TaxTMI 
TaxTMI 
2026 (8) TMI 553
X X X X Extracts X X X X
X X X X Extracts X X X X
....for supply of spare parts and repairs carried outside India aggregates to Rs. 108,56,70,943/- as exempt income. During assessment proceedings, the assessee held that the assessee has Permanent Establishment (PE) in India and the receipts for alleged off-shore supplies of spares parts and repairs were treated as business income. Accordingly, the Assessing Officer (AO) added Rs. 10,85,67,794/- to the returned income of assessee. 3. Shri Ajay Vohra, appearing on behalf of the assessee/appellant at the outset submits that the impugned final assessment order is liable to be quashed as the AO while framing the final assessment order has failed to comply with directions of the Dispute Resolution Panel (DRP). He submitted that the DRP in directions dated 17.12.2024 has recorded the fact that the issue of assessee having PE in India is a legacy issue. The Tribunal in ITA No.2033/Del/2022 for AY 2019-20 and ITA No. 2034/Del/2022 for AY 2018-19 vide order dated 25.07.2023 has held that the assessee has no PE in India. He further pointed that the DRP while adjudicating the issue of attribution has recorded the fact that the factual and legal matrix in the impugned assessment year is similar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tively addressed as 'M/s. GE'. Even, in the Board Meetings there is no separate reference to the assessee and GEII. This shows that assessee and GEII are collectively executing the contract and jointly liable for execution of entire contract. The ld. DR to show that the facts are distinguishable in AY 2022- 23 referred to para 5 of his written submissions, the same are as under:- "5. The AO carried out independent 133(6) inquiries and has brought out new facts in this case, which are enumerated below: a. Page 8 of the appeal papers clearly shows that the inquiries with BHEL clearly showed that the contracts were split artificially at the behest of the assessee, and it is not the natural intention of the end customer in India. The contract was floated as a composite contract, and only on the request of the assessee were the two parts split artificially. In this regard, the High Court of Madras ruling in the case of M/s Ansaldo Energia Spa is squarely applicable in this case. b. Page 38 -Discussion of OTPC's submission shows it's a composite contracts. In this case clearly the fragmentation of contracts undertaken by the assessee is clearly found in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be appointed as a single point of contact and the same is enclosed on page 50-51.AO has hence concluded that M/s GE International Inc has a project office/local office as per the above terms. AO has discussed on page 52 and 53 wherein joint protocol signed between GE and M/s RGPPL clearly shows that the protocol was signed by Binod Pandey, who acted as the project director of M/s GE International Inc. On page 56, it is clearly mentioned, Mr Binod Pandey, Project Director, GE International Inc, Site Office, GE Project office, C/o Ratnagiri Gas and Power Pvt Ltd. Similarly on page 56, in yet another joint protocol between M/s RGPPL and M/s GE, the documents have been signed by Binod Pandey. This is in page 57,58 g. Page 58 and 59 gives details of enquiries done by A where AO has clearly found that GE and BHEL have set up a workshop at Hyderabad for onshore repair of GE turbines after the debacle of the Dabhol Power Company. The relevant factual information is provided on page 60. h. Page 61-67 give the entire modus operandi adapted in the fragmentation of contracts to avoid Indian taxation. Discussions on page 67 on permanent establishment clearly brings out eviden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Agreements at pages 41 to 883 of the paper book. He submitted that assessee had entered into Off-shore supplies Agreement with various power companies viz. GSPC Pipavav Power CO Ltd., M/s Gujarat Electricity Corporation Ltd., M/s. Gujarat State Energy Generation Ltd., M/s. ONGC-Tripura Power Co. P. Ltd., Pragati Power Corporation Ltd., & Ratnagiri Gas & Power P. Ltd. The ld. Counsel submits that in case of Off-shore supplies of goods, the goods transported to India as per the terms and conditions of the agreement, the title in goods is transferred to the customers outside India. In the case of repair or refurbishment of gas turbine, the customer ships the equipment for repair to the workshop located outside India, after repairs and refurbishment, the equipment is shipped back to customer in India. 6. We have heard the submissions made by rival sides at length, examined the orders of lower authorities and the relevant documents referred to during the course of submissions from the paper book. The primary grievance of the assessee in appeal is against findings of the AO in holding: i. GEII's project office in India constitutes assessee's fix place PE in India; & ii.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....prises)]. 3. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include any one or more of the following : (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 or merchandise belonging to the enterprise solely for the purpose of storage, display, or occasional delivery ; (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise ; (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise ; (e) the maintenance of a fixed place of business solely for the purpose of advertising, for the supply of information, for scientific research or for other activities which have a preparatory or auxiliary character, for the enterprise. 4. Notwithstanding the provisions of paragraphs 1 and 2, where a person-other than an agent of an independent status to whom pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by Shri Binod Pandey, as Project Director of GEII, he is also representing the assessee. He is alleged to be single point of contact for GE group including the assessee. We are of considered opinion that reference to said agreement does not prove that the assessee has PE in India. In the first place, the comprehensive service agreement is between Ratnagiri Gas and Power P. Ltd and GEII and not the assessee. Secondly, the agreement has been signed by Shri Binod Pandey in the capacity of Project Director of GEII and not in the capacity of representative of assessee. Nowhere, in the said agreement, there is any reference of assessee. Further, no document is available on record to show that the assessee has authorized Shri Binod Pandey to represent the assessee. Therefore, the reliance on said documents does not support the cause of the Revenue. 10. The AO has not brought on record any documentary evidence to show that the condition set out in Article 5 to constitutes PE or DAPE in India are satisfied. The Revenue has not been able to show that the project office of GEII was used by the assessee for the purpose of storage, display or delivery of goods or maintenance of stocks of g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he materials on record. As discussed earlier, the short issue arising for consideration is whether the assessee's had PE in India during the assessment years under consideration? From the facts and materials on record, it is observed, not only before the Assessing Officer, but even before learned DRP, the assessee's have vehemently urged that since the factual position in the impugned assessment years have substantially changed, the decision taken in past assessment years cannot be followed blindly. It was the case of assessee's before the departmental authorities that as per the facts of the impugned assessment years, the assessee's had no PE in India as the AIFACS building considered as the PE of the assessee's was vacated by GEIOC on 01.05.2012. It was pleaded by the assessee that in these years, no expatriates have visited in India. As it appears, the departmental authorities have turned a blind eye to all the submissions and facts brought on record by the assessee. Merely following the decision taken by the appellate authorities and Hon'ble High Court in past assessment years, the departmental authorities have concluded the existence of PE without looking into or examining the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment year. 12. This is clearly evident from the submissions made and documents filed before the departmental authorities. Despite such submissions and evidences produced by the assessee, the departmental authorities have remained oblivious to such facts and materials brought on record and proceeded to conclude existence of PE merely relying upon the past orders passed by them and higher appellate authorities. It is trite law, the existence or otherwise of PE has to be determined on year to year basis, as the existence of PE has to be decided based on the definition of PE in the relevant tax treaty. Merely because in one year, the assessee had a PE in India, that by itself cannot lead to the conclusion that the assessee must be having a PE in subsequent assessment year, without looking into the relevant facts. In this context, we refer to the decision in the case of M/s. Bentley Nevada Inc. (supra). Further, in case of E-Funds IT Solution Inc. (supra), Hon'ble Supreme Court has very clearly and categorically held that the onus is entirely on the Revenue to establish existence of PE. 13. Adverting to the facts of the present appeal, undisputedly, the assessee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... authorities have failed to undertake such exercise. Therefore, in our view, it has to be concluded that the departmental authorities have not found anything amiss or adverse in the facts and material brought on record by the assessee. In such a scenario, we do not find any reason to again remit the matter back to the Assessing Officer to provide him a second inning to improve upon the deficiencies in the original assessment order. In view of the aforesaid, we are inclined to hold that keeping in view the facts and materials peculiar to the impugned assessment year, it has to be concluded that the assessee did not have any PE, either fixed place PE or dependent agent PE, in India in the year under consideration. We again reiterate, our aforesaid conclusion is purely based on the facts involved in the impugned assessment year." 7. Akin to the case referred to above, in the facts of the present appeals also, the departmental authorities have failed to controvert either the submission or the materials and evidences brought on record by the assessee's to demonstrate that they did not have any PE in India in these assessment years. In fact, even at the stage of Tribunal, no con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Power Company Ltd. (OTPC) and the assessee at page 373 of the paper book. A perusal of preamble of the said agreement inter alia spells out the place of supply of parts and repair services. The relevant extract is reproduced herein under: "WHEREAS, Owner has requested that Supplier will supply Parts and Repair Services to be carried outside Site Country, for the Covered Unit(s) in accordance with the terms of this Agreement." Further, Article 6 of the agreement spells out about delivery, title transfer, etc. As per Clause 6.2 of Article 6, the title in equipment to be shipped from US shall pass immediately after the equipment departs from the territorial land of the US. The relevant extract from Article 6.2 is as under:- "6.2.1 Passage of Title to Owner a) Title to Parts to be shipped from the United States shall pass from Supplier to Owner immediately after each item departs from the territorial land, seas and overlying airspace of the United States. b) Title to Parts shipped directly from a manufacturer, warehouse, or other point of shipment to the Owner, located in the European Union ("EU") but outside of the country of the Site, shall pass....