TMI Blog2019 (4) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... e lower authorities cannot be faulted with. Attribution of Income and allowance of expenses incurred by the Head Office - HELD THAT:- There is no dispute that the appellant company is having a PE in India. Therefore, whatever income the appellant company has earned from the projects has been earned through its PE. Therefore, the whole of the profit of the appellant company is attributable to its PE and since the expenses have already been allowed, incurred for the purpose of the PE, therefore, there is no need to tamper with the findings of the CIT(A) in the light of Article 7(3) of the India Russia DTAA. Transit Office Facility Expenses - HELD THAT:- AR stated that since the payments have been made to sovereign [Russian Embassy], there was no occasion to deduct tax at source. There is no dispute that the impugned amount has been paid to Russian Embassy as cost of accommodation to the Russian Employees. But the least the appellant company could have provided is the confirmation from Russian Embassy itself. We, therefore, allow one more opportunity to the appellant company to furnish the confirmations from the Russian Embassy in this regard. The appeals of the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the sides were heard at length, the case records carefully perused and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused. 6. Facts on record reveal that initially, the appellant company was represented by a liaison office, which assisted in identifying the business potential in India. Accordingly, the appellant company opened a Branch Office, which was established after seeking permission from Reserve Bank of India. The Branch Office (BO) commenced its activities with effect from October 1, 2003 and rendered technical and consultancy services in connection with various projects being implemented during the financial year 2003-04. 7. For the year under consideration, the appellant bifurcated its income into two being Royalty income [By the Head office] and fees for technical services (by the Branch Office in India) and accordingly, filed its return of income on November 1, 2004 declaring a total income of ₹ 67,233,870/-. 8. During the course of scrutiny assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch office Net income basis @41% 5. Chennai Trichy Madurai Project Royalty income Head Office Gross basis @ 10% as per DTAA 12. There is no dispute in so far as the Permanent Establishment [PE] is concerned since during the course of assessment proceedings itself, the assessee had accepted that since it has branch office in India it constitutes a PE in India within the meaning of Article 5 of the DTAA. 13. The bone of contention is the treatment of royalty income as business profit by the revenue authorities. The ld. counsel for the assessee vehemently stated that since technical bid preceded the financial bid and since the technical bid was provided by the Head Office of the appellant company whose principal focus of business in Russia and abroad is concerned with implementation of oil and industry projects which included design and construction of pipeline systems which included facilities for oil and gas production, oil and gas underground storage facilities, construction, mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e specialists manpower with appropriate experience for execution of this project and finally for the commissioning of the Gas Pipeline to the satisfaction of the client GSPL. It was agreed that the appellant shall get US dollar 405.840 for sending specialist manpower which shall be payable as per the monthly rate per specialist already agreed for the actual month the specialists are deployed. It was further agreed that the appellant would be further paid for the technical expertise and technical know-how which it has gathered over the years and additional amount of US dollar 10 lakhs on which the Indian Tax component would be paid by Essar. 21. As per the Third Supplementary dated 09.01.2003, it is mentioned that US dollars 10 lakhs is to be received by the appellant company as royalty/charges for providing technical know-how and technical service charges. 22. A close look of the contracts read with supplementary agreement shows that the appellant company was one of the partners in all the three projects which are mentioned elsewhere and which were executed during the year under consideration. Further, the contracts show that each member was assigned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of the PE, therefore, there is no need to tamper with the findings of the CIT(A) in the light of Article 7(3) of the India Russia DTAA. 27. As far as the transit facility expenses which have been paid by the appellant company to the Russian Federation, part of Russian Embassy as cost of accommodation of Russian Employees is concerned, since the assessee has not filed any confirmation, neither before the Assessing Officer nor before the CIT(A), the same were disallowed. 28. Before us also, the ld. AR merely stated that since the payments have been made to sovereign [Russian Embassy], there was no occasion to deduct tax at source. There is no dispute that the impugned amount has been paid to Russian Embassy as cost of accommodation to the Russian Employees. But the least the appellant company could have provided is the confirmation from Russian Embassy itself. We, therefore, allow one more opportunity to the appellant company to furnish the confirmations from the Russian Embassy in this regard. Ground Nos. 12 to 14 are treated as allowed for statistical purposes. All other grounds are dismissed. The appeals of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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