TMI Blog2018 (11) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has a PE under that article. That oil well should have been proved that it is under the disposal of the assessee in the sense of having some right to use the premises for the purposes of its business and not solely for the purposes of the project undertaken on behalf of the owner of the premises. Here it is apparent that assessee even if has the above place it is for the purposes of the above project undertaken as subs contractor. Even otherwise the CIT (A) has not given any finding that such oil well is at the disposal of the assessee. We rest at that and state that unless that is proved first by revenue, the income cannot be charged under that article. - decided in favour of assessee. - ITA No. 2354/Del/2012 - - - Dated:- 22-10-2018 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Mr. Percy Pardiwala , Sr. Advocate with Ms. Ananya Kapoor, Adv For The Revenue : Mr. G K Dhall, CIT DR (International Taxation) ORDER PER PRASHANT MAHARISHI, A. M. 01. This appeal is filed by M/s GIL Maritius Holdings Ltd (Assessee) against the order of The Commissioner Of Income Tax (Appeals) II , Dehrad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitute a fixed place of business in India in view of article 5 (1) of DTAA through which the business of the assessee is carried on, accordingly it constitutes the permanent establishment in India. Assessee was also asked to submit the copy of the profit and loss account to which assessee expressed its inability stating that as there is no permanent establishment in India, no profit and loss account has been drawn. It was further contended by the assessee that under the domestic law if the transaction is taxable under section 44BB of The Income Tax Act read with section 90 of The Income Tax Act the computation may be made in accordance with that. The learned assessing officer also rejected the same holding that as assessee has a permanent establishment in India and has filed the return of income under the provisions of DTAA but has not furnished the profit and loss account, he estimated the profits of the assessee at 25% of the total revenue of ₹ 50,01,62,027/ . Accordingly the income of the assessee was assessed at ₹ 12,50,00,506/ as per order passed under section 143 (3) of The Income Tax Act 1961 on 26/12/2008. 05. Assessee aggrieved with the order of the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant did not file audited accounts which could have given an idea about the surpluses available for taxation. 06. The assessee aggrieved with the order of the learned Commissioner of appeal has preferred appeal before us. 07. The learned authorized representative adverting to the facts stated that assessee has entered into two contracts. He submitted that the first contract is with the Hyundai, which is placed at page number 1 50 of the paper book where the vessel entered India on 1/2/2005 and contract was completed on 20/5/2005. He further referred to the second contract dated 15/9/2004 and stated that for that contract vessel entered into India on 1/12/2004 and contract was completed on 15/4/2005. He therefore submitted that both the contracts are for these durations only undisputedly. He therefore stated that construction and assembly work of laying pipeline was taken into India and both the contracts are for less than 9 months. Hence, there is no permanent establishment of assessee in India. He referred to the double taxation avoidance agreement have and stated that both the contracts are for less than 9 months therefore there is no permanent establishment. He furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is not relevant for determining PE in this case. He further reiterated that only two contracts are in dispute and both of them have been placed before the learned assessing officer. He further referred both the contracts at page number 41 47 and page number 75 to show the scope of work and stated that the contract referred to by the learned assessing officer is altogether a different contract. In the end, he submitted that as there is no permanent establishment the income of the assessee is required to be assessed under section 44BB of the act. He submitted that benefit of section 44 BB is allowable to the assessee in case of production also. He further referred to the decision of Kreuz Subsea pte Ltd V DDIT 58 Taxmann.com 371 [Mum] to state that even if the date of signing of the contract is taken as the date of commencement of the work even then it does not exceed the threshold of 9 months. He submitted that the commencement of the contract from the date of the signing of the contract has been specifically rejected by the coordinate bench in that case. 08. The learned CIT departmental representative vehemently supported the order of lower authorities. With respect to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tence only when the assessee submits the complete data/ details to the assessing officer. He further referred to completion certificate submitted by the assessee at page number 51 and 90 of the paper book and submitted that in both the certificates there is no date on which they have been issued. He further referred to page number 60 of the paper book which is a copy of the contract wherein as per clause number 5.5, it was specifically mentioned that certificate in respect of that is to be given to show that the work has been properly undertaken and completed. He submitted that on this date, the work has been completed but certificate has not been given before the assessing officer. He further referred to page number 60 of the agreement wherein at para number 5.6, it was stated that upon expiry of subcontractors guarantee obligation as set out in article 2.4, thereof contractor shall issue a final completion certificate releasing subcontractor from its guarantee obligation under the subcontract is submitted, this information is also not provided by the assessee to the assessing officer. He further referred to page number 29 of the paper book where in para number 23 completion of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail is found. With respect to the applicability of section 44BB of the act, he submitted that the decision of the Hon ble Supreme Court has stated that there has to be a direct connection of those contracts and then only that provision applies. He submitted that there has to be proximate connectivity/ linkage with oil exploration contracts to fall u/s 44BB of the act. The assessee has failed to show the same and therefore the provisions of 20 section 44BB of the act do not apply. On the issue of attribution of profit, he submitted that when the assessee has failed to prove/ provide any information about the profitability of the contract work, the learned assessing officer has most reasonably attributed 25% of the income of the gross receipt as income of the assessee attributable to its permanent establishment. In absence of such details, no fault can be found with the assessing officer. 09. In rejoinder the learned authorized representative submitted that in assessment proceedings whatever details have been asked by the assessing officer were provided, therefore, now it cannot be said that assessee has failed to provide any information to the assessing officer. In remand proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he project work was completed on 20/05/2005. On careful reading of the contract, condition of the subcontract has been placed at page number 4, where the tables of contents are mentioned. At page number 14 in para number 10.0 of the contract the details of commencement and execution of the contract is mentioned. According to that subcontractor shall commence the subcontract work on the effective date or such other date as may be mutually agreed between the parties. The assessee could not show us that what is the ‗effective date agreed by the parties. Therefore the commencement date of the contract remains unascertained and merely because the vessel entered into India on a particular day, that date cannot be taken as a commencement date. The reason being that the scope of the work of the main contract and coupled with the scope of subcontractor placed at page number 41 onwards of the paper book, the scope of the work does not commence with the date of entry of vessel in to India. According to appendix 1, the project management and engineering inclusive of reporting and necessary documentation and procedures are required to be carried on by the assessee. According to that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the completion of the work as neither the assessee nor the revenue has disputed this date. There was also no evidence available with the assessing officer that even after this date the work has continued. Instead of that assessee has given a certificate that the work got completed with respect to all aspects of the contract in the May 2005. Further the date of demobilization of the vessel is also 20/5/2005. In view of this we are of the opinion that the contract work continued in India with effect from 01/11/2004 to 20/05/2005. In view of this, it is apparent that this work was carried out by the assessee in India for 201 days. 11. With respect to the 2nd contract which has been entered into by assessee with the VMGL VML consortium for installation of riser/I- tube clamps and crossings in connection with MHN H pipeline project at Bombay high and Neelam and Heera Fields undertaken by the ONGC. Such contract was entered into on 15/9/2004. It is claimed that vessel entered into India on 1/12/2004 and contract was completed on 15/4/2005. On examination of the contract, it is mentioned at page number 59 of the paper book, where the copy of the contract is placed, and in para numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons given while deciding such dates for the 1st contract, we also take that the commencement of the work has started with effect from 15/09/2004. Further, similarly the assessee has submitted a certificate which is placed at page number 90 of the paper book, which states that contract number 010/2004/MHN and at dated 15/09/2004 commenced with effect from 15/09/2004 for installation of riser clamps etc in Mumbai Highfield have been satisfactory completed by the assessee as on 15/04/2005 and the equipment and the personnel have been demobilized from the project thereafter. In view of this, it is apparent that the commencement date of this agreement is from 15/09/2004 and the completion date is 15/04/2005. Neither the assessee nor the revenue could produce anything contrary to this to show that these are not the dates of the commencement and completion of this contract. Therefore, it is apparent that works commenced for this contract on 15/9/2004 and completed on 15/4/2005 carried out in India for approximately 212 days. 12. It is undisputed that assessee has a fixed place of business in India as there were personnel as well as the vessel situated in India through which the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terprise ; ( d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or for collecting information for the enterprise ; ( e) the maintenance of a fixed place of business solely- ( i) for the purpose of advertising, ( ii) for the supply of information, ( iii) for scientific research, or ( iv) for similar activities, which have a preparatory or auxiliary character for the enterprise. 4. Notwithstanding the provisions of paragraphs (1) and (2) of this article, a person acting in a Contracting State for or on behalf of an enterprise of the other Contracting State [other than an agent of an independent status to whom the provisions of paragraph (5) apply] shall be deemed to be a permanent establishment of that enterprise in the first-mentioned State if : (i ) he has and habitually exercises in that firstmentioned State, an authority to conclude contracts in the name of the enterprise, unless his activities are limited to the purchase of goods or merchandise for the enterprise ; or ( ii) he habitually maintains in that first-mentioned State a stock of goods or merchandise b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o oil and gas companies and issue before the coordinate bench was whether assessee had no PE in India by relying upon Article 5(2)(j) and (k) of the DTAA between India and Australia without properly appreciating the fact and the provisions of the Treaty that the case of the assessee was covered by Article 5(2)(f) of the Treaty which provides that mere existence of an ‗oil and gas well constitute Permanent Establishment (PE) and it is not necessary to use the same for extraction by the assessee. In that case the coordinate bench was presented with the decision of AAR ruling in P. No. 11 of 1995 (228 ITR) (AAR) = (2002-TII-47-ARAINTL) wherein installation or pipeline and submarine cable sea-bed in Bombay High Sea are claimed to have been covered by oil and gas well under Article 5(2)(f) of DTAA, whereas the AAR held that the argument of department cannot be accepted because the applicant has only worked on the oil or gas well and the oil well in question was not owned or operated by the applicant. Therefore it is incorrect to say that it has ben held that for determining PE the assessee should be owner of the oil or gas well. The only requirement is that it should be a fixed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement company had a PE in Germany when it entered into a 20 year contract with a limited partnership which owned a hotel. The agreement required the UK company to supply a general manager: the general manager's office constituted the PE (and not the entire hotel) since the UK company had a secured right to use this office for the purposes of the agreement. ( iii) A Swiss company was held not to have a PE when it contracted with a German company to produce salad dressings in the name of and in accordance with the recipe of the Swiss company. No employees of the Swiss company were present at the production facility to supervise production (Decision of the Lower Tax Court of Baden-Wurttemberg, May 11, 1992, decision No. 3K 309/91, RIW 1993, 81, IStR 1992, p. 104) . The Bundestinanzhof has also held that a scene painter who was commissioned to carry out a work in France for six weeks, and given special rooms for the purpose, did not have a fixed base at those premises. ( iv) The Administrative Court of Appeal of Paris has held that a German travel agency did not have a PE in France (Decision of November 10, 1998, (199) Revue de Droit Fiscal, No. 25, comm.. 503, repor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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