TMI Blog2012 (4) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... CHANDRA POOJARI, SMT. ASHA VIJAYARAGHAVAN, JJ. T. Diwakar Prasad for the Appellant. S.C. Tiwari for the Respondent. ORDER Smt. Asha Vijayaraghavan, Judicial Member This appeal by the Revenue is directed against the order of the CIT(A)-VI, Hyderabad dated 23.12.2009 for assessment years 2005-06 and 2006-07. 2. Brief facts of the case are that the assessee made payments to M/s. East Marine Pvt. Ltd., Singapore (EMPL for short) during the period 2.2.2006 to 28.7.2006 aggregating to Rs. 52,949,100. These payments were made by the assessee-company for subcontracting its works contract with Visakhapatnam Port Trust. A survey u/s. 133A of Income-tax Act, 1961 was conducted at the office premises of the assessee-company situated at Begumpet, Hyderabad on 8.2.2006. Subsequently, another survey was conducted at the site office of the assessee-company located in the Port area of Visakhapatnam. During the course of this survey action, the officers impounded a number of books, etc., including a copy of Standard Charter Agreement i.e., 'Baltime 1939' signed by the assessee-company and EMPL. The Assessing Officer discussed in his order about the copies of three agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to EMPL. Further he has held that on account of the failure to deduct tax at source within the time allowed, assessee is liable to pay additional amount by way of interest u/s 201(1A). 4. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the CIT(A). 5. Before the CIT(A), the learned counsel for the assessee referred to the three agreements furnished by the Assessing Officer and pointed out that the variations in the three agreements have no bearing on the assessability of EMPL in India as taking any one of the three agreements the legal position would remain one and the same i.e., the receipts in the hands of EMPL constitute business receipts within the meaning of Indo-Singapore DTAA. The assessee summarised the details of the agreement and the details of arrival of dredgers/contracts which has been reproduced at paras 6.1 and 6.2 of the CIT(A)'s order. 6. The assessee-company submitted before the CIT(A) that even if the Assessing Officer's finding that the assessee paid higher charges to EMPL was assumed to be correct, it did not follow that the payments made by the assessee to EMPL were royalty. The learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts were run by their qualified personnel. No personnel except menial labour was provided or deployed by the assessee. Thirdly, EMPL did not develop and transfer any technical plan or technical design to the assessee. The primary function of EMPL was to perform dredging work at Vishakhapatnam port. In short, EMPL executed work-contract as contra-distinguished from rendering of any services. For that reason Article 12 of the Treaty could not be invoked so as to hold the payments made by the assessee to EMPL neither as 'royalty' nor as 'fees for technical services'. In short, EMPL received payments as its business receipts that could not be brought to tax in India because it operated in Indian for less than 183 days in any financial year. 9. The CIT(A) held after going through the annexures and considering the contentions of the assessee that the assessee-company entered into a contract with several dredger owners including EMPL on 5th January, 2006 when the company was awarded the work of dredging for channel at Visakhapatnam Port Trust. He held that the contract given to EMPL was in the nature of sub-contract to undertake on behalf of the assessee's dredging work of Visakhapatn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tual payments which do not fall within the meaning of 'royalties'. ( iii ) The Ld. CIT(A) erred in facts by ignoring the 'standard time charter agreement' and giving much credence on the 'Dredging Contract' without appreciating its shortcomings. ( iv ) The CIT(A) erred in facts by failing to appreciate the findings from third party enquiries. ( v ) The CIT(A) erred in facts by failing to consider the declaration given by the assessee in the 'Form and Application for Remittance u/s. 195' and the entries made in its ledger. ( vi ) Any other ground that may be urged at the time of hearing. 13. The learned DR, Shri T. Diwakar Prasad, relied on the letter dated 3.4.2006 addressed to the Director General of Shipping, Mumbai and pointed out that "this boat is essential for operation of Grab Dredger Ketam, which has also been taken on lease and approved by your good self vide your letter No. SD-9/CHRT (105)/06/dated 8.02.06. He also pointed out to the invoice where Rs. 340 lakhs has been raised to charter of one unit dredger Ketam from 28.5.2006 to 27.6.2006. As per Charter Agreement the invoice has been raised by M/s. EMPL for an amount of Rs. 340.00 lakhs. He also pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7]. ( b ) Dy. CIT v. Hyundai Heavy Industries Co. Ltd. [2009] 31 SOT 482 (Delhi) ( c ) Dy. DIT v. Nederlandsche Overzee Baggermaat-sehappiji BV [2010] 39 SOT 556 (Mum.) ( d ) Dy. CIT (International Taxation) v. Dharti, Dredging Infrastructural Ltd. [2011] 44 SOT 586/9 taxmann.com 327 (Hyd.). 18. We have heard both the parties. We find in the present case the equipment has been used by EMPL under the supervision, control and employment of 18 member crew for 24 hours. The assessee took the dredger only on hire and paid only hire charges. Therefore, the equipment hired by the assessee from the foreign company cannot be construed as place of business of the foreign company. It is only hiring of the equipment simplicitor and the assessee did not use the dredger or any part thereof on its own neither it was given any right to use. Neither it had acquired any right to use from EMPL. Hence the payment cannot be treated as 'royalty'. Further in order to assess the payment as business receipt of the EMPL it has to be established that there is a permanent establishment of EMPL in India which is not possible since the dredger Ketam has been operated in India for less ..... X X X X Extracts X X X X X X X X Extracts X X X X
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