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2016 (4) TMI 413 - AT - Income TaxTDS u/s 194J - disallowance under section 40(a)(ia) as payments made to the Indian sub consultants, for delay in deposit of TDS effected on such payments - existence of PE in India - Held that:- Requirement of Article 5(1) of the DTAA is not satisfied in the present case. Carrying on of business involves the carrying on in a country of virtually any activity related to the business of the enterprise. As we have already seen the availability of office space for use by the Assessee at the premises of GRSE was for the limited purpose of rendering of services agreed between the Assessee and GRSE. The commentaries of Philip Baker on Treaties and OECD guidelines and decisions referred to by the learned counsel for the Assessee support the plea of the Assessee that it had no PE in India. The Revenue came to the conclusion that the Assessee had a PE in India mainly on the basis of existence of an office at GRSE’s shipyard. That alone was not sufficient to come to such a conclusion. The fact that the Assessee filed a return of income including all receipts from the contract with GRSE cannot be the basis to come to a conclusion that there was an admission by the Assessee that it had a PE in India. Existence of PE in India has to be established on the basis of evidence and by application of the requirements as contemplated in DTAA. On the question whether the Assessee having filed a return of income admitting income on the basis that it had a PE in India can thereafter make a claim that there was no PE of the Assessee in India without filing a revised return of income we are of the view that the action of the ld. AO of not allowing the claim of the Assessee due to failure to file the revised return, is bad in law. We therefore agree with the contention of the Assessee that there was no PE in India during the previous year. This conclusion will hold good even for AY 2005-06. As already held that there was no PE in India in the form of fixed place of business through which the business of the Assessee was wholly or partly carried on in India. As such, the Assessee would be entitled to the benefit of the provisions of section 115A of the Act and be taxed at 20% of the Gross receipts. We also hold that tax liability borne by GRSE will also need to be grossed up for arriving at Gross receipts of the Assessee and after such grossing up such receipts have to be taxed at 20%. Levy of interest u/s.234-B & 234-C - Held that:- Once it is found that the liability was that of the payer and the said payer has defaulted in deducting the tax at source, the Department is not remedy-less and therefore can take action against the payer under the provisions of Sec.201 of the Income Tax Act and compute the amount accordingly. No doubt, if the person (payer) who had to make payments to the non-resident had defaulted in deducting the tax at source from such payments, the non- resident is not absolved from payment of taxes thereupon. However, in such a case, the non-resident is liable to pay tax and the question of payment of advance tax would not arise. The provisions of Sec.209(1)(d) have been amended by the Finance Act, 2012 but those amendments are not relevant for the present case which relates to AY 2007-08. We therefore hold that the assessee was not liable to pay any interest under sec.234-B.
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