TaxTMI 
TaxTMI 
2023 (11) TMI 644
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....5,19,77,876/-. 2. That on the facts and in the circumstances 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 fixe....
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....g the relevant previous year) despite holding that last year's order should be followed w.r.t the treatment/ allowability of travel expenses incurred 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....
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....ted ("BTIL") for marketing, project management and engineering etc. during the AY 2010-11. As the facts and circumstances of the current year are the same as the preceding assessment year 2010-11, vide order 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 @....
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....ard both the parties and perused the records. We find that ITAT in the aforesaid order for AY 2010-11 has noted that DRP had held that project Office has not made any profit. In this regard, observation of the ITAT for AY 2010-11 in para 6 is as under :- " While dealing with assessee'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....
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....a in the form of its project office ("PO") in India. 2. That the rectification order passed by the Ld. AO is patently illegal as the interest income received from BTIN pursuant to the loan agreement has not been discussed in the Assessment Order dated 27.01.2016 and same is not a mistake apparent from the records under Section 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 Appel....