TMI Blog2018 (5) TMI 947X X X X Extracts X X X X X X X X Extracts X X X X ..... ly crystallised during the year under consideration and being ascertained liability incurred in the ordinary course of business, the same has to be allowed. We accordingly set aside the findings of the CIT(A) and direct the AO to delete the addition Taxability of sum received on account of supervision, erection and maintenance of a gas turbine plant for Basin Bridge Power House TNEB Project @ 10% u/s 44BBB - Held that:- As in assessee’s own case for A.Y 1996-97 and 1993-94 and in A.Y 1997-98 and 1998-99 decided issue in favour of assessee as held that in order to determine the total cost of project, each activity has to be evaluated separately and to ensure that all the costs are recouped y the contractor, at times, major ancillary activities are billed separately. But that does not mean that these activities are independent of constructing or erecting the plant. With regard to repairs and maintenance also, the submission of the learned counsel can be accepted that they might have been carried out during construction or trial runs before handing over the project completely in proper shape. Therefore, the CIT(Appeals) was justified in directing the Assessing Officer to determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from the operations and maintenance (O M) Project, as income from 'Fees for Technical Services' and consequently taxed the same @ 20 per cent on the gross amount That the fee aggregating to ₹ 97,68,000/- had been, received by the assessee not for merely providing technical services but such services included training Engineers, technical guidance for the Operations Maintenance of 160 MW Gas Turbine Combined Cycle power station reporting failure of equipment and carrying inventory etc. 7. The Tribunal considered the following facts: Assessee filed its return of income on 30/12/1999 declaring total income of ₹ 71,98,433/-. It was processed under section 143(a) of the Income Tax Act, 1961 (the Act). During the assessment proceedings it was observed that Vijjeswaram project comprised of 2 contracts, namely 160 MW Gas Turbine Combined Cycle Power Station and Operation and Maintenance (O M) Supporting Service Contract, with General Electric International Inc. Assessee had maintained separate accounts for both these contracts. Ld.AO observed that, as per P L account of the both contracts, assessee incurred loss of ₹ 14,21,015/- and ₹ 62, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ultancy services. Under such circumstances a composite contract of rendering of technical, advisory services along with services of installation, construction/aassembly of a project undertaken by the assessee should not be regarded and treated as consideration paid for rendering of managerial work. 3.11 Ld. DR had placed reliance upon the decision of Hon'ble Delhi High Court in the case of DDIT vs. Rio Tinto Technical Services (supra). The ratio of this decision cannot be applied to the facts of the present case because Hon'ble Delhi High Court in the case of Rio Tinto has observed that the resident assessee therein has been receiving exclusively managerial and consultancy services from the non-resident which strictly falls within the definition of technical services as defined under explanation to section 9 (1)(vii) The Act. 3.12 We therefore allow these grounds of the assessee by L the amount received under O M Agreement has to be characterized as bbusiness income under Article 7 (3) of DTAA between India and Japan. 9. As no distinguishing decisions/facts have been brought on record by the ld. DR, respectfully following the findings of the coordinate benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the completion of the forgoing items 1 to 7 13. Sales Revenue of Project Office which included amount paid by SSNNN to ETPL was ₹ 4,70,21,879/- whereas the cost of sales incurred and debited by the assessee was ₹ 6,49,46,525/-. The cost of sales excluded transportation cost paid to ETPL was ₹ 3,77,95,342/- whereas transportation cost representing payment to ETPL was ₹ 2,71,51,186/-. Out of this, SSNNL paid ₹ 1,77,86,265/- and assessee paid ₹ 93,64,922/-. The AO disallowed ₹ 93,64,922/- on the ground that liability does not relate to the assessee by SSNNL. The CIT(A) confirmed the disallowance by the AO. However, the first appellate authority treated the same as a contingent liability. 14. Before us, the ld. Counsel for the assessee vehemently stated that under the contract, the assessee has made impugned payments and, therefore, it was contractual liability which had been incurred in the course of business. It is the say of the counsel that liability discharged was expenditure incurred by the assessee. The ld. Counsel drew our attention to the agreement between the assessee and ETPL and invoices raised by ETPL which are exhibited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause referred by the ld. DR is from agreement made on 18.9.1992 and we are in the month of May 2018 more than 25 years have since elapsed but nothing to the contrary has been proved by the Revenue. Moreover, the Revenue authorities have not made any verification from ETPL to disprove the payments made by the assessee. Further, the said clause was entered to the supplementary agreement to protect the interest of ht assessee to enable the assessee to make a claim from SSNNL. Though attempts have been made to recover the amount, but SSNNL has never paid any amount till date. Moreover, there are specific provisions in the Act by which any amount recovered by the assessee can be taxed as income in the year of receipt. Therefore, in our understanding of law and the facts, the liability to pay has definitely crystallised during the year under consideration and being ascertained liability incurred in the ordinary course of business, the same has to be allowed. We accordingly set aside the findings of the CIT(A) and direct the AO to delete the addition of ₹ 93,64,921/-. Ground No. 2 is allowed. 21. In the result, the appeal of the assessee is allowed. ITA No. 3694/DEL/2014 [A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the Hon'ble Delhi High Court in assessee s own case for assessment years 1992-93 to 1996-97 wherein the Hon'ble High Court has held that supervision fee is taxable under Article 12(2) of the DTAA and concur with the view of the Tribunal that FTs was liable to be taxed at 20% under Article 12(2) of the DTAA. The question was accordingly answered in the negative i.e. in favour of the assessee and against the Revenue. 27. As no distinguishing decision has been brought on record, respectfully following the findings of the Hon'ble Jurisdictional High Court [supra] this ground is dismissed. 28. Last grievance relates to the levy of interest u/s 234B of the Act. 29. This issue was considered by the Tribunal in assessee s own case for assessment years 1992-93 to 1996-97 in ITA Nos. 5882/5883, 3943 and others. The Tribunal has deleted the interest levied u/s 234B on the ground that the assessee is a non resident not liable for advance tax. Respectfully following the decision of the coordinate Bench, this ground is also dismissed. 30. In the result, the appeal filed by the Revenue is dismissed. 31. To sum up, the appeal of the assessee in ITA No. 3674/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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