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2021 (8) TMI 986 - AT - Income TaxIncome accrued in India - PE in India - business service agreement/single unified agreement - multiple agreements entered as argued by assessee - Addition based on the billings scheme showing consolidated invoices and various SOF have been operated as a single project - AR argued that Article 5 of the Treaty defines PE to mean a fixed place of business through which the business of an enterprise is wholly or partly carried on - HELD THAT:- With regard to the contention that services specified in various SOFs constituted specific project and their services governed by uniform terms & conditions agreed between the parties and mere mention of the varying services and common agreement does not make it consolidated project cannot be found to be correct on the facts of the case as the agreement dated 18.08.2010 between the assessee namely Telenor SA and Uninor. It is this contract which defines the mutual obligations and implementation. There is no other inter-se agreement with any of the parties or among the parties. This gives rise to a conclusion that the business service agreement is a single unified agreement. On going through the clauses of the agreement, we find that no single clause is giving it a shape of multiple agreements. With regard to the contention that different services under SOFs are not inter related and are unique, it is necessary to go through the entire activity of the assessee with relation to the UNINOR - The launch of UNINOR services happened after Telenor Group finalized the transaction with Unitech Group and made the first investment into UNINOR. The statement of the Stein-Erik Vellan, Managing Director of UNINOR at the time of launch “with launch in seven circles and roaming agreements in place for the rest, we have started our service in India on day one as a pan-Indian national operator. This is a proud achievement of a committed and talented team. While our launch today is indeed a milestone in a longer journey to become a significant operator in India, we are delighted to have made such a strong start" augments the fact that there are only two entities involved UNINOR and Telenor, the assessee. With regard to the scheme of billing, the bills are raised on quarterly basis, consolidated invoices raised irrespective of the SOFs under which the services were rendered. The common billing by the recipient and the common payments gives rise to a conclusion that this is one single contract. We have gone through the various service order forms wherein it has been mentioned continuously that the contracts are performed in accordance with the service agreement between UNINOR and Telenor ASA, referred as the contractor and UNINOR referred as the recipient for all the services. On going through the sequence of activities and commentary of the OECD with regard to the Article 5(2)(1), it can be concluded that the activities consists of same and enter-connected projects. Activities of the assessee with regard to the recipients for services can be said to be inter-connected, inter laced, sequential technical services. It cannot be said that they are unrelated to each other as none of the activity could stand in isolation with the other activity and no single activity can give rise to performance and achieving of the purpose of the recipient. The activities start with preparation, execution and negotiation of the Global System for Mobile Communication (GSM) to devising the strategy development, preparation of IT solutions architect, benchmarking the same, recruiting the manpower for the purpose of implementation and training them for various activities in relation to GSM role out to customers. It is a clear commercial coherence between the said activity as no single activity mentioned above doesn’t serve any purpose individually, when segregated. All these activities are different facet of one seamless function. The project as defined in the Article 5 (2)(1) consists of bundle of inter- connected and inter- related services with the underlying theme of completion of projects. In the instant case, the implementation of one SOF leads to the other and it can be observed that they are well integrated, the outcome of one SOF become the inputs for the other SOF. Thus, based on the unified agreement, consolidated billing pattern, the activities being inter related as found in the preceedings paras, we hereby hold that the existence of the PE of the assessee is undeniable. What is the taxable income earned by the assessee in India - As find from the records that the AO made ad-hoc disallowance of 60% of the revenues received by the assessee allowing only the 40% of the receipts as expenditure. The assessee argued that only the mark- up of 3.5 % of the cost which translates to 3.38% of the revenues could at best be considered as the income attributable to the revenues pertaining to the PE in India. We are also in agreement with the assessee that the revenues raised out of the services rendered from Norway cannot be attributed to the PE of the assessee in India. The issue of determination of the profits is remanded back to the file of the Assessing Officer to pass an order by taking into consideration, the services rendered by the assessee from India and also from Norway, the evidence of the expenses incurred as submitted by the assessee. - Appeal of assessee dismissed.
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