TMI Blog2022 (10) TMI 905X X X X Extracts X X X X X X X X Extracts X X X X ..... 20-10-2022 - Shri Narendra Kumar Billaiya, Accountant Member And Shri Challa Nagendra Prasad, Judicial Member For the Assessee : Shri Ankit Sahani, Advocate; For the Revenue : Shri Anil Kumar Sharma, Sr. D.R.; ORDER PER C.N. PRASAD, J.M. : 1. The present appeal and the cross objection are filed by the Revenue and the assessee respectively against the order of the ld. Commissioner of Income Tax (Appeals)-42, New Delhi [hereinafter referred to CIT (Appeals)] dated 10.11.2016 for the assessment year 2010-11. 2. The Revenue in its appeal has raised the following substantive ground of appeal:- Whether, on the facts and in the circumstances of the case, the ld. CIT (A) erred in deleting the addition of Rs.6,55,71,253/- (50% of Rs.13,11,42,506/-) made under section 44DA of the Income Tax Act, 1961, thereby dismissing the AO s stand that the income of Rs.13,11,42,506/- disclosed by the assessee as Overseas Consultancy Income and offered on gross basis as FTS Income, is normal business and professional income u/s 44DA being effectively connected to the PE/Business Connection of the assessee. 3. Brief facts are that the Appellant is a tax resident o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings the Assessing Officer required the assessee to show cause as to why the Overseas Consultancy Income (OCI) of Rs.13.11 crores should not be treated as income as per the provisions of section 44DA of the Income Tax Act, 1961 (the Act) as profits and gains of business or profession. The assessee made its submissions before the Assessing Officer vide letter dated 07.02.2014 stating as under:- 1. Detail of Overseas Consultancy income from both the projects in India viz. Chennai Metro and Kolkata Metro totalling of Rs. 131142506/- is attached. Kindly refer pages no. 1 46. Page 1 is for Chennai Metro Project (Receipts in ENR 93832784/-) while page no. 46 is Kolkata Metro Project (Receipts in INR 37309721/-). We are also submitting herewith relevant pages of the invoices including remuneration concerning the overseas input for the month of January/March 2010 are attached. These invoices are being submitted as test check. Relevant pages of invoices for remuneration having only overseas input are being attached for all other months. In case you desire, we can submit the complete invoices for the whole year. For Chennai Metro Project invoices kindly refer pages no. 2 to 45 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s visited India. They have worked from Head Office. Tax at source u/s 195 @ 10% is also being deducted for all such receipts. All the invoices has been accepted and approved by the contractor and foil payment against all the aforesaid overseas work invoices is received by Head office at Hong Kong and not in India. 6. Not convinced with the submissions of the assessee the Assessing Officer treated the OCI as business income of the assessee under section 44DA of the Act. However, since the assessee has not provided the details of expenditure incurred in connection with OCI earned, the Assessing Officer estimated the expenditure at 50% and allowed and the remaining income of Rs.6,55,71,253/- being 50% of Rs.13,11,42,506/- was brought to tax @ 40% observing as under:- In the case of the assessee, since the entire contracts are effectively connected to the PE/Business Connection, any services rendered under these contracts even though rendered from outside India are effectively connected to such PE/Business Connection. In the present case, since AECOM Asia Company Limited is receiving FTS from India for carrying out services in relation to agreements for which PO has been est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Considering the submissions of the assessee, the ld. CIT (Appeals) deleted the addition made under section 44DA of the Act. 8. Before us the ld. DR submits that there are no separate agreements for overseas work done and the work done by the overseas employees is not corroborated with evidences and, therefore, the matter may be restored back to the file of the Assessing Officer. 9. On the other hand, the ld. Counsel for the assessee strongly placed reliance on the order of the ld. CIT (Appeals). The ld. Counsel for the assessee submits that for the assessment years 2012-13 to 2014-15 the ld. CIT (Appeals) has given similar relief and the Department did not file appeals on account of low tax effect. The ld. Counsel submits that for the assessment years 2015-16 to 2017-18 the Assessing Officer has accepted the assessee s stand with regard to treatment of off shore income as FTS under section 115A of the Act and the copies of the assessment orders are placed at pages 192, 193 for the assessment year 2017- 18 and at pages 231 to 233 for the assessment year 2016-17. 10. The ld. Counsel further submits that the co-ordinate bench of the Tribunal in the case of Iveco Spa Vs. ADI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such services. The ld. Counsel submitas that in fact the contract actually supports the fact that certain services can be rendered from overseas home offices and the invoices raised further corroborates the fact that such services were performed off shore for which the Indian customer paid the assessee. Therefore, the allegations are made without any basis and are, therefore, liable to be dismissed as a conjecture made by the Assessing Officer. 13. The ld. Counsel submits that it is the observation of the Assessing Officer that there is no evidence that specific or a particular work has been done from outside India. In this regard the ld. Counsel submits that assessee had enclosed certain invoices along with the time-sheets (paper book page No. 114, 116) which corroborate the fact that the employees of the assessee work from the home country office and never visited India. The ld. Counsel submits that evidence was submitted before the Assessing Officer to show that no employee of the appellant visited India in connection with the OCI and accordingly when the employees of the appellant home office in Hong Kong never travelled to India it cannot be held that work has been rendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendering of certain services from overseas Home Offices. 6.2 Further, assessing officer held that there is no evidence that a specific or a particular work has been done from outside India. The assessee contended that certain invoices along with the time sheets corroborating the fact of delivery of services from overseas were produced before the assessing officer during assessment proceedings. The assessee also stated that the employees of the Appellant worked from their home country office and never visited India and the evidence was submitted to the AO that no employee of the Appellant visited India in connection with the OCI (Overseas Consultancy Income). The invoices raised further corroborate the fact that such services were performed offshore for which the Indian customer paid the Appellant. A perusal of the agreement shows that it nowhere restricts the rendering of services from outside India. 6.3 Assessing officer also made observation in the assessment order that even if the Appellant has received some inputs or services from outside India, these are also related to the project office in India as the same are performed in terms of the contract agreements. This part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi in the case of Hon'ble jurisdictional ITAT in the case of Sumitomo Corporation vs Deputy Commissioner of lncome-tax(114 ITD 61) wherein it has been held that merely because an entity has a PE in India, all the income accruing or arising to the non-resident shall not be taxable in India and only such income which is attributable to the PE shall be chargeable to tax in India. Further, the income producing activity should be closely connected to the PE. It may be noted that effective connection is required to tax the income as business income whereas the services are chargeable to tax on gross basis in the absence of effective connection. So, with relation to project office, the tax authority of source country is entitled to tax on gross basis. However, once the effective connection is established, it entitles the tax authority to tax on net basis in accordance with the provisions of section 44DA. 6.8 The effective connection comes into play if activities in. order to deliver contractual obligations stand performed through project office. Since in this Case, situs of performance of the activities is outside India, the effective connection is not there with the project ..... X X X X Extracts X X X X X X X X Extracts X X X X
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