TMI Blog2023 (8) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... ivities have been offered to tax by BTIL. Therefore, in our view, the receipts from offshore supply of rolling stock cannot be taxable in India as the transfer of title over the goods has taken place outside India. Whether BTIL constitutes a fixed place PE of the assessee in India? - As analyzing the facts and materials on record in the touchstone of the ratio laid down in the judicial precedents cited before us, we are of the view that none of the conditions of fixed place PE as enshrined under Article 5(1) of India Germany tax treaty stand satisfied to construe BTIL as the PE of the assessee in India. Thus, in view of our aforesaid conclusion, we hold that the attribution of profit qua the receipts from offshore supplies to the alleged fixed place PE in the form of BTIL is unsustainable as, in our view, BTIL cannot be construed as PE of the assessee in India. - SHRI G.S. PANNU, HON BLE PRESIDENT AND SHRI SAKTIJIT DEY, VICE PRESIDENT For the Appellant by Sh. Deepak Chopra, Advocate Sh. Anmol Anand, Advocate Ms. Priya Tandon, Advocate For the Department by Sh. Gangadhar Panda, CIT(DR) Sh. Virendra Singh, Sr. DR ORDER The present appeal has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing, factory testing, inspection and dispatch, transit insurance, inland transportation of offshore manufactured/indigenous manufactured trains in India, integrated testing and commissioning and onshore training etc. 4. In terms with the contract with DMRC, the assessee made onshore supply of 58 rolling stocks (train sets) to DMRC, which were manufactured by BTIL in India. The total value of invoices raised, both in foreign currency and Indian currency, aggregated to Rs. 449,26,37,686/-. Besides the aforesaid onshore supply of train sets, the assessee supplied 8 more train sets costing Rs. 415,67,27,145/- to DMRC. Insofar as onshore supply of train sets are concerned, which were purchased by the assessee from BTIL and transferred to DMRC on cost to cost basis, BTIL declared income from such sales. Whereas, assessee did not offer income from such sales as the train sets were sold on cost to cost basis. 5. As regards offshore supply of 8 number of train sets, the assessee did not offer income from such sales to tax in India, pleading that the transfer of title over the goods took place outside India and the sale consideration was also received outside India. It was submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Networks OY, (2013) 358 ITR 259 (Delhi HC) 2. ADIT Vs. E-Funds IT Solution Inc. (2018) 13 SCC 294 (SC) 8. Proceeding further, he submitted, the departmental authorities have completely ignored the fact that the assessee and BTIL worked as a Consortium and earned profit separately from DMRC in accordance with their respective scope of work. Drawing our attention to the RS2 Contract with DMRC, learned counsel submitted, while the assessee earned income in respect of activities pursuant to Cost Centre B, such as, offshore manufacture and shipping to India, BTIL earned its income from activities under Cost Centre D, such as, inland transportation of offshore manufactured trains and commissioning. Thus, he submitted, as per the terms of the Contract, the Consortium partners, i.e., the assessee and BTIL have earned revenue in respect of specific work performed by them, as per Cost Centre B and Cost Centre D. He submitted, the entire revenue earned by BTIL under Cost Centre D has been offered to tax by it in India. He submitted, in terms of Article 5(1) of the treaty, the essential condition for determination of fixed place PE is that business of the non-resident is car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rain sets are handed over to DMRC and test run/commissioning done, the Contract is not complete. Further, he submitted, the Contract Agreement does not refer to the MoU between the assessee and BTIL. Thus, he submitted, the MoU is an internal arrangement between the assessee and BTIL to split up the composite contract. Thus, he submitted, BTIL constitutes a fixed placed PE in India in terms of Article 5(1) of the treaty. 11. In rejoinder, learned counsel submitted that learned DRP, while treating BTIL as fixed place PE of the assessee in India, has given two reasons that the scope of work relating to Cost Centre D and control exercised by the assessee on BTIL. He submitted, the DMRC Contract, in fact, refers the MoU between the assessee and BTIL. In this context, he drew our attention to the specific clause of the RS2 Contract. As regards the visits of the expatriates to India, learned Counsel submitted, they visited India only for supervisory work to ensure timely delivery of train sets to DMRC. 12. We have considered rival submissions in the light of the decision relied upon and perused the material on record. The Core issue arising for consideration is whether the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BT India will support BTG to arrange for incidental services like insurances, local and overseas transportation, clearance at port, unloading at DMRC. BT India will support BTG to manage project site and warranty sites in Delhi during DLP. BT India will support BTG in Training of DMRC official and Transfer of Technology, if required. 14. The payment to be made to the assessee and BTIL under the contract is in pursuance to the Cost Centre profit under the Contract. As per the Consortium Agreement between the assessee and BTIL, the assessee is responsible for the following activities: Preliminary and general requirement for rolling stocks and design of rolling stock. Offshore manufacture, factory testing, inspection, marine insurance upto port in India etc. Offshore training. 15. The responsibility of BTIL is as under: Indigenous manufacture, factory testing, inspection and discharge, transit insurance Inland transportation of offshore manufactured train in India. Inland transportation of indigenous manufactured train in India. Integrated testing and commissioning. Onshore training etc. 16. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom offshore supply of rolling stock cannot be taxable in India as the transfer of title over the goods has taken place outside India. 18. The next issue arising for considered is whether BTIL constitutes a fixed place PE of the assessee in India. As per Article 5(1) of India Germany Tax Treaty, a fixed place PE means a fixed place of business through which the business of an enterprise is wholly or partly carried on. For construing BTIL as fixed place PE of the assessee in India, the burden is on the department to establish firstly, that the premises of BTIL was used by the assessee to carry out its business and secondly, the premises of BTIL was at the disposal of the assessee. Though, it is the allegation of the Revenue Authorities that the expatriate employees of the assessee have visited India frequently during the year under consideration and have stayed in India for carrying out their activities by utilizing the premises of BTIL. However, these are in the nature of bald allegations without being backed by any evidence brought on record to establish that the expatriates were utilizing the premises of BTIL. As held by Hon ble Supreme Court in case of ADIT Vs. E-Funds IT S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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