TaxTMI 
TaxTMI 
2025 (3) TMI 352
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....and in law, the LD, AO has erred in holding that the Appellant has a Permanent Establishment ("PE") in the form and DAPE in M/s. Rajalakshmi International Corporation (Proprietor Anand Mathur) 3. That on the facts and circumstances of the case & in law, the Ld AO/CIT(A) grossly erred in treating the services in relation to preparation of design as FTS without appreciating that the same is inextricably linked with the supply of equipment and cannot be termed as FTS in view of Article 12(5) of the DTAA. 4. Prepaid Taxes, Interest u/s 234A, 234B& 234C a) The Ld AO has applied interest under 234B& 234C without giving credit of the prepaid taxes and credit of tax deducted at source. b) That in the facts and circumstances of the case & in law, the Ld AO erred in levying interest u/s 234B of the Act. 5. General a) The above grounds of objections are independent and without prejudice to each other. b) The above grounds of appeals are without prejudice to each other. That the appellant craves leave to add, alter, amend or withdraw all or any objections herein or add any further grounds as may be considered necessary either befor....
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....ign and Training charges, received from SAIL, amounting to 2,04,90,834/- [ $5,09,215.56 * 40.24] @ 10% on account of services as FTS u/s 9(1)(vii) r.w.s. 115A. 10. The assessee has denied having a PE in India. The Assessing Officer however, from a study of the Service Agreement between the assessee and Rajalaxmi International Corporation [RIC] dated 01.02.2005, has held that Rajalaxmi International Corporation [RIC], a proprietorship of Anand Mathur, in India, had acted as dependent agent of the assessee for supply of equipment and drawing design for SAIL and RINL. The crux of the dispute between the Revenue and the assessee therefore is, whether RIC is a dependent agent permanent establishment in order to tax the business income of the assessee in India and that the receipts for design and drawing is taxable as FTS u/s 9(1)(vii) of the Act. 11. The assessee agitated by the additions, approached the CIT(A), who confirmed the action of AO except he deleted the Training Service fee as FTS and directed to include the same as part of sales proceeds of equipment as it is integrated to the sale of equipment. 12. Aggrieved the assessee is before us. 13. The ld AR of the assess....
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....me of the assessee with the clientsand finally concluded by treating RIC as DAPE in terms of Article 5(4)(i) of the DTAA and referring to the decision of the Hon'ble Delhi High Court in the case of Rolls Royce Vs DDIT, the Assessing Officer attributed Rs. 21,15,642/- to the income of the assessee. 11. Further, following the directions of the DRP, the Assessing Officer treated the amount received from RINL and SAIl as taxable as FTS u/s 9(1)(vii) of the Act. 12. We have given thoughtful consideration to the orders of the authorities below. The whole controversy revolves around whether RIC is DAPE. It would be pertinent to refer to the relevant article of the India - USA DTAA, which is Article 5 and the same reads as under: "5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent, or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted wholly or almost wholly on....
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....under federal, state or local laws regarding employee liability and that the total commitment and liability of the company in regard to this Agreement is the payment of the Commission as defined under Schedule A. Neither party is authorized to make any commitment or representation, express or implied, on the other parties behalf unless authorized to do so in writing by such other party." 16. A perusal of the entire contract with RIC shows that RIC is an independent consultant having no rights to conclude contract on behalf of the assessee so as to construe as a permanent establishment in India. Since, in its independent professional capacity it provides similar services to other clients as mentioned elsewhere. 17. Further probe of facts show that one Shri Anand Mathur runsa consultancy business in the name and style of M/s Rajlaxmi International Corporation and the assessee seeks his service to represent it in India for its project in India. The assessee executes projects i.e supply, erection and commission of desulphurization plant on turnkey basis through international competitive bidding process. 18. The role of the RIC Shri Anand Mathur, representativ....
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....0 15 CENVAI Credit - 2,64,83,234 Contract Price (Net of CENVAT) 2,831,524 25,86,28,766 Applying an exchange rate of 44.30 per USD whereas the value of supply by ESM is Rs. 12.54 Crores, the value of supply, services and erection done by the consortium partner Beekay Engineering Corporation is Rs. 28.51 Crore accounting for 69% of the Contract value. S. No. Description Prices (Currency) Eoreign (USD) Indian (Rs) 1 Design & Engineering a) Imported (CIF) (Refer Appendix - 15-1) 592,826 - b) Indigenous (Refer Appendix - 15 - - 1,500,000 2 Supply of Plant & Equipment a) Imported (CIF) (Refer Appendix - 15-3) 1082135 b) Indigenous (FOR site) (Refer Appendix - 15-4) 251640000 3 Supply of Refractories (At NA - a) Imported (CIF) (Refer Appendix - 15-5) Included b) Indigenous (FOR site) (Refer Appendix - 15 - 6) 4(a) Supply of Commissioning a) Imported (CIF) (Refer Appen....
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....e by the consortium partner is 69%. 21. Considering the facts of the case in totality and in appreciation of the agreement with RIC, we are of the considered opinion that RIC does not constitute DAPE of the assessee under the relevant article of the India - USA DTAA. 22. We are also of the considered view that the consortium partner M/s Beekay Engineering Corporation has done its work by way of a separate contract and, therefore, the same cannot be held as installation PE of the assessee. There is no dispute that the assessee has supplied only engineering design, that too, from abroad and consideration in view thereof has also been received from outside India and since we have held that RIC is not DAPE within the meaning of Article 5 of the India-USA DTAA, there is no question of any attribution to the assessee. In light of the afore-mentioned discussion, the appeal of the assessee is allowed and that of the Revenue is dismissed". 17. We find that the ITAT has decided the issue of whether RIC is DAPE in terms of contract dated 01.02.2005 in favour of the assessee. We find that for the instant year, the same contract with RIC exist, hence the facts as available ....