TMI Blog2016 (10) TMI 426X X X X Extracts X X X X X X X X Extracts X X X X ..... endent agent / PE for reasons brought on record by the AO and as discussed in foregoing paragraphs. There were no presence of a number of principals who exercised legal and or economic control over the agent Sri V. Subramanian. The principal i.e. the assessee has failed to demonstrate this aspect when confronted by the AO. The principal i.e. the assessee was relying on the special skills and knowledge of the agent Sri V. Subramanian the Managing Director of the Indian entity by the same name and rendering similar functions. Sri V. Subramanian was acting exclusively or almost exclusively for and on behalf of the assessee during the currency of the contracts in question. To that extent it was not in furtherance of his ordinary course of business. Finally the refuge taken of Article 5(2)(j) on the short period of contracts and the interregnum does not offer any solace to the assessee either. The assessee has not demonstrated it was a mere passing, transient or casual presence for its activity in India. In view of this, we confirm the order of the lower authorities This ground is therefore dismissed. Income computation - contention of the ld. AR is that the assessee is entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave continuous presence or business connection or a permanent establishment in India. During the assessment proceedings, the assessee further pointed out that the duration of the Tanakpur project was 40 days only i.e. not more than 6 months and stands excluded from the scope of Article 5 of the DTAA between India and the Swiss Confederation. 3.1 The ld. Assessing Officer was of the view that as stated earlier the assessee is engaged globally in geo composite membrane water proofing and drainage systems for dams, canals, tunnels and other hydraulic structures. During the period under consideration the assessee commenced the work awarded by National Hydro Power Corporation Ltd (NHPC) relating to providing PVC geo membrane water proofing for an area of 25100 sq.mt in Tanakpur power channel in Uttarkhand. The project receipt of F11,95,56,285 was claimed as being exempt from tax on the ground that the assessee did not have a PE in India and as such was not liable to tax. The AO further found that while claiming the above exemption on the basis of DTAA, the assessee has disclosed NIL income for the year under consideration. According to the AO, if this is a anomaly specially aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Further that in the data sheet presented before the Principal i.e. NHPC Sri V. Subramanian has been represented as the Indian representative of the assessee. CIWSPL was also the Indian face of Carpi Tech SA, Switzerland representing the company in all practical matters, financially compensated by the assessee. To that extent the company represented by Sri V. Subramanian was dependent agent of Carpi Tech SA, the assessee, and therefore can be treated as PE. Finally the AO also drew attention to the fact that at the time of issuing an order u/s 195(2) on an application made by the assessee for NIL deduction certificate, all these facts could not be gone through. It is now that the facts have been analysed with reference to contract document, terms contained therein which leads to the irreversible conclusion that the receipts contrary to the claim of being fees for included services, was actually in the nature of business income taxable in India that the PE was in existence. 3.3 The assessee s submission was not accepted by the AO and framed the Draft assessment order dated 28.12.2010. The draft assessment order was served on the assessee on 05.01.2011. The AO determined th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this case, the activities of the assessee and the Indian entity are intertwined and the Indian entity participates in the economic activities of the assessee, the activities of the Indian entity therefore necessarily are to be analysed to determine whether there is a fixed place P.E. In fact, the name of the company itself is the same as the non-resident company but for calling it Carpi Waterproofing Specialties Private Limited. Both carrying out identical nature of jobs in India. 4.2 Further, DRP observed that Sri V. Subramanian, the Managing Director of the Indian entity is the technical head with qualifications of being a graduate, Engineer and Marketing Management having experience in handling Hydro Power projects for various foreign and domestic companies. The role played by him as an agent of the non-resident company and the. Indian company who render similar services cannot be easily discerned or separated. There being a unison of interest to a great extent, while as an independent agent there would be required an objectivity in execution of the tasks of the nonresident company. The DRP further observed that Sri V. Subramanian represented the consortium of M/s Litost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of a PE. The country of source is given right to tax only that much of the profits of the enterprise which is attributable to the PE. In this case the AC needs to bring to tax such profits attributable to the operations carried out in India as also contemplated in the provisions of Explanation to Section. 9(1) of the Act. Hence, the DRP directed the AO to finalise the order keeping in view the directions as contained above. Against this direction of DRP and final assessment order, the assessee is in appeal before us. 5. Before us, ld.A.R submitted the following pointed for our consideration. (i) Sri V. Subramanian, besides being a Director in CIWSPL was also representing foreign enterprise such .as M/s Liitostroj Power and M/s Koncar apart from an Indian company M/s VA Tech Hydro; (ii) the periodicity when the assessee did Geomembrane fixing for TNEB was executed within duration of project which was for 105 days for the F.Ys. 2004-05 2005-06. The other project carried out by it was for NHPC which was commenced and completed in duration of 40 days in the F.Y. 2007-08. There is of three years between the two of them; (iii) the address in Chennai mentioned by the AO w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases. 1. Motorola Inc. Vs. DCIT in (2005) 95 ITD 269 (Delhi)(SB) 2. Sutron Corporation in (2004) 268 ITR 156(AAR) wherein held that collecting information submitting tenders and signing contracts on behalf of the non-resident amounts to business connection. 3. Horizontal Drilling international S.A Vs. CIT in (1999) 237 ITR 142(AAR) 4. DIT Vs. Paper Products Ltd., in [2005] 257 ITR 1(Delhi) 5. Aditya Birla Nuro Ltd. Vs. ADIT in 11 ITR (Trib) 812(Mum.) 6. Tiong Woon Project and Contracting Pte Ltd., in (2011) 338 ITR 386(AAR). 6. On the other hand, ld.D.R relied on the order of the lower authorities. 7. We have heard both the parties and perused the material on record. In this case, the ld. AR made a plea that the assessee has executed the project of NHPC at Tanakpur between 27.01.2008 to 05.03.2008, so that the number of days is only 40 days. Hence, as per provisions, time may be containing in Article 5.2(j) of the DTAA between India and Swiss. According to the ld. AR, the assessee cannot be said to have any PE in India, since the project activity is less than six months. In our opinion, the above contention of the assessee s counsel has no merit. In the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion as 216-12-2005 with share holders and Directors including the name of Sr V. Subramanian as a Director with two others; vii) the letter heads of both the assesses i.e. CIWSPL and M/s. Carpl Tech SA were similar and to that extent CIWSPL Sri V. Subramanian was the India face of the assessee; viii) the domestic company CIWSPL was the authorized representative for the project taken by the assessee and further all expenses in India to execute the project were incurred by CIWSPL which were reimbursed by the assessee by remittance from Switzerland as well as from local account as confirmed by the assessee vide its letter dated 15-11-2010; ix) M/s. Shakira Enterprises Pvt. Ltd., a vendor was appointed by CIWSPL to render services locally at New Delhi and the payments to the said company was made from the account of CIWSPL through their bank account. 7.1 On the basis of the above factual findings, a show cause dated 21- 10-2010 was issued by AO requiring the assessee to explain why CIWSPL represented by Sri V. Subramanian or alternatively, Sri V. Subramanian himself be not treated as PE in terms of Article 5.1 and 5.2 of the DTAA. In reply to the above, the assessee mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficial transactions is the office cum residential address of Sri V. Subramanian. But for the feeble assertion that Sri V. Subramanian is an independent agent also acting for and on behalf of M/s. Koncar, Croatia and M/s. Litostroj Power, Slovenia, no evidence, credible or otherwise was led in this regard. As also, to refute and rebut the assertion made by the AO that Sri V. Subramanian primarily represented the assessee company almost exclusively during the period when these contracts were executed. In a case as this before us, the activities of the assessee and the Indian entity are intertwined and the Indian entity participates in the economic activities of the assessee, the activities of the Indian entity therefore necessarily are to be analysed to determine whether there is a fixed place P.E. In fact, the name of the company itself is the same as the non-resident company but for calling it Carpi Waterproofing Specialities Private Limited. Both carrying out identical nature of jobs in India. 7.4 Further, Sri V. Subramanian, the Managing Director of the Indian entity is the technical head with qualifications of being a graduate Engineer and Marketing Management having experie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts in question. To that extent it was not in furtherance of his ordinary course of business. Finally the refuge taken of Article 5(2)(j) on the short period of contracts and the interregnum does not offer any solace to the assessee either. The assessee has not demonstrated it was a mere passing, transient or casual presence for its activity in India. In view of this, we confirm the order of the lower authorities This ground is therefore dismissed. 8. The next ground is that the consideration for the Tanakpur Project had two components, namely, Euro component (Euro 1427977.00) paid by NHPC to Carpi Tech SA, Switzerland by bank transfer and Rupee component of which the INR component was ₹ 2,89,22,585/- only (out of the total contract value of ₹ 11,95,56,285/-) which alone was payable and received in India for payment of customs duty on imports (amount paid ₹ 1,21,12,541/-), Service Tax and Sales Tax and towards sub-contractors payment/labour charges and site expenses; the AO has allowed only sales tax/service tax; the assessee submits that the income so computed is patently incorrect and excessive. The ld. DR relied on the order of the lower authorities. 8.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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