TMI Blog2022 (6) TMI 180X X X X Extracts X X X X X X X X Extracts X X X X ..... d the DRP has accepted that the racing car driver came and performed for only three days in India. In this connection, a query was raised as to the actual duration of the said drivers' stay in India in connection with the aforesaid race, the time taken for preparation, finalization conclusion and the certificate of the said drivers' arrival in India and departure in relation to the event. Assessee was not in a position to provide any such detail. As submitted that these aspects are factual aspects and are not readily available and the matter can be remitted to the AO for examination in this regard. We find that the aforesaid is a crucial aspect and has not been examined by the Revenue authorities below, hence we deem it proper to remit the file to the AO to examine the issue in terms of our observation as above. As regards the plank on which the DRP had rejected the assessee's objection is by reference to Article 17 of the model tax treaty that the receipts are in the nature of income derived from service of personal activities of racing car drivers in India. We note that the aforesaid reference in the present case is coming under Article 16 of the DTAA between Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble DRP erred in holding that the receipts of the Appellant are in the nature of receipts derived from personal activities of the athletes exercised in India and hence, taxable in India under Article 17 of the DTAA without considering the detailed submissions filed with Hon'ble DRP on non-applicability of Article 17 of the DTAA. 5. The Learned AO/Hon'ble DRP erred in arriving at the taxable income of the Appellant based on the payments made to Formula FB Business Limited and Felipe Massa. 6. Even assuming (without admitting) that the Appellant's receipts are taxable in India under Article 17 of the DTAA, the Learned AO/Hon'ble DRP erred in not allowing payments made to Formula FB Business Limited and Felipe Massa as a deductible expense, inspite of the fact that tax has been deducted and deposited into the Indian Government treasury. 7. The Learned AO/Hon'ble DRP erred in levying interest under Section 234A, 234B and 234C of the Act. 8. The Learned AO/Hon'ble DRP erred in levying interest under Section 234D of the Act. 9. The Learned AO/Hon'ble DRP erred in initiating penalty proceedings under Section 271(1)(c) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All this discussion clearly establishes that all the necessary conditions required for Permanent Establishment (PE) under Article 5 of India-SWITZERLAND DTAA are satisfied in this case and the assessee has its Permanent Establishment (PE) in India as it undertakes regular, continuous and repetitive business activity at its fixed place of Business available to it at BIC, Greater Noida. The Assessee earns significant amount of revenue from participation in Formula One Event in India and, as it has a PE in India, therefore, all the considerations received/receivable by the Assessee in India is taxable in India. However, the assessee has failed to submit the agreements between FOWC JSIL. It is not disclosed how much consideration is received by the assessee from the organizer namely M/s. Formula One World Championship Limited, UK (FOWC), M/s. Formula One Management Limited (FOM). M/s. Allsport Management SA, and M/s. Beta Prema 2 Limited or any other source. 3. As per the detail available on record the assessee has deducted TDS on the payment made to the Formula FB Business Limited, PAN AABCF8233E amounting to Rs. 15,67,690/- and Rs. 16,86,610/- on the payment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not party to this contract. Ld. DRP noted certain other submissions and agreed that since the Grand Prix was held for three days in a year, there is no element of permanence in presence of assessee in India. It also agreed that assessee is not a team participating in FIA Championship races but it is a sports management company that provides drivers to teams participating in FIA Championship. Ld. DRP further noted that the AO has observed that the assessee is provided specific places of garages, pit stops and other sites where it sets up its equipment and other facilities, through which the assessee operates and carries out its operations related to the race and other commercial activities; that apart from using the main racing track for conducting its activity of racing, the assessee uses facilities provided at the track like the CCTV camera network, Medical Response facilities including Safety cars, etc.; that the AO has not alleged that the assessee has any permanent/fixed place in the form of office or otherwise in India. The DRP opined that use of facilities for 3 days in a year at the site of Formula One motor racing championship does not amount to having a fixed place of bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia, is not legally tenable. Thereafter, the DRP rejected other aspects of assessee's contention by holding as under:- 10.2 Regarding addition made by the AO with reference to payments made to the drivers, DRP has noted that despite repeated requests by the AO and also by DRP, the assessee has failed to furnish derail of various receipts from any source (resident or non-resident) in context of motor racing event. Under Article 17(2), receipts received by the assessee as legal entity for performance of its racing drivers in India is taxable in India, irrespective of absence or presence of any PE in India. The only information available with the AO was detail of payments made to two drivers. There is no information furnished by the assessee regarding receipts in respect of performance of drivers and it is undisputed that this information is in exclusive knowledge of the assessee and the assessee is bound legally to disclose this information. In view of non-cooperative and unresponsive nature of the assessee, the AO is constrained to take figure of income of the assessee corresponding to payments made by' the assessee to the drivers. Obviously the assessee should have e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a non-resident driver who participated in Indian event. This act cannot constitute a business connection for the purpose of procuring the consideration received by BBSE under the tax net. As regards the taxability of the consideration under Section 9(1)(vii) of Income-tax Act, we do not see any reason to hold that the nature of consideration is either technical or managerial. The Department has not provided any cogent reason to substantiate that the nature of consideration is managerial in nature. The consideration is received only for providing service of a driver to the team. There is no technical expertise involved in this and BBSE is not providing any managerial services either. Therefore, we do not agree that such consideration can be treated as fees for technical services. We have already pointed out that the consideration received by the driver has already been treated as taxable in India. 13. Referring to the above said decision, a question was put to Ld. counsel for the assessee as to whether the racing car driver in the case before us is a driver simplicitor or is he a technical expert in this field. Ld. counsel could not give a cogent reply nor he could rebut the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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