say of the ld. DR that since it is composite contract, therefore, there has to be attribution. The ld. DR pointed out that as per the contract, liability was fastened jointly and severally and the same profit has to be attributed for ....
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....nificant 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 consideration to the rival contentions and have carefully perused the relevant documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. The undisputed fact is that the supplies made under the BS-02 agreement were off shore supplies. The Hon'ble Supreme Court in the case of Ishikawajima Harima Heavy Industries Ltd 158 Taxman 259 has categorically held that only such part of the income as is attributable to....
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....gnaling & 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 participation of BT Sweden is 50% and the percentage participation of BT India is 50%. 2.12 Irrespective of the joint and several liability towards DMRC for any default by any party, the party not responsible for the respective default will have the right to be indemnified by the other party, 3. Co-operation Principles . - 3.1 It is clarified that the proposed arrangements between ~_ scope shall be on 'principal to principal' basis. 3.2 The co-operation defined in this MoU is on an exclusive basis and shall be subject to BT internal policies and guidelines. 3.3 In the event of contract, this MoU will be further elab....