TaxTMI 
TaxTMI 
2024 (5) TMI 345
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....he directions of the Ld. DRP, pertaining to AYs 2019-20, 2020-21 and 2021-22 respectively. Since all the four appeals involve common issues, these were heard together and are being disposed of by this common order. 2. The assessee has raised the following grounds of appeals: Assessment Year 2012-13 1. That the Ld. AO has grossly erred in treating the Appellant as an eligible assessee in terms of Section 144C of the Act and accordingly, passed draft assessment order under Section 144C of the Act, and thereafter passing the impugned final assessment order, beyond the period of limitation as prescribed under Section 153 of the Act, thereby making the assessment proceedings barred by limitation. 2. That, on the facts and in the circumstances of the case and in law, the order passed by the Ld. CIT(A) under Section 250 of the Act, taxing the receipts amounting to Rs. 3,64,35,459/-under Section 44BB of the Act, is wrong and bad in law as the same cannot be taxed at all, in the absence of any Permanent Establishment ('PE') of the Appellant in India in terms of the beneficial provisions under India-Canada DTAA. 3. That the Ld. CIT(A) has grossly erre....
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....acts and in the circumstances of the case and in law, the order passed by the Ld. AO under s. 143(3) read with s. 144C(13) of the Act, taxing the receipts amounting to Rs. 7,94,63,248/- under s. 44BB of the Act, is wrong and bad in law as the same cannot be taxed at all in terms of the beneficial provisions under India-Canada DTAA. 2. That, on the facts and circumstances of the case and in law, the Ld. AO and Ld. DRP erred in not holding that: (A) Rs. 2.34,14,794 received on account of sale of software license cannot be taxed as Royalty under Article 12(3) of India-Canada DTAA, particularly in view of Engineering Centre of Excellence Private Limited v CIT (2021] 125 taxmann.com 42 (SC). (B) Rs. 5,50,38,725 and Rs. 10,08,728 received on account of software maintenance/support services and training services respectively, cannot be taxed as FIS under Article 12(4) of India Canada DTAA, as the said receipts do not satisfy the make available criteria. 3. That, the Ld. AO/ DRP has grossly erred in not considering the evidence provided by the Appellant and also without providing the result of investigation/enquiry conducting against the Appellant. ....
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....a DTAA. (B) That on the facts and in the circumstances of the case and in law, receipts of Rs. 4,57,73,297 received on account of software maintenance/ support services and training services, cannot be taxed as Fee for Technical Service ('FTS') / Fee for Included Service ('FIS') under Article 12(4) of India-Canada DTAA. 5. That, on the facts and circumstances of the case and in law, the Ld. AO has erred in not granting complete interest due under Section 244A of the Act as the Appellant shall be eligible to interest under Section 244A of the Act from first day of AY i.e. 1 April 2020 till the date of receipt of actual refund in the bank account of the Appellant. 6. That, on the facts and the circumstances of the case and in law, the Ld. AO has erred in initiating penalty under section 270A of the Act. Assessment Year 2021-22 1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. AO under s. 143(3) read with s. 144C(13) of the Act is wrong and bad in law as the same is not accompanied by the notice of demand under Section 156 of the Act. 2. That on the fact and in circumstances....
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....p AY 2012-13 as the lead case. Our findings on the main issues recorded in AY 2012-13 shall apply mutatis-mutandis to the common issues in AY 2019-20, 2020-21 and 2021-22. 4. The facts in brief are that the assessee is a foreign company and is a tax resident of Canada. It is engaged in the business of supply of reservoir simulation software to oil companies such as ONGC, Oil India, Vedanta, etc. along with related software maintenance support services and training services for acquainting with the operation of such software. On examining the list of non-filers, the Ld. Assessing Officer ("AO") found that the assessee has not filed its return for AY 2012-13 despite receipts from M/s. Cairn Energy India Pty. Ltd.; M/s. Prize Petroleum Company Ltd.; M/s. Shell India Market Pvt. Ltd. and M/s. Reliance Industries Ltd. on which TDS has been deducted. He therefore issued notice on 29.03.2019 under section 148 of the Act. It was served but compliance was not made. He, then issued notice(s) to the above concerns under section 133(6) of the Act seeking details about the amount paid/accrued to the assessee, nature of products/services rendered by the assessee to them as well as the contrac....
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....148 of the Act as valid. 5.2 On the issue of addition, the Ld. CIT (A) concurred with the directions dated 19.04.2023 of the Ld. DRP in respect of similar addition made in AY 2019-20 and 2020-21 wherein the decision of Hon'ble Supreme Court in the case of ONGC vs. CIT (2015) 376 ITR 306 (SC) has been relied upon to assess the income of the assessee under section 44BB of the Act. Similar addition is made in AY 2021-22 as well. 6. Aggrieved, the assessee is in appeal before the Tribunal and the main issue of taxing the entire receipts of the assessee by applying the provisions of section 44BB of the Act is common in all the AYs presently involved. 7. The Ld. AR made common submissions for all the four AYs under consideration. The Ld. AR submitted that section 44BB of the Act is a computation provision and provides that notwithstanding anything contained in section 28 to 41 and section 43 and 43A of the Act, 10% of the gross receipt of a non-resident engaged in the business of providing services or facilities in connection with supplying plant and machinery on hire which is used or to be used in prospecting for or extraction of, mineral oils shall be deemed to be the prof....
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....bited to do anything by way of reverse engineering or otherwise and title and ownership of the licensed technology remained with the assessee. Moreover, it was stipulated that the licensee shall not at any time sell publish, transfer, gift or otherwise disclose any licensed technology in any form or manner to any third party. 7.4 The Ld. AR, without prejudice to the above contentions, further submitted that in para 18 of its order dated 19.11.2018 in assessee's own case for AYs 2006-07 to 2010-11 (copy placed in the Paper Book), the Tribunal held that nature of payment as received by the assessee through ONGC on account of software license fee cannot be characterized as 'royalty'. It is stated by the Ld. AR that the order (supra) of the Tribunal has been accepted by the Revenue and no appeal there against has been filed. The Ld. AR submitted that facts continue to remain the same in AYs presently under consideration. He also submitted that this issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. (2021) 125 taxmann.com 42 (SC). 7.5 The Ld. AR stated that software maintenance service and t....
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.... its impugned order is as below: "As already discussed, section 44BB which was inserted into the Act with effect from April 1, 2004, is a special, specific and exclusive provision dealing with the computation of profits of non-resident assessees engaged in the business of providing services in connection with or supplying plant and machinery on hire to be used "in the prospecting for, or extraction or production of, mineral oils". It is in the company of three other sections (which we have referred to earlier as 44BB series) specially providing for computation of profits of the non- residents/foreign companies engaged in the specified types of business. True, profits arising from the business specified in section 4488 may also fall within the ambit of fees for technical services chargeable under section 9(1)(vii). But, the question is which is the appropriate computation provision that is applicable? As between the competing provisions, namely section 9(1)(vii) read with section 44DA and section 44BB, section 44BB being a more specific provision, that provision should prevail for the purposes of computation. Section 44DA, it may be recalled, provides for the method of comp....
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....in the Hon'ble Court held as under: "29. Having stated the above, we must clarify that the income falling within Section 115A(1)(b) the Act which does not fall within the four corners of Section 44DA(1) of the Act would also no taxable under Section 4488(1) of four corners by virtue of proviso to Section 4488(1) of the Act, it is expressly excluded. Accordingly, if the consideration received by the Assessee for services rendered is found to be fees for technical services, the AO would specifically have to determine (a) whether the assessee had a PE in India during the relevant period; and (b) if so, whether the contracts entered into by the appellant with BG and RIL were effectively connected with the Assessee's PE in India. It is conditions are satisfied, that the income of the assessee would be computed under Section only, if the AO finds that the said two 44BB(1) of the Act. However, if such condition of the asst satisfied then the income tax payable b the appellant would have to be computed in accordance with Section 115A(1)(b) of the Act. 30. Therefore, if it is accepted that the Tribunal was right in finding that the consideration received by the Assesse....
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.... person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under subsection (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under subsection (3) of section 143 and determine the sum payable by, or refundable to, the assessee. Following sub-section (....
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....ate amount paid or payable to the assessee. This machinery provision will admittedly come into operation only when the income is liable to be computed under the Act. That can be done only if the assessee has a PE in India. We have already decided the matter of PE against the revenue and in favour of the assessee. Therefore, there is no question of computation of business income in this case." As to when does the specific PE come into existence or how the offshore supply of equipment is attributable to the PE has not been identified by the AO. Assessee's counsel has specifically mentioned that there is no finding in the assessment order as to which consortium member and which office of such consortium member constitutes PE of the assessee in India. Assessee has challenged the aforesaid finding before the DRP. DRP did not address the issue but held that the issue of PE is academic, therefore, need not be answered. This view is quite contradictory to the above decision. As referred in Hon'ble Supreme Court decision in the case of ADIT vs. E-Funds (2018) 13 SCC 294, burden of proving the existence of PE lies on the Revenue which has not been discharged. In this view of the mat....
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....f such remuneration, it is the requirement that the assessee must keep and maintain books of accounts and other documents as required under sub-section (2) of Section 44AA and to have his accounts audited and to furnish a report of such audit as required under Section 44AB of the Act. In the instant case, assessee did not maintain any such books of accounts nor got the same audited. On the other hand, solely on the basis of the contract, which recorded that the assessee will be remunerated for providing service at no profit, it was assumed by the appellant that the assessee made no profit at all. It appears to us that whether the assessee made any profit or it did not make any profit is of no consequence. 10 per cent of its remuneration, as mentioned in Section 44BB is deemed to be profit and to be taxed under the head 'profits and gains of business or profession'. If the assessee was of the view that it has not earned any profit by providing such service, the only way available to the assessee was to maintain books of accounts and to have the same audited and to furnish the audit report in respect thereof. It is submitted by the learned counsel for the respondent that a vi....
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....for the assessment year 2000-2001, the assessee was M/s Enron Oil Gas Expat Services Inc., Dehradun, and that, in the said appeal, the Division Bench of this Court granted relief to the assessee on the basis of the fact recorded that the assessee had no permanent establishment in India." 14. In view of the factual matrix in relevant AYs under consideration and the decisions (supra) of the Hon'ble jurisdictional Delhi High Court and the Hon'ble Uttrakhand High Court and also following the decision of the Coordinate Bench of the Tribunal (supra), we are of the view that the impugned receipts of the assessee are not taxable in India under the provisions of section 44BB of the Act for the reason that the assessee does not have a PE in India in the relevant AYs under consideration and that being a resident of Canada, the assessee is governed by the more beneficial provisions under the India-Canada DTAA. It is the claim of the Revenue that the assessee's case is covered by the decision of the Apex Court in the case of ONGC vs. CIT (2015) 59 taxmann.com 1 (SC). We do not agree with this contention of the Revenue as in our considered view, the assessee's case is distinguishable ....
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....2-13 and ground No. 6 in AY 2019-20, the assessee has challenged the levy of interest under section 234B of the Act on the ground of its inapplicability in case of a non-resident. 19.1 The proviso inserted in section 209(1)(d) of the Act by the Finance Act, 2012 w.e.f. 01.04.2012 reads as under:- "Provided that for computing liability for advance tax, income-tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid amount of 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." 19.2 It can be seen from the above 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, the Ld. AR has submitted that the income (impugned r....