Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (4) TMI 702 - ITAT MUMBAIDetermination of Permanent Establishment - Article 5 of Indo-Mauritius DTAA – GPI project – Held that:- The matter is principally factual would require an exposition and a clear understanding of the concept of PE - the words “permanent establishment” postulate the existence of a substantial element of an enduring or permanent nature of a foreign enterprise in another, which can be attributed to a fixed place of business in that country - It should be of such a nature that it would amount to a virtual projection of the foreign enterprise of one country onto the soil of another country - The rule to be invoked shall be the base rule of Art. 5(1), which is also commonly referred as ‘the basic rule PE’ - The ‘service’ rule, or any other sub-rule for that matter, is only derived from this basic rule and not in derogation. The assessee’s claims and contentions raised besides being un-evidenced, are at polar opposite to what would one would normally expect as well as the material on record in the form of the base documents and the communications exchanged between the parties in the regular course of business - The plea of the employees being subject to change is without material - The claim of the personnel only executing planning and supervising work, is again without substance and contradictory of the contract work as profiled by the documents, and as stated here-in-before - a fixed place of business, as contemplated in the definition of PE under Art. 5, does not at all imply or is confined to a place where the top management of the company is located - A branch of an enterprises may well be its’ PE; only the profit attributable to the same being liable to be taxed in the source State - as is apparent from the modus operandi to be adopted, the regular interviews, interactions, meetings, training sessions and seminars, etc., both by the consultants and the principal consultants, forming Tier I and Tier II of the assessee’s teams deputed on the project, and which are admittedly and principally at the GPI’s premises, is as much a part of the work undertaken by the assessee-company as is the independent collection, collation, analysis and review, etc. of the data/information being sought from the organization during any phase of the project management – thus, the assessee clearly has a PE in India during the relevant years – Decided against Assessee. Profit attributable to PE – Held that:- The issue though not raised by the assessee per its memorandum of appeal, was agitated during hearing, and being germane to the issue is admitted – as held in Dit (International Taxation) Versus Morgan Stanley And Company Inc. [2007 (7) TMI 201 - SUPREME Court], economic nexus is an important aspect of the principle of attribution of profits – thus, the matter is required to the remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Restriction of claim for business expenses – Held that:- The claim has been restricted by the Revenue on the ground of it being not subject to verification - the assessee failed to produce the relevant vouchers - The plea that the records being old, so that the same are not traceable, is not admissible – thus, there is no need for interference – Decided against Assessee. Disallowance u/s 40(a)(iii) of the Act wrongly mentioned as 40(a)(ia) of the Act – Held that:- As decided in assessee’s own case, that the limitation as regards the actual expenses, made particularly with reference to section 44C, has also been clarified by him as not applicable in view of Circular No.333 dated 02.04.1982 by CBDT, so that Art. 7(3) of Indio-Mauritius DTA would prevail – Decided against Revenue. Disallowance of indirect expenses – Held that:- The ‘indirect expenditure’ as reflected in the assessee-company’s global audited accounts can be, without demur, taken as a legally firm basis for applying the same to the Indian operations in terms of Art. 7(3) of the treaty - The Revenue may further seek a certificate from the auditors of the company after arriving at an agreement as to what constitutes and comprises ‘indirect expenditure’ - Insistence on the production of vouchers would be exaggerated – Decided against Revenue.
|