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2020 (1) TMI 1697
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.... in complete defiance of law and against specific mandamus issued by the Hon'ble Uttarakhand High Court in Writ Petition and consequent Special Appeal filed by the Appellant before Hon'ble Uttarakhand High Court. 3. That on the facts and circumstances of the case and in law, the order passed by Ld. CIT u/s 263 bad in law in as much it does not fulfill the jurisdictional conditions envisaged by section 263 of the Act. 4. That on the facts and circumstances of the case and in law, the order passed by Ld. CIT u/s 263 is against the settled legal dictum in as much that the Ld. CIT erred in not appreciating that- a. It was not a case where no enquiry was made by the Ld. Assessing Officer, on the contrary, was a case where assessment order was passed after making detailed enquiries. b. That 263 proceedings cannot be initiated on a mere change of opinion c. That where two views are possible and Assessing Officer has adopted on of the views, 263 does not lie d. If two reasonable constructions of a taxing provision are possible, the construction that favours the assessee has to be adopted. 5. That on the facts and circumstances ....
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....out to which assessee pointed out that total aggregate days of activities carried out in India was 102 days in the Financial Year 201415; and in support, filed various documents like bills, vouchers and invoices, details of expats who had come to India was also submitted. After examining the contract and all the details, the Assessing Officer accepted the assessee's contention holding that no PE exists in India. The relevant observations and findings of the Assessing Officer in the assessment order reads as under: - "2. The assessee company incorporated under laws of Singapore and is a tax resident of Singapore. It is engaged in the business of rendering offshore geophysical services to international oil & gas industry. The assessee has entered into a contract with Cairn India Limited on 11 February 2014 for provision of 3D Marine Seismic Data Acquisition services. 3. During the year under consideration assessee has filed Return of income declaring gross income as NIL. During the course of assessment proceedings vide order sheet entry dated 24.11.2016, the assessee was asked to submit the basis of filing nil return. Vide written submissions dated stated t....
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.... boats constitute a fixed place PE of the assessee in India. 4. The assessee, in the meantime had approached Hon'ble Uttarakhand High Court by way of Writ Petition challenging the maintainability of the process of initiation of revisionary jurisdiction u/s. 263 of the Act, however, the Hon'ble High Court held that the Ld. CIT will consider objections to the show cause notice and decide accordingly. Thereafter, the assessee filed detailed objections and submissions before the Ld. CIT, the copy of which has been placed in the paper book. However, the Ld. CIT held that the AO should have seen the applicability of Article 5(1) before coming to Article 5(5) and held that there has to be place of business to fall within the ambit of PE and there has to be linked between the place of business and a specific geographical point and it does not mean that equipment constituting the place of business had to be actually fixed to the soil on which it stands. The words "through which" are also open to wide interpretation, first to apply to any situation where business activities were carried out, that is, a particular location which is at the disposal of the enterprise for that purpose. Thus, ....
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.... coherence is not there even if there be business carried on within a limited geographical location, the same would not be considered as a single place of business." 5. Lastly, he cancelled the assessment order upholding it be erroneous as well as the prejudicial to the interest to the Revenue after observing as under:- "On the basis of above discussion, it is evident that the assessee M/s Nordic maritime Pte. ltd. has a fixed place of business in the shape of its vessel used for conducting the seismic survey and hence, under Article-7 of India- Singapore DTAA, the receipt of the assessee is taxable in India as business income. While verifying the applicability of any provisions of any statute law has to be read from the beginning of the provision. Accordingly, the test of existing of PE under the provision of Article 5 of the DTAA has to be made starting from first sub-Article. If it fails to include the existence of PE under sub-article (1) of Article 5, then one has to go to second sub-article and then third and so on. In this case, the very first sub article states that "a fixed place of business" could be held as a PE. Therefore, it was incorrect on the pa....
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....e perspective of Article 5(1) India Singapore treaty DTAA first and then only he could have resorted to others paragraphs of Article 5. However, the Ld. CIT has given very details reasons as to why Article 5(1) will apply and also referred to the decisions as quoted above by the Ld. CIT in the impugned order. Thus, he strongly relied upon the order of the Ld. CIT. 8. We have heard rival submissions and also perused the relevant findings given in the impugned order as well material on record placed before us. We have already discussed the facts in detail in the preceding paragraphs. It is undisputed fact that the assessee had carried out '3D Marine Seismic Data Acquisition Services for Cain India Ltd. and the scope of work consisted of acquisition and processing of seismic data as well as gravity and magnetic data. During the year, the assessee has shown gross revenue of Rs.133 Crores and has claimed that it is not liable to be taxed in India as a tax resident of Singapore, in view of Article 5(5) of India Singapore DTAA. The explanation of the assessee was that, it has provided services and facilities in India for a period of less than 183 days and has also given details and evi....
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....g State for a period of more than 183 days in any fiscal year in connection with the exploration, exploitation or extraction of mineral oils in that Contracting State. 6. An enterprise shall be deemed to have a permanent establishment in a Contracting State if it furnishes services, other than services referred to in paragraphs 4 and 5 of this Article and technical services as defined in Article 12, within a Contracting State through employees or other personnel, but only if: (a) activities of that nature continue within that Contracting Slate for a period or periods aggregating more than 90 days in any fiscal year; or (b) activities are performed for a related enterprise (within the meaning of Article 9 of this Agreement} for a period or periods aggregating more than 30 days in any fiscal year. 7. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include; (a) The use of facilities solely for the purpose of storage, display or occasional delivery of goods or merchandise belonging to the enterprise (b) the maintenance of a stock of goods of merchandise belonging to the enterpr....
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....e and other enterprises controlling, controlled by, or subject to the same common control, as that enterprise, he will not be considered an agent of an independent status within the meaning of this paragraph. 10. The fact that a company which, is a. resident of a Contracting Stale controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other Contracting State {whether through a permanent establishment or otherwise shall not of itself constitute/either company a permanent establishment of the other. " 10. The core issue before us is that, whether assessee who is carrying out specific activity of providing services or facilities in connection with the exploration, exploitation or extraction of mineral oils, which activity falls within the scope and definition given in Article 5(5), then whether general provision of Article 5(1) would apply or not. There are three types of PE contemplated under Article 5, firstly an establishment which is carrying out a business from a fixed place of business like office, branch, etc. and second type is agency PE. The third type of PE is for construction and installati....
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....ided that affixed place of business would be regarded as a 'permanent establishment' if the assessee carried on his business wholly or partly from this fixed place. Article 5 (2) provided that the term 'permanent establishment' would include six locations referred to therein. According to learned counsel, the six locations could become permanent establishments only if they satisfied the test laid down in article 5 (1), i.e. the business of the enterprise was wholly or partly carried on through such locations. Article 5 (3) according to learned counsel was a specific provision and it was well-settled that a specific provision overrides the general provision. The plea in concluding was that article 5 (3) was an exception to article 5(1) and article 5 (2) and where a building, site or construction assembly or installation project does not exist for a period exceeding nine months, an office rendering support services to such project could not be regarded as a 'permanent establishment' within the meaning of articles 5(1) and 5(2) since article 5(3) was a specific provision. The Income-tax Appellate Tribunal has also recorded in its finding that we are not sufficiently convinced to treat....