TaxTMI 
TaxTMI 
2025 (7) TMI 1682
X X X X Extracts X X X X
X X X X Extracts X X X X
....in China and a tax resident of China. TBEA had bid for certain projects floated by M/s. Power Grid Corporation of India Ltd. ('PGCIL') during F.Y. 2009-10. M/s. PGCIL had called for the bids for the design, engineering, manufacturing, supply, erection, testing and commissioning of shunt reactors at its different sites in Bilaspur, Bhiwani, Fatehpur, Agra, Lucknow, Meerut, Moga and Jatikalam. The bids were called for on Global Competitive Bidding basis. TBEA had successfully bid for these projects and entered into separate agreement for the various sites. Against the single bid, two separate agreements were executed by TBEA for each of the sites. a) Agreement for Offshore supply of equipments including type testing abroad. b) Agreement for Onshore Service including inland transportation, type testing, installation, erection and commissioning in India. 3. For the purpose of executing above agreements, TBEA had set up a project / branch office in India, which constituted Permanent Establishment (PE)of the non resident TBEA in India. 4. The case of the assessee (i.e. project office or Permanent Establishment) (PO/PE) was selected for scrutiny. During the course ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upply contract as well as onshore service contract) had also been received by the head office in China from PGCIL. The TPO, therefore, noted that the execution of the onshore service contract or offshore contract supply (either in full or in part) by the project office in India constituted an international transaction vis-à-vis head office in China since the responsibility of carrying out the contract was delegated by the head office in China to the project office in India. He, therefore, proceeded to determine the ALP of so identified international transaction between the project office and the head office in China i.e. TBEA. 6. The TPO noted that TBEA China had entered into ten contracts for eight different sites in India which are tabulated at page 16 of the TPO's order passed u/s. 92CA(3) of the Act. He also noted that while the offshore contract was to be executed / completed in F.Y. 2010-11, the onshore contract was to be executed in F.Y. 2011-12. The TPO noted that in the return of income filed by the assessee it had claimed income from offshore supply of reactors and equipments as not taxable in India since the title was transferred outside India and the considera....
X X X X Extracts X X X X
X X X X Extracts X X X X
....M/s. Cosco Logistics Ltd. Rs. 11.58 Crores. The TPO, therefore, noted that the project office was not compensated completely with respect to the transportation activity. 8. With respect to the sub contract entered into with M/s. Techno Electric and Engineering Company Limited, on going through the contract agreement, the TPO noted that the entire installation and civil work had been sub-contracted to M/s. Techno Electric and Engineering Company Limited for an amount of Rs. 32.50 Crores and though as per the original agreement the project office was to have earned profit from such activity, it had incurred losses at gross level continuously for successive financial years. In this background, the rate chart for various work related to installation and erection activity including civil work sub contracted was compared with the original agreement between PGCIL and TBEA and glaring differences were noted therein, more particularly the sub contract being noted to have been given at higher rates as compared to the original onshore agreement. The TPO, therefore, noted that the project office was not compensated adequately by TBEA with respect to the transportation activity and the activ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to be carried out by the project office of the assessee. The TPO accordingly, finding the pre-sale and postsale activities of the offshore contract carried out through the PE of TBEA in India, therefore held that profits attributable to the said activities were to be taxed in India. For this purpose, Comparable Uncontrolled Price (CUP) was chosen as the MAM for determining the ALP to be received by the project office in India. Search of comparable was done and one comparable agreement was identified, wherein, it was found that the ALP of the compensation for the work or activities carried out through the project office was 5% of the net sales. The ALP of the international transaction in relation to the offshore activity was accordingly computed by applying the said percentage to the total offshore supply contract value and ALP accordingly determined at Rs. 20,69,41,033/-. 11. Accordingly, total upward adjustment of Rs.29,50,86,132/- was proposed by the TPO to be made to the total income of the assessee, on account of determination of the ALP of international transactions undertaken by the assessee PE with its Head Office, i.e TBEA, China. 12. The AO passed a draft order in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e to the applicability of provisions of Chapter X of the Income Tax Act, the learned DRP, learned TPO and consequently the learned AO erred in Duct and in law in holding that the Project Office of assessee in India has not been adequately remunerated for the work performed by it in respect of on-shore service provided to M/s PGCIL and thereby making an adjustment of Rs 8,81,45,099 u/s. 92. It is submitted that in the facts and circumstances of the case, no adjustment in respect of value of offshore services can be made us. 92. It be so held now. 5. Without prejudice to the applicability of provisions of Chapter X of the Income Tax Act, the learned DRP, the learned TPO and consequently the learned AO erred in fact and in law in holding that a portion of the activities in relation to off-shore supply made from China were carried out in India and therefore a portion of off-shore supply contract value is taxable in India. In the facts and circumstances, no income in respect of offshore contract is taxable in India as it has not accrued or arisen in India or is not deemed to accrue or arise in India and it is also not attributable to Permanent Establishment of assessee company ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n chapter X of the Income Tax Act. The said grounds read as under: "1. The order passed by the learned Deputy Commissioner of Income Tat International Taxation), Vadodara ("the AO"] u's 143(3) 1440(13) invalid and void-ab-initio. In the facts and circumstances, the AO has erred in invoked provisions of section 92CA(1) without satisfying the conditions prescribed therein including applicability of Chapter X of the Income Tax Act It is submitted that it be so held now and such order may please he quashed or suitably modified. 2. The learned Deputy Commissioner of Income Tax (Transfer Pricing Officer)-2. Ahmedabad (the TPO) has erred in determining attributable profits to Permanent Establishment ("PE") of the assessee while TPO's authorization us. 92CA is restricted to determination of arm's length price of the international transactions referred to him by the AO. The sole authority to determine profits attributable to PE, if any, rests with the AO and the TPO exceeded his jurisdiction in carrying out exercise of attribution of profit to Indian PE. Transfer Pricing adjustment of Rs. 29,50,86, 132 made by the TPO essentially represents additional profit at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....jected the assessee's contention that the Indian PE did not qualify as a separate enterprise and categorically held the PE to qualify as an enterprise as defined under law. Thereafter, after identifying the head office and the PE as two separate enterprises the Special Bench went on to deal with the aspect of whether they can be said to be associated enterprise as defined u/s. 92A of the Act. The bench noted that while Section 92A(1) of the Act provided the basic rule for treating one enterprise as associated enterprise of another, that there has to be participation in any of the three aspects of the other enterprise i.e. management, capital or control, it was however, noted that Section 92A(1) of the Act did not define the expression participation in management, capital or control and noted that the same was illustrated in Section 92A(2) of the Act with several cases of participation in management, capital and control listed therein. The Special bench held that the provisions of Section 92A(1) & (2) of the Act are to be read together to establish the existence of association between the two enterprises. Thereafter, the Special Bench went on to identify the cases listed in Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... or more of the executive directors or members of the governing board, of each of the two enterprises are appointed by the same person or persons; or (g) the manufacture or processing of goods or articles or business carried out by one enterprise is wholly dependent on the use of know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, or any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process, of which the other enterprise is the owner or in respect of which the other enterprise has exclusive rights; or (h) ninety per cent or more of the raw materials and consumables required for the manufacture or processing of goods or articles carried out by one enterprise, are supplied by the other enterprise, or by persons specified by the other enterprise, and the prices and other conditions relating to the supply are influenced by such other enterprise; or (i) the goods or articles manufactured or processed by one enterprise, are sold to the other enterprise or to persons specified by the other enterprise, and the prices and o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clearly attracted which states that where the business carried out by one enterprise is wholly dependent on the use of know-how, patents, copyrights or any other business or commercial rights of similar nature, or any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process, of which the other enterprise is the owner or in respect of which the other enterprise has exclusive rights; there exist an association between the two enterprises. Clause (g) of 92A(2) of the Act is reproduced hereunder again for clarity: "92A. Meaning of associated enterprise. ................................... ................................... the manufacture or processing of goods or articles or business carried out by one enterprise is wholly dependent on the use of know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature, or any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process, of which the other enterprise is the owner or in respect of which the other enterprise has excl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mining its ALP was undertaken by the TPO. The TPO noted that there were two major activities to be carried out in lieu of onshore activities i.e. transportation and installation and commissioning of the shunt reactors. He noted the assessee to have completed onshore activity in relation to five sites during the impugned year and he found the assessee to have returned losses from onshore activities. He further noted that both the onshore activities had been further sub-contracted by the head office i.e. TBEA China to Indian entities and the assessee project office had no role to play in the same. He noted that the assessee had incurred losses from the carrying out of the onshore activities. Further on inquiring into the cause of losses, he found that with respect to onshore activity of transportation, the assessee project office had not been completely compensated by the head office. With respect to the civil construction activities of installation and commissioning of shunt reactors, he found that the work had been sub-contracted to Indian sub-contractors at a much higher rate than of originally agreed between head office TBEA China and PGCIL. He also found that there was no one to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3PL transaction with HO of the appellant company more so when the transactions are functionally comparable. I have also perused judicial pronouncements cited by the appellant company to contend that where CUP is available, CUP method should be followed in preference to other methods for determination of the ALP. I find force in the contention of the appellant company that CUP is the most appropriate method for determining ALP in the given set of facts in view of availability of CUP of APL & JPL with HO. Further, I hold that transaction of APL & JPL with HO of the appellant can be treated as CUP being functionally comparable uncontrolled transactions in terms of Rule 10B(2) & (3) of the IT Rules and more particularly in view of the fact that entire income from the transaction is offered for tax in India. Accordingly, I hold that on this count also the transfer pricing addition is unsustainable and is hereby deleted." 17. Learned CIT(A) further observed that the transfer pricing addition was incorrectly made by selecting functionally incomparable transactions by observing as follows:- "10. I have perused the above submission of the appellant company. The ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed or to be employed and risks assumed by such enterprises; (c) the availability, coverage and reliability of data necessary for application of the method; (d) the degree of comparability existing between the international transaction and the uncontrolled transaction and between the enterprises entering into such transactions; (e) the extent to which reliable and accurate adjustments can be made to account for differences, if any, between the international transaction and the comparable uncontrolled transaction or between the enterprises entering into such transactions; (f) the nature, extent and reliability of assumptions required to be made in application of a method." 19. In view of the above provisions and examining the facts of the instant appeal, we find that there is no difference in the terms of functions performed, assets employed and risk undertaken, the price charged, incomparable uncontrolled transactions entered in the contracts between the parties APL & JPL to Shandong HO vis-a-vis the contract awarded to Shandong PO by the Shandong HO. Further, it is also not disputed at the end of the Revenue that the price at which the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y Ltd. (supra) was distinguishable on facts. 32. We have heard the rival contentions. The solitary argument of the Ld. Counsel for the assessee before us against the ALP adjustment made to the international transaction of onshore activity carried out by the assessee PE, amounting to Rs. 8,81,45,099/-, is only with regard to applicability of the most appropriate method applied for determining the ALP for the transaction. While the AO/TPO had determined the ALP using TNMM method, the contention of the Ld. Counsel for the assessee is that the CUP method was the most appropriate method and the agreement entered into between the head office/ TBEA and PGCIL was to be treated as comparable since the entire onshore agreement between the two non associated entities, i.e TBEA and PGCIL, had been offloaded to the assessee project office for execution purposes on the same terms and conditions as agreed between the head office & PGCIL. 33. We have considered the facts of the case, the arguments of both the sides, the findings of the authorities below and we do not find any merit in the contention of the Ld.Counsel for the assessee that the CUP was the most appropriate method for determini....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the rates agreed therein were not even sufficient to cover expenses. 38. With respect to the onshore activity of transport, the TPO has recorded as a matter of fact that the assessee was not completely compensated. He has noted that while the entire work of transportation was executed during the impugned year the corresponding revenue was not recognized completely in the books of project office. He noted that the agreed compensation, as per the onshore contract of TBEA with PGCIL, for the five sites executed by the assessee was at Rs. 16.24 Crores, and the same was sub contracted to Cosco Logistics Ltd. for 10.24 crs, however as per the accounts of the assessee, revenue recognized in relation to the said activity was only 12.40 Crs against payment of 11.58 Crs to the sub-contractor. The TPO also noted lack of one to one correspondence between Revenue and Expenses incurred as recorded in the Books of the assessee. 39. The assessee, we have noted, was asked to furnish detailed project report prepared by the head office estimating the profit margin for the onshore activity separately for each year. However, no such details were furnished by the assessee. 40. The TPO has recor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lation, erection and civil work in the contract agreement between PGCIL and TBEA CHINA vis-à-vis sub-contract agreement between TBEA CHINA and M/s Techno Electric and Engineering Co. Thus, there was no one to one correspondence between the revenue earned and expenses incurred. The per unit rate for various items of work is found to be greater in the sub-contract agreement with M/s Techno Electric and Engineering Co as compared to such rates agreed upon with PGCIL. In the Arm's length scenario, any entity will seek commensurate compensation for a piece of work executed by it. However, in the present case, all the contract agreements including sub-contract agreement were executed by the Head Office and were forced upon the Project Office. In view of this, the terms at which the work was executed by the Project Office were not at Arm's Length. 8) Even though the entire civil works was sub-contracted to M/s Techno Electric and Engineering Co, the total scope of work as per the agreement with M/s Techno Electric and Engineering Co was all together different from the scope of work originally agreed upon in the contract executed with PGCIL. No explanation whatsoeve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idered as the Most Appropriate Method considering the value agreed upon between TBEA China and PGCIL as it represents the value agreed upon between two uncontrolled parties for the same transaction. Further, since the assessee has recorded revenue on the same basis, the same should be treated as arm's length price. (b) The companies selected by your office are functionally not comparable with the functions performed by the Project Office. The Project Office undertakes very limited function in respect of transportation, civil construction, erection and installation as significant portion of the said activities are sub-contracted and the role of Project Office is more in form of supervision and co-ordinating various activities. Whereas the comparable companies selected by your office performs full fledge infrastructure set-up activities including designing, engineering, manufacturing, procurement, construction, assembly, erection, installation, etc. Thus, the role of Project Office is much smaller as compared to the activities performed by the companies considered as comparable by your office. (c) We would further like to submit that the Operating Margin over Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIL ie. offshore supply contract and onshore service contract. From the perspective of PGCIL, the entire projects is a single project involving offshore supply and onshore service activity for which a single bid was placed Thus, POCIL awarded contract on the basis of total price quoted for off-shore supply and onshore service activity. Thus, from the perspective of PGCIL, the bifurcation of such total consideration into various activities is not important. However, from the perspective of Revenue, it is important to ascertain whether such bifurcation of consideration has been fairly valued as such bifurcation affects the Indian tax base. For this purpose, it was very important to examine the detailed project report which must have been prepared by the THEA China at the time of bidding the project at a fixed price. However, no such details have been furnished by the assessee. In the absence of such critical information, the use of comparable uncontrolled price CUP method becomes unreliable. Even though the two transactions may pass the test of "uncontrolled" nature, they do not pass the test of "comparability" and consequently CUP method cannot be applied on the facts of the case. I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsactions cannot be evaluated adequately on separate basis. Segmentation may be mandated when controlled bundled transactions cannot be adequately compared on an aggregate basis. Thus, taxpayer can aggregate the controlled transactions if the transactions meet the specified common portfolio or package parameters." 41. All the above facts are not disputed by the Ld. Counsel for the assessee before us. 42. In the light of the same, when considering the original onshore agreement entered into by the head office with PGCIL, it was found that the assessee was not adequately compensated for the activities carried out, there is no question at all for treating that agreement as a comparable for applying CUP method for determining ALP for the transaction. The onshore agreement surely was not at arms length since no independent entity would agree to carry out work at losses/ without being adequately compensated for it. The argument of the Ld.Counsel for the assessee in this regard is, therefore, rejected. 43. The decision of the coordinate Bench in the case of Shandong (supra) is of no assistance to the assessee since in the facts of the said case there was no finding of the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntee" 48. The TPO held that while design, engineering and manufacturing of the plant and equipment had been carried out by the head office in China, the presales activities (involving filing bid documents, negotiating the contract, signing the agreement etc.) and the post sales activities involving warranty functions had happened in India. He noted that for presales activity one Mr. Jagdish Lal and M/s. TBEA Energy India Ltd. had acted as PE of TBEA China in India. The TPO noted that Shri Jagdish Lal had been appointed by TBEA China as the country representative who represented TBEA China in bid related discussion held with PGCIL for all its project at various sites during F.Y. 2009-10 and 2010-11. All such discussions with respect to all the projects floated by PGCIL at its various sites were noted by the TPO to have been attended by Mr. Jagdish Lal. He further noted that subsequently TBEA China had registered its subsidiary M/s. TBEA Energy India Ltd. on 07.07.2010 with Mr. Jagdish Lal and Chen Zhijin as its director, for executing its contract with PGCIL. The TPO noted that though the project office of TBEA China, the assessee before us, was registered in India w.e.f. 1/12/20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ffice was to be remunerated as ALP. CUP was identified as the most appropriate method and for determining such ALP to be received by the Project Office in India and after conducting search for the most appropriate comparable, one comparable agreement was identified wherein it was noted that the consideration for rendering identical services was 5% of the net sale price treating the same as basis for determining the ALP of the international transaction of offshore activities carried out by the Project Office in India. The compensation for the same was determined to be Rs. 20,69,41,033/- adjustment accordingly was made to the total income of the project office. 51. The argument of the Ld. Counsel for the assessee against the same before us was that: i. the TPO had no power to attribute profit, the exercise of attribution of profits being different from the determination of ALP of international transaction in terms of TP provisions. Reference was made to para 20 of the decision of the order of Special Bench in this regard: "20. Article 7(2) of the India China DTAA leads to the conclusion that determination of profits under the hypothesis of the PE being a distinct and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th try to analyse as to how third parties would have dealt with each other under controlled conditions. In view of the above, we do not find any merit in the contention of the Ld. Counsel for the assessee that for the offshore activities the TPO could have carried out exercise only of attribution of profits and not the determination of ALP of the transaction by invoking the transfer pricing. ii. The other contention raised by the Ld. Counsel for the assessee before us was that the entities or persons identified by the TPO as constituting PE or TBEA China for both the pre-sales and post-sales activities did not constitute PE of TBEA China. His arguments were with reference to Shri Jagdish Lal, TBEA Energy India Ltd. and VEL. With respect to Shri Jagdish Lal not constituting PE, his contention was that he had no authorization on behalf of the TBEA China. That it was not the case of the Revenue that Shri Jagdish Lal had the authority to conclude contracts on behalf of the TBEA China. That in terms of Section Explanation 2 to section 9 (1) of the Act, Shri Jagdish Lal should not be treated as PE of TBEA. 52. With regard to VEL, the contention was that the same did not constitu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gdish Lal was the Country Representative of the TBEA CHINA in India at the time of negotiation. The relevant snapshot from one such document recording post bid discussion is reproduced as under: MINUTES/RECORD NOTES OF POST BID DISCUSSIONS HELD ON VARIOUS DAYS: FROM 14/01/2010 TO 03/02/2010 BETWEEN M/S. TBEA. SHENYANG TRANSFORMER GROUP CO. LTD, CHINA (TBEA-S) AND POWER GRID CORPORATION OF INDIA LTD., GURGAON- (POWERGRID). IN. RESPECT: OF REACTOR PACKAGE: RI ASSOCIATED WITH 765KV SYSTEM FOR CENTRAL PART OF NORTHERN GRID-PART-II & PART-III. SPECIFICATION NO .: C-14912-S017-3 FINANCING-DOMESTIC; GLOBAL COMPETITIVE BIDDING PARTICIPANTS POWERGRID TBEA-S 1. Sh. Comen Chandy, GM (Engg,-S/S & T/L) 1: Mr. Chen Zhijin, Deputy Manager 2. Sh. D. C. Joshi, GM (CS) 2. Mr. Fred Song, Representative - India 3. Sh. M. M. Goswami, GM (Engg .- S/Stn.) 3. Mr. Jagdish Lal, Country Representative 4. Sh. Gopal Gupta, GM (QA&I) 5. Sh. Ranjan Srivastava, AGM (Fin.) 6/ Sh. Abraham Oomen, AGM (Fin.) 7. Sh. Subhankar Das, DGM (QA (1) 8. Sh. Sudhir Agarwal, DGM (Engg .- S/Stn.) 9. Sh. C. S. Gupta, C....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... out. Subsequently, M/s TBEA Energy India Pvt Ltd was incorporated on 07/07/10 as agreed upon between TBEA and PGCIL as under and Mr Jagdish Lal became the First Director of the company: 9. TBEA-S informed that it is under the process of registering their company in India located in NCR. Further, before the dispatch of the first Reactor from China necessary manpower shall be in place. In view of the discussion made above, it is clear that M/s TBEA had fixed place of business or PE in India in office of Mr Jagdish Lal from where all pre-sales activity in India was carried out. It is also important to point here that even though the assessee was asked to furnish the passport details of Mr Chen Zhijin so as to ascertain his duration of stay in India during FY:09-10, the same was not submitted by the assessee. Without prejudice to above, if his stay in India during FY 09-10 exceeded 183 days, such stay would constitute service PE of TBEA in India. Accordingly, such component of the sale price of 'offshore supply' which relates to pre-sales activity carried out by such permanent establishment of TBEA is taxable in India." 56. On going through the order of the TPO,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive of TBEA, China, in the day to day activities of prebid discussion and being privy to all information relating to the same, even his office was also identified as PE of TBEA China and Mr. Chen Zhijin was also identified to have constituted service PE of TBEA, China in India. We have noted the assessee had not countered the same before us. In the light of the above therefore, the contention of the Ld. Counsel for the assessee in this regard is found to be without any merit and dismissed. 59. With regard to the contention of the Ld. Counsel for the assessee that TBEA Energy India Ltd. identified as constituting PE of TBEA China for offshore activity was incorrect, the findings of the TPO in this regard are contained at para 10.12 of his order as under: "10.12 As already discussed in detail in paragraph 10.2 above, subsequent to its incorporation on 07/07/10, M/s TBEA Energy India Ltd acted as the Permanent Establishment of M/s TBEA China. Though, a separate Project Office of M/s TBEA China was registered in India w.e.f 01/12/10, it neither had any infrastructure nor any employee. All project related activities were carried out by the employees of TBEA Energy India Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oject Office of THEA Shamyang, China Juring FY 11-12. A separate agency agreement was also excited between M'S THEA Shenyang and the THEA Energy India Ltd on 20/01/11 as per which Mis THEA Energy India Pvt Lid was engaged by the TBEA Shenyang for executing the PGCIL project and to market, sale and supply the products of TDEA Shenyang in India. The relevant portion of the contract is reproduced as under: The above agreement clearly states that M/s TBEA Energy India Pvt Ltd was engaged by THEA China in order to execute its EPC contract with PGCIL. Accordingly, M/s TBEA Shenyang, China had the business connection and permanent establishment in M/s TBEA Energy India Ltd in India from the date of incorporation of M/s TBEA Energy India Ltd i.e. 07/07/10 which also acted as Project Office of M/s TBEA China. 61. What is evident from the finding of the TPO, therefore, is that TBEA Energy India Ltd. had entered into an agreement with TBEA China to execute its contract with PGCIL and agreed to act as an agent of the foreign company in this regard. The TBEA Energy India Ltd. was also noted as a matter of fact to have incurred expenses for the project executed by TBEA China with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 9 of IT Act and Article 7 of the India-China DTAA." 63. What is evident from the above is that the TPO has noted VEL to have entered into an agreement with TBEA China to carry out its repairs and maintenance activity agreed as part of offshore contract entered into with PGCIL. He has also noted that the staff of VEL was required to be trained by TBEA China, for the said purpose and all major components for the said, were to be provided by TBEA China and only small jobs to be done by VEL under TBEA supervision. 64. The above facts have remained uncontroverted before us and we, therefore, see no reason to disagree with the TPO that VEL constituted PE of the TBEA China in India. In any case, we have noted that the TPO has only identified VEL as constituting PE of TBEA China in India for the offshore activity of defect liability and functional and equipment performance guarantees for which it has also identified the project office of TBEA China (the assessee before us) as the PE of TBEA China. For the said reason therefore, even if VEL did not constitute PE of TBEA China in India, the fact remains that project office constituted PE of the head office in India for the offsh....