TMI Blog2020 (2) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... 5%. Whether the assessee ought to be subjected to sec. 234B and 234C interest or not? - Suffice to say, learned co-ordinate bench s order in assessment year 2009-10 holds that the above interest provisions do not apply in case of the assessee being a non-resident company. We therefore adopt the very reasoning mutatis mutandis to decline the Revenue s instant substantive grievance as well. TDS u/s 195 - payments made to M/s Appledore International Ltd. in lieu of rendering technical services in UK forming subject-matter of 40(a)(ia) - HELD THAT:- Any disallowance stood rendered infructuous in view of the fact that it did not have any permanent establishment in India. We notice herein as well the tribunal s earlier order has already concluded that this sec. 40(a)(ia) disallowance issue stood rendered infructuous in view of the fact the sum in question has already been assessed as fee for technical services. The Revenue fails in its identical additional substantive grievance as well. All of the three identical substantive grounds raised at Revenue s behest fail therefore. - ITA No.403-405/Kol/2018 - - - Dated:- 12-2-2020 - Shri J. Sudhakar Reddy, Accountant Member An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,93,21,422. AO found from the revised computation of income filed by the assessee that the assessee accepts that it has PE in India. This is evident from the revised computation of income submitted by the assessee where it has attributed 10% of total profit from the project for the work done to its PE in India. Therefore AO held that the issue of existence of PE in India within the meaning of Article 5(I) as well as Article 5(2) of the India-UK Double Taxation Avoidance Agreement (DTAA) for the relevant assessment year is without doubt and settled. AO found from that the attribution of 10% of total profits to its PE in India is a first and no such stand has been taken by the assessee in the earlier years wherein the total profits for the project work done in India and UK has been considered in the returns. AO found that the assessee attributed 10% of total profits to its PE in India on account of man-hour basis Le the number of man work- performed in India and UK during the relevant AY. the AO gave assessee opportunity to provide all the relevant documents/evidences in support of its claim but the assessee only submitted a one page submission regarding the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 5(1) as well as Article 5(2) of the India-UK Double Taxation Avoidance Agreement (DTAA) for the relevant assessment year is without doubt and settled. AO found from that the attribution of 10%of total profits in A. Y 2009-10, respectively to its PE in India is a first and no such stand has been taken by the assessee in the earlier years wherein the total profits for the project work done in India and UK has been considered in the returns. In the earlier AYs 2005-06 2007-08, deduced in favor of assessee by the Hon'ble IT AT and relied on by the Ld CIT(A) in the instant A. Y, the only stand of the assessee was that it has no PE in India. 2. In page 22 Para 1.4 of Ld CIT(A)'s Order, the assessee submitted before the Ld CIT(A) that that in the revised return of income for A.Y 2009-10, the appellant contended that it does not constitute a PE in India under Article 5 of the DT AA between India and the UK. However, in the Annexure I filed along with the revised return of income which is a statement showing revised computation of total income and tax under the normal provisions of the Act, the assessee has itself worked out the profit attributable to its PE in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited number of visits that was made by the assessee to the G RSE site was only for the collection of drawings which was necessary for the purposes of the reports and drawings which were prepared and services form UK. Therefore, for the purposes of the reports and drawings which were prepared and services provided from UK which the assessee claims as not attributable to its PE in India, visits were made by the assessee to the GRSE site for the collection of drawings without which such reports and drawings would not have been possible. Therefore its income from foreign services is attributable to its PE in India. 4. Article S of the India -UK DTAA defines the term permanent establishment. As per article 5(1), the term permanent establishment means a fixed place of business through which the business of an enterprise is wholly or partly carried on. Article 5( I) stipulates 3 criteria: a) Place of business i.e some physical presence eg some premises or equipment which are used in business b) Place of business should be fixed in the sense that it is a distinct place which exhibits some degree of permanence. The fact that the enterprise has a certain amount of space at it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to Appendix 1.3 of the contract between the assessee and GRSE, the assessee had the authority to post at the site competent and qualified engineers. The facts clearly show that rendering of such services was the very business of the assessee. APE comes into existence if business is wholly or partly carried on from a fixed place. Thus the services rendered from the office were clearly part of the business of the assessee. Also the concept of 'at the disposal of cannot be carried to such an extend. The OECD commentary required only that there should be a clear right of use available to the assessee and such right in the present case was clearly given in the contract. The mere fact that permission of GRSE was to be obtained for working overtime does not mean there was no right. These extra measures were only because GRSE is a defence shipyard and considering its sensitivity needed extra security measures. The stand taken by the assessee is an instance of artificial avoidance of PE status. 5. AO found that the assessee attributed 10% of total profits to its PE in India on account of man-hour basis i.e the number of man work- performed in India and UK during the relevant A.Y. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arise in India (Permanent Establishment - Project office/Branch office) - Assessment year 2009-10 - Assessee a company incorporated in South Korea was engaged in business of heavy engineering - It was awarded Vasai East development Project by ONGC for purpose of survey design, etc. - Assessee carried out coordination and communication activities In India whereas design and engineering activities were performed in Malaysia - Further, on arrival of goods from Malaysia to India installation and commissioning activities were carried out in India - In pursuance to above contract ONGC asked assessee to open a project office In Mumbai for purpose of coordination and communication between parties to contract - Assessee recruited two employees for said purpose - In course of assessment, Assessing Officer held that income earned by assessee outside India were attributable to permanent establishment in India by way of project office for contract - It was noted that issue as to whether there was any permanent establishment of assessee in India or not had been examined in case of assessee with respect to same contract by co-ordinate bench in earlier years wherein it was held that assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile and modus operandi followed - Held, yes - Whether in view of above facts it would be clear that assessee had a PE in India during relevant years - Held, yes [ Paras 4.6 4.8 ] [In favour of revenue] 3. Learned authorized representative took us to this tribunal s consolidated order in assessment year(s) 2005-06 and 2007-08 involving ITA No. 1489/Kol/2011 and 2082/Kol/2010 decided on 06.04.2016 and is assessee s miscellaneous application No. 39 and 40/Kol/2017 filed therein deciding the instant issue as follows:- These are Miscellaneous applications filed by the Assessee u/s.254(2) of the Income Tax Act, 1961 (Act) praying for rectification of certain apparent errors in the common order dated 6.4.2016 of the Tribunal in ITA Nos.1489/Kol/2011 and 2082/Kol/2010 relating to AY 2005-06 2006-07 respectively. 2. Gifford Partner Ltd. ('Gifford' or ' the Assessee ') had entered into a contract with Garden Reach Shipbuilding Engineers (' GRSE ') in India for rendering the following services with regard to modernisation of the existing shipyard of GRSE:- Preparation of concept papers, Preliminary project report (PPR); Detailed proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yalties or fees for technical services in all other cases; and (ii) During subsequent years, 15 per cent of the gross amount of such royalties or fees for technical services; and 4. The Tribunal thereafter concluded that FTS has to be taxed in India as per Article 13(2) of the DTAA but as per the provisions contained in the Income Tax Act, 1961 (Act). The following were the findings of the Tribunal in paragraph 55 of its order: 55. We have already seen clause 3.10 of the Agreement between the Assessee and GRSE (see para-47 of this order) which provides that all plans, drawings, specifications, designs, reports and other documents prepared by the Consultant in performing the Services shall become and remain the exclusive property of GRSE. We are therefore of the view that the requirements of clause (c) of Article 13(4) of the DTAA are also satisfied in the present case and therefore the source country (India) has a right to tax the fee in question in accordance with Article 13(2) of the DTAA but subject to the limitation of rate of tax as laid down in Article 13(2). The provisions of the Act in this regard are contained in Sec.115A of the Act..... 5. In paragraph 72 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter such grossing up such receipts have to be taxed at 20%. We hold accordingly. 6. In this MAs, it has been submitted by the Assessee. That as to the provisions of section 90(2) of the Act, the provision of domestic law or DTAA whichever is beneficial is applicable to the non-resident assessee. It is the plea of the assessee that u/s 5 115A of the Act FTS is chargeable to tax @ 20% on the basis of the gross receipts, whereas as per the provision of Article 13(2)(bb)(ii) FTS is taxable @ 15% of the gross amount of such FTS. It is the stand of the assessee that since the provisions of the DTAA are more beneficial, the tribunal ought to have directed that tax should be levied in accordance with the provision of DTAA rather than the provision of section 115A of the Act. It is not in dispute that Assessment order for A.Y.2005-06 and 2007-08 was beyond the period of five years for which the convention between India and U.K came into effect and therefore Article 13(2)(bb)(ii) would alone apply in the present case. 7. When this miscellaneous application was taken up for consideration it was noticed that the miscellaneous application was filed on 17.03.2017 whereas the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g filed was passed prior to 1.6.2016 and the application u/s.254(2) in respect of such order is filed after 1.6.2016. The question before us is as to whether in respect of orders passed prior to 1.6.2016 and where M.A. u/s.254(2) in respect of such orders is filed after 1.6.2016, whether the time limit prescribed u/s.254(2) prior to the Amendment by Finance Act, 2016 should apply or the time limit prescribed after the Amendment by Finance Act, 2016 should apply? 10. The Hon ble M.P.High Court in Writ Petition No.4144/2017 in the case of District Central Co-op. Bank Ltd., Raisen Vs. Union of India vide its judgment dated 09th October, 2017 had to deal with an identical case such as the Assessee. The Hon ble Court relied on the decision of the apex Court in the case of M. P. Steel Corporation Vs. Commissioner of Central Excise reported in (2015) 7 SCC 58 wherein it was held that though periods of limitation, being procedural law, are to be applied retrospectively, yet if a shorter period of limitation is provided by a later amendment to a statute, such period would render the vested right of action contained in the statute nugatory as such right of action would now become time bar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the CBDT Circular No.3/2017 by pointing out that the Hon ble Madhya Ptradesh High Court in the aforesaid decision has not considered the effect of the CBDT Circular, we are of the view that it would not be appropriate to advance arguments on the correctness of the decision of the Hon ble High Court to which Tribunal is subordinate. We therefore deem it not necessary to deal with the objections of the ld. DR in this regard. 13. As far as the merits of the miscellaneous application filed by the assessee is concerned, the ld. Counsel for the assessee reiterated the submissions as were made in the miscellaneous application. 14. The ld. DR submitted that the mistake pointed out by the assessee in these miscellaneous applications cannot be said to be a mistake apparent from the record. In this regard the ld. DR drew our attention to the various grounds of appeal raised by the assessee before the tribunal which were as follows : GROUNDS OF APPEAL The grounds stated here under are independent of, and without prejudice, to one another. I For that the Assessing Officer and the Dispute Resolution Panel ( hereinafter referred to as the authorities below) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dras)/[2015] 373 ITR 355 (Madras)/[2015]281 CTR 317 (Madras). 16. In the aforesaid decision it was held that in a miscellaneous application new ground not set forth in the memorandum of the appeal or in the additional grounds cannot be taken. Similar ruling rendered by the Hon ble Calcutta High Court in the following cases were brought to our notice: i) Suman Tea and Plywood Industries reported in 226 ITR 34(Cal) ii) Gokul Chand Agarwal (202 ITR 14) iii) Pr. Commissioner of Income Tax, Surat-1 Vs. Gomti Silk Mills Ltd. In Special Civil Application No.15301 of 2017 and Special Civil Application No.15302 of 2017 dated August 29, 2017 and reported in 2017-TIOL-1768- HC-AHMIT. 17. His next submission was that the power to rectify a mistake u/s 254(2) of the Act is restricted to only to rectify a mistake apparent on the face of the record. If the issue sought to be agitated in a miscellaneous application involves debatable issues which involves long drawn process of reasoning, then it cannot be said that there is a mistake apparent on the face of the record. In support of the above proposition the following decision were brought to our notice: i) Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Act or the DTAA whichever is beneficial is to the assessee. Since the taxability of FTS at 15% of the gross receipts as per Article 13(2)(bb)(ii) is more favourable than the provision of section 115A of the Act, the FTS in question has to be taxed at 15% on gross basis as per the DTAA. We are of the view that the mistake pointed out in the miscellaneous applications is apparent in the face of the record. Even assuming that the long drawn processing of reasoning is required to decide the miscellaneous application but if ultimately there can be only one possible view then it cannot be said that the power to rectify such mistake is outside the ambit of section 254(2) of the Act. The ld. DR s arguments that the assessee is seeking review of the order of the tribunal is not correct. As we have already stated that this plea was already put forth in the submissions made before the tribunal but was not considered and omitted to be considered by the tribunal. For all the above reasons we accept the miscellaneous applications filed by the assessee. 21. The Order of the Tribunal is amended by substituting the existing paragraphs 72 73 of the order of the Tribunal for the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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