TaxTMI 
TaxTMI 
2024 (3) TMI 769
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....officer erred on facts and in law in completing assessment under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ('the Act') at an income of Rs. 15,55,45,693 as against the returned income of Nil under normal provisions of the Act, wherein demand amounting to Rs. 8,45,18,275 has been raised. Re: Validity of assessment proceedings/ order 2. That on the facts and circumstances of the case and in law, the impugned assessment completed vide order dated 28.07.2023 passed by the assessing officer under section 143(3) read with section 144C of the Act ('impugned order') being barred by limitation is illegal, bad-inlaw and is void ab initio and thus liable to be quashed. 3. That on the facts and circumstances of the case and in law, the directions issued by the Ld. Dispute Resolution Panel ('DRP') in absence of Document Identification Number ('DIN'), though intimated subsequently, is non-est and invalid and thus liable to be quashed, 3.1 That on the facts and circumstances of the case and in law, the final assessment order passed in conformity with invalid directions of DRP is, therefore, invalid and barred....
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....dice, the assessing officer erred on facts and in law in not applying the attribution rule provided in section 9 of the Act which mandate the income of the business deemed to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. 10. Without prejudice, the assessing officer erred on facts and in law by attributing the entire amount of revenue of Rs. 15,55,45,693 earned from India which includes the revenue earned in respect to the services provided from Singapore, thereby not following Article 7(1) of the Treaty. 11. Without prejudice, the assessing officer erred on facts and in law in not following decisions in appellant's own case for the previous assessment years wherein income was attributed to the alleged PE by bifurcating the amount of the invoice based on number of hours for which work was carried out in India and outside India. 12. Without prejudice, the assessing officer erred on facts and in law by not excluding the amount of expenses reimbursed to the appellant from determining income liable to tax in India. Re: Others 13. That the assessing officer er....
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....assessing officer is barred by limitation under section 153 of the Act and is liable to be quashed. 5.1 That on the facts and circumstances of the case and in law, since the impugned order is non-est, invalid, the additions made therein are invalid, beyond jurisdiction and bad in law. Re: Constitution of Service PE / Virtual Service PE in India 6. That the assessing officer erred on facts and in law in holding that the appellant constituted a permanent establishment ('PE') in India under Article 5(6) of the India-Singapore Tax Treaty ('Treaty'). 7. That the assessing officer erred on facts and in law disregarding the fact that no employees of the appellant visited India to hold that the appellant constituted a Service PE based on physical presence of employees in India. 8. That the assessing officer erred on facts and in law in holding that the appellant constituted 'Virtual Service PE', which is against the settled law, on the ground that in terms of para 6 of Article 5 of the Treaty what is important is the aggregate duration of provision of services by the non-resident within India and Singapore and duration of physi....
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....he assessing officer erred on facts and in law in not bringing any material/evidence on record that the alleged income was received by the appellant. 14.2 Without prejudice, the assessing officer erred on facts and in law in not granting The corresponding TDS credit amounting to Rs. 2,76,943 withheld on the aforesaid payment. Re: Alleged addition of interest on income tax refund which is vet to be received 15. That the assessing officer erred on facts and in law in making an addition of Rs. 10,23,649 on account of interest on income tax refund determined for AY 2019-20 based on mercantile system of accounting, without appreciating that no refund and/or interest on income tax refund was received by the appellant. 15.1 Without prejudice, the assessing officer erred on the facts and in law in taxing the interest income at the rate of 40 percent and not at the rate of 15 percent, the Outrunt. leno beneficial rate mentioned in article 11 of India-Singapore tax treaty 15.2 Without prejudice, the assessing officer erred on facts and in law in not granting the corresponding TDS credit amounting to Rs. 4,25,838 withheld by the department. Re: Others....
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....ee in India. The assessee filed detailed submissions before the Ld. AO which were not found to be tenable. He proceeded to pass the draft assessment order dated 30.09.2022 for AY 2020-21 and 29.12.2022 for AY 2021-22 under section 143(3) r.w. section 144(C) of the Act proposing to make addition of Rs. 15,55,45,693/- and Rs. 7,97,64,414/- respectively to the total income of the assessee on account of constitution of service PE of the assessee in India. 5. Aggrieved, the assessee filed objections before the Ld. DRP who vide its order dated 31.05.2023 for AY 2020-21 and 11.09.2023 for AY 2021-22 directed the Ld. AO to reconsider the facts/information and material placed on record by the assessee during the assessment proceedings, before passing the final assessment order. 5.1 Pursuant to the above directions, the Ld. AO passed final assessment order on 28.07.2023 under section 143(3) r.w. section 144(C)(13) of the Act for AY 2020-21 holding that the assessee constituted service PE based on physical presence of employees in India and also virtual service PE on the ground that in terms of para 6 of Article 5 of the India-Singapore DTAA what is important is the aggregate duration o....
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....assessee, namely Rahul Guptan and Shashwat Tewary travelled to India for rendering services to Indian clients. Although they were present in India for 120 days in total, their vacation period, days involving business development activities (business development days) and common days have been excluded from the total number of days after which the total days for which the services were furnished in India comes out to be 44 days. He submitted that these two employees were on leave for 36 days during the relevant AY. To demonstrate the same he took the Bench through the time sheet for aforesaid employees wherein annual leave has been captured (page 19 and 20 of the Paper Book) and leave record extracted from HR system of the assessee company for its two employees (page 55 to 103 of the Paper Book). Further he submitted that the assessee had also furnished a declaration that these employees did not work on client project during their vacation period in India. (page 104 of the Paper Book). He submitted that all these facts were present before the lower authorities. In support he relied on the judgment of the Delhi Tribunal in the case of Linklaters LLP vs. DDIT [(TS-210-ITAT-2019) (Mum)....
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....day it was considered as business development day. All this material was placed before the Ld. AO. However, he did not consider the same. Regarding the presence of Mr. Jonatham Crandall in India, the Ld. AR submitted that Mr. Jonatham Crandall was present in India for providing services from 2nd June, 2019 to 3rd June, 2019 and from 18th July, 2019 to 19th July, 2019. These days are already covered under common days with Rahul Guptan and Shashwat Tewary and accounted for while calculating number of days during which services were performed in India. 11. The Ld. AO has also alleged constitution of virtual service PE in both the AYs 2020-21 and 2021-22. The Ld. AO held that the services were provided by the employees of the assessee to the clients in India for a period of more than 90 days, physical presence of employees is not relevant and accordingly constituted virtual service PE in India on account of the nexus rule provided in Article 5(6) of India-Singapore DTAA. According to him, there is no mandate in the tax treaty that the employees providing services within India must be stationed in India and services provided from outside India are to be considered for constitution of....
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....90 days: or (b) activities are performed for a related enterprise (within meaning of Article 9 of this Agreement) for a period or periods aggregating more than 30 days in any fiscal year." In terms of the above provisions the following conditions need to be cumulatively satisfied for constitution of a service PE in India: (i) employees or the other personnel of the foreign entity (assessee) should be present in India; (ii) there should be furnishing of services (other than services referred to paragraphs 4 and 5 of this Article and technical services as defined in Article 12) within a contracting state (India) through employees or other personnel of such foreign entity (assessee); and (iii) activities of that nature i.e. such furnishing of services should continue for a period exceeding 90 days in a fiscal year (relevant AY) or 30 days when such services are rendered to related enterprises. The term "fiscal year" means the previous year as defined under section 3 of the Act which is the relevant AYs in the present case and the threshold of 90 days is to be applied since the services are rendered to independent Indian client by the assessee ....
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....ssee were present in India (i.e. 120 days) the same would come to 84 days which is less than the threshold of 90 days provided under Article 5(6)(a) of the India-Singapore DTAA for constitution of service PE of the assessee in India. Further, to arrive at the threshold, the Ld. AO has considered business development days comprising of 35 days as well as common days comprising of 5 days which in our considered view should be excluded while computing the threshold of service PE as no services were provided to customers in India on the days spent on business development activities and the computation of threshold should not be based on man days by aggregating common days spent by more than one individual. In effect, the services have been furnished by the assessee only for 44 days in India after excluding vacation period, Business Development days and common days and accordingly the assessee does not constitute service PE in India as per India-Singapore DTAA during the AY 2020-21. 12.5 So far as AY 2021-22 is concerned, as discussed above physical rendition of services in India beyond the threshold period is a prerequisite for creation of service PE and as none of the employees of ....
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....s also accepted the fact that there is minority view on the subject as of now and no judicial precedents are available on the same which have attained finality. In our considered view the assessee does not constitute virtual service PE in India as no provision regarding establishment of virtual service PE are mentioned under India- Singapore DTAA and hence the present service PE provision under the India-Singapore DTAA which requires physical rendition of service in India should only be applied. This view is supported by the OECD Interim Report 2018 itself wherein it is clearly mentioned that in the absence of any amendments to the tax treaty provisions themselves, these measures can be challenged by the tax payers before the courts. 12.8 In the light of above factual matrix, the arguments put forth by the parties and the judicial precedents relied upon by the Ld. AR, we hold that the assessee does not constitute service PE/virtual service PE in AY 2020-21 and 2021-22. The receipts of Rs. 15,55,45,693/- by the assessee in AY 2020-21 and Rs. 7,97,64,414/- in AY 2021-22 are in the nature of business profits of the assessee not taxable in India in the absence of the PE of the asses....
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....f income-tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax." 17.1 The Ld. AR submitted that proviso inserted in section 209(1)(d) of the Act by the Finance Act, 2012 w.e.f. 01.04.2012 would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax. In the case(s) at hand, income has been received by the assessee after deduction of tax at source and therefore the said proviso to section 209(1)(d) of the Act is not applicable. He submitted that as per section 209(1)(d) of the Act r.w. proviso thereto, where in case of a non-resident company, tax deductible at source has been paid, it would not be permissible for the Revenue to charge any interest under section 234B for alleged failure to pay advance tax by such assessee. This issue is covered by the decision of the Coordinate Bench of the Tribunal in the case of Amadeus I....
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....has been brought on record by the Revenue to prove that the assessee had received any payment from ICICI Bank Limited. In light of these submissions, we direct the Ld. AO to verify the claim of the assessee and if found to be correct by him, grant corresponding credit of TDS to the assessee in accordance with law. 22. With respect to the addition of interest income on income tax refund allegedly received by the assessee during the relevant AY, the Ld. AR submitted that the department had determined interest of Rs. 10,23,649/- on income tax refund and tax amounting to Rs. 4,25,838/- has been withheld by the department on the aforesaid interest amount. The Ld. AR submitted that neither the income tax refund amount nor interest amount was received by the assessee in AY 2021-22 and even till date which is verifiable from the NSDL status wherein only details of TDS having been deducted is reflected and the fact of remittance of refund to SBI is not stated. (Page 144 of the Paper Book) He also submitted that without prejudice, if at all the interest income should be taxed @ 15% provided under Article 11 of India-Singapore DTAA instead of 40% rate applied by the Ld. AO. 23. We have ....