M/s. Joy Global (UK) Limited,(formerly knows as joy Mining Machinery Limited), Kolkatta V. The DCIT (Int. Taxn.)-2, Ahmedabad

ITA 2008/AHD/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0776 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 03-12-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 25-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Permanent establishment; TDS; Set aside
• Section: 15; 143(3); 244A; 133(6); 195; 144C; 44DA; 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NOS: 2303/AHD/2017 & 2008/AHD/2018 (ASSESSMENT YEARS: 2014-15 & 2015-16) M/S JOY GLOBAL (UK) LTD. (FORMERLY JOY MINING MAHINERY LTD. OR JMML) C/O JOY GLOBAL (INDIA) LTD. 85/1 TOPSIA ROAD (SOUTH) KOLKATA 700046 WEST BENGAL V/S INCOME TAX OFFICER, CIRCLE- 1(1), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AACCJ 3893R APPELLANT BY : SHRI S.N. SOPARKAR & PARI N SHAH RESPONDENT BY : SHRI SUBHASH BAINS, CIT/DR ( )/ ORDER DATE OF HEARING : 03 -12-201 9 DATE OF PRONOUNCEMENT : 09 -12-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDER OF THE LD. ACIT(A)-2, AHMEDABAD DATED 11.08.2017 & 10.07.2 018 PERTAINING TO A.YS. 2014-15 & 2015-16. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 2 2. ITA NO. 2303/AHD/2017, THE ASSESSEE HAS TAKEN FOLLO WING GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY THE LEARNED ASS ISTANT COMMISSIONER OF INCOME- TAX (INTERNATIONAL TAXATION) - 2, AHMEDABAD (HERE-I N-AFTER REFERRED TO AS 'LEARNED AO' OR 'LD AO') U/S 143(3) READ WITH SECTION 144C O F THE INCOME-TAX ACT, 1961 ('ACT') AND THE DIRECTIONS OF THE LEARNED DISPUTE R ESOLUTION PANEL (HERE-IN-AFTER REFERRED TO AS 'LEARNED DRP') IS CONTRARY TO THE PR OVISIONS OF LAW AND ERRONEOUS ON THE FACTS OF THE CASE AND LIABLE TO BE QUASHED. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE LD AO AND LD DRP FAILED TO APPRECIATE THAT INCOME FROM SUPPLY OF MAI NTENANCE SPARES FROM OUTSIDE INDIA CANNOT BE TAXED IN INDIA IN THE ABSENCE OF AN Y ACTIVITY OF THE NON-RESIDENT IN INDIA. 3. THAT THE LD AO ERRED IN TREATING THE CON TRACT FOR SUPPLY OF EQUIPMENT, SCIENTIFIC SITE L INVESTIGATION AND PROVISION FOR S ERVICES AS COMPOSITE CONTRACT. 4. (A) THAT THE LD AO AND LD DRP ERRED IN HO LDING THAT THE APPELLANT HAS A PERMANENT ESTABLISHMENT IN INDIA. (B) WITHOUT PREJUDICE TO THE ABOVE, AND EVEN ASSUMING BUT NOT ADMITTING THAT THE APPELLANT HAS A PE IN INDIA, THE LD AO AND LD DRP ERRED IN NOT APPRECIATING THAT NOTHING FURTHER CAN BE ATTRIBUTED TO SUCH PE ON ACCOUNT OF INCOME FROM SUPPLY OF MAINTENANCE SPARES IN INDIA I N THE ABSENCE OF ANY FUNCTIONS PERFORMED IN INDIA. 5. THAT THE LD AO ERRED IN TREATING THE CONSIDERATI ON FROM SALE OF MAINTENANCE SPARES AS ROYALTY CONNECTED TO PE IN IN DIA AND TAXABLE U/S 44DA OF THE ACT READ WITH ARTICLE 13 READ WITH ARTICLE 7 OF INDIA-UK TREATY. 6. THAT THE LD AO ERRED IN ARBITRARILY APPL YING RULE 10 OF THE INCOME-TAX RULES, 1962 ('RULES') AND CONSIDERING 60% OF CONSID ERATION FROM SUPPLY OF MAINTENANCE SPARES THEREBY ARRIVING AT TOTAL TAXABL E INCOME OF INR 83,782,830. 7. THAT THE LD AO HAS NOT GRANTED CREDIT FO R ENTIRE INTEREST U/S 244A OF THE ACT. 8. THAT THE AMOUNT OF REFUND FOR AY 2014-15 ADJUSTED AGAINST AY 2012-13 BY THE LD AO IS INCORRECT. 3. THE ASSESSEE, M/S JOY GLOBAL (UK) LTD. (FORMERLY JO Y MINING MACHINERY LTD. JMML), IS A NON-RESIDENT UK COMPANY. THE ASSESSEE COMPANY HAD ENTERED INTO A CONSOLIDATED CONTRACT DATED 15.10.2009 FOR A LL THE ISSUES RELATED TO INTRODUCTION OF CONTINUOUS MINING TECHNOLOGY IN THE SE MINES AND ITS OPERATION FOR FIVE YEARS. ON THE PERUSAL OF SUCH CONTRACT, IT IS SEEN THAT JMML HAS ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 3 SIGNIFICANT PRESENCE IN THE SHEETALDHARA MINES ON ACCOUNT OF ITS ACTIVITY OF INTRODUCTION OF CONTINUOUS MINING TECHNOLOGY. THE ASSESSEE COMPANY THUS HAD ITS PERMANENT ESTABLISHMENT (PE) IN INDIA AND WAS LIABLE TO BE TAXED IN RELATION TO INCOME FROM SUCH ACTIVITIES. 4. 3. EARLIER, M/S SOUTH EASTERN COALFIELDS LIMITED (S ECL) HAD APPROACHED THE THEN DDIT (INTL. TAXN)-RAIPUR FOR CERTIFICATE UNDER SECTION 195(2) OF IT ACT IN RESPECT OF PAYMENTS MADE TO M/S-JOY MINING MACHINER Y LTD, UK (JMML) IN RESPECT OF THE ABOVE CONTRACT FOR INTRODUCTION OF C ONTINUOUS MINER TECHNOLOGY AT ITS SHEETALDHARA MINES IN HASDEV AREA. AGAINST T HE TENDER FLOATED, SECL HAD ENTERED INTO A CONSOLIDATED CONTRACT FOR ALL THE IS SUES RELATED TO INTRODUCTION OF CONTINUOUS MINING TECHNOLOGY IN THESE MINES AND ITS OPERATION FOR FIVE YEARS. THE JMML HAD TAKEN COMPLETE RESPONSIBILITIES OF EXE CUTION OF THE PROJECT RIGHT FROM SCIENTIFIC SITE INVESTIGATION, SUPPLY, ERECTIO N AND INSTALLATION, SEMICS AND MAINTENANCE AND TRAINING. THE CONTRACT HAD THUS FOL LOWING COMPONENTS: 1. SCIENTIFIC SITE INVESTIGATION & MONITORING. 2. SUPPLY EQUIPMENTS; INITIAL SPARES, CONSUMABLES A ND MAINTENANCE SPARES. 3. CONTRACT FOR PROVISION OF SERVICES. 4. SITE ASSISTANCE SERVICES. 5. SUBSEQUENTLY, SOME OF THE PORTION OF THE CONTRACT ( SCIENTIFIC INVESTIGATION AND PROVISION OF SERVICES) WAS ASSIGNED TO JOY MINING S ERVICES INDIA PVT LTD (JMSIPL). HOWEVER, THE CONSENT LETTER OF SECL CLEAR LY MENTIONED THAT JMML WILL BE FULLY RESPONSIBLE TO ITS OBLIGATIONS EVEN A FTER THE ASSIGNMENT OF THE CONTRACTS. UNDER THE SUPPLY CONTRACT, THE PAYMENT F OR MAINTENANCE SPARES WAS TO BE MADE NOT ON THE BASIS OF ACTUAL COST OF SPARE BUT ON THE BASIS OF PER TONNE PRODUCTION ACHIEVED AS PER THE CONTRACT. THE PERUSAL OF THE TERMS OF ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 4 CONTRACT REVEALED THAT THE PAYMENTS FOR DESIGN AND SUPPLY OF EQUIPMENTS COULD NOT BE TERMED AS A PAYMENT UNDER A STANDALONE SALES CONTRACT. HOLDING THAT 50% OF THE PROFITS FROM THE SUPPLY OF EQUIPMENTS AN D INITIAL SPARES WILL BE TAXABLE IN INDIA U/S 9(I)(I) OF THE IT ACT READ WIT H ARTICLE 7 OF THE INDIA-UK DTAA, THE ASSESSING OFFICER DIRECTED THE SECL TO DE DUCT TAX AT SOURCE @2% ON THE PAYMENT MADE TO JMML UNDER SUPPLY CONTRACT V IDE ORDER U/S 195(2) OF THE IT ACT DATED 13/03/13. IN RELATION TO PAYMENT F OR MAINTENANCE SPARES MADE ON THE BASIS OF MINIMUM GUARANTEED PRODUCTION ON PER TONNE BASIS, THE SAME WAS .CONSIDERED TO BE IN THE NATURE OF ROYALTY WHEREIN JMML WAS TAKING SHARE IN THE PROFIT AGAINST TRANSFER OF TECHNOLOGY AND KNOW-HOW IN RELATION TO CONTINUOUS MINER TECHNOLOGY. ACCORDINGLY, VIDE ORDE R U/S 195(2) OF THE IT ACT DATED 13/03/13, THE SECL WAS DIRECTED TO DEDUCT TAX AT SOURCE @ 10% ON THE SUCH PAYMENTS FOR MAINTENANCE SPARES UNDER SECTION 9(1)(VI) OF THE ACT READ WITH ARTICLE 13 OF INDIA-UK DTAA. THE ORDER U/S 195 (2) OF THE IT ACT PASSED BY THE THEN DDIT(IT). 6. THEREAFTER MATTER WAS REFERRED TO DRP AND DRP HELD AS FOLLOWS: 'WE HAVE GONE THROUGH DETAILED SUBMISSIONS INCLUDING CASE LAWS RELIED UPON BY THE ASSESSEE AND ARGUMENTS IN THIS REGARD. IT WILL BE PROPER TO GO THROUGH VARIOUS TERMS OF CONTRACTS AND SCOPE OF WORK TO ANALYSE FAC TS OF THE CASE: TERMS OF CONTRACT AND FACTS OF THE CASE: THE CONTRACT ENTERED INTO BY THE JMML WITH SECL IS FOR 'INTRODUCTION OF CONTINUOUS MINING TECHNOLOGY IN THE MINEFIELDS OF S HEETALDHARA-KURJA AREA OWNED BY SECL. THE SCOPE OF WORK AS PER PAGE 4 OF T HE BID DOCUMENT 'INCLUDES SCIENTIFIC STUDY OF THE MINE, DESIGN, SUPPLY, INSTA LLATION, COMMISSIONING OF EQUIPMENT AND THEREAFTER ITS OPERATION AND MAINTENA NCE FOR THE PERIOD OF FIVE YEARS ON CONTRACT INCLUDING INITIAL WARRANTY PERIOD AND HAND OVER EQUIPMENT IN GOOD WORKING CONDITION TO SECL FOR ITS SMOOTH AND S UCCESSFUL OPERATION BEYOND THE FIVE YEAR CONTRACT PERIOD.' IT ALSO INCLUDES TRA INING AND IMPARTING OF NECESSARY TECHNOLOGY TO SECL MANPOWER TO RUN THE MINE SUBSEQU ENTLY. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 5 A) THE PRESENCE OF THE ASSESSEE ON PROJECT SITE HAS BEEN BEEN DETAILED BY THE AO IN DRAFT ASSESSMENT ORDER AS UNDER: 'SUPPLIER'S SCOPE OF WORK, DETAILED AT PAGE 29 (OVER ALL PAGE 487} OF THE BID DOCUMENT DOES NOT RESTRICT ITSELF MERELY TO SUPPLY OF EQUIPM ENT BUT INCLUDES PRE-DESIGN SITE INVESTIGATION AND MONITORING STUDY SUPPLY OF EQUIPMENTS SUPPLY OF INITIAL SPARS AND CONSUMABLES SUPPLY OF MAINTENANCE SPARES SUPPLY OF STARTUP CONSUMABLES SUPERVISION AND ASSISTANCE IN ERECTION AND COMMISSI ONING OF EQUIPMENT SUPERVISION AND ASSISTANCE FOR ONE MAJOR OVERHAUL OPERATING, SUPERVISION OF MINING OPERATION AND MAIN TENANCE FOR FIVE YEARS WITH GUARANTEED PRODUCTION OF 0.42 MILLION TONNES IN EAC H APP, PROVIDING MINE LAYOUT, SEQUENCE OF OPERATIONS, DETA ILED SUPPORT SYSTEM, DETAILED NETWORK OF IMPLEMENTATION. TRANSFER OF TECHNOLOGY AND TRAINING OF SECL PERSONN EL IN OPERATION AND MAINTENANCE ASSISTANCE TO SECL FOR COMPLIANCE OF SAFETY ASPECTS PROVIDING OF MAINTENANCE SERVICES ASSIST SECL IN CLAIMING WARRANTY ON DEFECTIVE EQUIP MENTS PROVIDE DETAILS OFSECL MANPOWER REQUIREMENTS WITH P ROPOSED PRODUCTIVITY SUPPLY OF INFORMATION ON ADDITIONAL INDIGENOUS INFR ASTRUCTURE LIKE VENTILATION, WATER, MATERIAL TRANSPORT, POWER SUPPLY SYSTEM INSTALLATION FOR CONDITION MONITORING OF EQU IPMENTS TRAINING OF PERSONNEL IN INDIA AND ABROAD. THE COST OF TRAINING PERSONNEL ABROAD WILL BE BORNE BY THE JMML/BIDDER (PAGE 53 OF THE BI D DOCUMENT). B) THE AO HAS FURTHER NOTED FOLLOWING OBSERVATIO NS FROM BID DOCUMENT: I. THE BID DOCUMENT, AT PARA 13.4 AND PARA 13.5 MAN DATES NAMING OF A COMPETENT REPRESENTATIVE OF THE SUPPLIER FOR DEALIN G WITH ALL TECHNICAL MATTERS IN CONNECTION WITH WORKS AND TO RENDER TECHNICAL ASSIS TANCE AND INSTRUCTIONS. SUCH REPRESENTATIVE WOULD BE COMPETENT ENOUGH TO TAKE DE CISIONS ON THE SPOT AND WOULD REMAIN AVAILABLE FROM START OF INSTALLATION T O THE END OF CONTRACT PERIOD. II. THE REPRESENTATIVE, AS PER PARA 14.2, W HO WOULD BE POSTED AT THE SITE, ALONG WITH REPRESENTATIVE OFSECL, PREPARE JOINT PRO DUCTION REPORTS AND RECORD STOPPAGES. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 6 III. AS PER PARA 14.3, THE SUPPLIER'S PERSO NNEL WOULD BE ALLOWED FREE ACCESS TO THE UNDERGROUND MINE 24 HOURS A DA Y IN ACCORDANCE WITH PROVISIONS OF MINE'S ACT. IV. AS PER PARA 14.4, THE MANAGEMENT OF MINE WOULD BE CONDUCTED BY A MANAGEMENT COMMITTEE CONSISTING OF DIRECTOR (TECHNICAL) SECL OR HIS REPRESEN TATIVE GM OR CGM OF THE AREA TWO COMPETENT AND EXPERIENCED REPRESENTATIVES OF SUPPLIER (ASSESSEE) V. IN ADDITION TO THE PRICING OF SPARES ON THE BASI S OF PRODUCTION OF COAL IN THE MINE WHICH EVIDENCES JMML'S INTEREST IN THE RUN NING OF THE MINE, AS PER PARA 20.7.1 AND 20.7.2, THE JMML IS ENTITLED TO BONUS OR LIQUIDATED DAMAGE ON THE ANNUAL GUARANTEED PRODUCTION IN EACH APP INDICATING THE RISK AND REWARDS OF THE JMML IN CONDUCT OF ITS BUSINESS IN INDIA. VI. THE JMML HAS BEEN GIVEN ACCESS AND CONTROL OVER THE MINE INSTALLATION AREA BY SECL FOR INSTALLATION OF CONTINUOUS MINER TECHNO LOGY AS WELL AS OPERATION OF THE SAME FOR FIVE YEARS AND HENCE, FOR ALL PRACTICA L PURPOSES, THE ASSESSEE HAS A FIXED PLACE OF BUSINESS IN THE FORM OF THE PREMISES WHERE THE ABOVE TECHNOLOGY HAS BEEN INSTALLED/BEING INSTALLED AS WELL AS THE O PERATIONS OF THE MINE ARE BEING MANAGED. VII. THE BID DOCUMENTS CONTAINS SUFFICIENT INDICATI ON OF THE PARTICIPATION OF THE JMML, INCLUDING PARTICIPATION IN MANAGEMENT OF THE MINE, RUNNING AND MAINTENANCE OF THE MINE, PRESENCE IN FORM OF TECHNI CAL PERSONNEL AND SITE REPRESENTATIVE DURING THE COURSE OF INSTALLATION AN D COMMISSIONING. THIS PRESENCE OF THE JMML AT THE SITE IS SUFFICIENT TO CONSTITUTE A PERMANENT ESTABLISHMENT IN TERMS OF ARTICLE 5(1), 5(2)(A), 5(2)(H), 5(2)(I) AS WELL AS 5(2)(J). NO SPECIFIED PERIOD OF PRESENCE IS REQUIRED FOR ARTICLE 5(1), 5(2)(A) 5 (2)(H) AND 5(2)(I)WHITE IN RESPECT OF 5(2)0), O PERIOD OF SIX MONTHS IS REQUIRED. THE JMML MEETS THE CRITERIA OF PE IN ALL SUCH INSTANCES. 3.3 THE JMML HAS SUBMITTED ITS OFFER TO SECL IN THR EE VOLUMES. IN THE SECOND VOLUME (INTERNAL PAGE 30, CUMULATIVE PAGE 688), THE COMPANY HAS ELABORATED ON ITS PRESENCE IN INDIA. ITS PRESENCE IN INDIA IS ACK NOWLEDGED BY CLAIMING THAT FULL SERVICE TEAMS HAVE BEEN ESTABLISHED IN CHIMIRI MINE OF SECL AND ALSO THAT OY HAS WORKED WITH DGMS OVER LONG PERIOD OF TIME TO GET IT S EQUIPMENTS APPROVED AS PER INDIAN STANDARDS. IT HAS ACKNOWLEDGED THAT IN R ESPECT OF SALES & MARKETING, THE INDIAN SUBSIDIARY REPORTS THROUGH THE JMML AND HENCE, CLEARLY, THE INDIAN SUBSIDIARY WAS RENDERING SIGNIFICANT MARKETING SERV ICE ON BEHALF OF THE JMML. 'CONTINUOUS MINER' IS A SIGNIFICANT PACKAGED TECHNOL OGY FROM THE JMML AND HENCE, IT CANNOT BE TERMED AS MERE SALE OF EQUIPMEN T AT FOB BASIS. THE JMML IS ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 7 PROVIDING TRAINING IN RUNNING AND MANAGEMENT OF SUC H MINES, AND IT HAS BUILT A CONSIGNMENT STOCK IN INDI'A WHICH CONTAIN ALL THE M AJOR COMPONENTS REQUIRED FOR CONTINUOUS MINING AND IT HAS A SYSTEM OF SERVICING CONTINUOUS MINING EQUIPMENTS AT NAGPUR. AS PER THE SHEET, THE JMML HAS SIGNIFICA NT PRESENCE IN INDIA SO AS TO CONSTITUTE ITS PE IN INDIA. 3.4 AT PAGE 13 OF ITS ANNUAL REPORT (RUNNING PAGE 7 23), THE JMML ADMITS HAVING A WAREHOUSE IN INDIA IN RELATION TO PROVIDING STORA GE FACILITIES. 3.5 THE JMML, AS PER PAGE 107 OF ITS OFFER (SECTION 5 OF ENVELOP 2 - RUNNING PAGE 960) AND PAGE 148 (RUNNING PAGE 1003) HAS SUBCONTRA CTED SOME PORTION OF ITS FUNCTIONS TO OTHER ENTITIES. HOWEVER, THE PAYMENT F OR THESE SERVICES HAS BEEN NEGOTIATED IN THE TURNKEY CONTRACT AND IT IS NOT OP EN TO SECL TO SEPARATE OUT THESE CONTRACTS FROM OTHER FUNCTIONS. HENCE, THIS ACTIVITY, IN NO WAY, TAKES AWAY THE NAT URE OF ESTABLISHMENT OF THE JMML IN RESPECT OF THIS CONTRACT. THE ENTIRE DATA G ENERATED DURING SITE INVESTIGATION SERVICE ARE TO BE USED IN DESIGN OF T HE MINE AS DETAILED AT PAGE 107 TO 115. 3.6 THE JMML HAS NOT SIGNED ANY CONTRACT FOR MERE S UPPLY OF EQUIPMENT. THE CONTRACT DATED 15/10/2009 IS A COMPREHENSIVE CONTRA CT BETWEEN SECL AND JMML, UK FOR 'INTRODUCTION OF CONTINUOUS MINER TECHN OLOGY' AND NOT SUPPLY OF MATERIAL. UNLIKE IN THE JUDGMENTS QUOTED BY THE JMM L, THE OWNER, IN THIS CASE, HAS NO RIGHT TO ONLY OPT FOR SUPPLY OF EQUIPMENT AN D HAS NO FREEDOM TO SELECT ITS OWN CONTRACTORS FOR OTHER ACTIVITIES. THE PRESENCE OF THE JMML IS MANDATED IN THE CONTRACT ON THE SITE IN THE FORM OF MANAGEMENT COMMITTEE AS WELL AS IN THE FORM OF SITE REPRESENTATIVES. THIS PRESENCE CLEARLY DEMONSTRATES EXISTENCE OF PE FOR THE JMML WITH RESPECT TO THIS CONTRACT. 3.7 EVEN THE CONTRACT DATED 27TH JANUARY 2010 BETWE EN JMML AND SECL FOR PROVISION OF SERVICES WITH RESPECT TO RUNNING THE M INE FOR A PERIOD OF FIVE YEARS WITH GUARANTEED PRODUCTION AS MENTIONED AT PAGE 8 O F THE CONTRACT. PARTIAL SUB- ASSIGNMENT OF THIS CONTRACT TO AN INDIAN ENTITY (SU BSIDIARY OF THE JMML) DOES NOT TAKE AWAY THE NATURE OF THE CONTRACT SPECIALLY IN A SITUATION WHERE THE JMML IS ENTITLED TO A SHARE OF THE REVENUES OF THE MINE IN THE FORM OF 'COST OF RUNNING SPARES' BEING SUPPLIED TO SECL ON THE BASIS OF PER T ONNE OF PRODUCTION AND NOT ON THE BASIS OF COST OF SPARES. 3.8 THE SCOPE OF WORK ENUMERATED IN THE CONTRACT DA TED 27TH JANUARY 2010 ON PAGE 10 OF THE CONTRACT INCLUDES; TO SUPERVISE AND ASSIST IN ERECTION AND COMMISSIONI NG ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 8 SUPERVISE AND ASSISTANCE IN ONE MAJOR OVERHAUL DURI NG THE FIFTH YEAR OF CONTRACT AND TRANSFER OF KNOW HOW TO SECL FOR UNDERTAKING TH E WORK BY SECL INDEPENDENTLY IN FUTURE. SUPERVISION OF MINING OPERATION AND MAINTENANCE OF IMPORTED EQUIPMENT DURING THE CONTRACT PERIOD TO ENSURE THE ANNUAL GUARANTEED PRODUCTION IN EACH APP FOR A PERIOD OF 5 YEARS. PROVIDING MINE LAYOUT, SEQUENCE OF OPERATIONS, DETA ILS OF SUPPORT SYSTEM AND DETAILED NETWORK OF IMPLEMENTATION. TRANSFER OF TECHNOLOGY AND TRAINING OF SECL PERSONN EL IN OPERATION AND MAINTENANCE OF IMPORTED EQUIPMENT. ASSISTANCE TO SECL FOR COMPLIANCE OF SAFETY ASPECTS IN THE DISTRICT INCLUDING STRATA CONTROL DURING DEVELOPMENT AND DEPILLARING. PROVIDING OF MAINTENANCE SERVICES ENGAGEMENT OF FIRM FOR PROVISION OF SITE INVESTIGAT ION AND MONITORING SERVICES ASSIST SECL IN CLAIMING WARRANTY REPLACEMENT ETC X. PROVIDING ASSISTANCE SERVICE INCLUDING T RAINING OF PERSONNEL XI. TO SUPERVISE THE DISTRICT PREPARATION W ORK FOR DEPLOYMENT OF CM PACKAGE. XII. JMML WILL BE RESPONSIBLE FOR CO NTRACT WORK INSURANCE, THIRD PARTY COMPREHENSIVE INSURANCE, INSURANCE COVERING ACCIDEN T FOR ALL PERSONNEL OF JMML. 3.9 IN LIGHT OF THE ABOVE SCOPE OF WORK, THE FUNCTI ONAL PRESENCE OF THE JMML FOR A PROLONGED PERIOD OF TIME (OVER FIVE YEARS) IS NO LO NGER IN DISPUTE. MERE PARTIAL ASSIGNMENT OF SOME SERVICES TO OTHER PARTIES WILL N OT RESULT IN REDUCTION OF THE PRESENCE OF THE JMML. AS ELABORATED EARLIER, THE PR ESENCE IS SUFFICIENT TO CONSTITUTE A PERMANENT ESTABLISHMENT FOR THE JMML A ND THE JMML IS LIABLE TO TAX ON INCOME ATTRIBUTABLE TO THE PERMANENT ESTABLISHME NT. 3.10 SINCE SIGNIFICANT AMOUNTS HAVE BEEN REMITTED T O NMML IN VARIOUS ASSESSMENT YEARS WHICH HAVE DIRECT BEARING WITH THE ACTIVITY OF THE PERMANENT ESTABLISHMENT OF JMML AT SHEETA/DHARA MINES, INCOME ACCRUING IN INDIA IN RESPECT OF THESE AMOUNTS IS LIABLE TO TAX IN INDIA. THE LETTER OF INTENT ISSUED BY SECL VIDE LETTER DATED 30TH APRIL, 2008 INDICATES T HAT FOLLOWING AMOUNTS WERE LIABLE TO BE PAID TO THE NON-RESIDENT IN RESPECT OF THIS CONTRACT: I. SCIENTIFIC INVESTIGATION AND MONITORING PHI & I I US$ 247,144.65 II. SCIENTIFIC IN VESTIGATION AND MONITORI NG PH3&4 US$ 549,223.98 III. EQUIPMENT COST US$ 8544,359 IV. SITE ASSISTANCE SERVICES US$1,143,698 V. MOBILISATION US$ 52,234 VI. SUPERVISION SERVICES FOR FIVE YEARS US$ 8.72 TO 4,87 PER TONNE ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 9 VII. MAINTENANCE SPARE PARTS/CONSUMABLES US$ 1.50 PMT TO 3.29 PMT 3.11 IT IS CLEAR FROM ABOVE THAT ASSESSEE WAS ENGAG ED IN OPERATION OF MINE AND WAS HAVING CONTROL OVER IT AND AS IT REVENUES OF AS SESSEE WAS DEPENDENT ON PRODUCTION, IT CARRIED OUT ITS BUSINESS ACTIVITY FR OM SAID MINING AREA WITH THE HELP OF ITS AGENTS AND OTHER PERSONNEL. THUS ABOVE ACTIV ITIES HAS CREATED ITS PE IN INDIA AS PROVIDED IN INDIA-UK DTAA AS PER ARTICLE 5(2)(H) AND 5(2)(K).A MINE WAS CLEARLY IN ITS CONTROL AND ITS CONTINUOUS PRESENCE IN ABOVE MINE IS CLEAR FROM SCOPE OF WORK. FURTHER, IT WAS FURNISHING SERVICES IN INDIA THROUGH ITS AGENTS AND OTHER PERSONNEL'S FOR MORE THAN 90 DAYS WITHIN ANY 12 MON TH PERIOD. IN VIEW OF ABOVE, WE ARE OF CONFIRMED OPINION THAT ASSESSEE HAS PE IN INDIA. IN VIEW OF ABOVE THIS GROUND OF THE ASSESSEE IS REJECTED. 3.12 IT ABUNDANTLY EVIDENT THAT THE EQUIPMENTS BEIN G SUPPLIED WERE TO BE CUSTOMIZED SO AS TO MEET THE SITE SPECIFICATION AS DETERMINED ON THE BASIS OF SCIENTIFIC INVESTIGATION BEING CARRIED OUT. THE TIM E SCHEDULE ANNEXED VIDE ANNEXURE-VI TO THE SUPPLY AGREEMENT DATED 15TH OCT 2009 PROVIDED FOR 8 MONTHS FOR THE MANUFACTURING OF THE EQUIPMENTS. ADDITIONAL LY, THE MANUFACTURING OF EQUIPMENTS WAS TO START ONLY AFTER THE SCIENTIFIC I NVESTIGATIONS WERE COMPLETED AND DGMS APPROVALS WERE RECEIVED. THE SEQUENCE OF E VENTS AS PER THE TIME SCHEDULE WAS SPECIFIED AS UNDER: I. MONTH-1: SIGNING OF CONTRACT II. MONTH-1: ENTRY INTO FORCE OF SCIENTIFIC IN VESTIGATION CONTRACT (SIC) III. MONTH-1 TO MONTH-3: SIC PERFORMANCE IV. MONTH-4: DGMS APPROVAL V. MONTH-4: RBI/GOVT CLEARANCE VI. MONTH-4: ENTRY INTO FORCE OF SUPPLY/SERVIC E CONTRACTS VII. MONTH-5 TO MONTH-12: MANUFACTURING OF EQ UIPMENTS 3.13 IF THE EQUIPMENT TO BE SUPPLIED WERE THE STAND ARD EQUIPMENTS, THERE WAS NO NEED FOR THE ASSESSEE COMPANY TO WAIT FOR COMPLETIO N OF SCIENTIFIC INVESTIGATIONS FOR IT TO START MANUFACTURING OF THE EQUIPMENTS. TH E FACT THAT THE MANUFACTURING OF THE EQUIPMENTS WAS TO START ONLY AFTER THE SCIEN TIFIC INVESTIGATIONS WERE COMPLETED VERY CLEARLY SHOWS THAT EQUIPMENTS SUPPLI ED BY THE ASSESSEE COMPANY WERE CUSTOMIZED TO MEET THE SITE SPECIFICATIONS. TH US THE SUPPLY OF EQUIPMENT, IN THIS CASE WAS NOT MERE SUPPLY ON FOB BASIS. PRIOR T O SUPPLY OF EQUIPMENT, THE SCIENTIFIC STUDY OF THE MINING AREA WAS TO BE CONDU CTED WHICH WAS CRITICAL TO DECIDE THE OPERATIONAL PARAMETERS OF THE EQUIPMENT; THE EQUIPMENTS WERE TO BE DESIGNED ACCORDING TO SUCH OPERATIONAL PARAMETERS; AND THE MINING PROCESS WAS TO BE APPROVED, WE AGREE WITH THESE FINDINGS OFAO. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 10 3.14 IT WAS OBSERVED BY THE AO THAT THE INVOICES FO R THE SUPPLY OF 'MAIN EQUIPMENT, INITIAL SPARES AND CONSUMABLES' WERE RAI SED ON SECL BY THE ASSESSEE UNDER CONSIDERATION TOWARDS SUPPLY OF MAINTENANCE S PARES TOTALING TO USD 535,851. WHILE THE 'MAIN EQUIPMENT, INITIAL SPARES AND CONSUMABLES' WERE TO BE SUPPLIED AT THE FIXED PRICE, THE PRICE OF THE MAINT ENANCE SPARES WERE LINKED TO ANNUAL PRODUCTION FROM THE MINES AS UNDER: ANNUAL PRODUCTION PERIOD (APP) MAINTENANCE SPARE PARTS FOB RATE/TONE (IN US$) 1ST 1.50 2ND 4.37 3RD 4.37 4TH 4.37 5TH 3.29 THE AMOUNT TO BE PAID FOR THE MAINTENANCE SPARES WA S TO BE CALCULATED BY MULTIPLYING THE PRODUCTION ACHIEVED DURING THE RELE VANT THREE MONTHS OF APP BY THE CORRESPONDING RATES PER TONNE AS PROVIDED ABOVE - A MERE SUPPLY CONTRACT ON FOB BASIS CANNOT HAVE A PROVISION WHEREIN THE PRICE OF THE ITEM IS DETERMINED ON THE BASIS OF PRODUCTION IN THE MINE. SUCH SUPPLY CA N ONLY BE ON PUBLISHED PRICES OF THE SUPPLIER. SUCH A PRICING REFLECTS A CHARGE F OR TRANSFER OF TECHNOLOGY AND NOT A CHARGE FOR SUPPLY OF SPARES. THIS IS AN ARTIFICIA L DIVISION OF ORIGINAL EQUIPMENT COST BETWEEN INITIAL SPARES AND MAINTENANCE SPARES, SUCH A DIVISION BEING ATTEMPTED TO AVOID PAYMENT OF TAXES IN INDIA. THE C ONDITION THAT THE SUPPLY OF SPARES IS ON FOB BASIS MAKES NO DIFFERENCE TO THE F ACTS OF THIS CASE. THE ARRANGEMENT CLEARLY DEMONSTRATES PRESENCE OFJMML IN THE MINE FOR A PERIOD OF FIVE YEARS. THE FACT THAT THE JMML IS NOT CHARGING FOR ACTUAL COST OF SPARES, INSTEAD IT IS TAKING PART IN THE PROFITS OF SECL IS VERY IMPORTANT AND CANNOT BE IGNORED. IF THE PAYMENT FOR MAINTENANCE OF SPARES I S VIEWED SEPARATELY FROM THE SUPPLY CONTRACT THEN IT IS NOTHING BUT A CHARGE FOR TRANSFER OF TECHNOLOGY AND PROVIDING KNOW HOW TO THE SECL IN RELATION TO CONTI NUOUS MINER TECHNOLOGY AND ACHIEVING MINIMUM GUARANTEED PRODUCTION. THUS, THE PAYMENT MADE TOWARDS MAINTENANCE SPARES ARE ACTUALLY IN THE NATURE OF RO YALTY PAYMENT TO THE ASSESSEE COMPANY FOR TRANSFER OF TECHNOLOGY TOWARDS CONTINUO US MINING TECHNOLOGY AND ACHIEVING MINIMUM PRODUCTION. 3.15 THE ASSESSEE COMPANY HAS ARGUED THAT CONSIDERA TION BASED ON PER TONNE RATE FOR MAINTENANCE SPARES IS ONLY A MODE OF RECOV ERING THE ACTUAL CHARGES AND THE METHOD OF RECOVERY DOES NOT IN ANY MANNER DILUT E THE ESSENTIAL CHARACTER OF THE CONTRACT. SUCH CONTENTION CANNOT BE ACCEPTED. A MERE SUPPLY CONTRACT ON FOB ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 11 BASIS CANNOT HAVE A PROVISION WHEREIN THE PRICE OF THE ITEM IS DETERMINED ON THE BASIS OF PRODUCTION IN THE MINE. SUCH SUPPLY CAN ON LY BE ON PUBLISHED PRICES OF THE SUPPLIER. SUCH A PRICING REFLECTS A CHARGE FOR TRANSFER OF TECHNOLOGY AND NOT A CHARGE FOR SUPPLY OF SPARES. THIS IS AN ARTIFICIAL DIVISION OF ORIGINAL EQUIPMENT COST BETWEEN INITIAL SPARES AND MAINTENANCE SPARES, SUCH A DIVISION BEING ATTEMPTED TO AVOID PAYMENT OF TAXES IN INDIA, THE CONDITION T HAT THE SUPPLY OF SPARES IS ON FOB BASIS MAKES NO DIFFERENCE TO THE FACTS OF THIS CASE. THE ARRANGEMENT CLEARLY DEMONSTRATES PRESENCE OF JMML IN THE MINE FOR A PER IOD OF FIVE YEARS. THE FACT THAT THE JMML IS NOT CHARGING FOR ACTUAL COST OF SP ARES, INSTEAD IT IS TAKING PART IN THE PROFITS OF SECL IS VERY IMPORTANT AND CANNOT BE IGNORED. IF THE PAYMENT FOR MAINTENANCE OF SPARES IS VIEWED SEPARATELY FROM THE SUPPLY CONTRACT THEN IT IS NOTHING BUT A CHARGE FOR PROVIDING KNOW HOW TO THE SECL FOR ACHIEVING A MINIMUM PRODUCTION. WE AGREE WITH AO'S CONTENTION T HAT THESE PAYMENTS ARE PAYMENT FOR ROYALTY FOR KNOWHOW PROVIDED BY THE ASS ESSEE FOR CONTINUOUS MINING TECHNOLOGY. SINCE THIS UNIQUE KNOWHOW IS DEVELOPED FOR THIS PARTICULAR PROJECT AND EFFECTIVELY CONNECTED WITH PE, AO HAS CORRECTLY ATTRIBUTED 60% OF THE ROYALTY PAYMENT TO THE PE AND APPLIED PROVISIONS OF SECT/ON 44DA FOR COMPUTATION PURPOSE. THE ASSESSEE'S CONTENTION THAT NO PRIVATE OR GOVERNMENT ORGANISATION WILL ALLOW TO SHARE ITS REVENUE IS WITHOUT FORCE AS IT IS NORMAL PRACTICE TO PAY ROYALTY ON OUTPUT FOR USE OF KNOWHOW IN BUSINESS. F URTHER, THIS IS PART OF GLOBAL TENDER, WHICH HAS BEEN AWARDED TO ASSESSEE ON THE B ASIS OF LOWEST OVERALL BIDDING PRICE. IN VIEW OF ABOVE DISCUSSION AND DETA ILED DISCUSSION BY THE AO IN HIS ORDER, OBJECTION NO. 3&4 OF THE ASSESSEE ARE REJECT ED. AS THE FACTS REMAIN THE SAME, FOLLOWING THE DECISI ON OF A.Y.2013-14, ASSESSEE'S / OBJECTION FOR THIS YEAR IS ALSO REJECTED. 4. GROUND NO. 5 IS GENERAL IN NATURE AND NO T PRESSED BY THE ASSESSEE AND HENCE REJECTED. 5. IN VIEW OF THE DETAILED DISCUSSION, ALL OBJECTIONS RAISED BY THE ASSESSEE COMPANY ARE DISMISSED. 6. THE ASSESSING OFFICER SHALL GIVE EFFECT T O THE ABOVE DIRECTIONS, AS PER PROVISIONS OF SECTION 144C(13) OF THE INCOME-TAX AC T, 1961. 7. THEREAFTER AGAINST THE ABOVESAID ORDER, ASSESSEE HA S COME BEFORE US. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 12 8. AT THE TIME OF HEARING, ASSESSEE STATED THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF CO-ORDINATE BENCH I N ASSESSEES OWN CASE FOR A.YS. 2012-13 & 2013-14 AND THE ORDER OF THE ITAT I S REPRODUCED: 5. FACTS OF THE CASE ARE THAT THE APPELLANT COMPANY IS INCORPORATED UNDER THE LAWS OF UNITED KINGDOM (UK). THE APPELLANT COMP ANY IS A GLOBAL LEADER IN THE MANUFACTURE, SALE AND SERVICING OF UNDERGROUND MINI NG EQUIPMENT AND PARTS. 6. THE APPELLANT COMPANY ENTERED INTO THE FOLLOWING CONTRACT WITH SOUTH EASTERN COALFIELDS LIMITED (SECL)- (A) CONTRACT FOR SUPPLY OF EQUIPMENT, INITIAL SPARE S, CONSUMABLES AND MAINTENANCE SPARES. (B) CONTRACT FOR SCIENTIFIC SITE INVESTIGATION SERV ICES. (C) CONTRACT FOR PROVISION OF SERVICES. 7. THE CONTRACT FOR SCIENTIFIC SITE INVESTIGATION S ERVICES WAS SUBSEQUENTLY ASSIGNED TO JOY MINING SERVICES INDIA PVT. LTD. (JM SIPL) UNDER THE SAME TERMS AND CONDITIONS AS WAS AGREED WITH THE APPELLANT COMPANY BY SECL. SIMILARLY, CONTRACT FOR PROVISION OF SERVICES WAS ALSO COMPLETELY ASSIG NED TO JMS INDIA UNDER THE SAME TERMS AND CONDITIONS AS WAS AGREED WITH THE AP PELLANT COMPANY BY SECL. 8. PROFITS EARNED BY JMS INDIA FROM THE TWO CONTRAC TS ASSIGNED TO IT BY THE APPELLANT COMPANY WERE OFFERED FOR TAXATION AND HAV E BEEN TAXED ACCORDINGLY. TO THIS EXTENT, THERE IS NO DISPUTE. 9. THE BONE OF CONTENTION BETWEEN THE APPELLANT COM PANY AND THE REVENUE RELATES TO THE PROFIT EARNED FROM CONTRACT FOR SUPP LY OF EQUIPMENT, INITIAL SPARES, CONSUMABLES AND MAINTENANCE SPARES BY THE APPELLANT COMPANY. 10. THE APPELLANT COMPANY CLAIMS THAT THE INCOME FR OM SUPPLY OF MAINTENANCE SPARES HAVE BEEN EARNED FROM OUTSIDE IN DIA WHERE THE RISK AND TITLE TO THE GOODS HAVE BEEN TRANSFERRED AND, THEREFORE, NO ACTIVITY HAS BEEN PERFORMED BY THE APPELLANT COMPANY IN INDIA FOR TRA NSFER OF SPARES FROM OUTSIDE INDIA. THE APPELLANT COMPANY FURTHER CONTENDS THAT SINCE IT DOES NOT HAVE ANY OTHER INCOME AND THE ONLY INCOME EARNED BY IT WAS W ITH RESPECT TO SUPPLY OF MAINTENANCE SPARES, THERE WAS NO INCOME WHICH COULD BE TAXED IN INDIA. IT IS FURTHER STATED THAT AS FAR AS INCOME FROM SERVICES PERFORMED IN INDIA WAS ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 13 CONCERNED, SAME HAS BEEN RENDERED BY JMS INDIA AND THE INCOME ON ACCOUNT OF SUCH SERVICES HAS BEEN OFFERED TO TAX IN INDIA BY J MSIPL. THIS FACT HAS ALSO BEEN VERIFIED BY THE A.O. BY ISSUE OF NOTICE U/S. 133(6) OF THE ACT. 11. THE APPELLANT COMPANY FURTHER CONTENDS THAT THE REVENUE AUTHORITIES HAVE GROSSLY ERRED IN TREATING THE CONTRACT FOR SUP PLY OF EQUIPMENTS, SCIENTIFIC SITE INVESTIGATION AND PROVISION OF SERVICES AS COM POSITE CONTRACT. IT IS THE SAY OF THE LD. SENIOR COUNSEL THAT SECL HAS SPECIFICALLY E NTERED INTO SEPARATE CONTRACT FOR SUPPLY OF EQUIPMENT AND SERVICES AND SEPARATE PRICE S HAVE BEEN AGREED FOR EACH COMPONENT. 12. WE FIND FORCE IN THIS CONTENTION OF THE LD. SEN IOR COUNSEL AS BY LETTER DATED 02.09.2008 ISSUED BY SECL, THE INTENTION IS CLEAR T O TREAT EACH CONTRACT AS A SEPARATE CONTRACT. THE SAID LETTER IS EXHIBITED AT PAGE 322 OF THE PAPER BOOK. FURTHER EXHIBITS AT PAGES 323 TO 325 OF THE PAPER B OOK CONTAIN PRICE BID FORMAT WHERE SEPARATE PRICE QUOTES HAVE BEEN SOUGHT FOR SC IENTIFIC SITE INVESTIGATION, EQUIPMENT, INITIAL SPARES, MAINTENANCE SPARES, SERV ICE COST, ETC. AND BY EXHIBITS 326 TO 328 OF THE PAPER SECL CONFIRMED THE PRICE FO R EACH ACTIVITY SEPARATELY. 13. A PERUSAL OF PARA 33.3 OF THE CONTRACT WHICH IS AT PAGE 67 O THE PAPER BOOK IT HAS BEEN SPECIFICALLY PROVIDED THAT IN CAS E DGMS DOES NOT GIVE APPROVAL AS SPECIFIED ABOVE UNDER SUB-CLAUSES 33.1 AND 33.2, THIS CONTRACT WILL NOT ENTER INTO FORCE AND THIS CONTRACT WILL NOT BE EFFECTIVE WITHOUT ANY OBLIGATION ON THE PART OF ANY PARTY. HOWEVER, THE CONTRACT ON SCIENTI FIC SITE STUDIES AND INVESTIGATION SHALL COME INTO FORCE ON SIGNING OF T HE CONTRACT. 14. THIS CLAUSE CLEARLY PROVES THAT THE CONTRACTS A RE SEPARATE AND, THEREFORE, THERE IS NO QUESTION OF TREATING THE CONTRACT AS CO MPOSITE, WHEN THE PARTIES HAVE SUO MOTU AGREED TO TREAT THEM AS SEPARATE. 15. ANOTHER GROUND ON WHICH THE INCOME HAS BEEN TAX ED IN THE HANDS OF THE APPELLANT COMPANY IS THAT THE A.O. AND THE DRP HELD THAT THE APPELLANT COMPANY HAS A PERMANENT ESTABLISHMENT IN INDIA. THE MAIN R EASON FOR THIS GIVEN BY THE REVENUE AUTHORITIES READ AS UNDER:- JMML HAS TAKEN COMPLETE RESPONSIBILITIES OF EXECUT ION OF THE PROJECT RIGHT FROM SITE INVESTIGATION, SUPPLY, ERECTION AND INSTALLATI ON, SEMICS AND MAINTENANCE AND TRAINING. EACH ASSIGNMENT CONTRACT SIGNED SUBSEQUEN TLY REFERS TO THE TERMS OF ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 14 TENDER ISSUED BY SECL AND SUBMISSION OF BID BY JMML . EVEN THE SCOPE OF WORK TO BE PERFORMED BY THE JMML IN SUPPLY CONTRACT DATED 1 5/10/2009 INCLUDES RESPONSIBILITY FOR OVERALL PROJECT IMPLEMENTATION I NCLUDING VARIOUS SERVICES. THE JMML HAS TAKEN THE RESPONSIBILITIES OF APPROVAL OF MINING EQUIPMENT AS WELL AS MINING METHOD FROM DGMS (DIRECTOR GENERAL OF MINES SAFETY). AS PER ANNEXURE- VI OF SUPPLY, TIME SCHEDULE OF THE WHOLE PROJECT, S TARTING FROM SIGNING OF CONTRACT TILL COMMENCEMENT OF FIRST ANNUAL PRODUCTION PERIOD IS GIVEN IN A CHART FORM. IT IS CLEAR FROM THIS THAT SITE INVESTIGATION CONTRACT (S IC) CAME INTO FORCE WEEKS BEFORE SUPPLY CONTRACT. BY VIRTUE OF SIGNING SITE INVESTIG ATION CONTRACT, JMML (OR ITS REPRESENTATIVES) HAD ALL THE ACCESS TO THE MINING S ITE. JMML HAD THE MINING SITE AT ITS DISPOSAL AND FOR THE PURPOSE OF DESIGNING TH E MINING METHOD AND EQUIPMENT AND FOR TAKING APPROVAL OF DGMS SO THAT E QUIPMENT SUITABLE TO SITE MAY BE MANUFACTURED, IT HAS ITS PLACE OF MANAGEMENT AT THE SITE. IT IS VERY IMPORTANT TO NOTE THAT ACCESS OF JMML WAS NOT LIMIT ED OR RESTRICTED IN ANY RESPECT TO THE MINING SITE. THIS CONSTITUTED A FIXE D PLACE PERMANENT ESTABLISHMENT FOR THE JMML. RMT, WHICH CARRIED OUT SITE INVESTIGATION ACTIVITY ON BEHALF OF JMML ACTED AS ITS AGENT TO THAT EXTENT AL ONG WITH M/S JOY MINING SERVICES INDIA PVT LTD (JMSIPL). THUS, JMML HAD FIX ED PLACE PE IN INDIA THROUGH RMT AND JMSIPL WITH THE ENTIRE MINING SITE AT ITS D ISPOSAL. 16. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS PLA CED ON THE DECISION OF THE CO-ORDINATE BENCH AT CHENNAI IN THE CASE OF ANSALDO ENERGIA SPA 310 ITR 237. 17. IT IS THE SAY OF THE LD. D.R. THAT THE APPELLAN T COMPANY HAD FIXED PLACE OF BUSINESS IN INDIA WITH THE ENTIRE MINING SITE AT IT S DISPOSAL THROUGH ITS AE WHICH FULFILLS THE MANDATE OF ARTICLE 5 OF INDIA-UK DTAA AS WELL AS BUSINESS CONNECTION U/S. 9(1)(I) OF THE ACT. 18. THERE IS NO DISPUTE THAT THE APPELLANT COMPANY IS A TAX RESIDENT OF UK AND ELIGIBLE TO BE GOVERNED BY PROVISIONS OF INDIA-UK T REATY. IN TERMS OF ARTICLE 5 OF INDIA-UK TREATY, FOR ENTERPRISE TO CONSTITUTE FIXED PLACE PERMANENT ESTABLISHMENT, THERE MUST BE A FIXED PLACE OF BUSIN ESS AT THE DISPOSAL OF THE ENTERPRISE THROUGH WHICH THE BUSINESS OF THE ENTERP RISE IS CARRIED ON. WE FIND THAT THE APPELLANT COMPANY DID NOT HAVE ANY PLACE O F BUSINESS/OFFICE/BRANCH THROUGH WHICH ITS BUSINESS WAS CARRIED ON IN INDIA. THE ONLY INCOME EARNED BY THE APPELLANT COMPANY DURING THE YEAR UNDER CONSIDERATI ON WAS FROM SUPPLY OF MAINTENANCE SPARES FROM OUTSIDE INDIA AND THE RISK TITLE OF SUCH GOODS HAVE ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 15 PASSED TO SECL FROM OUTSIDE INDIA. THIS IS CLEAR FR OM PARA 16 OF THE CONTRACT AT PAGE 58 OF THE PAPER BOOK WHICH READ AS UNDER:- PASSING OF RISK AND TITLE RISK AND TITLE TO THE GOODS AND MAINTENANCE SPARES TO BE SUPPLIED THE CONTRACT SHALL PASS TO SECL UPON DELIVERY EFFECTED FOB AT TH E FOREIGN PORT OF SHIPMENT. 19. AND PARA 17 PRICE AND PAYMENT TERMS HAVE BEEN P ROVIDED AND IT HAS BEEN PROVIDED THAT THE PRICE FOR MAINTENANCE SPARES DETERMINED BY SECL WAS CALCULATED BASED ON PRODUCTION ACHIEVED DURING ANNU AL PRODUCTION CYCLE. 20. THE HONBLE SUPREME COURT IN THE CASE OF ISHIKA WAJIMA-HARIMA HEAVY INDUSTRIES 288 ITR 408 HAD THE OCCASION TO CONSIDE R THE APPLICABILITY OF SECTION 9 OF THE ACT READ WITH ARTICLE 7 & 12 OF THE DTAA BET WEEN INDIAN AND JAPAN WHEREIN THE APPELLANT WAS A COMPANY INCORPORATED IN JAPAN AND INCLUDED, INTERALIA, IN BUSINESS OF CONSTRUCTION OF STORAGE T ANKS, ENGINEERING, ETC. - IT ENTERED INTO AN AGREEMENT WITH PETRONET LNG LIMITED FOR SETTING UP A LIQUEFIED NATURAL GAS (LNG) RECEIVING STORAGE AND DEGASIFICAT ION FACILITY IN INDIA - THE APPELLANT WAS TO DEVELOP, DESIGN, ENGINEER AND PROC URE EQUIPMENT, MATERIALS AND SUPPLIES, TO ERECT AND CONSTRUCT SOME STORAGE T ANKS. IT WAS HELD BY THE HONBLE SUPREME COURT THAT SINCE THE CONTRACT INVOL VED OFFSHORE SUPPLY AND OFFSHORE SERVICES AND SINCE ALL ACTIVITIES IN CONNE CTION WITH OFFSHORE SUPPLY WERE CARRIED OUT OUTSIDE INDIA, AMOUNTS RECEIVE/RECEIVAB LE BY THE APPELLANT FOR OFFSHORE SUPPLY OF EQUIPMENTS, MATERIALS, ETC, CANN OT BE DEEMED TO ACCRUE OR ARISE IN INDIA. A SIMILAR VIEW WAS DECIDED IN FAVOU R OF THE ASSESSEE BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF LINDE AG, LINDE ENGINEERING DIVISION 365 ITR 1 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT WHERE EQUIPMENT AND MATERIAL WAS MANUFACTURED AND PROCURED OUTSIDE INDIA, INCOME ATT RIBUTABLE TO SUPPLY THEREOF COULD ONLY BE BROUGHT TO TAX IF IT WAS FOUND THAT S AID INCOME THEREFROM AROSE THROUGH A BUSINESS CONNECTION IN INDIA. THE HONBLE HIGH COURT HAD TO CONSIDER WHETHER APPELLANTS INCOME IS TAXABLE UNDER THE ACT AND DTAA AND THE HONBLE COURT HELD, INTERALIA, AS UNDER:- AS FAR AS OBLIGATIONS OF L AND S ARE CONCERNED, THE CONTRACT IS AN INDIVISIBLE ONE. HOWEVER, FOR THE PURP OF TAX, THE CONTRACT DOE S SPECIFY THE AMOUNTS THAT ARE PAYABLE WITH RESPECT TO THE VARIOUS ACTIVITIES CARRIED ON L/S. INCOME MAY ACCRUE OR ARISE AT VARIOUS STAGES AND ON ACCOUNT OF VARIED ACTIVITIES. IN CASE OF A RESIDENT TAX ENTITY ANY INCOME WHICH ACCRUES OR ARI SES FROM AN ACTIVITY OUTSIDE ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 16 INDIA, WOULD NOT BE TAX UNLESS THE SAME FALLS WITHI N THE DEEMING PROVISION CONTAINED IN SECTION 9(1). IN THESE CIRCUMSTANCES, IT WAS NOT BE APPOSITE TO CONSIDER THE CONTRACT AS A COMPOSITE ONE FOR THE PU RPOSES OF IMPOSITION OF TAX UNDER THE [PARA 82]. THE AUTHORITY REFERRED TO THE DECISION OF THE SUPRE ME COURT IN THE CASE OF VODAFONE INTERNATIONAL HOLD B.V. V. UNION OF INDIA [2012] 341 ITR 1/204 TAXMAN 408/17 TAXMANN.COM 202 IN SUPPORT OF ITS VIEW THAT IN LAW THE LIABILITY FOR PERFORMANCE OF THE CONTRACT BY 'L' AND 'S' WAS JOIN T AND SEVERABLE, THE CONTRACT MUST READ AS AN INDIVISIBLE ONE FOR THE PURPOSES OF TAX. [PARA 83]. THE APPROACH AS WELL AS THE CONCLUSION OF THE AUTHO RITY IS FLAWED. THE AUTHORITY ERRED IN PROCEEDING OR BASIS THAT THE CONTRACT AS A WHOLE WAS THE SUBJECT OF TAXATION. THE SUBJECT MATTER OF TAXATION WAS NOT CO NTRACT BETWEEN THE PARTIES BUT THE INCOME THAT THE PETITIONER DERIVED FROM THE CONTRACT. THUS, THE SITUS OF OBJECT OF THE CONTRACT WOULD NOT BE AS RELEVANT AS DETERMINING THE SITUS WHERE THE INCOME OF' L HAD ACCRUE ARISEN. BY VIRTUE OF SECTION 4, INCOME TAX IS CHARGED IN RESPECT OF THE TOTAL INCOME OF A PERSON. BY VIRT UE OF SECTION 5, THE SCOPE OF TOTAL INCOME OF A NON-RESIDENT IS LIMITED TO INCOM E WHICH IS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA AND INCOME WHICH ACCRUES O R IS DEEMED TO ACCRUE OR ARISE IN INDIA. IT, THEREFORE, FOLLOWS THE OBJECT OF INQU IRY WOULD HAVE TO BE TO DETERMINE WHETHER ANY/INCOME OF 'L' ACCRUED OR AROSE IN INDIA WHETHER ANY INCOME COULD BE DEEMED TO ACCRUE OR ARISE IN INDIA. THE FACT THAT T HE CONTRACTUAL OBLIGATIONS WERE NOT LIMITED TO MERELY SUPPLYING EQUIPMENT, BUT WERE FOR DUE PERFORMANCE OF THE ENTIRE CONTRACT, WAS NOT NECESSARILY IMPLY THAT THE ENTIRE INCOME WHICH WAS RELATABLE TO THE CONTRACT COULD BE DEEMED TO ACCRUE ARISE IN INDIA. [PARA 84]. 21. THE NEXT QUESTION WHICH WAS CONSIDERED BY THE H ONBLE HIGH COURT RELATED TO THE TAXABILITY OF INCOME RECEIVED/RECEIV ABLE BY LINDE - (A) DESIGN AND ENGINEERING PREPARED SOLELY FOR MANU FACTURE AND/OR PROCUREMENT OF EQUIPMENT OUTSIDE INDIA (B) SUPPLY OF EQUIPMENT MATERIAL AND SPARES OUTSIDE INDIA. 22. THE HONBLE COURT OBSERVED AS UNDER:- 83. THE AUTHORITY CONCLUDED THAT ALTHOUGH, PAYMENTS FOR EACH ITEM OR WORK WERE SPECIFIED OR THAT THE AMOUNTS PAYABLE FOR THE WORK TO BE PERFORMED BY INDIVIDUAL MEMBERS OF THE CONSORTIUM WAS RECOGNIZED UNDER THE CONTRACT, THE SAME WOULD ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 17 NOT ALTER THE NATURE OF THE CONTRACT IN ANY MANNER. THE AUTHORITY CONCLUDED THAT THE CONTRACT WOULD HAVE TO BE CONSIDERED AS ONE IND IVISIBLE CONTRACT AND THE INCOME FROM THE SAME WOULD BE TAXABLE IN INDIA AS T HE OBJECT OF CONTRACT WAS TO SET UP A FACILITY IN INDIA. THE AUTHORITY FURTHER H ELD THAT THE MOU ENTERED INTO BETWEEN LINDE AND SAMSUNG COULD NOT BE UNDERSTOOD T O BE OVERWRITING THE CONTRACT OR THE OBJECT OF THE CONTRACT. WITH RESPEC T TO THE INTERNAL CONSORTIUM AGREEMENT THE AUTHORITY HELD THAT THE SAME WAS AT B EST ONLY AN INTERNAL ARRANGEMENT BETWEEN LINDE AND SAMSUNG AND COULD NOT BE REFERRED TO FOR DETERMINING THE NATURE OF THE CONTRACT. THE AUTHORI TY WAS OF THE VIEW THAT THE CONTRACT BEING A COMPOSITE CONTRACT, A 'DISSECTING APPROACH' WAS NOT PERMISSIBLE. HAVING FOUND THAT THE CONTRACT WAS AN INDIVISIBLE O NE, THE AUTHORITY CONCLUDED THAT IT WAS NOT OPEN FOR LINDE TO PLEAD THAT THE SA LE OF EQUIPMENT AND MACHINERY AND DESIGNING OF THE PROJECT AND EQUIPMENT SHOULD B E TREATED AS AN OFFSHORE TRANSACTION. THE AUTHORITY REFERRED TO THE DECISIO N OF THE SUPREME COURT IN THE CASE OF VODAFONE INTERNATIONAL HOLDINGS B. V. (SUPR A) IN SUPPORT OF ITS VIEW THAT SINCE IN LAW THE LIABILITY FOR PERFORMANCE OF FOR T HE PURPOSES OF TAX. 84. IN OUR VIEW, THE APPROACH AS WELL AS THE CONCLU SION OF THE AUTHORITY IS FLAWED. FIRST OF ALL, THE AUTHORITY ERRED IN PROCEEDING ON THE BASIS THAT THE CONTRACT AS A WHOLE WAS THE SUBJECT OF TAXATION. THE SUBJECT MATT ER OF TAXATION WAS NOT THE CONTRACT BETWEEN THE PARTIES BUT THE INCOME THAT TH E PETITIONER DERIVED FROM THE CONTRACT. THUS, THE SITUS OF THE OBJECT OF THE CONT RACT WOULD NOT BE AS RELEVANT AS DETERMINING THE SITUS WHERE THE INCOME OF LINDE HAD ACCRUED OR ARISEN. BY VIRTUE OF SECTION 4 OF THE ACT, INCOME TAX IS CHARGED IN R ESPECT OF THE TOTAL INCOME OF A PERSON. BY VIRTUE OF SECTION 5 OF THE ACT, THE SCOP E OF TOTAL INCOME OF A NON- RESIDENT IS LIMITED TO INCOME WHICH IS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA AND INCOME WHICH ACCRUES OR IS DEEMED TO ACCRUE OR ARISE IN INDIA. IT, THEREFORE, FOLLOWS THAT THE OBJECT OF INQUIRY WOULD HAVE TO BE TO DETERMINE WHETHER ANY INCOME OF LINDE ACCRUED OR AROSE IN INDIA OR WHETHE R ANY INCOME COULD BE DEEMED TO ACCRUE OR ARISE IN INDIA. THE FACT THAT T HE CONTRACTUAL OBLIGATIONS OF LINDE WERE NOT LIMITED TO MERELY SUPPLYING EQUIPMEN T, BUT WERE FOR DUE PERFORMANCE OF THE ENTIRE CONTRACT, WOULD NOT NECES SARILY IMPLY THAT THE ENTIRE INCOME WHICH WAS RELATABLE TO THE CONTRACT COULD BE DEEMED TO ACCRUE OR ARISE IN INDIA. 85. THE PRINCIPLE OF APPORTIONMENT OF INCOME ON THE BASIS OF TERRITORIAL NEXUS IS NOW WELL ACCEPTED EXPLANATION L(A) TO SECTION 9(1)( I) OF THE ACT ALSO SPECIFIES THAT ONLY THAT PART OF INCOME WHICH IS ATTRIBUTABLE TO O PERATIONS IN INDIA WOULD BE ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 18 DEEMED TO ACCRUE OR ARISE IN INDIA. IT NECESSARILY FOLLOWS THAT IN CASES WHERE A CONTRACT ENTAILS ONLY A PART OF THE OPERATIONS TO B E CARRIED ON IN INDIA, THE ASSESSEE WOULD NOT BE LIABLE FOR THE PART OF INCOME THAT ARISES FROM OPERATIONS CONDUCTED OUTSIDE INDIA. IN SUCH A CASE, THE INCOME FROM THE VENTURE WOULD HAVE TO BE APPROPRIATELY APPORTIONED. THE SUPREME COURT IN THE CASE OF ISHIKAWAJMA- HARIMA HEAVY INDUSTRIES LTD. (SUPRA) HAD CONSIDERED THIS ASPECT AND HELD THAT MERELY BECAUSE A PROJECT IS A TURNKEY PROJECT WOULD NOT NECESSARILY IMPLY THAT FOR THE PURPOSES OF TAXABILITY, THE ENTIRE CONTRACT BE CONSIDERED AS AN INTEGRATED ONE. THE TAXABLE INCOME IN EXECUTION OF A CONTRACT MAY ARISE AT SEVERAL STAGES AND THE SAME WOULD HAVE TO BE CONSIDERED ON THE ANVIL O F TERRITORIAL NEXUS. THE DECISION IN THE CASE OF ISHIKAWAJMA-HARIMA HEAVY IN DUSTRIES LTD. (SUPRA) IS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE AS IN THAT CASE ALSO THE CONTRACT IN QUESTION WAS FOR A TURNKEY PROJECT WHERE THE OBJ ECT WAS TO SETUP A LIQUEFIED NATURAL GAS (LNG) RECEIVING, STORAGE AND DEGASIFICA TION FACILITY. INDISPUTABLY, INSOFAR AS OBLIGATIONS OF PARTIES ARE CONCERNED, TH IS CONTRACT WAS ALSO AN INDIVISIBLE CONTRACT. THE SUPREME COURT HELD THAT F OR THE PURPOSES OF DETERMINING THE TAXABILITY, IT WAS NECESSARY TO ENQUIRE AS TO W HERE THE INCOME SOUGHT TO BE TAXED HAD ACCRUED OR ARISEN. THE IMPUGNED RULING IS THUS CLEARLY CONTRARY TO THE DECISION OF THE SUPREME COURT IN ISHIKAWAJMA-HARIMA HEAVY INDUSTRIES LTDS. CASE (SUPRA). 23. HEAVY RELIANCE WAS PLACED ON THE DECISION OF TH E HONBLE HIGH COURT OF MADRAS IN THE CASE OF ANSALDO ENERGIA SPA 310 ITR 3 27. IN OUR VIEW THE SAID CASE IS CLEARLY DISTINGUISHABLE ON FACTS. IN THE CASE OF ANSALDO (SUPRA), IT WAS HELD BY THE MADRAS HIGH COURT THAT THE INDIAN SUBSIDIARY OF ANSALDO WAS A LEGAL FAADE WHICH WAS CREATED FOR TAXATION PURPOSES AND WAS NOT ACTUALLY ENGAGED IN EXECUTING ONSHORE CONTRACTS. IN THE INSTANT CASE, R IGHT FROM THE INCEPTION AND AS PART OF THE DOCUMENTS, SEPARATE CONTRACTS HAVE BEEN ENTERED INTO BY SECL WITH SEPARATE CONTRACT PRICES. MOREOVER, ONE HAS TO KEEP IN MIND THE MOST IMPORTANT FACTOR AND THAT IS THE CONTRACT IS WITH SECL, A GOV ERNMENT OF INDIA UNDERTAKING. THEREFORE, BY ANY STRETCH OF IMAGINATION, IT CANNOT BE CONSIDERED AS A SHAM TRANSACTION. 24. THE AO/DRP HAS ALSO HELD THAT THE CONSIDERATION FROM SALE OF MAINTENANCE SPARES IS ROYALTY CONNECTED TO PE IN IN DIA AND TAXABLE U/S. 44DA OF THE ACT READ WITH ARTICLE 13 & 7 OF INDIA UK TREAT Y AND FURTHER CONSIDERING 60% OF CONSIDERATION FROM SUPPLY OF MAINTENANCE SPARES AS THE INCOME OF THE ASSESSEE TO BE TAXED IN INDIA. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 19 25. AS MENTIONED ELSEWHERE, THE CONTRACT HAS BEEN E NTERED INTO BETWEEN AND INDEPENDENT GOVERNMENT ORGANIZATION AND THE APPELLA NT COMPANY WHERE THE PRICE FOR THE PRODUCT HAS BEEN DETERMINED BY THE GO VERNMENT ORGANIZATION AND AT PARA 11.4 OF THE INVITES OF GLOBAL BIDS WHICH IS AT PAGE 332 OF THE PAPER BOOK, IT HAS BEEN MENTIONED THAT THE BIDDER SHOULD QUOTE THE PRICE FOR MAINTENANCE SPARES ON THE BASIS OF COST PER TON. IN OUR UNDERST ANDING OF THE FACTS, THE CONSIDERATION IS BASED ON RATE PER TON IS ONLY A MO DE OF RECOVERING THE PRICE OF PRODUCT BUT IT SHOULD NOT DILUTE THE ESSENTIAL CHAR ACTER OF THE CONTRACT. FOR THIS PROPOSITION, WE DRAW SUPPORT FROM THE JUDGMENT OF H ONBLE SUPREME COURT IN THE CASE OF P. J. CHEMICALS LTD. 210 ITR 830 IN WHICH T HE HONBLE SUPREME COURT HAS LAID DOWN THE RATIO THAT THE NATURE OF TRANSACTION CANNOT BE DETERMINED BY THE METHOD IN WHICH CONSIDERATION IS COMPUTED. 26. ASSUMING, YET NOT ACCEPTING THE ACTIVITIES RELA TING TO SSI CREATES A PE OF THE APPELLANT COMPANY IN INDIA, INCOME OF PE TO BE TAXED IN INDIA IN TERMS OF ARTICLE 7 OF INDIA-UK TREATY WOULD BE LIMITED TO EX TENT OF ACTIVITY ATTRIBUTABLE TO SUCH PE. WITH REFERENCE TO SSI SERVICE, JMS INDIA H AS BEEN REMUNERATED AT THE MARKET VALUE BY AN INDEPENDENT THIRD PARTY, A GOVER NMENT OF INDIA UNDERTAKING I.E. SECL. FURTHER, THE ENTIRE INCOME FROM SSI SERV ICE EARNED BY JMS INDIA HAS BEEN OFFERED TO TAX IN INDIA. THUS, THERE IS NOTHIN G FURTHER WHICH CAN BE ATTRIBUTED TO TAX IN INDIA. FOR THIS PROPOSITION, W E DERIVE SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F DIT (INTERNATIONAL TAXATION) VS. MORGAN STANLEY AND CO. INC 292 ITR 416. 27. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HEREINABOVE AND CONSIDERING THE FACTS IN ISSUE FROM ALL POSSIBLE ANGLES, WE DO NOT FIND ANY MERIT IN THE FINDINGS OF THE AO/ DRP. WE, THEREFORE, SET ASIDE THE FINDINGS AND DIRECT THE A.O. TO DELETE THE IMPU GNED ADDITIONS. THE OTHER ISSUE RELATES TO THE LEVY OF INTEREST AND DENIAL OF CREDI T OF TDS. LEVY OF INTEREST IS MANDATORY. WE, THEREFORE, DIRECT THE A.O. TO CHARGE INTEREST AS PER THE PROVISIONS OF THE LAW AND SO FAR AS THE DENIAL OF THE CREDIT O F TDS IS CONCERNED, THE A.O. IS DIRECTED TO DECIDE THE ISSUE WHILE GIVING EFFECT TO OUR FINDINGS. 9. SINCE MATTER IN HAND IS IDENTICAL TO THE CASE DECID ED BY THE ITAT IN ASSESSEES OWN CASE IN ITA NOS. 655 & 656/AHD/2017 DATED 05/07 /2017, THUS, IN PARITY WITH THE CO-ORDINATE BENCH JUDGMENT, WE ALLOW THE A PPEAL OF THE ASSESSEE. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 20 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 11. NOW WE COME TO ITA NO. 2008/AHD/2018, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER PASSED BY THE LEARNED DEPUTY COMM ISSIONER OF INCOME-TAX (INTERNATIONAL TAXATION) - 2, AHMEDABAD (HERE-IN-AF TER REFERRED TO AS 'LEARNED AO' OR ID AO') U/S 143(3) READ WITH SECTION 144C OF THE INCOME-TAX ACT, 1961 ('ACT') AND THE DIRECTIONS OF THE LEARNED DISPUTE R ESOLUTION PANEL (HERE-IN-AFTER REFERRED TO AS 'LEARNED DRP') IS CONTRARY TO THE PR OVISIONS OF LAW AND ERRONEOUS ON THE FACTS OF THE CASE AND LIABLE TO BE QUASHED. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD AO FAILED TO APPRECIATE THAT INCOME FROM SUPPLY OF MAINTENANCE S PARES FROM OUTSIDE INDIA CANNOT BE TAXED IN INDIA IN THE ABSENCE OF ANY ACTI VITY OF THE NONRESIDENT IN INDIA. 3. THAT THE LD AO ERRED IN TREATING THE CONTRACT FO R SUPPLY OF EQUIPMENT, SCIENTIFIC SITE INVESTIGATION AND PROVISION FOR SER VICES AS COMPOSITE CONTRACT. 4. A) THAT THE LD AO ERRED IN HOLDING THA T THE ASSESSEE HAS A PERMANENT ESTABLISHMENT (PE) IN INDIA. B) WITHOUT PREJUDICE TO THE ABOVE, AND EVEN ASSUMIN G BUT NOT ADMITTING THAT ASSESSEE HAS A PE IN INDIA, THE LD AO ERRED IN NOT APPRECIATING THAT NOTHING FURTHER CAN BE ATTRIBUTED TO SUCH PE ON ACCOUNT OF INCOME FROM SUPPLY OF MAINTENANCE SPARES IN INDIA. 5. THAT THE LD AO ERRED IN TREATING THE CONSIDERATI ON FROM SALE OF MAINTENANCE SPARES AS ROYALTY CONNECTED TO PE IN IN DIA AND TAXABLE U/S 44DA OF THE ACT READ WITH ARTICLE 13 READ WITH ARTICLE 7 OF INDIA-UK TREATY. 6. THAT THE LD AO ERRED IN ARBITRARILY TREATING 60% OF CONSIDERATION FROM SUPPLY OF MAINTENANCE SPARES AS BUSINESS PROFIT THE REBY ARRIVING AT TOTAL TAXABLE INCOME OF INK 94,397,436. 7. THAT THE LD AO AND LD DRP ERRED IN NOT FOLLOWING THE JUDGMENT OF JURISDICTIONAL AHMEDABAD TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 2012-13 AND AY 2013-14 WHEREIN IT WAS HELD THAT SUPPLY OF MAINTENA NCE SPARES BY THE APPELLANT FROM OUTSIDE INDIA IS NOT TAXABLE IN INDIA. 8. THAT THE LD AO ERRED IN COMPUTING INTEREST U/S 2 34BOF THE ACT. ITA NOS. 230 3/AHD/2017 & 2008/A/18 . A.YS. 2014-1 5 & 2015-16 21 12. SINCE FACTS AND CIRCUMSTANCES OF THE CASE ARE SAME AS ITA NO. 2303/AHD/2017 ONLY AMOUNT AND ASSESSMENT YEAR ARE DIFFERENT. SINC E ALREADY WE HAVE GRANTED RELIEF TO THE ASSESSEE IN THE CONNECTED APPEAL, THU S, IN PARITY WITH THE SAME, WE ALLOW THE APPEAL OF THE ASSESSEE. IN BOTH THE APPEA LS, LD. D.R. RELIED ON THE ORDER PASSED BY THE DRP. 13. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESS EE ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09- 12- 2019 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASA D) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 09/12/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD