TaxTMI 
TaxTMI 
2009 (7) TMI 171
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....on 2nd July, 1997 under which TVCL desired to procure and the assessee desired to provide satellite network communication system and also provide certain installation and commissioning services associated with the initial installation and communications thereof. On being called upon to furnish the details of revenue earned from the said contract, the assessee submitted item-wise detail of such revenue and also the reasons for its taxability and non-taxability as under: -------------------------------------------------------------- Sl. No. Particulars Amount in US $ -------------------------------------------------------------- 1. Supply of equipment 47,31,971 -------------------------------------------------------------- 2. Installation, testing and commissioning 2,58,053 ------------------....
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....------------------------------------------------------------ Total 62,32,002 -------------------------------------------------------------- 4. There is no dispute on the fact that the assessee offered all the above items of income for taxation except those as mentioned at serial Nos. 1, 5 and 6. The AO did not raise any objection to the non-taxability of item at serial No. 1 i.e., the consideration for supply of equipment. He, however, opined that the other two items at serial Nos. 5 and 6 i.e., factory acceptance test and project management and engineering support services were liable to tax in India. The assessee submitted a detailed reply to the AO, a part of which has been reproduced in the assessment order, by contending that the consideration for items at serial Nos. 5 and 6 was not taxable because such services were in the nature of provision for administrative and technical services from overseas to facilitate ....
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....ill or experience, etc. to TVCL. He further held that such services were inextricably and essentially linked to the supply of equipment and hence should take the same character as the supply of the equipment, as it was consideration for nothing else but supply of equipment only. He further noted that since such PMES & FT services were not in the nature of fees for included services the nature of such income would become "business income" and only that part of the services which is relatable to the PE of the assessee in India could be taxed. As in his opinion PMES & FT services were not attributable to such PE since these were performed outside India, he held that the addition was not sustainable. He, therefore, ordered for the deletion of the addition. against which the Revenue has come up in appeal before us. 5. Before us the learned Departmental Representative opened her arguments by contending that the assessee had indisputably a PE in India which fact was also acknowledged by it. She vehemently argued that art. 7 of DTAA taxing "business profit" as relatable to the PE was clearly attracted due to the presence of the PE in India and hence the amount could not escape taxation.....
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....dered outside India. He made distinction between the services rendered in and outside India by inviting our attention towards items at serial Nos. 2 and 3 of the above referred chart, which were towards the installation, testing and commissioning along with supervisory services and rendered by the assessee in India for which total consideration of US $ 2,58,053 and 17,714 was voluntarily offered for taxation that came to be accepted by the AO. He maintained that PMES & FT services were performed overseas prior to the supply of equipment. He further stated that if the case of the Revenue was accepted that the disputed consideration was for the rendering of the services in India, then the above referred two amounts at serial Nos. 2 and 3 would not have been there. He drew our notice towards a milestone schedule, copy provided at p. 214 onwards of the paper book, which contains the date of start and finish of each activity upto the date of shipment i.e., after 10th Dec., 1997. While referring to item at serial Nos. 11, 14 and 15 etc. of this milestone chart, the learned Authorised Representative showed that these were services rendered outside India in respect of the equipment for whi....
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....la or process, or for information concerning industrial, commercial or scientific experience including gains derived from the alienation of any such right or property which are contingent on the productivity, use or disposition thereof; and (b) payments of any kind received as consideration for the use of, or the right to use, any industrial, commercial or scientific equipment, other than payments derived by an enterprise described in para 1 of art. 8 (shipping and air transport) from activities described in para 2(c) or 3 of art. 8. (4) For purposes of this article, 'fees for included services' means payments of any kind to any person in consideration for the rendering of any technical or consultancy services (including through the, provision of services of technical or other personnel) if such services- (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a payment described in para 3 is received; or (b) make available technical knowledge, experience, skill, know-how, or processes, or consist of the development and transfer of a technical plan or technical design...." 9. A bare perusal of this article reve....
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....s used in this article, which is the bone of contention. 'Make available' means to provide something to one, which is capable of use by the other. Such use may be for once only or on a continuous basis. In our context to make available the technical services means that such technical information or advice is transmitted by the assessee to TVCL, which comes at its disposal for taking the benefit therefrom by its use. Even the use of such technical services by the recipient for once only will satisfy the test of making available the technical services to the assessee. If the first party uses all the technical services at its own end abroad, albeit the benefit of that directly and solely flows to the payer of the services in India, that cannot be characterized as the making available of the technical services to the recipient. 11. The meaning of the expression "make available" has been aptly considered in the case of Intertek Testing Services India (P) Ltd., In re (2008) 220 CTR (AAR) 540 : (2008) 16 DTR (AAR) 93 : (2008) 307 ITR 418 (AAR) as under: "Now, we shall proceed to analyse further cl. (c) of art. 13(4). Rendering of service and making use of service go together. They a....
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.... taken in the case of Mahindra & Mahindra Ltd. vs. Dy. CIT (2009) 122 TTJ (Mumbai)(SB) 577 : (2009) 22 DTR (Mumbai)(SB)(Trib) 361 : (2009) 30 SOT 374 (Mumbai)(SB). It, therefore, follows that making available the technical services to the recipient is of paramount importance for including the consideration paid for it as fees for included services under art. 12 of DTAA. Adverting to the facts of the instant case we find that the assessee put up a categorical claim before the AO that these services were provided overseas to facilitate the timely execution of the project and no part of such services was made available to TVCL. This specific contention raised before the learned AO has not been controverted by him. On the contrary the AO has made out a case that since the assessee was instructing TVCL and imparting education about the expertise in India and hence if the instructions through managerial services or technical input was provided, it should be considered as equivalent to making available the technical knowledge, experience, skill etc. to TVCL. Thus, it is apparent that the AO misdirected himself by interpreting the expression "make available" in an erroneous manner. 13. ....
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....en there arises a presumption that he is satisfied with the explanation tendered on behalf of the assessee. Thereafter he cannot allege the existence of a fact contrary to record without specifically disproving the material before him. However there may be a situation where the assessee does not furnish the desired information and the assessment order is passed drawing inference against the assessee. Subsequently if the assessee comes out with the relevant information and proves to the satisfaction of the appellate authorities the bona fide of the reasons for not producing such relevant information at the assessment stage, the authorities may consider the restoration of the matter to the AO for a fresh decision. There may be other situations necessitating the sending of matter back to the file of AO for fresh determination, like the AO deciding the controversy from one angle which does not stand the test of scrutiny by the higher authorities and at the same time it is found that he had a valid jurisdiction over the matter, in such a situation the matter may be directed to be examined from the other accurate angle which is alternatively available to him as per law; or where the cont....
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....se of one Contracting State may not be taxed by the other Contracting State unless the enterprise carries on business in that other Contracting State through a PE situated there. There is no dispute on the fact that the assessee did have a PE in India in the previous year relevant to the assessment year under consideration. Now the only question which falls for determination is to decide as to whether income from any of the services rendered overseas, having no relation whatsoever with the PE, can be subjected to tax only on the ground that the assessee has a PE in India. 17. At this juncture it will be relevant to consider the judgment of the Hon'ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Ltd. vs. Director of IT (2007) 207 CTR (SC) 361 : (2007) 288 ITR 408 (SCJ, in which it has been held that where the PE has no role to play in the transaction which is sought to be taxed, then no income can be attributed to such PE. Though the Hon'ble Supreme Court in this case has held that only the business profits resulting from the activities of the PE can be brought to tax, but it is important to note that the said finding has been rendered in the context of the D....
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....iii) Other business activities carried on in the other State of the same or similar kind as those effected through that PE. 20. Thus, it can be seen that going by the cl. (a) of art. 7(1), the business profits can be taxed in India only to such extent which are attributable to the PE in India. In other words if there is no PE then the business profits of the non-resident cannot be taxed in India. Even if there is PE but no part of the business profits is attributable to such PE, then also there does not arise the question of taxability under art. 7. Here is a case in which the stated consideration was received for rendering of services outside India. In the present circumstances, the assessee had categorically stated before the AO that such consideration was for rendering of overseas services, which position had not been disturbed by the AO. That being the position even though the assessee has PE in India, no part of such services rendered overseas can be linked with the PE in India for the purposes of determination of income attributable to the PE in India. We, therefore, hold that the learned CIT(A) was justified in coming to the conclusion that no portion of the Revenue could....
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....sofar as the admission of the additional ground is concerned it is austere that there are no clips on the powers of the Tribunal to entertain such ground after giving both the parties of the appeal an opportunity of being heard. If it is a legal ground that can undisputedly be raised before the Tribunal for the first time as per the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. 'so long as the relevant facts are on record in respect of that item'. Thus even though such power of admission of the additional ground is very wide, but still there is an inherent limitation that the relevant facts for the determination of the issue, raised through the additional ground, must be available on record and that no further investigation of facts is required. The same view has been taken by the Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) in the context of the powers of the AAC in entertaining an additional ground raised by the assessee. Thus the legal position which, therefore, emerges is that any party can raise an additional legal ground before the Tribunal for the first time,....