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2010 (3) TMI 1112 - AT - Income TaxSupervision charges received on account of erection, supervision, commissioning etc. - AO and CIT(A) treated it as fee for technical services under the treaty of DTAA with Germany and consequently they had applied the provisions of Article 7 of the DTAA with Germany read with section 44D and 115A - scope of work of Siemens Ltd. (Indian company) under the agreement - Submission that the assessee was only claiming that the income of the assessee was liable to be taxed u/s 44BBB -submission that the assessee falls within the exclusion clause of Explanation (2) to Section 9(1)(vii) of the Act and consequently the income of the assessee was liable to be assessed only under the provisions of Section 44BBB - HELD THAT:- We would like to refer to the agreement entered into by the assessee with M/s Voith Siemens Hydro Private Limited (VSHPL) on 1st October 2003. This agreement it is found has been produced before both the lower authorities but neither has referred from the same. Even in the course of the arguments, other than referring to this agreement as the agreement in regard to the sub-contracting of the contract work entered into by the assessee with OHPC, no detailed reference has been made to it. But this agreement, it is noticed does give a clear picture of the nature of the work and the scope of work of the assessee in the main contract with OHPC. A perusal of the above mentioned agreement clearly shows that the assessee has sub-contractor the “supervision services” that the assessee was to do under the main contract between he assessee and OHPC. Thus accepting the arguments of the assessee that the terms of the contract are to be given the meaning as specified in the agreement and not the ordinary or general meaning, if the sub contract agreement is seen, the sub contractor is to perform the supervision services meeting the requirements and terms of the main contract being the one between the assessee and OHPC. It is noticed that the assessee has not produced before any of the lower authorities or before us any evidence to show how the assessee or the assessee thru its sub-contractor has indulged in any activities, which can be termed construction, assembly or erection. The assessee if has indulged in any of the said activities would have incurred substantial expenses in the form of wages, tools, etc. No such expenses having been incurred have been shown. Just because the employees of the assessee or its sub-contractor have given directions to the personal working at the site but employed with another contractor it cannot be said that the assessee has done the business of erection or the work of assembly of the plant or machinery. In such circumstances it can only be said that the assessee has done the work of supervision simpliciter. Once it is found that the assessee has not been able to prove that the assessee has involved itself in the physical activities of the business of assembly or erection of the plant or machinery or testing or commissioning of the power project but has only done the supervision simpliciter of the same the assessee would not be eligible to be taxed under the provisions of section 44BBB nor would the receipts fall within the exclusions provided in explanation 2 to section 9 (1). Further as the assessee has also not challenged the existence of the permanent establishment in India, the findings of the AO and the Ld. CIT(A) in holding that the business profits of the assessee is from the supervision charges are in the nature of “fees for technical services” from the rendering of supervision services in connection with the erection, testing and commissioning of the power project is liable to be upheld and we do so. In the circumstances the finding of the Ld. CIT(A) that the provisions of Article 7 of the DTAA read with section 44D and section 115A apply to the business profits of the assessee is upheld. Consequently grounds of the assesses grounds of appeal are dismissed. Levy of interest u/s 234 B - HELD THAT:- It is noticed that the receipts of the assessee are liable for tax deduction u/s 195. It is also noticed that M/s OHPC has deducted tax at source on the payments made to the assessee. the fact remains that the receipts of the assessee are liable to TDS and TDS has been done. In these circumstances we are of the view that interest u/s 234B is not leviable on the assessee as the receipts of the assessee under the contract is liable for TDS. In the circumstances respectfully following the decision of the Special Bench of this tribunal in the case of M/s. Motorola [2005 (6) TMI 226 - ITAT DELHI-A] the interest levied u/s 234B stand deleted. In the circumstances the ground No. 6 of the assessees appeal stand partly allowed. In the result the appeal of the assessee is partly allowed.
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