TMI Blog2023 (11) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... ing services is royalty income for use of process of equipment. We find, while deciding assessee s appeals for assessment year 2016-17, 2018-19 and 2019-20 [ 2023 (8) TMI 1372 - ITAT DELHI] the coordinate Bench has also addressed this issue and held that the receipts are not in the nature of royalty. Appeal of assessee allowed. - Shri Saktijit Dey, Vice-President And Dr. BRR Kumar, Accountant Member For the Assessee : Sh. Shashwat Bajpai, Adv. For the Revenue : Sh. Vizay B. Vasanta, CIT-DR ORDER This is an appeal by the assessee against final assessment order dated 29.04.2023 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961, pertaining to assessment year 2020-21, in pursuance to the directions of learned Dispute Resolution Panel (DRP). 2. Ground No. 1, being general in nature, does not require adjudication. Whereas, in ground No. 2, the assessee has challenged taxability of receipts from offshore supplies, based on allegation of the revenue authorities that the assessee has a supervisory permanent establishment (PE) under the provisions of Article 5 of India-Thailand Tax Treaty. In ground No. 3, the assessee has challenged taxability of receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment orders for the assessment years 2013-14, 2014-15, 2015-16 and assessment year 2017-18 that this issue of as to whether the off shore supplies of equipment and providing engineering services qualify to tax with reference to the DTAA with Thailand has also been examined in the proceedings under section 143(3) r.w.s. 144C of the Act and the Assessing Officer accepted that these incomes are not liable to tax. The relevant observations of the Assessing Officer in these assessment years are as under:- Assessment Year : 2013-14 : M/s Bombardier Transportation Signal (Thailand) Ltd. (hereinafter referred to as assessee ) e-filed its return of income on 29.11.2013 declaring total income of Rs. 5,62,36,850/-The assessee filed a revised return on 31.03.2015 declaring Nil income. The case was selected for scrutiny under CASS and a notice u/s 143(2) of the Income Tax Act 1961 ( the Act ) was issued to the assessee on 31.08.2015 Further, a notice u/s 142(1) of the Act along with detailed questionnaire was issued to the assessee on 20.10.2015 In response to various notices, Sh Arvind Rajan and Ms. Chinu Bhasin CAs, authorized representatives of the assessee attended the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etail of computation of tax and interest charged as provisions of law is given In the enclosed ITNS- 150 which is part of this order. Issue necessary forms. Assessment Year : 2015-16 : M/s Bombardier Transportation Signal (Thailand) Ltd. (hereinafter referred to as the assessee and BT-Thailand') e-filed its return of income on 29.11.2015 declaring Nil income. The case was selected for scrutiny under CASS and a notice u/s 143(2) of the Income Tax Act, 1961 ( the Act ) was issued to the assessee on 04.04.2016. Further a notice u/s 142(1) of the Act along with detailed questionnaire was issued to the assessee on 01.07.2016In response to various notices. Sh. Aditya Gupta and Ms. Chinu Bhasin, CAs, Authorized Representatives of the assessee attended the assessment proceedings from time to time and filed necessary information and details. Written submissions and documents are considered. The case was discussed with the authorised representatives of the assessee. 2. The assessee company is registered and incorporated under the laws of Thailand and engaged in the business of manufacturing and supply of train signaling systems. The assessee had entered into an agreement namely CS03 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansportation India Pvt. Ltd. (BTIN). 3. Correctness of assessee's income from various sources is verified in respect of DTAA provisions of India Thailand during the assessment proceedings. After considering the facts and circumstances of the case assessee's income as shown in the return is accepted. 4. Assessment is accordingly made at NIL income. Detailed computation of tax and interest charged as per provision of law is given in the enclosed ITNS-150 which is part of this order. Necessary forms are issued. 10. Therefore, it is noticed that while completing assessment of the assessee for the assessment years 2013-14 to 2015-16 and also for the immediately succeeding assessment year to the assessment year under consideration i.e. 2017-18 the Assessing Officer thoroughly examined the taxability of the income received by the assessee on off shore supplies made to DMRC and the engineering services provided to BTIN with reference to the DTAA between India and Thailand and the conclusion was drawn by the Assessing Officer that these incomes are not taxable. This consistent approach was departed by the Revenue for the assessment years 2016-17, 2018-19 and 2019-20 for one reason o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel vehemently stated that the entire findings of the DRP are based upon incorrect facts, in as much as, the DRP has considered Rs. -02 contract whereas the correct contract was BS-02 12 which was design, manufacture, supply, installation testing and commission of train control and signalling systems. The learned counsel for the assessee concluded by stating that the disposal test has not been satisfied as no place of disposal was available to the appellant in India and for this proposition, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Formula One World Championship Ltd 80 Taxmann.com 347. 33. Per contra, the ld. DR strongly supported the findings of the DRP. It is the say of the ld. DR that since it is composite contract, therefore, there has to be attribution. The ld. DR pointed out that as per the contract, liability was fastened jointly and severally and the same profit has to be attributed for supply made to India by the appellant. 34. Referring to the findings of the DRP at Pages 18 19 of its order, the ld. DR pointed out that the seconded employee of Bombardier Transportation Sweden who has been seconded to Bombardier India and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd utilization of the premises of BTIN by BT Sweden 12. For the same contract in respect of RS2 project there-is a project office existing in India. 13. The cases of Ishikawajima and Hyundai heavy industries are not applicable as the contract in the Case of the assessee is a composite indivisible contract. 14. As per the terms and conditions of the contract, it is clear that the assessee is working with DMRC on a composite contract. 35. We have given thoughtful consideration to the rival contentions and have carefully perused the relevant documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. The undisputed fact is that the supplies made under the BS-02 agreement were off shore supplies. The Hon'ble Supreme Court in the case of Ishikawajima HarimaHeavy Industries Ltd 158 Taxman 259 has categorically held that only such part of the income as is attributable to the operations carried out in India can be taxed in India. Same view was taken by the Hon'ble High Court of Delhi in the case of Nortel Networks India International Inc Ors 386 ITR 0353. 36. We have also considered the agreement between the appellant and BTIN. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Delhi. 2.S BT India will manage project sites, Warranty /Maintenance service sites in Delhi. 2.10 BT India will be responsible for providing onshore Training to the officials of DMRC. 2.11 The percentage participation of BT Sweden is 50% and the percentage participation of BT India is 50%. 2.12 Irrespective of the joint and several liability towards DMRC for any default by any party, the party not responsible for the respective default will have the right to be indemnified by the other party, 3. Co-operation Principles . 3.1 It is clarified that the proposed arrangements between ~_ scope shall be on 'principal to principal' basis. 3.2 The co-operation defined in this MoU is on an exclusive basis and shall be subject to BT internal policies and guidelines. 3.3 In the event of contract, this MoU will be further elaborated for detailed clarity of scope split In meeting the overall project requirement 3.4 3.5 The detailed interfaces and scope of supply services is defined after taking into consideration each entities experience ond capabilities while considering the requirement of the tender document of DMRC and in particular the need to involve suitable local partners. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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