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TMI Blog2024 (12) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... le in India ignoring submission and documentary evidence. 2. Both the lower authorities ought to have considered fact that as payee is not liable for taxation in India under domestic law and accordingly there shall be no obligation for deduction of TDS on appellant (Payer). 3. Alternatively, both lower authorities ought to have considered fact that payment is not taxable as per DTAA and accordingly there is no default on the part of the Appellant in not deducting tax. 4. In any case both the lower authorities erred in not restricting the alleged amount of default only to the payment for services received by the Appellant." ITA No. 681/Ahd/2019 (A.Y. 2014-15) "1. Both the lower authorities erred in law and on facts in holding that payment to "TEEMS ELECTRIC CO., USA" is taxable in India ignoring submission and documentary evidence. 2. Both the lower authorities ought to have considered fact that as payee is not liable for taxation in India under domestic law and accordingly there shall be no obligation for deduction of TDS on appellant (Payer). 3. Alternatively, both lower authorities ought to have considered fact that payment is not taxable as per DTAA and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18, 17th May 2018, and 13th November 2018 and submitted that the determination of the taxability of the payments should be made in TEC's assessment and not in the assessee's assessment. The assessee further submitted an AMC (Annual Maintenance Contract) with a third party, DILO Machines, to suggest that maintenance was handled by external parties. Moreover, the assessee invoked Article 16 of the India-USA DTAA, which deals with the taxation of employees' income and submitted that since the TEC employees stayed in India for lesser than 183 days, no tax should be levied on them. During the course of appellate proceedings, the assessee also submitted records to show that the number of man-days spent in India, which amounted to 52 days in FY 2012-13 and 109 days in FY 2013-14, and submitted that TEC did not have a PE in India. However, these submissions were not accepted by Ld. CIT(A), for several reasons. First, Ld. CIT(A) noted that the assessee had not filed an application under Section 195(2) of the Income Tax Act to determine the taxability of the payee, as mandated by the Supreme Court in GE India Technology Centre (P.) Ltd. v. CIT. In this case, the assessee had failed to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, such as the passport copies of TEC's engineers, to prove that their stay in India was less than 120 days, the appellant did not produce any credible evidence to support their claims. Therefore, Ld. CIT(A) held that TEC had a permanent establishment in India due to the prolonged stay of its employees and the nature of the activities conducted in India. Ld. CIT(A) analyzed the taxability of the payments made to TEC under Article 5(2)(k) of the India-USA DTAA, which applies to situations involving construction, installation, or assembly projects that last more than 120 days within any twelve-month period. Since the project undertaken by TEC in India lasted for more than 120 days, the provisions of Article 5(2)(k) established that TEC had a permanent establishment in India. Consequently, the payments made to TEC were subject to Indian tax laws. Ld. CIT(A) noted that the OECD commentary specifically states that the duration of a project plays a critical role in determining the existence of a PE. According to the OECD Commentary, a construction or installation project constitutes a PE if it lasts more than 12 months. The project's existence starts from the date the contractor beg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... multiple counting of period of stay of employees in India. 7. In response, the Ld. D.R. placed reliance on the observations made by Ld. CIT(A) in the appellate order. 8. We have heard the rival contentions and perused the material on record. 9. The issue for consideration before us is whether in the present facts of construction / installation permanent establishment can be said to exist looking into the facts of the instant case. In terms of Article 5(2)(k) of the India-USA Treaty construction / installation permanent establishment would come into existence in case installation / assembly or supervisory activities in connection therewith would continue in India for a period of more than 120 days in any 12 month period. The issue for consideration is whether the period of stay of the employees exceeded this threshold provided under Article 5(2)(k) of the India-USA Tax Treaty. 10. We observe that the assessee entered into three job work orders with TEC viz. Order No. 155/1213, Order No. 156/1213 and Order No. 157/1213, all orders having been signed on 20.11.2012. Order No. 155/1213 required services of Electricians for New Non-Woven Line 8 at the SKAPS Plant in Mundra, Gujarat, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date has to be taken cumulatively and not independently, and also taking into consideration the fact that Ld. CIT(A) has not disputed the dates of employee visits of TEC in India, in our view, the employees had visited India during the period 5th March, 2013, relevant to A.Y. 2013-14. We also note that it is not the case where the assessee was carrying out multiple projects at various locations in India for which separate employees had visited India, in which case we would have to analyse how the period of commencement and completion of various projects would have to be aggregated so as to ascertain whether the employees of TEC had visited India for a period existing 120 days in a calendar year. This, however, is a case where all three job works in relation to installation of New Non-Woven Line 8 were to be carried by the employees of TEC at the same premises i.e. SKAPS Plant in Mundra, SEZ, Gujarat. Even on perusal of the details of employees visits furnished during the period for A.Y. 2013-14, relevant to A.Y. 2014-15, we observe that employees of TEC had visited India during the period 01.04.2013 to 07.06.2013 i.e. for a total period of approximately 65 days for F.Y. 2013-14, r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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