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2023 (11) TMI 434 - AT - Income TaxIncome deemed to accrue or arise in India - PE in India - attribution of income relating to work done outside India to the PE - consideration of disbursement as income attributable to the PE and invocation of article 15 of the DTAA - HELD THAT:- We observe from the record that the similar issue was considered by the coordinate bench and decided the issue against the assessee in AY 1995-96 [2010 (7) TMI 1226 - ITAT MUMBAI] where they dealt with the issue of existence of permanent establishment wherein it was held that assessee’s permanent establishment exists in India under Article 5(2)(k) of the DTAA. has elaborately discussed the Article 5 and its sub Articles 5(1), 5(2) and 5(3) of the Indo-UK Treaty. They came to the conclusion by bringing on record the relevant clauses of the treaty, by also discussing the other model conventions like OECD, UN along with its commentaries. They held that the Article 5(2) is no more than an illustration or examples of application of permanent establishment under basic rule under Article 5(1). However, so far as the provisions of India - UK tax treaty are concerned, the clauses (j) and (k) of Article 5(2), which are on the lines of provisions in Article 5(3) in all most standard model conventions. Therefore, they rejected the earlier submissions of the assessee that unlike the applicability of basic rule are in consonance with the illustrations contained in Article 5(2)(a) to (i) and even the clauses (j) and (k) has to pass the test of basic rule. We observe that the “meaning of furnishing” emphasizes the idea of providing necessary or other services. It provides general meaning to emphasize to carry out certain services, which may include provision of services. It is fact on record that legal interpretation or technical interpretation of treaty will leads to nowhere. It is also a fact on record that the assessee provides various services to the clients in the contracting state, i.e., in India. When the other conditions contained in the clause (k) exists like the employees or other personnel are in India for more than 90 days in the twelve months, the deeming provisions get attracted. Decided against assessee. Assess only fees relatable to work performed in India - We observe from the record that identical issue is decided in favour of the assessee for the A.Y. 1997-98 [2014 (11) TMI 725 - ITAT MUMBAI] wherein as relying on Clifford Chance. [2013 (6) TMI 544 - ITAT MUMBAI] decided issue in favour of assessee which held that the profit which is attributable to the PE, can only be assessed in India. Reimbursement of expenses as an income - HELD THAT:- Identical issue is decided in favour of the assessee for the preceding Assessment Years [2015 (9) TMI 1532 - ITAT MUMBAI] as held that reimbursements received by the assessee are in respect of specific and actual expenses incurred by the assessee and do not involve any markup, there is reasonable control mechanism in place to ensure that these claims are not inflated, and the assessee has furnished sufficient evidence to demonstrate the incurring of expenses. There is thus no good reason to make any addition to income in respect of these reimbursements of expenses. Interest u/s 234B was not chargeable in the case of assessee, as all sums chargeable to tax in the hands of the assessee are liable to deduction of tax at source u/s 195. Liability to tax in India under Article 15 of the tax Treaty between India and the U.K - HELD THAT:- As identical issue is decided in favour of the assessee for the A.Y. 1995-96 [2010 (7) TMI 1226 - ITAT MUMBAI] as held that while we agree with the learned counsel that Article 15 will not be applicable on the facts of the present case, this finding does not really come to the rescue of the assessee since, as we have already held, 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.”
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