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2020 (2) TMI 1053 - AT - Income TaxIncome from offshore supplies - Income attribution - composite contracts - Offshore supply qua PE - amount paid or payable to the assessee whether in or out of India irrespective of whether towards “offshore supply” or towards “onshore services” become income u/s 5 and 9 of the Act by fiction created u/s u/s 44BBB - order of the CIT(A) holding the assessee a Dependent Agent Permanent Establishment - DTAA between India and Japan - HELD THAT:- A perusal of the decision of the Hon’ble High Court in LG Cables [2010 (12) TMI 948 - DELHI HIGH COURT] shows that the Hon’ble High Court has dealt with each of the issues raised by the AO in the present case. The Hon’ble High Court has also referred to the decision of the apex court in the case of Ishikawajima Harmia Heavy Industries Co. Ltd. Vs. Director of Income-tax [2007 (1) TMI 91 - SUPREME COURT] as held that the existence of PE would not constitute sufficient business connection. It has further been held that there exist a difference between the existence of a business connection and the income accruing or arising out of such business connection. The Apex Court has further held that para 6 of the protocol to the DTAA is not applicable because for the profits to be attributable directly or indirectly, the PE must be involved in the activity giving rise to the profits. In view of the above discussion, we are of the considered opinion that the ld.CIT(A) is correct in holding that the income from offshore supplies is not liable to tax in India both u/s 44BBB as well as under the provisions of Article 7 r.w. para 6 of DTAA between India and Japan. Accordingly, grounds No.1 and 2 raised by the Revenue are dismissed. Liaison offices - liaison offices do not constitute PE liable to tax in India. Since the facts and the issue involved are same in in assessee’s own case in the immediately preceding assessment year 2005-06 we hold that the Liaison offices of the assessee do not constitute PE liable to tax in India. No income is liable to be attributed in India even if Mitsui & Co. Ltd., constituted a DAPE [ Dependent Agent Permanent Establishment ] of the assessee in India Determination of income from Teesta and Purulia projects on cash basis instead of mercantile basis - HELD THAT:- AO applied section 44BBB in respect of onshore supplies and onshore services in computing the income on the basis of amount accrued. We find the ld.CIT(A) at para 5.3 of the order has discussed the issue and held that as per the provisions of section 44BBB, it is a presumptive module. The relevant observation of the CIT(A) is at para 5.3 of his order. The ld. DR could not controvert the findings given by the ld.CIT(A). In our opinion, the ld.CIT(A) was fully justified in holding that while computing the presumptive income books of account are not required to be maintained. Therefore, what is received by the assessee during the year a fixed percentage of such receipt is deemed to be the income. In absence of any distinguishable features brought before us by the ld. DR in the findings given by the ld.CIT(A), we do not find any infirmity in the same. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed.
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