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TMI Blog2015 (3) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... t Technologies India Ltd. in connection with services of installation, commissioning, testing, etc. of the hardware and software constitutes only 'Service PE' and further determining the profits attributable to the Indian PE of the assessee at the rate of 2.5% of the total turnover for the relevant year." 3. Briefly stated, the facts of the case are that the assessee is a company incorporated in USA. It is a leading supplier of hardware and software products for GSM Cellular Radio Telephone System. The assessee supplied telecommunication hardware and software to customers in India. No return of income was furnished by the assessee for the year in question. On perusal of contract signed between the assessee and various customers, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... read with Article 5 of the Double Taxation Avoidance Agreement between India and USA (hereinafter also called 'the DTAA') and the profit on supply of software and Documentation taxable as 'Royalty' as per Article 12 of the DTAA. The AO further held that the assessee has a Permanent Establishment in India by virtue of fixed place of business in the form of office of its Indian subsidiary; service PE in the form of employees of the assessee company coming to India and staying here for a long time; and also dependent agent PE in India in the form of LTIL. Taking into consideration all the relevant factors and without any support from the assessee, the AO computed the total income u/s 144 of the Act by considering 70% of total r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Delhi High Court that the AO did not give any opportunity of hearing before passing this order. The Hon'ble High Court set aside this order passed by the AO and remitted the matter to him for passing a fresh order after granting an opportunity of hearing. A fresh order was passed by the AO on 29.3.10, a copy of which is available on page 127 of the paper book, repeating the view taken by him in his earlier order and computing the same income. The assessee appealed before the ld. CIT(A) against this order. Vide the impugned order, the ld. CIT(A) held that the assessee has a service PE in India as was directed by the Tribunal. On the question of attribution of income, the ld. CIT(A) held that 2.5% of the sales made by the overseas e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent and installation PE is to expand the scope of the Permanent establishment of the assessee in India so that higher profits could be attributed to it. It goes without saying that larger the scope of the PE, more is the profit attribution. 7. It is relevant to note that the present proceedings are flowing out of the order passed by the Tribunal in the first round on 19.12.2008. In this order, the Tribunal noted the facts as recorded by the AO in which he held the assessee to have a fixed place PE, dependent agent PE and service PE in India. Thereafter, it observed that assessee entered into contract with Escotel for supply of hardware and software for turnkey project of GSM network in India and at the same time LTIL entered into contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuted only service PE of the assessee in India, was not appealed before the Hon'ble Delhi High Court. This leads us to an irresistible conclusion that the Tribunal held LTIL to be the service PE of the assessee in India. The contention of the Department through the instant appeal that LTIL should be considered as PE on the basis of fixed place, installation and dependent agent as well, does not merit acceptance. If the Revenue was aggrieved against the order passed by the Tribunal holding LTIL to be the service PE of the assessee in India, it ought to have challenged the same before the Hon'ble High Court or have got it modified through miscellaneous application. Having neither filed any MA nor raised this issue before the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its permanent establishment. If there are certain activities of the enterprise in India in which the PE has no direct or indirect role to play, obviously, the income resulting from such activities cannot be included in the 'Business profits' of the foreign enterprise. It is only in relation to the activities that are carried on by the foreign enterprise in India directly or indirectly through its PE, that the 'Business profits' become chargeable to tax in India. 10. It can be noticed from the facts recorded above that the AO attributed 100% of the transactions carried out in India to the permanent establishment. The activities of the assessee in India can be broadly classified into supply of hardware and software embedded i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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