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2012 (10) TMI 257 - AT - Income TaxIndia UAE DTAA - as appellant had entered into a turnkey project the net taxable income is estimated by him @ 25% of such gross turnover - assessee contested that A.O. exceeded in his jurisdiction in holding that the appellant has a P.E. in India - Held that:- Turnkey contracts means where a contractor has to complete the contract as a whole i.e. from the stage of procurement of material, erection, construction, fabrication and supply thereof. However, where the terms of the contract provide that either party can withdraw or abandon the contract, the company or the contractor has not to make entire payments under the terms of the contract or refund the amounts received, which will accrue only on the completion of the contract, cannot be regarded as a turnkey contract. Hence, agreeing with the contention that even if the contract is a turnkey contract, it does not lead to taxability of the entire contract revenues in India but only as much of the profits as is attributable to the PE India can be taxed in India. The assessee fabricated the platform in Abu Dhabi and after fabrication the said platform was brought to India with the help of its barges and then the possession is handed over to ONGC. In this regard, it is worth noting that before sailing the platform after fabrication, the same is certified by ONGC through it's approved surveyor. Furthermore, as per the insurance policy though to be taken by the assessee, but ONGC is the joint beneficiary. Further, insurance policy also exhibits that, in case there is a loss suffered in the course of transportation the payee of the insured amount would be ONGC. Thus, under the contract there are different phases of execution of contract. The first phase was completed when it was fabricated, erected and brought to India through its barges, to be physically supplied. Thus, agreeing with the contention of the assessee that income attributed to PE in India could not extend to the activities carried outside India and had to be therefore confined to incomes from activities carried out from the PE.- All the activities prior to installation and commissioning are carried out in UAE and thus having regard to Article 7 of the DTAA, no income can be attributed to the PE in India - Thus it is to be opined that assessee did not have a PE in respect of erection and fabricating the platform in Abu Dhabi. The assessee had a PE in respect of installation and commissioning - partly in favour of assessee Assessee has contended that taxability of the assessee should be the same as in preceding years - Held that:- The contention of the Renenue that any formula or any agreement whatsoever arrived at between the assessee and department which is against the provision of law is not enforceable under the law. The Revenue is not bound to follow and perpetuate the mistake which has been committed in the past. In this regard, the case of Distributor (Baroda) Pvt. Ltd. (1985 (7) TMI 1 - SUPREME COURT) may be referred where Hon'ble Apex Court has held that there is no heroism in perpetuating a mistake - against assessee. Section 44BB applies in two situations when non-resident is engaged in the business of providing services or facilities in connection with OR supplying plant and machinery on hire used or to be used, in the prospecting for, of extraction or production of, mineral oils. Thus as the assessee is not in the business of providing services, neither any plant or machinery has been supplied on hire basis. The assessee is under the contract engaged in successful installation of off-shore platform. This activity cannot be characterized as facility provided by the assessee. Thus, business activity of the assessee does not fall within the meaning of section 44BB. Interest u/s 234B, 234C & 234D levied - Held that:- Section 234B is attracted where in any financial year an assessee is liable to pay advance tax under sec. 208 and has failed to pay such tax or where the advance tax paid by the assessee under sec. 210 is less than 90% of the assessed tax. Similarly, section 234C is attracted wherein in any financial year, an assessee is liable to pay advance tax under section 208 and he failed to pay such tax or the advance tax paid by the assessee and its current income on or before the specified dates is less than the specified percentage of the tax due on returned income. In this regard, assessee's contention is that its entire income is subject to tax at source under section 195 & the payer has also taken certificate from the AO under section. 195(2) and thus, there was no liability to pay the advance tax under section 208 and in the absence of any liability, Sec. 234B and 234C could not be applied.
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