TMI Blog2018 (5) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... roperly considered by the authorities below In view of the observations of in assessee’s own case for the assessment year 2007-08 and also the decision in Carborandum Co. vs. CIT [1977 (4) TMI 2 - SUPREME Court] and National Petroleum Construction Company [2016 (2) TMI 47 - DELHI HIGH COURT], we are of the considered opinion that no income from offshore supplies could be attributed to its alleged PE in Mumbai. - Decided in favour of assessee - I.T.A. No. 872/Del/2017 - - - Dated:- 25-4-2018 - SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER Appellant by: S/Shri C.S. Aggarwal Ravi Sharma Respondent by: Shri G.K. Dhall, CIT- DR ORDER Per K. Narasimha Chary, JM Aggrieved by the order dated 19.12.2016 of the Commissioner of Income-tax (Appeals)-2, Noida (for short CIT(A)) } in Appeal No.15/CIT(A)- 2/2015-16, assessee preferred this appeal. 2. Briefly stated facts are that the assessee, M/s Samsung Heavy Industries Co. Ltd a company incorporated in South Korea and a tax resident of South Korea, is engaged, inter alia, in the business of heavy engineering and had been awarded the Vasai East Development Project ( VED Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5103/Del/2011 and by order dated 27/09/2013, following its order for the Asstt. Year 2007-08, a coordinate bench of the Tribunal held that the appellant had a PE in India, but in respect of the taxability of Outside India revenues in India, the matter was remanded to the file of the Ld. AO. 5. Pursuant to the directions of the ITAT, with respect to computation of income from design engineering, fabrication and supply of platform, which activities were performed outside India, Ld. AO held that the same is chargeable to tax in India on the basis of the findings of the ITAT in its order for AY 2007-08. In appeal, Id. Commissioner of Income Tax (Appeals) confirmed the findings of the Ld. AO. Hence this appeal by the assessee. 6. Ld. AR submitted that the entire dispute in the appeal revolves around the issue as to whether the consideration received by the assessee, a foreign company, against an offshore supplies made by it from outside India is taxable in India, and if so, how much of the income can be attributed to the Permanent Establishment from such business of supplies? 7. It is the argument of the Ld. AR that the facts of the current year undisputedly are identical w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through its PE in India is on the revenue, Ld. AR placed reliance on the decisions in National Petroleum Construction Company [383 ITR 648] of the Hon ble Delhi High Court and Carborandum Co. vs. CIT reported in 108 ITR 335 of the Hon ble Supreme Court, and inasmuch as the Revenue has failed to discharge its aforesaid onus in this case, the impugned addition cannot be sustained. 10. Ld. AR submitted that an FAR analysis corroborated by material or evidence is a sine qua non for attribution and to fasten tax liability and the Ld. AO has proceeded merely on assumptions and surmises while attributing 60% of the revenue to the PE of the appellant. 11. He submitted that Article 7(2) of the India- Korea DTAA clearly provides that profits attributable to the Permanent Establishment are the profits that the permanent establishment might be expected to make if it were a separate and independent enterprise engaged in the same or similar activities under the same or similar conditions, taking into account the functions performed, assets used and risks assumed through the permanent establishment and through other parts of the enterprise. 12. He submitted that though the assessee plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/Del/2010 upheld the contention of department that assessee had PE in India. While upholding this contention, the Tribunal observed that AO's finding regarding attribution of 25% outside India revenue to the PE of the assessee in India needs proper verification as there was lack of material available on record to ascertain as' to what extent the activities of business were carried on bu the assessee through its Mumbai project office and this fact had to be determined before deciding the percentage of attribution o f the outside India activity of the assessee to its PE in India. xxx xxx xxx 6. Taking into consideration the entire conspectus of the case, as agreed by both the parties, we restore the matter to the file of AO as per the directions given in pars 78 of Tribunal's order forA.Y. 2007-08 (supra). 18. However, against the findings of the ITAT in Asstt. Year 2007-08, assessee preferred an appeal before the Hon ble High Court of Uttarakhand, and the Hon ble High Court reversed the order of the ITAT for Asstt. Year 2007-08, with the following observations: 8. In the instant case, appellant held out that a part of the money received by it was att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g certain work in India. It did not contend that even those works were done by or through its Project Office at Mumbai. On the other hand, there is not even a finding that 25 per cent of the gross revenue of the appellant was attributable to the business carried out by the Project Office of the appellant. One has to read Article 5 of the Agreement in order to understand what a permanent establishment is, in terms whereof permanent establishment means a fixed place of business through which business of an enterprise is wholly or partly carried on. In the instant case, according to the revenue, the Project Office of the appellant in Mumbai is the permanent establishment of the appellant in India through which it carried on business during the relevant assessment year and 25 per cent of the gross receipt is attributable to the said business. Neither the Assessing Officer, nor the Tribunal has made any effort to bring on record any evidence to justify the same. 10. That being the situation, we allow the appeal, set aside the judgment and order under appeal as well as the assessment order in so far as the same relates to imposition of tax liability on the 25 per cent of the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 of the DTAA. 22. Further in the case of Carborandum Co. vs. CIT reported in 108 ITR 335, Hon ble Supreme Court held in the context of Section 9(1) which is pari materia to Article 7(1) that: It has rightly been pointed out by the Bombay High Court in Commissioner of Income-tax v. Tata Chemicals Ltd. [1974] 94 ITR 85 (Bom) with reference to the similar or almost identical provisions in section 9(1) of the Income-tax Act, 1961, that in order to rope in the income of a non-resident under the deeming provision it must be shown by the department that some of the operations were carried out in India in respect of which the income is sought to be assessed. 23. In view of the fact that the Ld. AO did not bring on record any evidence or material in support of the contention that the office at Mumbai had any role to play in respect of offshore supplies made and, as such, such income could be attributed to such supplies being the profit which has been carried through the business from such alleged PE, and on the other hand the assessee claims to have placed on record its annual accounts, in support of the contention that the office at Mumbai had absolutely no role to play in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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