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DDIT (IT) -2 (1) (1) /ACIT-1 (2) , Mumbai Versus M/s. Clough Projects International Pty. Ltd. And Vice-Versa

2017 (10) TMI 534 - ITAT MUMBAI

Non declare income from operations carried out outside India - reasoning for non deceleration that the income arising from operations carried outside India is not attributable to the Permanent Establishment (PE) in India in terms of India-Australian treaty and hence the same is not taxable in India - gross receipts relating to ‘inside India’ operations - rejection of books of accounts and also in upholding the decision of the AO in assessing income relating to Indian operations u/s 44BB(1) - Hel .....

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n as part of gross receipts. We notice that the Ld CIT(A) did not adjudicate the same, since he had held that the receipts relating to operations carried outside India is not required to be considered. Now we have held that the receipts relating to operations carried outside India is required to be considered. Accordingly the foreign exchange gain relating thereto is also required to be taken into account for determining the income of the assessee. Accordingly we confirm the view taken by the AO .....

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e appeals are identical in nature, they were heard together and are being disposed of by this common order, for the sake of convenience. 2. The facts relating to the case are discussed in brief. The assessee is a company registered in Australia and is engaged in the business of providing engineering and construction services to various oil and gas companies. It belongs to Clough Group which provides turnkey engineering, construction, operations and maintenance solutions to its various clients in .....

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missioning and commissioning assistance for Three four legged jackets and topside platforms (PH, PJ and STD) in water depths ranging from 23m to 52m, four infield pipelines and associated risers ranging from 4 to 18 diameter for a route length of approximately 30 km and modifications to three existing platforms (PPA, PB and TPP). It was a turnkey project. The project operations are to be carried out partly inside India and partly outside India as per the terms of Contract. It was stated that the .....

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India-Australian treaty and hence the same is not taxable in India. The AO did not agree with the contentions of the assessee. He took the view that the PE of the assessee is required to be determined in terms of Article 5(2)(f) and 5(2)((j), which reads as under:- 5(2) The term, Permanent Establishment shall include especially: (a) to (e) …….. (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources; (g).(i)… (j) an installation or stru .....

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ies for which the assessee had to be physically present through various technical persons etc in connection with aforementioned works so as to commence the project. The assessee cannot take the plea that work in India started with the transportation of saleaway jackets which were fabricated outside Indian waters in the Middle East. This suggests that the assessee had to undergo various exercises and activities in the Indian territorial waters in order to commence the project work so that the pro .....

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E keeping in view the nature of work which related to oil wells. In the light of above discussion, it is thus conclusively established that assessee had a PE in India and whatever payments were received though for the work performed outside the Indian territorial waters, the same are liable to tax in India, since the work related to the oil/gas wells and which is expressly covered under article 5(2)(f) and (j) of the treaty. Accordingly the AO held that the entire payments received by the assess .....

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under percentage completion basis, instead of computing income on actual receipts. The AO was not satisfied with the same and accordingly rejected the workings furnished by the assessee under sec. 145(3) of the Act, by citing various defects. Accordingly the AO computed the income u/s 44BB(1) @ 10% of the aggregate receipts (both for works carried inside and outside India). 5, Before Ld CIT(A), the assessee contended that the PE of the assessee is required to be determined in terms of Article 5 .....

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ons carried outside India should not be brought to tax. The Ld CIT(A) agreed with the contentions of the assessee. Accordingly he held that the profit attributable to Indian PE would only be taxable in India. 6. The Ld CIT(A), however, upheld the action of the AO in rejecting the books of accounts. 7. With regard to the income computation, the Ld CIT(A) held that only gross receipts relating to inside India operations alone is attributable to PE and to be taxed u/s 44BB(1) of the Act. 8. The Ld .....

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e has filed cross objection, wherein the assessee is challenging the decision of the Ld CIT(A) in confirming the rejection of books of accounts and also in upholding the decision of the AO in assessing income relating to Indian operations u/s 44BB(1) of the Act. 11. The Ld D.R submitted that the Ld CIT(A) was not justified in holding that the receipts pertaining to operations carried on outside India is not chargeable to tax. He submitted that the assessee has won contract from M/s BG and a comp .....

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onvenience of the assessee would not take away the liability to pay tax in India on the work carried out outside India. In this regard, the Ld D.R placed reliance on the decision dated 06-01-2016 passed by the Co-ordinate bench in the case of M/s Orpak Systems Ltd (ITA No.8863/Mum/2011), wherein the co-ordinate bench had followed the decision rendered by Hon ble Madras High Court in the case of Ansaldo Energia SPA Vs. ITO (2009)(310 ITR 237), wherein it was held that the subdivision of a composi .....

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a composite contract to execute the project on turnkey basis and further the coordinate bench has already taken a view in this matter, the Ld A.R submitted that he is agreeing with the order of the AO in holding that the entire receipts, i.e., payments received for operations carried out inside as well as outside India is assessable to tax. 14. Since the Ld A.R has agreed that the receipts relating to operations carried outside India is also chargeable to tax, the ground urged by the revenue is .....

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ss objection, wherein it is challenging the rejection of books of account as well as the rejection of income computed by the assessee. The Ld A.R submitted that the Ld CIT(A) has confirmed the order of the AO in rejecting the books of accounts and in determining income @ 10% of the gross receipts relating to operations carried on in India. He submitted that the assessee had computed the income without including receipts relating to the operations carried out outside India. However, since the ass .....

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submissions made by Ld A.R with regard to the recomputation of income. We have noticed that the assessee had computed income by considering the receipts relating to Indian operations. Now the assessee has agreed with the view taken by the AO that the receipts relating to operations carried outside India relating to the project carried on in India also requires to be taken into account for determining the income of the assessee. In this view of the matter, the whole scenario relating to computati .....

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ermination of income before the AO. Accordingly we set aside the order passed by Ld CIT(A) on the issues relating to rejection of books of account and determination of income and restore them to the file of the AO with the direction to examine the same afresh. The assessee is also directed to furnish the financial statements and other documents as required under the law. After affording adequate opportunity of being heard to the assessee, the AO may decide the issues in accordance with the law. .....

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confirm the view taken by the AO that the receipt relating to operations carried out outside India is required to be considered for determining income of the assessee. 18. The revenue has also taken a ground in not considering the foreign exchange gain as part of gross receipts. We notice that the Ld CIT(A) did not adjudicate the same, since he had held that the receipts relating to operations carried outside India is not required to be considered. Now we have held that the receipts relating to .....

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by us in AY 2006-07 in the preceding paragraphs and both the issues have been restored to the file of the AO for the reasons discussed therein. Consistent with the view taken therein we restore these issues to the file of the AO with similar directions. 20. We shall now take up the appeal filed by the revenue for AY 2008-09. In this year also, the Ld CIT(A) held that the receipts relating to operations carried out outside India is not required to be considered for determining the income. We have .....

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