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2024 (4) TMI 255 - AT - Income TaxTaxability of Income in India - receipts from offshore supply under PGCIL Contract - benefit under the India-UK DTAA - PE in India or not? - AO formed an opinion that the Indian Associate was actively involved in soliciting business for the assessee while also taking on the Indian leg of the composite contracts thus concluded that there was a Dependent Agent Permanent Establishment (PE) in India - HELD THAT - We find that the assessee had enclosed a certificate issued by HM Revenue and Customs UK certifying that assessee is a tax resident in UK for the year 2015 - The said certificate specifically mentioned that the assessee company is a resident of UK in accordance with Article 4 of the treaty between India-UK DTAA -We find that the assessee is liable for tax for worldwide income. The assessee is a fiscal transparent entity entitled for treaty benefits as it holds valid tax residency certificate from UK Tax Authorities. Article 3(g) of India UK DTAA defines the term company to mean any body corporate or any entity which is treated as a company or body corporate for tax purposes. Admittedly the assessee is a company. Admittedly UK tax authorities had issued tax residency certificate for assessee clearly stating that it is a tax resident of UK even as per Article 4 of India-UK DTAA. In our considered opinion once the assessee is a tax resident of UK as per Article 3(g) read with Article 4 of India-UK DTAA the mechanism of tax assessment and recovery of tax will follow thereafter. The expression liable to tax mentioned in Article 4 of India UK DTAA is to be understood in the manner that whether a particular person is obligated to pay tax in that respective country or not. If it is obligated to get taxed in that country then depending upon its income recovery of tax would happen on its own and tax mechanism for framing tax assessment would get triggered. Hence we hold that the assessee herein is a tax resident of UK which fact is also confirmed by the Tax Residency Certificate issued by the UK Tax authorities specifically confirming that the assessee is a tax resident even as per Article 4 of the India-UK DTAA. Having held that the assessee is a tax resident of UK it would be automatically entitled for treaty benefits. Action of the AO in holding that GETDIL constitutes fixed place permanent establishment in India - Indian company is independently acting on its own having its own work force having independent receipts and had suffered taxes in India. Hence it cannot be construed as Dependent Agent Permanent Establishment (DAPE). The Indian entity does not have any authority to conclude contract. The contract is awarded based on global bids. Hence we hold that the entire observations made by the ld AO in this regard are totally without any basis. Our view is further fortified by the decision of National Petroleum Construction Company 2016 (2) TMI 47 - DELHI HIGH COURT wherein it was held that given where assessee a UAE based company in course of carrying out contract with ONGC for installation of petroleum platforms availed services of ASL for providing marketing information and other facilities in India since ASL was not authorized to conclude contract on assessee s behalf paragraph 5 of article 5 of India-UAE DTAA applied to its case and thus it could not be regarded as Dependent Agent Permanent Establishment (DAPE) of assessee in India. Accordingly ground No. 6 raised by the assessee is allowed. Action of AO in placing reliance on the Base Erosion and Profit Shifting (BEPS) Action Plan 7 read with Article 13 of Multilateral Instrument - We find that the application of BEPS Action Plan 7 read with Article 13 Multilateral Instrument is an issue which is still in the air and is in nascent stage as the OECD members had not come into consensus for the same. Accordingly the same cannot be applied for the AY under consideration. Hence the Ground No. 11 raised by the assessee is allowed. Levy of interest u/s 234B and 234D - default on the part of the assessee in payment of advance tax - Assessee challenged levy of interest on the ground that the buyer has deducted tax at source and remitted to the account of the Central Govt in accordance with the proviso to section 209(1)(d) of the Act and hence there would be no liability for the assessee to pay advance tax - HELD THAT - This issue is no longer res integra to hold that interest u/s 234B of the Act is not chargeable in the instant case. The chargeability of interest u/s 234D of the Act is consequential in nature. Chargeability of interest u/s 234A - HELD THAT - AO is directed to verify whether the return of income was filed before the due date specified u/s 139(1) of the Act or the extended due date from time to time by the CBDT and decide the chargeability of interest u/s 234A of the Act accordingly. With regard to chargeability of interest u/s 234B of the Act the decision rendered by us hereinabove for AY 2016-17 shall apply mutatis mutandis for this year also. Accordingly ground raised by the assessee is allowed for statistical purposes.
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