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2014 (5) TMI 1185 - AT - Income TaxPermanent Establishment(PE) in India under the provisions of Article 5(2) (k) - scope of expressions “rendering” and “furnishing” - case of the assessee that it did not have any Permanent Establishment(PE) in India under the provisions of Article 5(2) (k) as it was “rendering” services in India, where as per Article 5(2)(k) of DTAA, it was necessary to “Furnish” services in India - HELD THAT:- Expressions “rendering” and “furnishing” are somewhat inter changeable in the normal course of business and it will be too pedantic hyper technical approach to narrow down the meaning of expression “furnishing” to exclude rendering of professional services and if the answer of this question is in yes then it was to be held that assessee did not have a P.E in India in terms of Article 5(2)(k) of India UK DTAA, and, accordingly, profits attributable to P.E were taxable under Article – 7 of India UK DTAA and this question was answered in favour of Revenue and against assessee. As decided in own case [2010 (7) TMI 535 - ITAT, MUMBAI] the assessee did have a PE in India under article 5(2)(k) of the India-UK tax treaty, and, accordingly, profits attributable to the PE are taxable under article 7 of the India-UK tax treaty. - Decided against the assessee. Profits attributable to P.E in India - computation provided by the appellant in the Income and Expenditure Account as being the income attributable to the permanent establishment - whether value of services rendered by the PE is to be taken at market value of such services in India and not the price at which permanent establishment should be taken? - gross income at £ 1,56,813, deduction for direct expenditure at £ 52.445, deduction for overheads £ 2,623 and net profit at £ 1,01,745 - HELD THAT:- The very plea of the assessee proceeds on fallacy that arm’s length price adjustment can be made in respect of the transactions with the clients of the assessee. The revenues earned by the assessee are to be taken at actual figures and no adjustments are permissible in the same. We reject this plea of the assessee as well. The action of the authorities below is confirmed on this count as well - Decided against the assessee. Disallowance of disbursements to the extent of 25% of the disbursement claim proportionate to the fee relating to services rendered in India as compared to the total fees - permanent establishment in India under Article 5(2)(k) of the Tax Treaty between India and the U.K - HELD THAT:- The Commissioner (Appeals) ought to have directed the Assessing Officer to allow deduction for the entire amount of the disbursements. AR was able to demonstrate that similar evidence which was furnished in respect of A.Y 1995-96 was also placed before AO during the course of assessment proceedings and on the basis of that evidence CIT(A) has given part relief to the assessee on account of reimbursement of expenses. The decision relied upon by DR also does not support the case of the Revenue for restoration of the issue to the file of AO as in the present case reimbursement has been compensated directly and not through third party. In this view of the situation, we are of the opinion that the issue raised by the assessee in ground No.6 of this appeal and raised by the Revenue in Ground No.2 of its appeal are covered in favour of the assessee.
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