TMI Blog2024 (1) TMI 788X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as under :- Whether on the facts circumstance of the case the Ld. CIT (A) has erred in holding that the assessee company does not have a Permanent Establishment (PE) in India in the form of BTIN in respect of offshore supply of sub-assemblies without appreciating the fact that the core business of the assessee was being carried out from the premises of BTIN. 3. Brief facts of the case are that Bombardier Transportation GmbH ( BT-Germany ) is a company registered and incorporated under the laws of Germany with its head office located at Schoneberger Ufer 1, 10785, Berlin, Germany. It operates in Rail transportation industry. The company is a tax resident of Germany as contemplated under Article 4 of the India-Germany Tax Treaty. 3.1 The assessee company along with the other consortium member entered into contracts with Delhi Metro Rail Corporation (DMRC) (Contract RS2 dated 19.07.2007, RS5 dated 06.07.2010 and RS7 dated 14.10.2011) for design, manufacture, supply, testing and commissioning of passenger rolling stock and with Mumbai Rail Vikas Corporation (MRVC) (dated 25.11.2011) for supply of propulsion control system. 3.2 During the year under consideration, ons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace of business in India. The sub-assemblies supplied to BTIL have been manufactured at the overseas manufacturing facility of the assessee. The sale of sub-assemblies had occurred outside India and payments have also been received outside India. 3.6 As regards, the sale of sub-assemblies, the AO held that it was related to the assessee's PE in India on the ground that the assessee had a fixed place PE in India in the form of BTIL. In other words, the AO held that the assessee has two fixed base PEs in India, first in the form of BTIL and the other in the form of the project office (PO). Further, the AO made attribution of 35% of gross profits to the Indian PE at BTIL. 4. Against the above order, assessee appealed before the ld. CIT (A). Ld. CIT (A) after elaborate consideration held that AO s action of holding Bombardier Transportation India Pvt. Ltd. as fixed place of the assessee company was not correct. The concluding order of the ld. CIT (A) in this regard read as under :- I find that the AO has not assigned any specific functions to the project office in India. Therefore, the project office gets covered under paragraph 4 of Article 5 of DTAA. As regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and the BTIL is well defined. The scope of work of the assessee is as under: BTG will be responsible for design, vehicle integration and setting up production for all trains (off shore and indigenous). BTG will supply trains and components manufactured offshore and indigenous. BTG will provide training to DMRC officials in Europe and also undertake integrated testing and commissioning of Trains on the Section of Service trails. BTG will provide unit exchange spares, Mandatory Spares, Recommended Spares, Consumable Spares for a period of three years, special tools, testing and diagnostic equipment. BTG will be responsible for warranty during the Defects Liability Period (DLP) BTG will be responsible for the transfer of production know-how to enable the local partner to produce indigenous trains. BTG will be responsible for Transfer of Technology for Carbody Bogies, if the option is exercise by DMRC. 13. Whereas, the scope of work of BTIL is as under: BT India will support BTG to procure and supply trains and components manufactured in India. BT Indian will support BTG in local procurement for components and goods as well as in tes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a conjoint reading of the contract between the DMRC and the consortium partners and the Consortium Agreement would make it clear that not only the scope of work under the contract given to Consortium partner is well defined but the cost relating to such scope of work has also been specifically demarcated under different cost centres. 17. Thus, it can be safely concluded that though DMRC executed a single contract with the Consortium partners, however, the scope of work to be performed by each of Consortium partner has been well defined and demarcated. Therefore, essentially the contract is a divisible Contract. On a careful perusal of observations of learned DRP, it is observed that learned DRP has misconstrued the terms of the agreement between the DMRC and the Consortium partners as well as the terms of the Consortium Agreement. Learned DRP has erroneously assumed that the activities under Cost Centre D are also performed by the assessee. Whereas, factually and in terms of the contract, such activities falling under Cost Centre D were not only performed by BTIL but the profits from such activities have been offered to tax by BTIL. Therefore, in our view, the receipts from off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court in case of Ishikawajma Harima Heavy Industries Ltd. Vs. DIT, 158 Taxman 259. 20. At this stage, it is relevant to observe, learned DRP, while coming to conclusion that BTIL constitutes fixed place PE in India, has relied upon the decision of the Tribunal in case of Nortel Networks India International Inc. However, the decision of the Tribunal stands reversed by the Hon ble Jurisdiction High Court in Nortel Networks International Inc. Vs. DIT [2016] 386 ITR 253 (Delhi). Thus, 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. 9. Respectfully following the precedent as above, we do not find any infirmity in the order of ld. CIT (A) in this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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