Voith Siemens Hydro Kraftwerkstechnik Gmbh & Co. KG, New Delhi V. DDIT, New Delhi

ITA 1226/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4070 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHWANI MAHAJAN
• Assessee Lawyers: ASHOK KHANNA
• Keywords: Double taxation relief; Permanent establishment
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI DELHI BENCH H : NEW DELHI DELHI BENCH H : NEW DELHI DELHI BENCH H : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI B.C.MEENA, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI B.C.MEENA, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI B.C.MEENA, AM BEFORE SHRI R.P.TOLANI, JM AND SHRI B.C.MEENA, AM ITA NO.1226/DEL/2011 ITA NO.1226/DEL/2011 ITA NO.1226/DEL/2011 ITA NO.1226/DEL/2011 ASSESSMENT YEAR :2006 ASSESSMENT YEAR :2006 ASSESSMENT YEAR :2006 ASSESSMENT YEAR :2006- -- -07 0707 07 M/S VOITH SIEMENS HYDRO M/S VOITH SIEMENS HYDRO M/S VOITH SIEMENS HYDRO M/S VOITH SIEMENS HYDRO KRAFTWERKSTECHNIK GMBH & KRAFTWERKSTECHNIK GMBH & KRAFTWERKSTECHNIK GMBH & KRAFTWERKSTECHNIK GMBH & CO. KG, CO. KG, CO. KG, CO. KG, C/O MOHINDER PURI & CO., C/O MOHINDER PURI & CO., C/O MOHINDER PURI & CO., C/O MOHINDER PURI & CO., CAS., CAS., CAS., CAS., 1A 1A1A 1A- -- -D, VANDHNA, D, VANDHNA, D, VANDHNA, D, VANDHNA, 11, TOLSTOY MARG, 11, TOLSTOY MARG, 11, TOLSTOY MARG, 11, TOLSTOY MARG, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN NO.AABCV9155B. PAN NO.AABCV9155B. PAN NO.AABCV9155B. PAN NO.AABCV9155B. VS. VS. VS. VS. DY. DIRECTOR OF INCOME TAX, DY. DIRECTOR OF INCOME TAX, DY. DIRECTOR OF INCOME TAX, DY. DIRECTOR OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -2(2), 2(2), 2(2), 2(2), INTERNATIONAL TAXATION, INTERNATIONAL TAXATION, INTERNATIONAL TAXATION, INTERNATIONAL TAXATION, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK KHANNA, CA. RESPONDENT BY : SHRI ASHWANI MAHAJAN, CIT-DR. ORDER ORDER ORDER ORDER PER R.P.TOLANI, JM : PER R.P.TOLANI, JM : PER R.P.TOLANI, JM : PER R.P.TOLANI, JM : THIS IS ASSESSEES APPEAL. FOLLOWING GROUNDS ARE RAISED:- 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCOM E TAX (APPEALS)[CIT(A), IS BAD BOTH IN LAW AND ON FAC TS OF THE CASE. 2. THAT THE LEARNED CIT(A) HAS ERRED IN MECHANICALL Y FOLLOWING THE ORDERS OF EARLIER YEARS WHEREIN IT WA S HELD THAT THE ASSESSEE HAD A P.E. IN INDIA. 3. THAT THE LEARNED CIT(A), MECHANICALLY RELYING UP ON THE ORDERS OF EARLIER YEARS, HAS ERRED IN REJECTING THE CONTENTION OF THE ASSESSEE THAT AMOUNT RECEIVABLE U NDER THE CONTRACT TOWARDS SUPERVISION OF ERECTION, AND COMMISSIONING IS CHARGEABLE TO TAX U/S 44BBB OF THE INCOME-TAX ACT, 1961. 4. THAT WITHOUT PREJUDICE, THE LEARNED CIT(A), MECHANICALLY FOLLOWING THE ORDERS OF EARLIER YEARS, HAS ERRED IN ARBITRARILY ESTIMATING PROFIT ON CONSIDERA TION FOR SUPERVISORY SERVICES @ 50% OF THE GROSS AMOUNT. ITA-1226/DEL/2011 2 5. THAT WITHOUT PREJUDICE, THE LEARNED CIT(A), MECHANICALLY FOLLOWING THE ORDER OF EARLIER YEARS, HAS ERRED IN UPHOLDING THE SUBJECTING OF THE RECEIPTS OF THE ASSESSEE TO TAX @ 20% ON THE GROSS AMOUNT WITHOUT ALLOWING A NY DEDUCTIONS FOR EXPENDITURE OR ALLOWANCE. 6. THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING L EVY OF INTEREST U/S 234B OF THE INCOME TAX ACT, THE PRO VISIONS OF WHICH ARE NOT ATTRACTED ON THE FACTS OF THE CASE . 7. THAT THE ASSESSEE MAY BE ALLOWED TO ADD, SUPPLEMENT, REVISE AND AMEND ANY OF THE GROUNDS AS RAISED HEREIN ABOVE. 2. LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, CONTENDS THAT GROUND NOS.1 & 7 ARE GENERAL IN NATURE. GROUND NOS .2 TO 5 RAISED BY THE ASSESSEE IS ABOUT TAXABILITY OF ASSESSEES INCO ME U/S 44BBB AND GROUND NO.6 RAISES ANOTHER GROUND OF CHARGEABILITY OF INTEREST U/S 234B OF THE ACT. 3. BOTH THESE ISSUES CAME UP BEFORE ITAT IN AY 2004 -05 BY ORDER DATED 5.3.2009. ITAT HELD THAT THE ASSESSEE HAD A PE IN INDIA BY FOLLOWING OBSERVATIONS:- IN SUCH CIRCUMSTANCES IT CAN ONLY BE SAID THAT THE ASSESSEE HAS DONE THE WORK OF SUPERVISION SIMPLICITER. EVEN THOUGH IN THE CONTRACT BETWEEN THE ASSESSEE AND OHPC THE T ERM SUPERVISION HAS BEEN GIVEN A SPECIFIC MEANING THE C ONDUCT OF THE ASSESSEE IS NOT SUPPORTED BY ANY EVIDENCE TO HINT AT MUCH LESS SHOW THAT THE ASSESSEE HAS DONE ANY THING OTHER THAN SUPERVISION AS UNDERSTOOD IN ITS GENER AL MEANING. IN THESE CIRCUMSTANCES EVEN THOUGH AS PER THE TERMS OF THE CONTRACT WITH OHPC THE ASSESSEE COULD BE ASSUMED TO BE LIABLE TO DO THE ASSEMBLY, ERECTION, TESTING AND COMMISSIONING OF THE POWER PROJECT AS ALSO THE SUPERVISION THEREOF, IN THE ABSENCE OF THERE BEING ANY EVIDENCE OF THE ASSESSEE HAVING DONE ANY SUCH ACTIV ITIES OTHER THAN SUPERVISION SIMPLICITER OF THE ASSEMBLY, ERECTION AND TESTING AND COMMISSIONING THE ACTIVITIES OF THE ASSESSEE CANNOT BE SAID TO FALL WITHIN THE MEANING OF THE TERM, BUSINESS OF ERECTION OF PLANT OR MACHINERY O R TESTING OR COMMISSIONING AS PROVIDED IN THE PROVISIONS OF SECTION44BBB, OR TO FALL WITH IN THE MEANING OF THE TERMS, ITA-1226/DEL/2011 3 CONSTRUCTION OR ASSEMBLY AS PROVIDED IN THE EXCLU SIONS PROVIDED IN EXPLANATION 2 TO SECTION 9 (1) OF THE A CT. ONCE IT IS FOUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE ASSESSEE HAS INVOLVED ITSELF IN THE PHYSIC AL ACTIVITIES OF THE BUSINESS OF ASSEMBLY OR ERECTION OF THE PLANT OR MACHINERY OR TESTING OR COMMISSIONING OF T HE POWER PROJECT BUT HAS ONLY DONE THE SUPERVISION SIM PLICITER OF THE SAME THE ASSESSEE WOULD NOT BE ELIGIBLE TO B E TAXED UNDER THE PROVISIONS OF SECTION 44BBB NOR WOULD THE RECEIPTS FALL WITHIN THE EXCLUSIONS PROVIDED IN EXP LANATION 2 TO SECTION 9 (1) OF THE ACT. FURTHER AS THE ASSESSE E HAS ALSO NOT CHALLENGED THE EXISTENCE OF THE PERMANENT ESTABLISHMENT IN INDIA, THE FINDINGS OF THE AO AND THE LD. CIT(A) IN HOLDING THAT THE BUSINESS PROFITS OF THE ASSESSEE IS FROM THE SUPERVISION CHARGES ARE IN THE NATURE O F FEES FOR TECHNICAL SERVICES FROM THE RENDERING OF SUPER VISION SERVICES IN CONNECTION WITH THE ERECTION, TESTING A ND COMMISSIONING OF THE POWER PROJECT IS LIABLE TO BE UPHELD AND WE DO SO. IN THE CIRCUMSTANCES THE FINDING OF T HE LD. CIT(A) THAT THE PROVISIONS OF ARTICLE 7 OF THE DTAA READ WITH SECTION 44D AND SECTION 115A OF THE ACT APPLY TO TH E BUSINESS PROFITS OF THE ASSESSEE IS UPHELD. CONSEQU ENTLY GROUNDS 2 TO 5 OF THE ASSESSES GROUNDS OF APPEAL AR E DISMISSED. 13.2 AS THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 6 IN REGARD TO THE LEVY OF INTEREST UNDER SECTION 234A A ND 234D, THE SAME ARE DISMISSED AS NOT PRESSED. IN REG ARD TO THE GROUND AGAINST THE LEVY OF INTEREST UNDER SECTI ON 234 B IT IS NOTICED THAT THE RECEIPTS OF THE ASSESSEE ARE LIABLE FOR TAX DEDUCTION UNDER THE PROVISIONS OF SECTION 195 O F THE ACT. IT IS ALSO NOTICED THAT M/S OHPC HAS DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE TO THE ASSESSEE. WHETHE R THE TAX DEDUCTED A SOURCE HAS BEEN CORRECTLY DEDUCT ED OR NOT IS NOT THE ISSUE BEFORE US, BUT THE FACT REMAIN S THAT THE RECEIPTS OF THE ASSESSEE ARE LIABLE TO TDS AND TDS HAS BEEN DONE. IN THESE CIRCUMSTANCES WE ARE OF THE VIE W THAT INTEREST UNDER SECTION 234B IS NOT LEVIABLE ON THE ASSESSEE AS THE RECEIPTS OF THE ASSESSEE UNDER THE CONTRACT IS LIABLE FOR TDS. IN THE CIRCUMSTANCES RESPECTFULLY FOLLOWIN G THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN T HE CASE OF M/S. MOTOROLA REFERRED TO SUPRA THE INTEREST LEVIED UNDER SECTION 234B STAND DELETED. IN THE CIRCUMSTANCES TH E GROUND NO. 6 OF THE ASSESSEES APPEAL STAND PARTLY ALLOWED. ITA-1226/DEL/2011 4 4. THUS, THE TAXABILITY ISSUE WAS HELD AGAINST THE ASSESSEE AND THE LEVY OF INTEREST U/S 234B ON INCOME LIABLE FOR TDS WAS HELD IN FAVOUR OF THE ASSESSEE. AGGRIEVED, THE REVENUE PREFERRED AN APPEAL BEFORE THE HON'BLE DELHI HIGH COURT WHICH, IN ITA NO.1872/2010 BY ORDER DATED 1.12.2010, DISMISSED THE REVENUES GROUND CHALLENGI NG ITAT ORDER ABOUT NON-LEVY OF INTEREST U/S 234B. 5. LEARNED DR IS HEARD. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. GROUND NO.1 & 7 RAISE D BY THE ASSESSEE ARE GENERAL IN NATURE AND ARE DISMISSED. GROUND NO .2 TO 5 ARE HELD AGAINST THE ASSESSEE RESPECTFULLY FOLLOWING THE ORD ER OF THE TRIBUNAL CITED SUPRA. GROUND NO.6 ABOUT NON-CHARGEABILITY O F INTEREST U/S 234B IS HELD IN FAVOUR OF THE ASSESSEE RESPECTFULLY FOLL OWING THE HON'BLE DELHI HIGH COURT JUDGMENT (SUPRA). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 9 TH MAY, 2011. SD/- SD/- (B.C.MEENA) (B.C.MEENA) (B.C.MEENA) (B.C.MEENA) (R.P.TOLANI) (R.P.TOLANI) (R.P.TOLANI) (R.P.TOLANI) A AA ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 09.05.2011. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR