TMI Blog2019 (7) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... rvisory PE in terms of Article 5(4) of the DTAA - Taxability of FTS - DR s isolated Purchase Order having more than 180 days - HELD THAT:- The period of supervision in case of individual contracts did not exceed a period of 180 days except the one purchase order mentioned hereinabove and they did not constitute supervisory PE in terms of Article 5(4) of the DTAA. DR s isolated Purchase Order having more than 180 days cannot establish that each individual Purchase Orders are interlinked. In fact, these Purchase Orders are very much independent and separate from each other and thus, does not constitute the supervisory PE or fixed PE. AR also submitted during the hearing that the sole Purchase Order which has more than 180 days has been offered to tax in earlier Assessment Year i.e. 1999-00. Hence, the issue raised in the present appeal filed by the Revenue is squarely covered by the decision of the Tribunal for A.Y. 1999-00 which is now confirmed by the Hon ble High Court as well as by the Hon ble Supreme Court. Thus, in the present case the FTS was liable to be taxed at 20% under Article 12(2) of the DTAA. Hence, Ground Nos. 3 to 3.1 in Revenue s appeal are dismissed. Intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the expenditure incurred of ₹ 16,80,400/- which has been physically paid by the assessee is to be allowed by the AO. Interest income not declared - AO held that the assessee has not disclosed the interest income earned in the original return of income and also the revised return of income - HELD THAT:- From the records it can be seen that during the assessment proceeding, the assessee submitted revised return of income filed on 30th March, 2009 vide e-filing acknowledgment in which the interest income was disclosed and tax was paid on it. Inadvertently, the income was not captured in the head of income from other sources , however, the same was duly included in the tax payable and tax was paid on it. Further, the assessee filed submission on 8th September, 2009 with the Assessing Officer informing about the revised computing of income wherein interest income was disclosed in the computation of income. Thus, the assessee completely disclosed the interest income in Schedule S1 of the revised return of income form filed on 30th March, 2009. It is only inadvertent error in the filing of the revised return form but the tax was paid suo-moto before the enquiry of the AO. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the issue of existence or constitution of the PE is always year-specific and therefore the finding with regards to the existence of PE has to be examined afresh in each year on the basis of facts specific to the year under consideration. 1.4) Without prejudice to the foregoing, the issue of constitution of PE in those years has not yet achieved finality as the Revenue has filed a Miscellaneous Application ('MA') before the Hon'ble ITAT to the effect that there are mistakes apparent from record regarding assumption of facts on the basis of which decision was rendered by Hon'ble ITAT. 2) Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that no portion of the assessee's income from the activity of supplies of equipments to M/s MUL is taxable in India 2.1) The Ld CIT(A) has erred in holding that no operations in relation to the supplies of equipments to MUL were undertaken in India, not appreciating the fact that the assessee has a PE in India in the form of long-standing presence in India in relation to the supplies being made and services being rendered to MUL for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny incorporated as per the laws of Japan under tax resident in Japan. It had a trading house and had been having Liaison Office (LO) in India at New Delhi since 1956 and had Sub Liaison Offices at Mumbai, Chennai, Bangalore and Calcutta. The L.O in New Delhi was established with the approval of Reserve Bank of India (RBI) for facilitating imports from Japan and exports from India. After the introduction of the FERA in 1973 its license was extended by the RBI of continuing its activity. The LO acted as the communication channel between Indian importers and the assessee to sold their goods to the Indian Importers on a principal to principal basis. During the Assessment Year under consideration, the assessee had various products in hand especially power projects which were being executed through its project office situated in India. The following were the projects in the hand of the assessee during the year under question:- 1. Vijjeshwaram Project of APGPCL. 2. Basin Bridge Project for Tamil Nadu Electricity Project. 3. MUL Project for Maruti Udyog Limited. 4. Koyna Hydro Electric Project 5. Sarda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India, the same will be taxable @ 20% on gross basis in terms of Section 44D r.w.s. 115A. Finally, on consideration of the entirety of the facts and circumstances of the case, the Assessing Officer made the following additions/disallowances: COMPUTATION OF INCOME A. Profit/loss APGPCL Project i) Operation maintenance contract (as discussed above) (ii) 160 MW Gas Turbine Combined Cycle Power Station To be taxed @20% 1,70,00,000 B. Loss from Sardar Sarover Project As per the figure returned (68,35,270) Disallowed as discussed (125,13,333) C. Loss of MUL Project (31,411) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PE in India in the form of long-standing presence in India in relation to the supplies being made and services being rendered to MUL for the past several years. The reliance of the decision in case of M/s Ishikawajima Harima Heavy Industries Ltd. (288 ITR 408 (SC)) was misplaced by the CIT(A) as the facts of the said case are distinguishable to the present assessee s case. 7. The Ld. AR submitted that during the year, the assessee was engaged in supply of equipment to MUL outside India. The supply of equipment was not offered to tax on the ground that the same was offshore supply, where the risks and title pertaining to the same were transferred outside India based on the purchase orders. The same was not offered to tax in the absence of any Permanent Establishment related to MUL activities in India. However, the Assessing Officer vide its order held that the assessee has PE in India under the following paras of Article 5: 2(a): Place of management 2(b): Branch 2(c): Office 2(d): Installation for a period exceeding six months The Ld. AR submitted that after alleging that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sor could not be clubbed together for computing 180 days. Period of supervision for each contract does not exceeds 6 months. Thus, there is no Supervision PE. This fact has been confirmed by Hon ble High Court for A.Y. 1992-93 to 1996-97 in assessee s own case and SLP of revenue is dismissed by Hon ble Supreme Court. * Even in case for any contract, supervision period exceeds 6 months, it can t impact taxability of offshore which is completed before supervision is done. * Other projects are entered with the other parties in India and are not connected to MUL income. This, has been confirmed by Hon ble High Court for AY 1992-93 to 1996-97 in assessee s own case and SLP of revenue is dismissed by Hon ble Supreme Court. * Contract was entered with MUL directly by Head Office in Japan, no office was involved. 8. Thus, the Ld. AR submitted that the CIT(A) after observing the above was right in holding that the assessee does not have any PE in India and offshore supply of equipment are not taxable in India. In fact such a contention raised as above has also been accepted already by the CIT(A) in his order for AY 2006- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The custom clearance, inland transportation etc were done by MUL on its own. No PE was involved in the sale. Supervision was done after supply of equipment. Thus, no operation in relation to supply was carried out in India. Considering the argument of the appellant and as a matter of judicial discipline it is inferred that the appellant did not have PE in India, so far as its offshore supply of equipment to MUL was concerned. Thus, the ground of the appellant is allowed with a direction to follow the verdict of the Hon ble ITAT, New Delhi in accordance with which supervision fees should be taxed @ 20% as per Article 12(2) of the DTAA. In the present case the goods were sold to MUL from outside India. Thus, the risk and title were also transferred outside India and no transaction took place in India. The custom clearance, inland transportation were also done by the MUL on its own and assessee at no stage involved in the said activities. There was no PE involved in the sale. In fact supervision was done after the supply of equipments. The revenue could not establish that the assessee is having fixed place PE or supervisory PE. The ratio laid by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue was that the assessee admittedly had a Permanent Establishment (PE) in India in respect of Raichur Project and Basin Bridge Project. The assessee being one entity, it is enough if the enterprises has a Permanent Establishment (PE) and it is not necessary that each project should have been a separate PE. The Ld. DR pointed out the Tribunal s decision in Para 43. The Ld. DR further submitted that the issue of the existence of fixed place PE under Article 5(1) in the form of LO was also discussed in Para 76 of the Tribunal s order thereby rejected the contention of Revenue. The other forms of PE under Article 5 (2) of the DTAA were never raised by the Revenue nor have been adjudicated upon. The Tribunal after considering the facts of the case held that since in none of the POs the duration exceeds 180 days, no supervisory PE is constituted. The Ld. DR further submitted that the conclusion and findings recorded by the Tribunal are in the context of the POs as stated in Para 61 of the order dated 31/05/2007 as against this the facts of the year under consideration are distinguishable. LO has already been closed. Hence, the question of LO being PE does not exist/arises in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 10/12/2009 for Assessment Year 2007- 08 which contains the details of few such sub-contractors. The Purchase Orders also contain Clauses for sub-contracting part of the work. For example, PO No. MUL/PE/AS/EX2-PBS/812/MOD 306/2190 dated 10/06/1995 provides for employment of sub-contractors and employment of local personnel. Duration of the period of work completed through sub-contractors are not included in the duration of project as claimed by the assessee. Thus, for example, in PO No. MUL/PE/AS/EXH-ANL/1791/MOD-3023 dated 25/03/2005 visit by Sub- contractors are not included in the duration of the project as claimed by the assessee. Thus, for example, in PO No. MUL/PE/AS/EXH-ANL/1791/MOD-3023 dt. 25/3/05 visit by sub-contractor M/s Modi Measurement not included in the duration of the project. Thus, the Ld. DR submitted that these are only the few examples and don t constitute the exhaustive list. 12. The Ld. DR further submitted that the Purchase Order for the relevant year when examined in the above context reveals the following:- (i) Not all the Purchase Orders are procured on the basis of Global Tenders floated by MUL and on the basis of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out by the Project Office, the same are much wider than those carried on by the Liaison Office. This distinction between Project Office and Liaison Office has been succinctly clarified by the Hon ble Delhi High Court in case of National Petroleum Construction Company (2016-TII-02-HC-Del-Intl). The Ld. DR further submitted that the Tribunal for the earlier years recorded a finding that the said PE in the form of Project Office is not effectively connected with the rendering of technical services. Accordingly, the Tribunal observed that there were technicians on the pay rolls of the PE in India established for contracts with MUL for the year ending 31st March, 1994. However, this aspect alone would not be conclusive to prove that PE in India and the contract for rendering technical services were effectively connected. The assessee also accepted the existence of such fixed place PE under Article 5(1) in the form of YE2 Project Office at the premises of MUL and has furnished audited Balance-Sheet and P L A/c in respect of such PE. The Ld. DR further submitted that examination of the purchase orders revealed that the active involvement of the MUL PE (PO) in their procuring as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PE which was involved in these negotiations. (iv) Similarly, for PO No. MUL/PE/EAE/GNT-AL/MOD-1535 dt. 23/02/00, MUL issued inquiry letter on 30/11/99 in response to which the assessee gave its quotation on 3/12/99. MUL issued its LOI 27/1/00 and PO on 23/2/00. The Purchase Order was signed on 28/2/00 but formal acceptance was issued on 13/3/00 i.e. after the Purchase Order was accepted thereby establishing the involvement of the PE. (v) Original PO No. MUL/PE/PN/501/IMP(SUP)/118 was issued on 15/4/99. This was amended and PO No- MUL/PE/PN/501/IMP(E)/Mod-1058 was issued on 15/4/99. This was again amended on 18/8/99 by way of amended PO No. MUL/PE/PN/501/IMP(E)/Mod-1058A. Subsequently, MOM (minutes of meeting) was held at MUL works, Gurgaon on 18/2/00. The Purchase Order was modified and another PO No. MUL/PE/PN/501/IMP(E)/Phase-II/Mod-1058 was issued on 2/3/00. This was accepted and signed by Y. Fujiura on 17/3/00. This Purchase Order was amended and a fresh PO No. MUL/PE//PN/501/IMP(E)/Phase-II/Mod-1548A was issued on 28/8/00. Another MOM held at MUL works on 7/11/00 and subsequent discussions were held at MUL works, Gurgaon on 14/12/00 15/12/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pts the existence of Fixed Place PE under Article 5(1) in the form of YE2 Project Office at the premises of MUL. It has been filing the audited accounts of such project office as well. However, it has been the consistent claim of the assessee that the said project office is not associated with the procuring of purchase orders and hence no part of the supply or supervision charges can be attributed to such PE. It has already been established as per the Ld. DR that the YE2 Project Office plays an active role in procuring the purchase orders and providing supervisory assistance. The assessee also accepts the active involvement of YE2 Project Office in the projects (purchase orders) as although on the one hand, it claims that the YE2 PO is not associated with any part of the projects (purchase orders issued by MUL), yet contrastingly, in the other hand, it continues to include and show the TDS deducted by MUL from the payments made by it against the purchase orders as a part of the balance-sheet of the YE2 PE in the form of Loans and Advances . In view of these submissions, the Ld. DR submitted that it is not only established that there are Purchase Orders which exceeds the minimum du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory services in India. On the contrary, all Purchase Orders in respect of either supply or of rendering supervisory services was received by it in Japan. Copies of all such Purchase Orders have been placed on record before the Assessing Officer as well as before the CIT(A). In fact when compared subject year Purchase Orders with preceding years or even later years, they are found to be identical. As mentioned above, all these issues have been dealt by Tribunal in its order for AY 1992-93 to 1996-97. The Ld. DR argued that technicians on payroll of YE2 MUL Project had provided supervisory service before Purchase Order for supervision fee was accepted. The Ld. DR ignored the established fact that for providing supervision fee service, technicians have come directly from Japan as mentioned in the Purchase Order. There is no fresh fact brought that reveals that technicians were on payroll of India. In fact, it can be seen from the supervision details submitted to the Assessing Officer that all technicians are different for different supervisory activities, who have come to India on a specific date and exit on a specific date and exit on a specific date. So, they cannot be alleged to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has not disputed the position where any purchase order has exceeded 180 days or 6 months stay in India and should be taxed as per assessment order. The Ld. AR submitted that supervision fee was either fixed or based on per man day basis, which is a commercial term agreement between the assessee and MUL. The Ld. AR submitted that the submissions of Ld. DR are highly vague and without any basis. The calculation has been made in identical manner in each year and the same is accepted by the Tribunal. For the purpose of calculating the period of 6 months, the only method accepted by the Tribunal is given below: * The days must be counted from the entry of supervisors in India till the date of his exit * There is a difference between Man days and days . To calculate a day , for example if 10 supervisors come for a day, then Man days are 10 and number of days is One . Thus, in order to determine number of days for the purpose of Article 5, period should be taken as One day and not 10 Man days . * This was duly affirmed by Tribunal as well as by the Hon ble High Court. The Ld. AR submitted that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I approval. The Ld. AR submitted that the revenue purely on assumption, cannot alleged that such project office had exceeded its authority and did some activities relating to negotiation of purchase order for supervision. The Ld. AR pointed out that assessee has been doing supervision activities prior to such project office as well as subsequent to closure of such project office. The Ld. AR pointed out that the assessee has been taking support from Sumitomo Corporation India for exchanging the communication with MUL for which service fee at arm s length price had been paid and accepted by tax department. However, all supervisory services were provided by technician travelled from Japan whose travel cost was duly borne by MUL as referred in the purchase orders. Further, as regards allegation regarding to several rounds of negotiations on technical as well as price before Purchase Orders issued, the Ld. AR submitted that the same was also present in AY 1992-93. There are similar references in many other Purchase Orders. The assessee visited for meetings during the earlier years Project Office as well. During the earlier years also, there were such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The Tribunal in A.Y. 1992-93 to 1996-97 (supra) held as under: 79. The above rule is however subject to exceptions, viz., where each building site or installation site form a coherent whole in the other country and are operated at one place and the same ordering party. The thrust of the argument of the ld. counsel for the revenue has been on this exception to the rule. We are of the view that the case of the assessee does not fall within the exception to the rule. We have already highlighted the fact that each PO was independent and did not complement each other. The MUL YE2 project would not stand concluded with execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2000. The assesseee is not denying this Purchase Order being mentioning more than 180 days which amounts to supervisory PE in this particular Purchase Order. But the other purchase orders mentioned therein are separate and have distinct element of work and will not constitute any PE in India. The assessee also accepted this Purchase Order be taxed accordingly. From the various purchase orders, the identical features emerge that in all the purchase orders, supervisors were to come from Japan and MUL bears the cost of their Air ticket and provides for their boarding and lodging in India. The period of supervision in case of individual contracts did not exceed a period of 180 days except the one purchase order mentioned hereinabove and they did not constitute supervisory PE in terms of Article 5(4) of the DTAA. The Ld. DR s isolated Purchase Order having more than 180 days cannot establish that each individual Purchase Orders are interlinked. In fact, these Purchase Orders are very much independent and separate from each other and thus, does not constitute the supervisory PE or fixed PE. The Ld. AR also submitted during the hearing that the sole Purchase Order which has more than 180 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, it follows from the above that interest under section 234B of the Act can be levied only on the unpaid tax liability, if any, after reducing the amount of taxes deductible and collectible at source. Under section 195 of the Act, tax is deductible at source from payments made to non-residents. Since the assessee is a non-resident, tax is deductible at source from the entire payments made to the assessee as per the provisions of section 195 of the Act. Accordingly, since tax was deductible at source and was correctly deducted on all the payments made to the assessee, no advance tax was payable by the assessee as per the provisions of section 208 read with Section 209(1)(d) of the Act. Consequently, in the absence of any liability for payment of advance tax, the provisions of section 234B of the Act would not be applicable in the assessee s case. The Ld. AR relied upon the following decisions: DIT vs. Mitsubishi Corporation (ITA Nos. 209, 299, 282, 283, 297, 301, 316, 320 of 2009 (Del.) and DIT vs. Jacobs Incorporated wherein the Hon ble Jurisdictional High Court has categorically held that interest is not leviable on the assessee since its entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itsubishi Corporation (supra) and Jacobs Incorporated wherein it is categorically held that interest is not leviable on the assessee since its entire income is subject to tax deduction at source. Hence, Ground Nos. 4 to 4.2 are dismissed. 21. In result, ITA No. 3695/Del/2014 is dismissed. 22. Now we are taking up assessee s appeal 3675/ Del/2014 (A.Y. 2001-02) Assessee s appeal 1. That learned Commissioner of Income Tax (Appeals) has erred in law and on facts in disallowing the business loss of ₹ 23,780 claimed by the Project Office ( PO ) of the Appellant under the O M contract with M/s Andhra Pradesh Gas Power Corporation Limited ( APGPCL ) by merely following the order of learned Commissioner of Income Tax (Appeals) for the assessment year 1999-2000 and without independently examining the claim of the appellant. 1.1 That learned Commissioner of Income Tax (Appeals) has erred in law in subjecting the Business Income arising to the PO of the Appellant under O M contract with APGPCL as Fees for Technical Services . 1.2 That learned Commissioner of Income Tax (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax (Appeals) has erred in law and on facts in not allowing the payments amounting to ₹ 1,50,00,000 to M/s Delta Mechcons (India) Limited, a vendor, towards supply of spares and related services against the additional compensation received by your Appellant from APGPCL, as deductible expenditure. 2.5.That learned Commissioner of Income Tax (Appeals) has erred in law in concluding that section 44D of the Act applies to the instant case, without appreciating that this method of taxation causes discrimination and thus violates the spirit and intent of Article 24 of the Double Taxation Avoidance Agreement between India and Japan ( DTAA ). Sardar Sarovar Narmada Nigam Limited ( SSNNL ) Project 3. That learned Commissioner of Income Tax (Appeals) has grossly erred in law and on facts in treating the payment of ₹ 12,513,333 made to Express Transport Private Limited (ETPL), a sub-contractor for custom clearance and inland transportation services, towards contractual price adjustment for services rendered by ETPL, as contingent liability, since it was not verified by Sardar Sarovar Narmada Nigam Limited ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant operation and maintenance; Ensure zero breakdowns and providing reports of breakdowns to suppliers for warranty replacements; Supervision of rectification and repair work on failed equipment and parts, and Ensure utilization of the correct spares; With respect to O M project, the assessee claimed loss amounting to ₹ 5,38,740/- and ₹ 23,780 for AY 2000-01 and AY 2001-02 respectively. However, the Assessing Officer while relying upon the findings of his predecessor for AY 1999-00 disallowed the returned loss for both the AY 2000- 01 and AY 2001-02 holding that the receipts from O M contract is in the nature of Fee for Technical Services and is to be taxed on gross basis without allowing any deduction for expenditure under section 44D of the Act. The Assessing Officer further went on to conclude that there was no case for allowing any loss irrespective of the fact that there were no receipts from the contract this year. The CIT(A) held that the issue is covered by the earlier order of his predecessor in AY 1999-2000 wherein it was held that as per section 44D, no deduction will be allowed to the O M project whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident of India doing similar business as in case resident would be taxed on net income for the similar services and would not be subject to section 44D of the Act, by virtue of Article 24(2) of DTAA, the non-resident should also be taxed not less favorably. By taxing assessee, being non-resident, on gross basis, it is getting taxed less favorably than compared to resident of India for similar business activities. Thus, the income of the PE should be taxed on net basis. The Ld. AR relied upon the decision of the Agra Special Bench Tribunal in case of Rajeev Sureshbhai Gajwani vs. ACIT 8 ITR 616. In addition, the Ld. AR submitted that this issue is covered by the order of the Tribunal in assessee s own case for AY 1999-00 (ITA No. 867/Del/2006), wherein, after going the facts of the case the Tribunal held that the services received by the assessee does not fall under FTS and has to be considered as service in relation to construction, assembly of project. As the income is not in the nature of FTS, section 44D will also not apply. Thus, the amount received under O M agreement is business income and taxable under Article 7(3) of DTAA on net basis. The Ld. AR also relied upon the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incomes of the project were offered to tax by Sumitomo Corporation on a Net Income basis which was accepted by the Assessing Officer. At the time of the completion of the EPC contract, Sumitomo Corporation claimed compensation for some additional work carried out by it in course of the construction. The claim for additional work was filed for an amount of ₹ 2.47 crores of which Sumitomo Corporation got a partial acceptance and payment amounting to ₹ 1.70 crores during the accounting year relevant to AY 2001-02 and the balance was accepted during the accounting year relevant to AY 2003-04. The assessee in turn had agreed on 28/12/98 with their principal sub-contractor M/s Delta Mechons Limited that assessee would pay Delta Mechons Ltd. The additional sums claimed by them, for the additional work done by them in case of acceptance by APGPCL of assessee s claim for such payments. The Assessing Officer erroneously treated the entire gross amount received by SC by way of additional compensation for the EPC contract as receipts from O M project and considered it as fees for technical services: and assessed it to tax at 20% of the gross receipts (1,70,00,000 @ 20%) without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which merely entitled ETPL to collect receive contract price from SSNNL for each portion. The Ld. AR further submitted that there is a difference between accrual of income and incurring of expenditure. The Ld. AR submitted that under the agreement entered by assessee with ETPL, it has incurred a liability and in fact paid the said sum on transportation to ETPL. It is not denied that assessee under the contract with SSNNL could have recovered the amount. However, in the absence of any agreement with SSNNL, to pay the extra amount due to escalation of cost, no income has either accrued or was received by the assessee. In fact, it is not a finding that assessee has not honored the commitment. Thus, the assessee has paid to ETPL under its contractual liability even though the same could not be recovered from SSNNL. The findings of the authorities below i.e. of the Assessing Officer and CIT(A) is misconceived. Therefore, the Ld. AR prayed that the disallowance made of the expenditure incurred of ₹ 1,25,13,333/- which has been physically paid should be directed to be allowed. The Ld. AR reiterated that the assessee in the course of its business was under an obligation to incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard both the parties and perused all the relevant material available on record. This issue is covered by the Tribunal s order in assessee s own case for AY 2000-01. The Tribunal in A.Y. 2000-01 held as under: 20. In our considered opinion, this clause of the supplementary deed cannot be read in isolation and it has to be considered in the context as a whol. There is no evidence brought on record to suggest that ETPL has repaid this amount to the assessee. 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 the assessee to enable the assessee to make a claim from SSNNL. Though attempts have been made to recover the amount, but SSNL 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 rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in ignoring the findings of the Assessing Officer ('AO') that the assessee had a fixed-place PE in India in relation to the contracts for supplies executed for M/s MUL in the form of a long-standing presence at M/s MUL's site in India and which operated as an effective system to know the requirements of M/s MUL, to negotiate the Purchase Orders, to procure Purchase Orders etc. 1.2) Without prejudice to the foregoing, the Ld CIT(A) has erred in holding that the assessee did not have a supervisory PE in relation to the services of installation, testing, commissioning etc of equipments 1.3) The Ld. CIT(A) has erred in mechanically following the judgment of the Hon'ble ITAT in assessee own case for Asstt Years 1992-93 to 1994-95 1996-97, not appreciating the fact that the issue of existence or constitution of the PE is always year-specific and therefore the finding with regards to the existence of PE has to be examined afresh in each year on the basis of facts specific to the year under consideration. 1.4) Without prejudice to the foregoing, the issue of constitution of PE in those years has not yet achie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 234B is not chargeable in all cases, particularly in cases where the Non-Resident assessee/ payee/ deductee has played a role in inducing non-deduction or short-deduction on the part of the payer/deductor. 4.2) The Ld CIT(Appeals) has erred in failing to take note of the observations of the Hon'ble High Court in the case of M/s Mitsubishi [330 ITR 578, Del] that the role of the assesse/payee/deductee in short-deduction or non-deduction of tax needs to be ascertained before claim regarding non-liability to interest u/s 234B of the Act is accepted, a proposition affirmed subsequently in the case of M/s Alcatel Lucent (judgement of Delhi High Court dated 7.11.2013 in ITA No. 327 Ors of 2012) and followed by ITAT Delhi in the order dated 13.06.2014 in the case of Nortel Network India International Inc. (ITA No. 4766/Del/2011) 34. Likewise AY 2001-02, the Assessing vide Assessment order concluded that the Assessee has PE in India on various grounds, and hence, taxed ₹ 34,827,076 taking 5% of total supply as profit ratio and attributing 100% of the profit as income attributable to tax in India. The Ld. CIT allowed the grounds of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute the supervisory PE or fixed PE. Hence, the issue raised in the present appeal filed by the Revenue is squarely covered by the decision of the Tribunal for A.Y. 1999-00 which is now confirmed by the Hon ble High Court as well as by the Hon ble Supreme Court. Thus, in the present case the FTS was liable to be taxed at 20% under Article 12(2) of the DTAA. Hence, Ground Nos. 3 to 3.1 in Revenue s appeal are dismissed. 39. As regards to Ground No. 4 to 4.2 of the Revenue s appeal, the Ld. DR submitted that the issues are identical to the Revenue s appeal for A.Y. 2001- 02 as ground Nos. 4 to 4.2. The Ld. AR also submitted that the issue is identical and in fact factual aspects also remain the same. 40. We have already decided this issue in the above para no. 20 of this order. We once again find that in the present assessment year 2002-03 also, this issue is identical and covered in favour of the assessee by the jurisdictional High Court in case of Mitsubishi Corporation (supra) and Jacobs Incorporated wherein it is categorically held that interest is not leviable on the assessee since its entire income is subject to tax deduction at source. Hence, Gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43. The Ld. AR submitted that the fact of the matter remains that ₹ 1,41,32,974/- represents an amount of expenditure incurred on transportation and has been directly paid by SSNNL to ETPL and the assessee has thus not made any effective claim of ₹ 1,41,32,974/-. The Assessing Officer has failed to appreciate that in the similar manner what had been paid in AY 2000-01, by SSNNL to ETPL had not been disallowed whereas for the said year without disputing that there was an expenditure incurred on transportation which was the liability of the assessee has even been disallowed. The Ld. AR submitted that out of the claim of expenditure ₹ 31,83,916/- is a sum which was paid by the assessee to ETPL has also been disallowed. The character and nature of the said sum is of similar character as is incurred for the AY 2000-01 and is of ₹ 93,64,921/-.The Ld. AR therefore submitted that the disallowance made of ₹ 1,73,16,892/- is apparently misconceived. 44. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). 45. We have heard both the parties and perused all the relevant material available on record. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shore), were inextricably connected with the execution of the contact as a whole in India. 1.2) The Ld CIT(A) has erred in holding that no activity in relation to the 'offhsore' supply of equipments was undertaken in India, not appreciating the findings of the Assessing Officer ('AO') that a) negotiations and signing of the contracts took place in India, b) the risk and responsibility associated with the supply remained with the assessee till successful installation commissioning of the equipment, c) there was close interaction between technical personnel of assessee and M/s SSNNL resulting into establishment of assessee's Permanent Establishment ( PE) in India which was involved in the execution of a contract of composite nature. 1.3) The Ld CIT(A) erred in placing reliance on the judgment in the case of M/s Ishikawajima Harima Heavy Industries Ltd [288 ITR 408 (SC)] as the facts of the case are distinguishable. 2. ) Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that assessee did not have a Permanent Establishment ('PE') in relation to various contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MUL were undertaken in India, not appreciating the fact that the assessee has a PE in India in the form of M/s SCIPL as well as in the form of a long-standing presence in India through which various activities were carried out in India in relation to the supplies being made and services being rendered to MUL. Therefore, the reliance by the Ld CIT(A) on the judgment in the case of M/s Ishikawajima Harima Heavy Industries Ltd [288 ITR 408 (SC)] was misplaced as the facts of the case are distinguishable. 4) Whether on the facts and in the circumstances of the facts, the Ld CIT (A) erred in holding that the revenues received by the assessee from M/s MUL on account of supervisory services is chargeable to tax under Article 12(2) of the India-Japan DTAA. 4.1) The Ld CIT(A) has erred in not appreciating the fact that the provisions of Article 12(2) are not applicable where Fee for Technical Services has been received on account of services rendered through a PE in India and since in the case of assessee, the Fee for Technical Services are effectively connected with its PE in India, the said revenue is liable to tax under section 115A of the Act, read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio @ 5.38% in AY 2003-04 and 5.46% in AY 2004-05 as per the global balance sheet of the assessee as income accruing to the assessee on supply of equipment in India. The CIT(A) observed that the assessee has already offered to tax the income which is taxable in India for the work done in India. The CIT(A) further observed that the offshore supply was made from outside India where the risk and title was transferred outside India. Thus, the sale was completed outside India. Accordingly, the addition on offshore supply was deleted. 50. The Ld. DR submitted that the issues are identical to the Revenue s appeal for A.Y. 2001-02 as Ground Nos. 1 to 1.4 and 2 to 2.1. 51. The Ld. AR also submitted that the issue is identical and in fact factual aspects also remain the same. The Ld. AR further submitted that the assessee was not engaged in actual installation commissioning of the equipment. The assessee s role was limited to supervision of installation commissioning at the buyer s i.e. SSNNL site. The observations made by the Assessing Officer were factually incorrect as to the income earned by the assessee from offshore supply of the plant and equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R further submitted that the Assessing Officer erroneously adopted the gross profit rate instead of operating profit rate and has made high attribution of 50% considering significant operation of such alleged PE in India for offshore supply. 52. We have already decided this issue in the above para no. 9 of this order while deciding A.Y. 2001-02. We once again find that in the present assessment year 2003-04 also, this issue is identical. In the present case the goods were sold to SSNNL from outside India. Thus, the risk and title were also transferred outside India and no transaction took place in India. The custom clearance, inland transportation were also done by the SSNNL on its own and assessee at no stage involved in the said activities. There was no PE involved in the sale. In fact supervision was done after the supply of equipments. The revenue could not establish that the assessee is having fixed place PE or supervisory PE. The ratio laid by the Hon ble Apex Court in case of M/s Ishikawajima Harima Heavy Industries Ltd. (supra) is applicable in the present case. Therefore, Ground Nos. 1 to 1.3 of the Revenue s appeal is dismissed. 53. As rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individual contracts did not exceed a period of 180 days except the one purchase order mentioned hereinabove and they did not constitute supervisory PE in terms of Article 5(4) of the DTAA. In fact, these Purchase Orders are very much independent and separate from each other and thus, does not constitute the supervisory PE or fixed PE. Hence, the issue raised in the present appeal filed by the Revenue is squarely covered by the decision of the Tribunal for A.Y. 1999-00 which is now confirmed by the Hon ble High Court as well as by the Hon ble Supreme Court. Thus, in the present case the FTS was liable to be taxed at 20% under Article 12(2) of the DTAA. Hence, Ground Nos. 4 to 4.1 in Revenue s appeal are dismissed. 57. As regards to Ground No. 5 to 5.2, the Ld. DR submitted that the issues are identical to the Revenue s appeal for A.Y. 2001-02 as ground Nos. 4 to 4.2. The Ld. AR also submitted that the issue is identical and in fact factual aspects also remain the same. 58. We have already decided this issue in the above para no. 20 of this order. We once again find that in the present assessment year 2003-04 also, this issue is identical and covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact of AY 2003-04 is similar to the facts of 2000-01, wherein the Assessing Officer disallowed the amount paid by the assessee on the ground that liability doesn t relate to the assessee. 62. The Ld. AR submitted such a conclusion is entirely misconceived. In fact the entire liability is that of assessee and not that of SSNNL which is in respect of the transportation of goods, custom clearances etc as per agreement between assessee and ETPL. It is however not denied that under arrangement between assessee, SSNNL and ETPL, such a liability could be directly discharged by SSNNL on making payment to ETPL and is evident from the account itself and has been admittedly allowed by the Assessing Officer. It is thus manifestly evident that the Assessing Officer proceeded on misconception of the facts and on misreading of the agreement. Thus, the disallowance made and sustained by the CIT(A) of ₹ 16,80,400/- is entirely misconceived. In the instant assessment year the assessee had debited Cost of sales of ₹ 21,41,447/- and credited ₹ 6,21,063/-. Out of the said sum ₹ 6,21,063/- had been directly paid by SSNNL to ETPL; whereas the assessee has i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 3714/Del/2014 for A.Y. 2003-04 filed by the Revenue. 3714/Del/2014 1) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that no portion of the income of the assessee from 'offshore' supply of plant equipments to M/s Sardar Sarovar Narmada Nigam Limited ('SSNNL') is taxable in India. 1.1) The Ld CIT(A) has erred in not appreciating the fact that the contract with M/s SSNNL was a integrated/composite contract involving supply/procurement, transportation, supervision of erection commissioning testing of equipment at the site of SSNNL and considering the scope of the contract, the supply obligations (whether onshore or offshore), were inextricably connected with the execution of the contact as a whole in India. 1.2) The Ld CIT(A) has erred in holding that no activity in relation to the 'offhsore' supply of equipments was undertaken in India, not appreciating the findings of the Assessing Officer ('AO') that a) negotiations and signing of the contracts took place in India, b) the risk and responsibility associated with the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined afresh in each year. 2.5) Without prejudice to the foregoing, the issue of constitution of PE in those years has not yet achieved finality as the Revenue has filed a Miscellaneous Application ('MA') before the Hon'ble ITAT to the effect that there are mistakes apparent from record regarding assumption of facts on the basis of which decision was rendered by Hon'ble ITAT. 3) Whether on the facts and in the circumstances of the case, the Ld CIT(A) has erred in holding that no portion of the assessee's income from the activity of supplies of equipments to M/s MUL is taxable in India. 3.1) The Ld CIT(A) has erred in holding that no operations in relation to the supplies of equipments to MUL were undertaken in India, not appreciating the fact that the assessee has a PE in India in the form of M/s SCIPL as well as in the form of a long-standing presence in India through which various activities were carried out in India in relation to the supplies being made and services being rendered to MUL. Therefore, the reliance by the Ld CIT(A) on the judgment in the case of M/s Ishikawajima Harima Heavy Industries Ltd [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant and equipment to SSNL from Japan is taxable in India. The Assessing Officer determined 50% of gross trading profit ratio @ 5.46% in AY 2004-05 as per the global balance sheet of the assessee as income accruing to the assessee on supply of equipment in India. The CIT(A) observed that the assessee has already offered to tax the income which is taxable in India for the work done in India. The CIT(A) further observed that the offshore supply was made from outside India where the risk and title was transferred outside India. Thus, the sale was completed outside India. Accordingly, the addition on offshore supply was deleted. 68. As regards to Ground Nos. 1 to 1.3, the Ld. DR submitted that the facts are identical to that of A.Y. 2003-04 which has also mentioned the determination of the gross profit ratio while discussing the facts of the said case hereinabove paras. The Ld. DR submitted that the issues are identical to the Revenue s appeal for A.Y. 2001-02 as Ground Nos. 1 to 1.4 and 2 to 2.1. 69. The Ld. AR also submitted that the issue is identical and in fact factual aspects also remain the same. The Ld. AR further submitted that the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nership), clearly exhibits the intention of the contracting parties. Merely by stating that assessee was responsible for risk and responsibility of the equipment, does not, in any way effects the intention of the parties. The parties agreed to transfer of title FOB which has been executed as such. Without prejudice to the above, the Ld. AR further submitted that the Assessing Officer erroneously adopted the gross profit rate instead of operating profit rate and has made high attribution of 50% considering significant operation of such alleged PE in India for offshore supply. 70. We have already decided this issue in the above para no. 9 of this order while deciding A.Y. 2001-02. We once again find that in the present assessment year 2004-05 also, this issue is identical. In the present case the goods were sold to SSNNL from outside India. Thus, the risk and title were also transferred outside India and no transaction took place in India. The custom clearance, inland transportation were also done by the SSNNL on its own and assessee at no stage involved in the said activities. There was no PE involved in the sale. In fact supervision was done after the supply of eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and have distinct element of work and will not constitute any PE in India. From the various purchase orders, the identical features emerge that in all the purchase orders, supervisors were to come from Japan and MUL bears the cost of their Air ticket and provides for their boarding and lodging in India. The period of supervision in case of individual contracts did not exceed a period of 180 days except the one purchase order mentioned hereinabove and they did not constitute supervisory PE in terms of Article 5(4) of the DTAA. In fact, these Purchase Orders are very much independent and separate from each other and thus, does not constitute the supervisory PE or fixed PE. Hence, the issue raised in the present appeal filed by the Revenue is squarely covered by the decision of the Tribunal for A.Y. 1999-00 which is now confirmed by the Hon ble High Court as well as by the Hon ble Supreme Court. Thus, in the present case the FTS was liable to be taxed at 20% under Article 12(2) of the DTAA. Hence, Ground Nos. 4 to 4.1 in Revenue s appeal are dismissed. 75. As regards to Ground No. 5 to 5.2, the Ld. DR submitted that the issues are identical to the Revenue s appeal fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of an amount stated to be an income attributable to Maruti Udhyog Limited (MUL) project (i.e. the estimated and assumed sum) on the supplies made by it from Japan could validly have been made. The learned AO, has erred in not appreciating that such income, as has been held to be attributable on the supplies made, since was not attributable to its permanent establishment has been misconceived and the addition so made be thus held untenable and deserves to be deleted. 2.1 That the Hon ble DRP/learned AO has erred in holding that the profit of supplies of equipment by the assessee to MUL are taxable in India even knowing that title of equipment and supplies had been made by the appellant outside India and no income thus had accrued to the assessee in India. 2.2 That the Hon ble DRP/leaned AO has erred in holding that the assessee has a PE in India under Article 5 of the Double Taxation Avoidance Agreement between India and Japan ('DTAA or 'treaty ) 2.3 Without prejudice and in the alternative even if it is held that the appellant had a PE in India then also, no amount of the alleged profits from supply of equipme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder which it was the Appellant alone to provide such services and could not be performed by anyone else. Thus, the findings of the learned AO are arbitrary and untenable. 4.3. That the Hon ble DRP/learned AO has erroneously assumed and held without any basis that the appellant has admitted that it constitutes a service PE as under Article 5 of the India - Japan DTAA. 4.4. That the Hon ble DRP/leamed AO without prejudice to above ground that supervision income is not taxable, has erred in taxing supervision income @10% gross when the same should have been taxed in the similar manner in which she has taxed the equipment supply income. 5. That the finding recorded by the learned AO that the receipts from MUL., are held to be taxable as fee for technical services u/s 9(l)(vii) read with section 115A of the Income Tax Act as per Article 12 of Double Taxation Avoidance Agreement between India and Japan is misconceived and is not based on the proper appreciation of the facts and the statutory provisions relating thereto. 6. That the learned AO has erred in holding that, the purchase orders were only for supervision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft order of the Assessing Officer on this issue. 80. The Ld. AR submitted that during the assessment proceeding, the assessee submitted revised return of income filed on 30th March, 2009 vide efiling acknowledgment in which the interest income was disclosed and tax was paid on it. Inadvertently, the income was not captured in the head of income from other sources , however, the same was duly included in the tax payable and tax was paid on it. Further, the assessee filed submission on 8th September, 2009 with the Assessing Officer informing about the revised computing of income wherein interest income was disclosed in the computation of income. The Assessing Officer has held that the assessee has not disclosed the interest income earned in the original return of income and also the revised return of income. Further, the Assessing Officer held that the interest income was disclosed only when enquiry was made during assessment proceeding, hence income was concealed. The Ld. AR submitted that the assessee completely disclosed the interest income in Schedule S1 of the revised return of income form filed on 30th March, 2009. However, by inadvertent error in filing up th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewise AY 2000-01, the Assessing Officer vide Assessment order held that assessee has PE in India, and the supplies in question have been made through the said PE. Hence, the operating profit @ 1.93% was applied to compute the sale of equipment and attributed @ 25%. The DRP panel also held that assessee has PE in India and the supplies in question have been made through the said PE. Further, DRP enhanced the attribution for 25% to 50% on the basis of other Japanese Company without application of mind. 84. The Ld. DR also submitted that the issue is identical with the issue decided in respect of Ground No. 1 to 1.4 and 2 to 2.1 for A.Y. 2001-02 as this involves offshore supplies and equipments to MUL. The Ld. AR also submitted that the issue is identical. The Ld. AR further submitted that the title in the equipment was transferred to MUL outside India. The assessee was not responsible for any custom clearance and transportation of the equipment. This responsibility belonged to MUL and the same is also evident from the Purchase Orders. 85. We have already decided this issue in the above para no. 9 of this order while deciding A.Y. 2001-02. We once again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards to Ground No. 8, the Ld. DR submitted that the issues are identical to the Revenue s appeal for A.Y. 2001-02 as ground Nos. 4 to 4.2. The Ld. AR also submitted that the issue is identical and in fact factual aspects also remain the same. 89. We have already decided this issue in the above para no. 20 of this order. We once again find that in the present assessment year 2007-08 also, this issue is identical and covered in favour of the assessee by the jurisdictional High Court in case of Mitsubishi Corporation (supra) and Jacobs Incorporated wherein it is categorically held that interest is not leviable on the assessee since its entire income is subject to tax deduction at source. Hence, Ground Nos. 8 is allowed. 90. In result, ITA No. 5964/Del/2014 in A.Y. 2007-08 filed by the assessee is allowed. 91. Now we are taking up ITA No. 1114/Del/2015 in A.Y. 2010-11 filed by the assessee. 1114/Del/2015 Based on the facts and circumstances of the case, the Appellant respectfully submits: 1. That the learned Assessing Officer has erred both on facts and in law, in computing the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de India and no negotiation took place in India in respect of such offshore supply. 3.4 That the Hon'ble DRP/leamed AO has erred on facts in holding and that to without any basis, that the Appellant has entered into integrated contract for supply of equipment and commissioning, and PE was established to undertake the contractual obligation. In-fact the assessee did not carry out any activity in India in respect of such offshore supplies. Thus, the allegation of the learned AO is totally baseless. 3.5 Without prejudice and in the alternative even if it is held that the Appellant had a PE in India then also, no amount of the alleged profits from supply of equipment to MSIL could be taxed in India, since no such alleged profits could be attributed to such PE in India as per Article 7 of the DTAA. 3.6. That the Hon ble DRP/leamed AO has erred in attributing 50% of the profit in respect of offshore supplies to the alleged PE of the Appellant in India without any basis such a conclusion is arbitrary and is untenable. 3.7. Without prejudice to above that offshore supply is not taxable in India, the authorities bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant has not concealed any income or has furnished any inaccurate particular of income. The above grounds are independent and without prejudice to each other. 92. As regards to Ground No. 1, the same is general in nature hence not adjudicated upon herein. 93. As regards to Ground Nos. 2 and 3 to 3.5, the Ld. AR submitted that the issue is identical. The Ld. AR further submitted that the title in the equipment was transferred to MUL outside India. The assessee was not responsible for any custom clearance and transportation of the equipment. This responsibility belonged to MUL and the same is also evident from the Purchase Orders. The Ld. DR also submitted that the issue is identical with the issue decided in respect of Ground No. 1 to 1.4 and 2 to 2.1 for A.Y. 2001-02 as this involves offshore supplies and equipments to MUL. 94. We have already decided this issue in the above para no. 9 of this order while deciding A.Y. 2001-02. We once again find that in the present assessment year 2010-11 also, this issue is identical. In the present case the goods were sold to MUL from outside India. Thus, the risk and title were a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income. The Ld. AR submitted that the Assessing Officer has not given any reason as to the non granting of the credit of tax deducted at source despite giving details. 99. The Ld. DR relied upon the Assessment Order. 100. We have heard both the parties and perused all the relevant material available on record. From the perusal of record it can be seen that the assessee filed all the details before the Assessing Officer and therefore, the non granting of credit of tax deducted at source is uncalled for. Therefore, we direct the Assessing Officer to grant the credit of tax deducted at source in consonance with the details filed by the Assessing Officer. Thus, Ground No. 6 is allowed. 101. As regards to Ground No. 7, the Ld. DR submitted that the issues are identical to the Revenue s appeal for A.Y. 2001-02 as ground Nos. 4 to 4.2. The Ld. AR also submitted that the issue is identical and in fact factual aspects also remain the same. 102. We have already decided this issue in the above para no. 20 of this order. We once again find that in the present assessment year 2010-11 also, this issue is identical and covered in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India then also, no amount of the alleged profits from supply of equipment to MSIL could be taxed in India, since no such alleged profits could be attributed to such PE in India as per Article 7 of the DTAA. 3.3 Without prejudice to above and in alternative the Ld. DRP / Ld. AO has erred in attributing 50% of the profit to the alleged PE of the assessee in India without any basis such a conclusion is arbitrary and is untenable. It is settled law that even an estimate, where it is required to be made, should be on valid basis after confronting the same with the assessee for their rebuttal. Thus, assessment made is bad in law. 3.4 Without prejudice to above that offshore supply is not taxable in India, Ld. DRP/Ld. AO has erred in not allowing set-off of the business losses against income from supply of equipment. 4. That the Ld. DRP/Ld. AO, even after observing that the Appellant does not have supervisory PE in India and thus supervision fees are taxable under Article 12(2) of DTAA, has erred in applying the rate @ 20% on aggregate supervision income of ₹ 36,97,27,985 thereby ignoring the fact that correct rate as per Artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the title in the equipment was transferred to MUL outside India. The assessee was not responsible for any custom clearance and transportation of the equipment. This responsibility belonged to MUL and the same is also evident from the Purchase Orders. The Ld. DR also submitted that the issue is identical with the issue decided in respect of Ground No. 1 to 1.4 and 2 to 2.1 for A.Y. 2001-02 as this involves offshore supplies and equipments to MUL. 107. We have already decided this issue in the above para no. 9 of this order while deciding A.Y. 2001-02. We once again find that in the present assessment year 2011-12 also, this issue is identical. In the present case the goods were sold to MUL from outside India. Thus, the risk and title were also transferred outside India and no transaction took place in India. The custom clearance, inland transportation were also done by the MUL on its own and assessee at no stage involved in the said activities. There was no PE involved in the sale. In fact supervision was done after the supply of equipments. The revenue could not establish that the assessee is having fixed place PE or supervisory PE. The ratio laid by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 of this order. We once again find that in the present assessment year 2011-12 also, this issue is identical and covered in favour of the assessee by the jurisdictional High Court in case of Mitsubishi Corporation (supra) and Jacobs Incorporated wherein it is categorically held that interest is not leviable on the assessee since its entire income is subject to tax deduction at source. Hence, Ground Nos. 8 is allowed. 115. As regards to Ground Nos. 9 and 10 relating to levy of interest u/s 234A, the Ld. AR submitted that 116. The Ld. DR relied upon the Assessment Order. 117. We have heard both the parties and perused all the relevant material available on record. 118. In result, ITA No. 6385/Del/2015 in A.Y. 2011-12 filed by the assessee is allowed. 119. Now we are taking up ITA No. 6385/Del/2015 in A.Y. 2012-13 filed by the assessee. 6385/Del/2015 Based on the facts and circumstances of the case, the Appellant respectfully submits: 1. That the learned Assessing officer ( Ld. AO ) has erred both on facts and in law, in computing the total income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supply of equipment. 4. That the Ld. DRP/Ld. AO, even after observing that the Appellant does not have supervisory PE in India and thus supervision fees are taxable under Article 12(2) of DTAA, has erred in applying the rate @ 20% on aggregate supervision income of ₹ 28,93,52,067 thereby ignoring the fact that correct rate as per Article 12(2) of the DTAA for AY 2012-13 wherein tax cannot be levied more than is 10% gross. 5. That the Ld. AO has erred in applying surcharge and education cess on the aggregate supervision fee of ₹ 28,93,52,067 offered to tax by the appellant under Article 12(2) of the DTAA completely ignoring the directions of Ld. DRP that the supervision fee was to be taxed only under Article 12(2) of the DTAA. 6. That the Ld. AO, without any basis, erred in levying surcharge and education cess on the interest income of ₹ 26,45,088 already offered to tax in the return of income in accordance to Article 11(2) of the India - Japan DTAA wherein tax cannot be levied more than 10% gross. 7. That the Ld. AO has erred in granting short credit of Tax deducted at source (TDS) claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of M/s Ishikawajima Harima Heavy Industries Ltd. (supra) is applicable in the present case. Therefore, Ground Nos. 3 to 3.4 of the assessee s appeal is allowed. 123. As regards to Ground Nos. 4, 5 and 6, the Ld. DR submitted that the issues are identical to the Revenue s appeal for A.Y. 2001-02 as ground Nos. 3 to 3.1. The Ld. AR also submitted that the issue is identical and in fact factual aspects also remain the same. 123. We have already decided this issue in the above para no. 17 of this order. We once again find that in the present assessment year 2012-13 also, the purchase orders mentioned therein are separate and have distinct element of work and will not constitute any PE in India. From the various purchase orders, the identical features emerge that in all the purchase orders, supervisors were to come from Japan and MUL bears the cost of their Air ticket and provides for their boarding and lodging in India. The period of supervision in case of individual contracts did not exceed a period of 180 days except the one purchase order mentioned hereinabove and they did not constitute supervisory PE in terms of Article 5(4) of the DTAA. In fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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