TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 644
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....s of the case and in law, the impugned order passed by the Ld. AO is bad in law and void ab-initio. Re: Project Office at Vadodara does not constitute Fixed Place Permanent Establishment ("PE") of the Appellant Company under Article 5(1) of the India-Germany DTAA. 3. That on the facts and in the circumstances of the case and in law, the Ld. AO and the Hon'ble DRP erred in alleging that "Project Office at Vadodara" constitutes fixed place PE of the Appellant under Article 5(1) of the Indo-Germany Double Taxation Avoidance Agreement ("DTAA") without independently examining the same in the light of Appellant's factual background. 3.1 Without prejudice to above, Ld. AO and the Hon'ble DRP failed to appreciate that mere existence of a PE in the host country, i.e., India, would not automatically lead to the conclusion that any portion of income arising from sale of equipment outside India was liable to be taxed in India. 3.2 That on the facts and in the circumstances of the case, Ld. AO and Hon'ble DRP erred in alleging that "Project Office at Vadodara" constitutes fixed place PE of the Appellant under Article 5(1) of the Indo- Germany Double Taxation Avoidance Ag....
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....d during captioned assessment year. 4.7 That the Ld. AO and Hon'ble DRP erred in disallowing travel related expenses by also alleging that 25% of the same relates to contracts other than RS-2 contract without any basis to support the same. 4.8 That the Ld. AO / Hon'ble DRP erred in adopting contradictory stands inasmuch as one hand they allege large number of expat employees visited India during the relevant previous year solely for purposes to assist BTIL in execution of "RS-2" contract and on the other hand, they disallow 25% of travel expenses while holding that the appellant has been unable to demonstrate that the entire amount of travel expenses were incurred only in respect of "RS-2" contract. 5. That the Ld. AO and Hon'ble DRP erred in not allowing INR 2,60,00,000/-, being 25% of the travel expenses disallowed in AY 2010-11 on the ground that these expenses pertain to contracts awarded in AY 2011-12, while holding that contracts awarded in AY 2011-12 did not fetch any income. Re: Taxation of sale of sub-assemblies and intermediary services corresponding to onshore sales of INR 27,93,70,105/- already taxed in AY 2010-11 - Disallowance of INR 12,80,51,100/-....
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....rder sheet entry dated 16.03.2015 the assessee was asked to show cause as to why the assessment for AY 2011-12 should not be completed on the same lines as the previous A.Y. 2010-11. The assessee vide letter dated 25.03.2015 filed its written submissions. 3.1 AO made enquiry from the assessee in this regard but he was not satisfied. He has held that the assessee has two fixed base PEs, first in the form of BTIL and the other in the form of Project Office (PO). AO further held that facts and circumstances remaining the same as in the previous AY 2010-11, the same rate has been accepted for the purpose of attributing profits of the PE by the assessee during the current AY 2011-12. AO went on to compute the net profit attributable to the assessee's PE in India as under :- " In view of above Net profit attributable to the assessee's PE in India is computed as under :- Particulars Amount in (Rs.) Sale consideration for sub-assemblies 98,61,59,616 Gross profit @ 8.12% 8,00,76,161 Gross profits attributable to the PE in India @ 35% of the above 2,80,26,656 Net profit of PE 2,80,26,656 Less : Overheads as per Section 44C (14,01,333) Net taxable profit 2,66,25,323 46. The....
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....'s objection, learned DRP granted substantial relief to the assessee qua the attribution of profit in relation to onshore supply and services. However, insofar as, income from offshore supply of 8 train sets, learned DRP, though, agreed with the assessee that the project office had no involvement with offshore supply, hence, no profit attribution can be made to the PE. However, learned DRP held that the assessee had a fixed place PE in the form of BTIL. Accordingly, learned DRP directed the Assessing Officer to attribute profit to the PE in respect of income earned from offshore supply at 35%." 10. As regards the issue of PE is concerned, the facts are similar to AY 2010-11. This has been mentioned by both AO and DRP. We note that ITAT in the order of AY 2010-11 (supra) had held that BTIL cannot be considered as PE of assessee in India. The order of ITAT may be gainfully referred to as under :- "20. At this stage, it is relevant to observe, learned DRP, while coming to conclusion that BTIL constitutes fixed place PE in India, has relied upon the decision of the Tribunal in case of Nortel Networks India International Inc. However, the decision of the Tribunal stands reversed by t....
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....tion 154 of the Act. 3. That the AO completely erred in law and on facts in ignoring that the ECB advanced by the Appellant to BTIN, was not effectively connected with the activities of the PO, basis which such PO was determined to be the PE of the Appellant for the subject year. 4. That the AO completely failed to appreciate that BTIN and PO were completely independent of each other and therefore, interest income received from BTIN could not have been charged as income in the hands of the Appellant under Article 7 of the India-Germany DT AA, earned through activities carried out by the PO. 5. Without prejudice, the observation of the AO vis-a-vis BTIN being the PE of the Appellant in India, which formed the basis for the AO to rectify its final assessment order dated 27.01.2016 in order to tax the interest received by the Appellant from BTIN at a higher rate, is also erroneous since BTIN had not been determined to be a PE qua the transaction of ECB and as such the ECB advanced were not effectively connected with the activities of BTIN either. 6. That the AO failed to appreciate that the ECB loan agreement executed between the Appellant and BTIN was not in connection with t....