HITT Holland Institute of Traffic Technology B.V (now known as 'Saab Technologies B.V.'), Netherlands V. ACIT, International Taxation, Circle - 1(1), Kolkata, Kolkata

ITA 2112/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4568 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 26-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; Permanent establishment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SHRI ABY T VARKEY, JM & SHRI M.BALA GANESH, AM ] I.T.A NO. 2112/KOL/2017 ASSESSMENT YEAR : 2014-15 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V -VS- ACIT, INTERNATIONAL TAXATION, (NOW KNOWN AS SAAB TECHNOLOGIES B.V.). C IRCLE-1(1), KOLKATA [PAN: AABCH 5694 R] (APPELLANT) ( RESPONDENT) FOR THE APPELLANT : SHRI AVISEKH KEJRI WAL, AR FOR THE RESPONDENT : SHRI G. MALLIKARJUNA, CI T DR DATE OF HEARING : 30.07.2018 DATE OF PRONOUNCEMENT : 01.08.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE LEARNED ACIT, INTERNATIONAL TAXATION, CIRCLE 1(1), KOLKATA [ HEREINAFTER REFERRED TO AS T HE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, [ HEREINAFTER REFERRED TO AS THE ACT] DATED 31.7.2017, PURSUANT TO THE DIRECTIONS OF THE LEARNED DISPUTE RESOLUTION PANEL [HEREINAFTER REFERRED TO AS LD DRP] ISSUED U/S 144C(5) OF THE ACT DATED 6.6.2017 FOR THE ASST YEAR 2014-15. 2. THE BRIEF FACTS OF THIS APPEAL IS THAT THE ASSES SEE IS A SUBSIDIARY OF HITT N.V.. IT IS A COMPANY INCORPORATED AS PER THE LAWS OF NETHERLANDS OPERATING IN THE INTERNATIONAL MARKET FOR SAFETY, SECURITY AND EFFICIENCY OF NAUTI CAL AND AIR TRAFFIC. IT OPERATES IN THE SPECIALIZED MARKET FOR TRAFFIC CONTROL, NAVIGATION AND PORT MANAGEMENT SYSTEMS. THE ASSESSEE HAS ENTERED INTO CONTRACTS WITH OIL AND NA TURAL GAS CORPORATION OF INDIA 2 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 2 (ONGC) . DIRECTOR GENERAL OF LIGHTHOUSE AND LIGHTSH IPS (DGLL) AND AIRPORTS AUTHORITY OF INDIA (AAI) FOR SUPPLY OF EQUIPMENT AN D SERVICES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED PAYMENTS IN RE SPECT OF PERFORMANCE OF SERVICES AND SUPPLY OF EQUIPMENT UNDER THE FOLLOWING CONTRACTS I N INDIA :- A) ESTABLISHMENT OF VESSEL TRAFFIC SERVICE (VTS) SY STEM IN THE GULF OF KUCHCHH (GOK PROJECT) B) CONTRACT TO PROVIDE ANNUAL MAINTENANCE OF THE VE SSEL AND AIR TRAFFIC MANAGEMENT SYSTEM (VATMS) SYSTEM FOR ONGC (ONGC VATMS AMC PR OJECT). THE TRANSACTIONS OF THE ASSESSEE ARE COVERED UNDER THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND NETHERLANDS. 3. GULF OF KUCHCH (GOK) PROJECT THE ASSESSEE HAD ENTERED INTO A CONSORTIUM AGREEMEN T WITH TELECOMMUNICATIONS CONSULTANTS INDIA LIMITED (IN SHORT TCIL) AND DALMI A & COMPANY LIMITED , WITH TCIL ACTING AS THE CONSORTIUM LEADER. THIS CONSORTIUM W AS AWARDED A CONTRACT FOR ESTABLISHMENT OF VESSEL TRAFFIC SERVICE (VTS) SYSTE M IN THE GULF OF KUCHCH (GOK) BY THE DIRECTOR GENERAL OF LIGHTHOUSE AND LIGHTSHIPS ( DGLL) IN 2005 (AGREEMENT BETWEEN DGLL AND CONSORTIUM ENCLOSED IN PAGES 224 TO 227 OF PAPER BOOK AND CONSORTIUM AGREEMENT ENCLOSED AT PAGES 194 TO 222 OF PAPER BOO K). THE RESPONSIBILITIES OF EACH OF THE MEMBERS OF THE CONSORTIUM ARE SET OUT IN THE AN NEXURE TO THE CONSORTIUM AGREEMENT. SUPPLY, INSTALLATION, TESTING AND COMMISSIONING OF INTEGRATED AUTOMATIC IDENTIFICATION SYSTEM BASE STATIONS EQUIPMENTS WITH ASSOCIATED SOF TWARE IS THE PRIMARY RESPONSIBILITY OF THE ASSESSEE. AS PER THE CONSORTIUM AGREEMENT , THE ASSESSE HAD SET UP A PROJECT OFFICE (PO) IN INDIA FOR THE EXECUTION OF THIS PROJ ECT IN THE YEAR 2005. HOWEVER, THE PO NEVER BECAME OPERATIONAL AND WAS NOT INVOLVED IN AN Y ACTIVITY PERTAINING TO THIS PROJECT. 3 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 3 DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE R ECEIVED PAYMENTS FOR THE FOLLOWING OFFSHORE SUPPLY OF EQUIPMENT / SERVICES / TRAINING AND ONSHORE SUPPLY OF EQUIPMENT / SERVICES:- SL. NO. NATURE RECEIPTS IN INR 1 OFF-SHORE SUPPLY OF EQUIPMENT 3,77,38,037 2 OFF-SHORE PROVISION OF SERVICES 92,47,567 3 ON-SHORE SUPPLY OF EQUIPMENT 40,75,095 4 ON-SHORE PROVISION OF SERVICES 60,80,986 TOTAL 5,71,41,685 3.1. THE GROUND 2.1. RAISED BY THE ASSESSEE IS WITH REGARD TO THE ACTION OF THE LD AO IN HOLDING THAT AN INSTALLATION PE OF THE ASSESSEE EXI STS IN INDIA. WITHOUT PREJUDICE TO EARLIER GROUND, THE ASSESSEE HAD RAISED GROUND 2.3. WITH REGARD TO THE ACTION OF THE LD AO IN ATTRIBUTING 10% GROSS CONSIDERATION AMOUNT OF SUPPLY OF EQUIPMENT AND PROVISION OF SERVICES FOR BOTH OFFSHORE AND ONSHORE TO THE AL LEGED PE. WITHOUT PREJUDICE TO EARLIER GROUNDS, THE ASSESSEE HAD RAISED GROUND 2.3. THAT N O PART OF THE INCOME FROM OFFSHORE ACTIVITIES CAN BE ATTRIBUTED TO THE ALLEGED PE. 3.2. WE FIND THAT THESE GROUNDS HAD BEEN ADJUDICATE D BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST YEARS 2012-13 AND 2013-14 IN I.T.A NOS. 2 90/KOL/2016 & 348/KOL/2017 DATED 20.7.2018 WHEREIN IT WAS HELD THAT THE ASSESSEE HER EIN CONSTITUTED INSTALLATION PE IN INDIA. FURTHER IT WAS HELD THAT NO ATTRIBUTION CAN BE DONE ON RECEIPTS FROM OFFSHORE SUPPLY OF 4 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 4 EQUIPMENT AND OFFSHORE PROVISION OF SERVICES. ONLY THE PROFITS ATTRIBUTED TO THE ACTIVITIES CARRIED OUT IN INDIA SHALL BE TAXABLE AND ACCORDING LY, ONLY THE ONSHORE SUPPLY OF EQUIPMENT AND ONSHORE SERVICES RENDERED BY THE ASSESSEE, WOULD H AVE TO BE CONSIDERED FOR TAXING THE ONSHORE RECEIPTS AT 10%. THIS VIEW HAS BEEN CONSISTENTLY T AKEN BY THIS TRIBUNAL FOR THE ASST YEAR 2011- 12 IN ITA NO. 390/KOL/2015 DATED 4.4.2018 IN ASSESS EES OWN CASE. THE RELEVANT OPERATIVE PORTION OF THE ORDER PASSED BY THIS TRIBUNAL FOR TH E ASST YEARS 2012-13 AND 2014-15 IS REPRODUCED HEREUNDER:- 3.3. WE FIND THAT THESE GROUNDS HAD BEEN ADJUDICATE D BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST YEAR 2011-12 IN IT A NO. 390/KOL/2015 DATED 4.4.2018 WHEREIN IT WAS HELD THAT THE ASSESSEE HERE IN CONSTITUTED INSTALLATION PE IN INDIA. FURTHER IT WAS HELD THAT NO ATTRIBUTION CAN BE DONE ON RECEIPTS FROM OFFSHORE SUPPLY OF EQUIPMENT AND OFFSHORE PROVISION OF SERVICES. ONLY THE PROFITS ATTRIBUTED TO THE ACTIVITIES CARRIED OUT IN INDIA SHALL BE TAXABLE AND ACCORDINGLY, ONLY THE ONSHORE SUPPLY OF EQUIPMENT A ND ONSHORE SERVICES RENDERED BY THE ASSESSEE, WOULD HAVE TO BE CONSIDER ED FOR TAXING THE ONSHORE RECEIPTS AT 10%. THE RELEVANT OPERATIVE PORTION OF THE SAID ORDER IS REPRODUCED HEREUNDER:- 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. PERMANENT ESTABLISHMENT TO INCLUDE A BUILDING SITE OR CONSTRUCTION, INSTALLATION OR A SSEMBLY PROJECT CONSTITUTES A PERMANENT ESTABLISHMENT ONLY WHERE SU CH SITE OR PROJECT CONTINUES FOR A PERIOD OF MORE THAN SIX MON THS. 3.2.1. . 3.2.2. WE FIND THAT DURING THE YEAR UNDER CONSIDERA TION, THE EQUIPMENT WAS SUPPLIED ON HIGH SEA SALE BASIS AND THE PROPERT Y IN THE EQUIPMENT HAS PASSED OUTSIDE INDIA AND FOR WHICH PAYMENT WAS RECE IVED OUTSIDE INDIA. FURTHER, THE OFF SHORE SERVICES CONSISTED OF LABOUR SERVICES OF SIZING OF EQUIPMENT, TUNING AND TESTING OF THE EQUIPMENT ETC WHICH WERE PERFORMED ON THE EQUIPMENT IN NETHERLANDS. THEREFORE, THE AL LEGED INSTALLATION PE COULD NOT HAVE BEEN INVOLVED IN SUCH OFFSHORE SUPPL Y AND SERVICES SINCE THESE WERE CARRIED ON BY THE ASSESSEE DIRECTLY FROM NETHERLANDS. HENCE THE PROFITS FROM SUCH OFFSHORE SUPPLY OF EQUIPMENT AND SERVICES CANNOT BE 5 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 5 ATTRIBUTED TO THE INSTALLATION PE OF THE ASSESSEE I N INDIA. IN THIS REGARD, WE WOULD LIKE TO PLACE RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA HARIMA HEAVY INDU STRIES LIMITED VS DIT REPORTED IN 288 ITR 408 (SC) WHEREIN IT WAS CLE ARLY STATED THAT IN CASE THE PE OF A FOREIGN COMPANY IS NOT INVOLVED IN ANY TRANSACTION CARRIED OUT IN INDIA OR OUTSIDE INDIA, NO PART OF I NCOME EARNED FROM SUCH TRANSACTIONS CAN BE ATTRIBUTED TO THE PE IN INDIA. THE HONBLE SUPREME COURT HELD THERE HAS TO BE SOME ACTIVITY THROUGH PE FOR ATTRACTING THE TAXING STATUTE AND , IF INCOME ARISES WITHOUT ANY A CTIVITY OF PE, EVEN UNDER DTAA, TAXATION LIABILITY IN RESPECT OF OVERSEAS SER VICES WOULD NOT ARISE IN INDIA. IN THE CASE BEFORE THE HONBLE SUPREME COUR T, THE FOREIGN ENTERPRISE WAS TO DEVELOP, DESIGN , ENGINEER AND PR OCURE EQUIPMENT, MATERIALS AND SUPPLIES TO ERECT AND CONSTRUCT STORA GE TANKS IN INDIA. THE HONBLE SUPREME COURT HELD THAT THE OFF-SHORE SUPPL Y AND OFF-SHORE SERVICES UNDER THE CONTRACT WERE NOT TAXABLE IN IND IA SINCE ALL ACTIVITIES IN CONNECTION WITH OFFSHORE ACTIVITES WERE CARRIED OUT OUTSIDE INDIA, AND HAD NOTHING TO DO WITH PE. 3.2.3. WE ALSO FIND THAT THE HONBLE AUTHORITY OF A DVANCE RULINGS , NEW DELHI HAD RECENTLY IN THE CASE OF MICHELIN TAMIL NA DU TYRES (P) LTD., IN RE REPORTED IN (2018) 89 TAXMANN.COM 217 (AAR-NEW D ELHI) DATED 19.12.2017 HELD THAT NO INCOME FROM THE OFFSHORE SU PPLY OF EQUIPMENT WOULD BE TAXABLE IN INDIA SINCE THE TRANSFER OF PRO PERTY IN THE GOODS AS WELL AS THE PAYMENT, WERE CARRIED ON OUTSIDE THE IN DIAN SOIL. IN THIS CASE, THE AAR PLACED RELIANCE ON THE JUDGEMENT OF THE HON BLE SUPREME COURT IN THE CASE OF ISHAKIWAJIMA HARIMA SUPRA. 3.2.4. WE FIND THAT THE CO-ORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF ATOMSTROY EXPORT VS DDIT REPORTED IN (2017) 80 T AXMANN.COM 178 (MUMBAI ITAT) HELD AS UNDER:- 15. THEREFORE, AFTER ANALYZING THE VARIOUS CASE LAWS, STATUTORY PROVISIONS, DTAA PROVISIONS AND CONTRACTUAL TERMS A ND RESPECTFULLY FOLLOWING JUDGMENT OF HON'BLE SUPREME COURT IN ISHI KAWAJMA-HARIMA HEAVY INDUSTRIES LTD., (SUPRA) WE ARE INCLINED TO H OLD THAT OFFSHORE SUPPLY CONTRACTS WERE 'CARRIED AND CONCLUDED' OUTSI DE INDIA AND HENCE NO INCOME THEREFROM DEEMED TO ACCRUE OR ARISE IN IN DIA AS PER SECTION 9(1) AND DTAA PROVISIONS AND ACCORDINGLY, NOT CHARG EABLE TO TAX. THE RECEIPTS THEREOF DO NOT FORM PART OF RECEIPTS FOR T HE PURPOSE OF COMPUTATIONAL PROVISIONS OF SECTION 44BBB. EXPLANAT ION 4 COULD NOT OVERCOME THE LIMITATION IMPOSED BY EXPLANATION 1(A) TO SECTION 9(1)(I) AND HENCE, THE IMPUGNED INCOME DO NOT FORM PART OF BUSINESS RECEIPTS FOR COMPUTATION OF INCOME U/S 44BBB OF THE ACT. . 6 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 6 3.2.5. RESPECTFULLY FOLLOWING THE AFORESAID JUDICIA L PRECEDENTS AND APPLYING THE SAME TO THE FACTS OF THE INSTANT CASE, WE HOLD THAT THE CONSIDERATION RECEIVED IN RESPECT OF OFFSHORE SUPPL Y OF EQUIPMENTS AND SERVICES AND PROFITS ATTRIBUTION @ 10% ON THE SAME SHOULD NOT BE ADDED IN THE HANDS OF THE ASSESSEE CONSTRUING IT AS INSTALL ATION PE IN INDIA. 3.3. THE FACTS OF ASST YEAR 2014-15 ARE EXACTLY SIM ILAR TO THOSE OF ASST YEARS 2012-13 AND 2013-14 AND THERE IS NO CHANGE IN FACTS AND HEN CE IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY, WE WOULD LIKE TO FOLLOW THE SAME. HENCE THE GROUNDS 2.1., 2.2. & 2.3. ARE DISPOSED OFF ACCORDINGLY. 4. ONGC VATMS - AMC PROJECT THE BRIEF FACTS OF THIS PROJECT ARE THAT THE ASSESS EE WAS AWARDED A CONTRACT IN 2006 BY ONGC FOR SUPPLY, INSTALLATION, TESTING AND COMMISSI ONING OF VESSEL AND AIR TRAFFIC MANAGEMENT SYSTEM (VATMS) ALONG WITH THE PROVISION OF MAINTENANCE SERVICES. THIS CONTRACT ENVISAGED A WARRANTY PERIOD OF 1 YEAR AFTE R HANDING OVER OF THE PROJECT SITE AND PROVISION OF ANNUAL MAINTENANCE SERVICES (AMC SERVI CES) FOR 6 YEARS POST SUCH WARRANTY PERIOD. THE ASSESSEE STARTED PROVIDING AMC SERVICES IN RELATION TO THE VATMS SYSTEM FOR A TOTAL PERIOD OF 6 YEARS, COMMENC ING FROM 1 ST OCTOBER 2008, JUST AFTER THE COMPLETION OF MAIN CONTRACT FOR SUPPLY, I NSTALLATION , TESTING AND COMMISSIONING OF VATMS SYSTEM. ACCORDINGLY, THE ASS ESSEE PROVIDED ONLY AMC SERVICES FOR THE VATMS SYSTEM INSTALLED BY IT IN TH E EARLIER YEARS. THE ACTIVITY WAS SUB-CONTRACTED TO A LOCAL INDEPENDENT CONTRACTOR VI Z ELCOME MARINE SERVICES PRIVATE LIMITED (IN SHORT ELCOME) AND INCLUDED REGULAR MAIN TENANCE ACTIVITIES SUCH AS VISITING THE SITES FOR CLEANING, CHECKS, LOCAL FAULT REPAIR ETC. IN GENERAL, THERE WERE ALL ACTIVITIES OF A SERVICE NATURE. THE ASSESSEE SUBMITTED THAT IT DID NOT PERFORM ANY INSTALLATION ACTIVITY DURING THE YEAR UNDER CONSIDERATION AND ON LY MAINTENANCE SERVICES WERE UNDERTAKEN THROUGH A SUB-CONTRACTOR IN INDIA. THE COPY OF THE INVOICES ARE ENCLOSED IN PAGES 408 TO 412 OF THE PAPER BOOK. 7 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 7 4.1. THE LD AO BROUGHT TO TAX THE AMC FEE RECEIVED AS BUSINESS PROFITS ATTRIBUTABLE TO AN INSTALLATION PE IN TERMS OF ARTICLE 5(3) OF THE INDIA-NETHERLANDS DTAA. ACCORDING TO THE REVENUE, THE ONGC PROJECT WAS IN EXISTENCE F OR A PERIOD OF MORE THAN SIX MONTHS AND THEREFORE CONSTITUTED AN INSTALLATION PE OF T HE ASSESSEE IN INDIA. THE REVENUE FURTHER RELIED ON THE FACT THAT A SUBCONTRACTOR HAD CARRIED OUT AMC WORK IN INDIA ON BEHALF OF THE ASSESSEE AND THEREFORE THE ASSESSEE H AD A VIRTUAL PRESENCE IN INDIA FOR EXECUTION OF THE PROJECT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS TRIBUNAL HAD CONSIDERED THE SAME ISSUE IN ASSESSEES OWN CASE FOR THE ASST YEARS 2010-11 , 2011-12 , 2012-13 AND 2013-14 AND HAD HELD THAT THE AMC SERVICES PROVIDED POST COMPLETION OF INSTALLATION A CTVITIES AT THE SITE OF THE CUSTOMER, CANNOT LEAD TO CARRYING OUT INSTALLATION ACTIVITIES FOR THE PURPOSE OF CONSTITUTION OF AN INSTALLATION PE IN INDIA. FURTHER, IT WAS ALSO HEL D THAT THE PRESENCE OF AN INDIAN CONTRACTOR TO WHICH THE ASSESSEE HAS SUB-CONTRACTED THE WHOLE AMC WORK ON PRINCIPAL TO- PRINCIPAL BASIS , DOES NOT CREATE ANY VIRTUAL PRESENCE OF THE ASSESSEE IN INDIA. IT WAS HELD THAT SINCE NO BUSINESS ACTIVITIES WERE CAR RIED OUT BY THE ASSESSEE IN INDIA, IT IS UNREASONABLE TO CONCLUDE THAT THE ASSESSEE HAS ANY PE IN INDIA. THE RELEVANT OPERATIVE PORTION OF THE ORDER PASSED BY THIS TRIBUNAL IN ASS ESSEES OWN CASE FOR THE ASST YEARS 2012-13 AND 2013-14 IN ITA NOS. 290/KOL/2016 AND 34 8/KOL/2017 DATED 20.7.2018 IS REPRODUCED HEREUNDER:- 4.3. THE GROUND 3.1. RAISED BY THE ASSESSEE IS WITH REGARD TO THE ACTION OF THE LD AO IN HOLDING THAT THE ASSESSEE HAS AN INSTALLATION PE IN INDIA BY ALLEGING THAT THE SUB-CONTRACTOR WAS THE ASSESSEES VIRTUAL PRESE NCE IN INDIA. THE GROUND 3.2. RAISED BY THE ASSESSEE IS WITH REGARD TO FAILURE OF THE LD AO TO APPRECIATE THE FACT THAT SERVICES WERE PROVIDED AFTER THE CONCLUSION OF THE INSTALLATION ACTIVITY AND MAINTENANCE SERVICES POST INSTALLATION ACTIVITIES C ANNOT FORM AN INSTALLATION PE. WITHOUT PREJUDICE TO EARLIER GROUNDS, THE ASSESSEE HAD RAISED GROUND 3.3. WITH REGARD TO THE ACTION OF THE LD AO IN ATTRIBUTING 50 % OF GROSS CONSIDERATION AMOUNT WHICH IS WRONG AND EXCESSIVE. WITHOUT PREJU DICE TO EARLIER GROUNDS, THE 8 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 8 ASSESSEE HAD RAISED GROUND 3.4. WITH REGARD TO THE ACTION OF THE LD AO IN HOLDING THAT AMC SERVICES ARE TAXABLE AS FEES FOR TECHNICA L SERVICES (FTS). 4.4. WE FIND THAT THESE GROUNDS HAD BEEN ADJUDICATE D BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST YEAR 2011-12 IN IT A NO. 390/KOL/2015 DATED 4.4.2018 WHEREIN IT WAS HELD THAT THE MAINTENANCE A CTVITIES CARRIED OUT BY THE ASSESSEE DOES NOT CONSTITUTE ANY PE IN INDIA AND AC CORDINGLY, IN THE ABSENCE OF ANY PE, NO ATTRIBUTION OF PROFITS COULD BE DONE IN INDIA. THE RELEVANT OPERATIVE PORTION OF THE SAID ORDER IS REPRODUCED HEREUNDER:- 4.9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERU SED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT SIMILAR ARGUMENT S WERE ADVANCED BY BOTH LD AR AND LD DR IN THE EARLIER YEAR IN ASSESSE ES OWN CASE FOR THE ASST YEAR 2010-11. THIS TRIBUNAL FOR THE ASST YEAR 2010-11 WITH REGARD TO THE IMPUGNED ISSUE HAD HELD AS UNDER:- 47. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO T HE RIVAL SUBMISSIONS. OUR CONCLUSIONS IN PARA-36 WITH REGARD TO EXISTENCE OF AN INSTALLATION PE IN RESPECT OF GOK PROJECT WIL L EQUALLY APPLY TO THIS PROJECT ALSO. ADMITTEDLY, NO INSTALLATION A CTIVITY WAS CARRIED OUT DURING THE PREVIOUS YEAR AND THEREFORE THE QUES TION OF AN INSTALLATION PE OF THE ASSESSEE EXISTING DURING THE PREVIOUS YEAR DOES NOT ARISE FOR CONSIDERATION AT ALL. WE ARE IN COMPLETE AGREEMENT WITH THE CONTENTIONS PUT FORTH BY THE LEA RNED COUNSEL FOR THE ASSESSEE ON THIS ASPECT. ACCORDINGLY, WE HOLD T HAT SINCE THE VATMS EQUIPMENT WAS ALREADY ACCEPTED AND HANDEDOVER TO THE CUSTOMER IN THE YEAR 2007 AND NO INSTALLATION ACTIV ITY WAS CARRIED OUT IN INDIA DURING THE SUBJECT YEAR, IT CANNOT BE HELD THAT THE ASSESSEE HAD AN 'INSTALLATION PE' IN INDIA IN THE S UBJECT YEAR. AS FAR AS THE CONCLUSION OF THE REVENUE THAT THE INDEPENDE NT CONTRACTOR OF THE ASSESSEE IN INDIA CREATED A VIRTUAL PRESENCE OF THE ASSESSEE IN INDIA SO AS TO CREATE AN INSTALLATION PE, GIVEN THA T THE ENTIRE ONSHORE MAINTENANCE CONTRACT HAS BEEN PERFORMED BY AN INDEPENDENT LOCAL CONTRACTOR IN INDIA, IT CANNOT BE SAID THAT THE BUSINESS OF THE ASSESSEE HAS BEEN CARRIED OUT BY TH E PRESENCE OF THE LOCAL CONTRACTOR IN INDIA, SO AS TO CREATE ITS PE I N INDIA. THE EXAMINATION OF WHETHER A PE EXISTS NEEDS TO BE DETE RMINED BASED ON THE ACTIVITIES OF THE FOREIGN ENTERPRISE IN INDI A. SINCE NO ACTIVITIES HAVE BEEN CARRIED OUT BY THE ASSESSEE IN INDIA WITH RESPECT OF SUCH MAINTENANCE ACTIVITY, IT IS UNREASO NABLE TO CONCLUDE THAT THE BUSINESS OF THE ASSESSEE WAS CARRIED OUT I N INDIA THROUGH 9 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 9 SUCH SUBCONTRACTOR, TO CONSTITUTE ITS PE IN INDIA. WE THEREFORE HOLD THAT RECEIPTS IN THE FORM OF AMC FEES FROM ONGC ON VATMS CANNOT BE BROUGHT TO TAX IN INDIA AS BUSINESS INCOM E. IN VIEW OF THE ABOVE CONCLUSION, THE QUESTION OF WHAT QUANTUM OF I NCOME HAS TO BE ATTRIBUTED TO THE PE IN INDIA THAT IS AGITATED I N GR.NO.D-3 & 4 DO NOT REQUIRE ANY CONSIDERATION. 4.10. IN VIEW OF THE AFORESAID ARGUMENTS AND FINDIN GS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWIN G THE AFORESAID JUDICIAL PRECEDENT , WE HOLD THAT AMC SERVICES PROVIDED POST COMPLETION OF INSTALLATION ACTIVITIES AT THE SITE OF CUSTOMER, CA NNOT LEAD TO CARRYING OUT INSTALLATION ACTIVITIES FOR THE PURPOSE OF CONSTITU TION OF AN INSTALLATION PE IN INDIA. FURTHER IT IS HELD THAT PRESENCE OF AN INDIAN CONTRACTOR TO WHICH THE ASSESSEE HAS SUB-CONTRACTED THE WHOLE AMC WORK ON PRINCIPAL- TO-PRINCIPAL BASIS, DOES NOT CREATE ANY VIRTUAL PRE SENCE OF THE ASSESSEE IN INDIA. IN VIEW OF THE ABOVE DECISION, THE GROUND N O. 4..3. AND 4.4. RAISED BY THE ASSESSEE REQUIRES NO ADJUDICATION. ACCORDING LY, THE GROUNDS 4.1 TO 4.4. RAISED BY THE ASSESSEE ARE ALLOWED. 4.5. THE FACTS OF ASST YEARS 2012-13 AND 2013-14 AR E EXACTLY SIMILAR TO THOSE OF ASST YEAR 2011-12 AND HENCE IN ORDER TO MA INTAIN JUDICIAL CONSISTENCY, WE WOULD LIKE TO FOLLOW THE SAME. WIT H REGARD TO THE ASPECT OF AMC SERVICES BEING CONSIDERED AS FTS, WE HOLD TH AT THESE SERVICES DO NOT MAKE AVAILABLE ANY TECHNICAL KNOW HOW OR KNOWLE DGE TO THE PERSONNEL OF THE CUSTOMER AS PER ARTICLE 12(5) OF THE INDIA-N ETHERLANDS DTAA. HENCE THE GROUNDS 3.1., 3.2., 3.3. AND 3.4. (FOR AS ST YEAR 2012-13) AND GROUNDS 3.1. AND 3.2. (FOR ASST YEAR 2013-14) ARE D ISPOSED OFF ACCORDINGLY. 4.3. DURING THE YEAR UNDER CONSIDERATION, THERE HAS BEEN NO CHANGE IN THE FACTS OF THE ASSESSEE COMPARED TO FACTS IN ASST YEARS 2012-13 AN D 2013-14 SUPRA AND HENCE IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY, WE WOULD LIKE TO FOLLOW THE SAME. WITH REGARD TO THE ASPECT OF AMC SERVICES BEING CONSIDERED AS FTS, WE HOLD THAT THESE SERVICES DO NOT MAKE AVAILABLE ANY TECHNICAL KNOW HOW OR KNOWLEDGE TO THE PERSONNEL OF THE CUSTOMER AS PER ARTICLE 12(5) OF THE INDIA-NETHERLANDS DTAA. HENCE THE GROUNDS 3.1 TO 3.5. RAISED BY THE ASSESSEE ARE DISPOSED OFF ACCORDINGLY . 10 ITA NO.2112/KOL/2017 HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V. A.YR. 2014-15 10 5. THE GROUND NO.1 RAISED BY THE ASSESSEE IS GENERA L IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 01.08.2018 SD/- SD/- [A.T.VARKEY] [ M. BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 01.08.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. HITT HOLLAND INSTITUTE OF TRAFFIC TECHNOLOGY B.V .(NOW KNOWN AS SAAB TECHNOLOGIES B.V.), LAAN VAN MALKENSCHOTEN 40, 7333 NP APELDOORN, THE NETHERLANDS. 2. ACIT(IT), CIRCLE-1(1), KOLKATA, AAYAKAR BHAWAN P OORVA, 110, SHANTIPALLY, KOLKATA- 700107. 3..C.I.T(A).- 4. C.I.T .- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S