Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (7) TMI 527 - AT - Income TaxIncome accrued in India - profit on supply of equipment - PE in India - offshore supply - contracts for supplies and services executed in India for MUL - DTAA between India and Japan - HELD THAT:- In the present case the goods were sold to MUL from outside India. Thus, the risk and title were also transferred outside India and no transaction took place in India. The custom clearance, inland transportation were also done by the MUL on its own and assessee at no stage involved in the said activities. There was no PE involved in the sale. In fact supervision was done after the supply of equipments. The revenue could not establish that the assessee is having fixed place PE or supervisory PE. The ratio laid by the Hon’ble Apex Court in case of M/s Ishikawajima Harima Heavy Industries Ltd. [2007 (1) TMI 91 - SUPREME COURT] is applicable in the present case. Therefore, Ground Nos. 1 to 1.4 and 2 to 2.1 of the Revenue’s appeal is dismissed. Supervisory PE in terms of Article 5(4) of the DTAA - Taxability of FTS - DR’s isolated Purchase Order having more than 180 days - HELD THAT:- The period of supervision in case of individual contracts did not exceed a period of 180 days except the one purchase order mentioned hereinabove and they did not constitute supervisory PE in terms of Article 5(4) of the DTAA. DR’s isolated Purchase Order having more than 180 days cannot establish that each individual Purchase Orders are interlinked. In fact, these Purchase Orders are very much independent and separate from each other and thus, does not constitute the supervisory PE or fixed PE. AR also submitted during the hearing that the sole Purchase Order which has more than 180 days has been offered to tax in earlier Assessment Year i.e. 1999-00. Hence, the issue raised in the present appeal filed by the Revenue is squarely covered by the decision of the Tribunal for A.Y. 1999-00 which is now confirmed by the Hon’ble High Court as well as by the Hon’ble Supreme Court. Thus, in the present case the FTS was liable to be taxed at 20% under Article 12(2) of the DTAA. Hence, Ground Nos. 3 to 3.1 in Revenue’s appeal are dismissed. Interest u/s 234B - role of the assessee/payee/deductee in short-deduction or non-deduction of tax - HELD THAT:- There was no requirement to pay advance taxes in respect of income which was liable to tax deduction at source. Hence, no interest under section 234B of the Act is leviable. This issue is covered in favour of the assessee by the jurisdictional High Court in case of Mitsubishi Corporation and Jacobs Incorporated [2010 (8) TMI 37 - DELHI HIGH COURT] wherein it is categorically held that interest is not leviable on the assessee since its entire income is subject to tax deduction at source. Taxability of receipts from O&M contract - FTS and is to be taxed on gross basis without allowing any deduction for expenditure u/s 44D OR Business income - assessee declare loss - HELD THAT:- This issue is covered by the order of the Tribunal in assessee’s own case for AY 1999-00, wherein after going through the facts of O&M contract, held that the services received by the assessee does not fall under FTS and has to be considered as service in relation to construction, assembly of project i.e. business income. Thus, the amount received under O&M agreement is business income and taxable under article 7(3) of DTAA on net basis. Disallowance of amount paid by the assessee on the ground that liability which doesn’t relate to the assessee - expenditure in respect of transportation of the material supplied - HELD THAT:- Under Article 5 of the agreement between assessee and ETPL, however, the assessee had authorized, which merely entitled ETPL to collect & receive contract price from SSNNL for each portion. The Ld. AR rightly submitted that there is a difference between accrual of income and incurring of expenditure. Under the agreement entered by assessee with ETPL, it has incurred a liability and in fact paid the said sum on transportation to ETPL. It is not denied that the assessee under the contract with SSNNL could have recovered the amount. However, in the absence of any agreement with SSNNL, to pay the extra amount due to escalation of cost, no income has either accrued or was received by the assessee. There is no a finding given by the Assessing Officer that assessee has not honored the commitment. Thus, the assessee has paid to ETPL under its contractual liability even though the same could not be recovered from SSNNL. Therefore, the disallowance made of the expenditure incurred of ₹ 16,80,400/- which has been physically paid by the assessee is to be allowed by the AO. Interest income not declared - AO held that the assessee has not disclosed the interest income earned in the original return of income and also the revised return of income - HELD THAT:- From the records it can be seen that during the assessment proceeding, the assessee submitted revised return of income filed on 30th March, 2009 vide e-filing acknowledgment in which the interest income was disclosed and tax was paid on it. Inadvertently, the income was not captured in the head of ‘income from other sources’, however, the same was duly included in the tax payable and tax was paid on it. Further, the assessee filed submission on 8th September, 2009 with the Assessing Officer informing about the revised computing of income wherein interest income was disclosed in the computation of income. Thus, the assessee completely disclosed the interest income in Schedule S1 of the revised return of income form filed on 30th March, 2009. It is only inadvertent error in the filing of the revised return form but the tax was paid suo-moto before the enquiry of the AO. Therefore, it is not a deliberate mistake on part of the assessee and the tax is also duly paid by the assessee. Therefore, the AO was not right in making the said addition.
|