Appeal details
Counselvise Citation
[2010] 119 COUNSELVISE.COM (IT) 5587 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-03-2010
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
H
Assessment Year
2004-2005
Appeal Filed On
19-06-2008
Judgement Text
I.T.A. NO. 2353 /DEL/2008 1/28 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH H BEFORE SHRI K. G. BANSAL, ACCOUTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO. 2353 /DEL/2008 (ASSESSMENT YEAR 2004-05) VOITH SIEMENS HYDRO KRAFTWERKSTECHNIK VS. ADIT, GMBH & CO. KG, C/O MOHINDER PURI & CO., CAS CIR.2( 2) 1A-D, VANDHNA, 11, TOLSTOY MARG, NEW DELHI NEW DELHI-110 001 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AABCV9155B APPELLANT BY: SHRI S D KAPILA & SHRI R R MAURYA, ADV. RESPONDENT BY: SHRI ASHWANI KUMAR MAHAJAN CIT DR ORDER PER GEORGE MATHAN, JM: 1. THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED A GAINST THE ORDER OF LD. CIT(A) XXIX, NEW DELHI IN APPEAL NO.330/2006-07 DATED 18.03.2008 FOR THE ASSESSMENT YEAR 2004-05. SHRI S D KAPILA & SHRI R R MOURYA ADVOCATES REPRESENTED FOR THE ASSESSEE AND SHRI ASHWANI KUMAR MAHAJAN CIT DR REPRESENTED FOR THE REVENUE. I.T.A. NO. 2353 /DEL/2008 2/28 2. IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASSESS EE IS A COMPANY INCORPORATED UNDER THE LAWS OF GERMANY AND THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF SUPPLY OF PLANT & EQUIPMENTS AND RELATED SERVICES FOR HYDRO POWER PLANTS. IT WAS THE SUBMISSION THAT THE ASSES SEE HAD BEEN AWARDED A CONTRACT BY M/S. ORISSA HYDRO POWER CORPORATION LTD. (OHPC) FOR RENOVATION, MODERNIZATION AND UPGRADING OF UNITS 3 & 4 OF HIRAKUND POWER HOUSE AT BURLA, ORISSA. IT WAS THE SUBMISSION THAT ONE OF THE ASSOCIATED CONCERNS OF T HE ASSESSEE BEING M/S. SIEMENS LTD. WAS ALSO AWARDED P ART OF THE CONTRACT. AS PER THE AGREEMENT THE ASSESSEE WAS REQUIRED TO SUPPLY MATERIAL AND EQUIPMENTS AND TO R UN THE SUPERVISION IN RESPECT OF RENOVATION, MODERNIZA TION AND UPGRADATION OF UNITS 3 & 4 OF HIRAKUND POWER HOUSE. IT WAS THE SUBMISSION THAT THE ASSESSEE IN ITS APPEAL HAS CHALLENGED THE ISSUE OF THE ACTION OF LD . CIT(A) IN HOLDING THAT THE ASSESSEE HAD PERMANENT ESTABLISHMENT IN INDIA IN GROUND NO.5 OF GROUNDS OF APPEAL. IT WAS THE SUBMISSION THAT THE SAID GROUND WAS NOT BEING PRESSED AND CONSEQUENTLY IT WAS ACCEPTED THAT THE ISSUE OF EXISTENCE OF PERMANENT ESTABLISHMENT O F THE ASSESSEE IN INDIA IS NOT BEING DISPUTED. IT WAS AL SO THE SUBMISSION THAT THE ISSUE OF TAXABILITY AS HELD BY THE LD. I.T.A. NO. 2353 /DEL/2008 3/28 CIT(A) IN RESPECT OF THE INCOME OF THE ASSESSEE FOR THE TRAINING CHARGES WAS ALSO NOT IN DISPUTE. IT WAS T HE SUBMISSION THAT THE DISPUTE WAS ONLY IN RELATION TO THE SUPERVISION CHARGES RECEIVED BY THE ASSESSEE ON ACC OUNT OF ERECTION, SUPERVISION, COMMISSIONING ETC. IT WA S THE SUBMISSION THAT THE ASSESSEE HAD ENTERED INTO CONTR ACT WITH OHPC BY WHICH THE ASSESSEE HAD SUPPLIED THE BU LK OF THE MACHINERY, WHICH WAS IMPORTED FROM GERMANY. THE LOCAL EQUIPMENT WAS SUPPLIED BY SIEMENS LTD. AN INDIAN COMPANY AND THE CIVIL CONSTRUCTION WAS ALSO DONE BY SIEMENS INDIA LTD. BUT UNDER THE TOTAL CONT ROL AND SUPERVISION OF THE ASSESSEE. IT WAS THE SUBMIS SION THAT THE A.O. AND THE LD .CIT(A) HAD HELD THAT THE SUPERVISION CHARGES RECEIVED BY THE ASSESSEE WAS FE E FOR TECHNICAL SERVICES UNDER THE TREATY OF DTAA WITH GERMANY AND CONSEQUENTLY THEY HAD APPLIED THE PROVISIONS OF ARTICLE 7 OF THE DTAA WITH GERMANY RE AD WITH SECTION 44D AND 115A OF THE I. T. ACT, 1961. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS ONLY CLAIM ING THAT THE INCOME OF THE ASSESSEE WAS LIABLE TO BE TA XED U/S 44BBB OF THE ACT. IT WAS THE SUBMISSION THAT T HE ASSESSEE FALLS WITHIN THE EXCLUSION CLAUSE OF EXPLA NATION (2) TO SECTION 9(1)(VII) OF THE ACT AND CONSEQUENTL Y THE INCOME OF THE ASSESSEE WAS LIABLE TO BE ASSESSED ON LY I.T.A. NO. 2353 /DEL/2008 4/28 UNDER THE PROVISIONS OF SECTION 44BBB OF THE ACT. IT WAS THE FURTHER SUBMISSION THAT THE A.O. AND THE CI T(A) HAD WHEN INTERPRETING THE CONTRACT ENTERED INTO BY THE ASSESSEE WITH OHPC, READ ONLY PART OF THE CONTRACT BEING THE SCOPE OF THE SERVICES UNDER THE CONTRACT AND THEY HAD NOT CONSIDERED THE CONTRACT AS A WHOLE. I T WAS THE SUBMISSION THAT THIS WAS WRONG IN VIEW OF THE DECISION OF HON'BLE HIGH COURT OF KERALA IN THE CAS E OF ASIAN DEVELOPMENT SERVICES REPORTED IN 239 ITR 713. THE LD. A.R. FURTHER DREW OUR ATTENTION TO THE CONT RACT ENTERED INTO BY THE ASSESSEE WITH M/S. OHPC, WHICH WAS SHOWN AT PAGES 33-74 OF THE PAPER BOOK. HE DRE W OUR ATTENTION TO THE CLAUSE (D) OF THE PREAMBLE TO THE CONTRACT WHEREIN IT WAS MENTIONED THAT M/S. OHPC HA D APPOINTED A CONSORTIUM OF CONSULTANTS FOR THE IMPLEMENTATION OF RENOVATION, MODERNIZATION AND UPGRADING WORK OF UNITS 3 & 4 OF HIRAKUND POWER HOUSE. IT WAS THUS THE SUBMISSION THAT THE ASSESSE E WAS NOT A CONSULTANT. FURTHER, HE DREW OUR ATTENTION T O PAGE 43 OF THE PAPER BOOK CONTAINING THE DEFINITION CLAU SES OF THE WORDS USED IN THE AGREEMENT. HE SPECIFICALL Y DREW OUR ATTENTION TO CLAUSE 1.13 FOR DEFINING ERE CTION TO MEAN THAT THE INSTALLATION OF ANY EQUIPMENT BY A ND UNDER THE SUPERVISION OF CONTRACTOR AND WILL INCLUD E ANY I.T.A. NO. 2353 /DEL/2008 5/28 SERVICE WHICH THE CONTRACTOR IS REQUIRED TO PERFORM AT THE SITE WITH HIS OWN AND/OR OTHER STAFF AND/OR LAB OUR FOR THE FULFILLMENT OF CONTRACT. HE FURTHER DREW OUR ATTENTION TO CLAUSE 1.20 WHICH DEFINES THE PERFORM ANCE GUARANTEE TEST/ PERFORMANCE TEST TO MEAN SUCH TEST S AS ARE PRESCRIBED IN THE SPECIFICATION TO BE DONE B Y THE CONTRACTOR BEING THE ASSESSEE HEREIN, BEFORE THE PL ANT IS FINALLY TAKEN OVER UNDER GUARANTEE BY THE PURCHASER BEING OHPC. HE ALSO DREW OUR ATTENTION TO CLAUSE 1 .27 WHICH DEFINES SUPERVISION TO MEAN SUCCESSIVE CONT ROL AND DIRECTIONS GIVEN BY THE CONTRACTOR IN RELATION TO CONTRACT WORK DURING EXECUTION OF THE CONTRACTORS AND/OR HIS SUBCONTRACTORS WORK. THE FURTHER DREW OUR ATTENTION TO CLAUSE 1.37 WHICH DEFINES THE TERM WO RKS SHALL MEAN AND INCLUDE ALL WORKS SPECIFIED OR SET F ORTH AND REQUIRED IN ANY OF THE SPECIFICATIONS, DRAWINGS AND SCHEDULES HERETO ANNEXED OR REFERRED TO OR TO BE IM PLIED THEREFROM OR INCIDENTAL THERETO OR TO BE HEREAFTER SPECIFIED OR REQUIRED IN SUCH EXPLANATORY INSTRUCTI ONS AND DRAWINGS AS SHALL FROM TIME TO TIME DURING THE PROGRESS OF THE WORK HEREBY CONTRACTED FOR, BE SUPP LIED BY THE PURCHASER AND TO BE SUPPLIED, MODIFIED/REPAIRED/RENEWED AND EXECUTED BY THE CONTRACTOR UNDER THE CONTRACT. I.T.A. NO. 2353 /DEL/2008 6/28 3. IT WAS THE SUBMISSION THAT THE WORDS AS DEFINED IN THE CONTRACT WERE TO BE GIVEN SPECIFIC MEANING AS PROVI DED IN THE CONTRACT AND NOT THE GENERAL AND COMMON MEANING OF THE TERMS. HE FURTHER DREW OUR ATTENTIO N TO SCHEDULE 2 OF THE AGREEMENT WHICH WAS THE SCOPE OF SUPPLY AND SERVICES WHEREIN CLAUSE 2.1 THE SCOPE OF THE WORK HAS BEEN SPECIFIED AS : SCOPE OF WORK: THE SCOPE OF WORK UNDER THE CONTRACT SHALL INCLUDE DESIGN, MODIFICATION, ENGINEERING, MANUFACTURE, PROCUREMENT AND SUPPLY OF NEW EQUIPMENT, COMPONENTS AND SPARES, AND SUPERVISION OF DISMANTLING SUPERVISION OF REPAIRING, SUPERVISION O F ERECTION, TESTING AND DEMONSTRATION AND ESTABLISHMENT OF PERFORMANCE GUARANTEE PARAMETERS AND SUCCESSFUL COMMISSIONING OF MATERIAL AND EQUIPMENT UNDER RENOVATION, MODERNIZATION & UPRATING OF THE UNITS 3 & 4 AND ITS ASSOCIATED FACILITIES OF HIRAKUND POWER HOUSE NO.1 AND HAND OVER TO THE PURCHASER AN OPERATING PLANT. THE SCOPE OF WORK ALSO INCLUDES SUPPLY OF EQUIPMENT/COMPONENTS REQUIRED FOR THE RENOVATION OF INTAKE GATES & HOISTS, DRAFT TUBE GATES & HOISSTS. DETAILS OF THE SCOPE OF SUPPLIES AND THEIR SPECIFICATIONS ARE DESCRIBED IN SCHEDULE 8 AND THE RELEVANT ANNEXURE. GENERAL TERMS AND CONDITIONS OF CONTRACT ARE AS STATED IN SCHEDULE 10. 4. HE FURTHER DREW OUR ATTENTION TO CLAUSE 2.2.1 BE ING THE COPY OF THE SERVICES WHICH READS AS UNDER: I.T.A. NO. 2353 /DEL/2008 7/28 2.2.1 TECHNICAL SERVICES TO BE PROVIDED BY THE CONTRACTOR SHALL GENERALLY INCLUDE THE FOLLOWING AMONGST OTHERS: A) MATERIAL TESTING, IF NECESSARY. B) BASIC DESIGN/DRAWINGS AND LAYOUT ENGINEERING C) DETAIL DESIGN/DRAWINGS AND ENGINEERING D) DRAWINGS/DATA FOR CARRYING OUT PLANT ENGINEERING AND DETAIL DESIGN INCLUDING DESIGN MODIFICATION DRAWINGS OF CIVIL, WORK AND SERVICES, WHEREVER NECESSARY. E) TECHNICAL SERVICES RELATING TO PLANNING, PROCUREMENT, MANUFACTURING, INSPECTION, EXPEDITING, PACKING, SHIPPING ETC. ALL PROCUREMENT WILL BE AS PER KFW GUIDELINES. F) PROJECT MANAGEMENT SERVICES AND COMPLETE FEED BACK DATA AND INFORMATION TO PURCHASER/CONSULTANT FOR THE SAME FOR THE CONTRACTORS SCOPE OF SUPPLY AND SERVICES. G) TRAINING OF PURCHASERS PERSONNEL. H) CONSULTANCY SERVICES, IF ANY, OBTAINED BY THE CONTRACTOR FROM ELSEWHERE. I) TECHNICAL CONSULTATION/LIAISON/GUIDANCE RELATING TO DETAIL DESIGN AND PLANT ENGINEERING BY HIS SUBCONTRACTORS. J) SUPPLIERS COORDINATION RELATING TO SITE WORK AN D OTHER ENGINEERING WORK. K) SUPERVISION OF DISMANTLING, SUPERVISION OF REPAI R, SUPERVISION OF CIVIL ENGINEERING WORK & ERECTION, INCLUDING SUPERVISION OF SPECIALIZED ERECTION SERVICES AND OTHER SUPERVISION SERVICES FOR COMPLEMENTATION OF THE RM & U WORK. L) SUPERVISION OF STARTUP TRAIL RUNS AND COMMISSIONING SERVICES. M) DEMONSTRATION AND ESTABLISHMENT OF PERFORMANCE GUARANTEE PARAMETERS. I.T.A. NO. 2353 /DEL/2008 8/28 N) QUALITY CONTROL AND ADHERENCE TO TIME SCHEDULE, CONTROL OF SITE WORK AND OTHER INDIAN WORKS. 5. IT WAS THE SUBMISSION THAT IN THE SAID CLAUSE, T HE SERVICES MENTIONED IN SUB-CLAUSE (B) TO (I) WERE OU TSIDE INDIA SERVICES AND THE WORK SPECIFIED IN SUB-CLAUSE (A), (J) TO (N) WERE THE WORK IN INDIA. IT WAS THE SUBM ISSION THAT AS PER THE SAID CLAUSE 2.2.1(J), THE ASSESSEE WAS TO COORDINATE THE SITE WORK AND OTHER ENGINEERING WORK S AND AS PER CLAUSE (K) SUPERVISE THE DISMANTLING, RE PAIR, CIVIL ENGINEERING WORK AND ERECTION AS ALSO SPECIAL IZED ERECTION SERVICES FOR THE COMPLETION OF THE WORK. IT WAS THE SUBMISSION THAT AS PER CLAUSE 2.1 EXTRACTED ABO VE, THE SCOPE OF THE WORK SHOWED THAT THE POSSESSION OF SITE TILL THE SUCCESSFUL COMMISSIONING AND THE ESTABLISH MENT OF PERFORMANCE GUARANTEE PARAMETERS AND THE HANDING OVER TO OHPC OF A COMPLETE OPERATING PLANT RESTED W ITH THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ASSES SEE WAS SOLELY RESPONSIBLE FOR THE COMPLETION OF THE PR OJECT AND HANDING OVER THE COMMISSIONED PLANT TO M/S. OHPC. IT WAS THE SUBMISSION THAT EVEN THOUGH M/S. SIEMENS INDIA LTD. HAD BEEN CONTRACTED BY OHPC FOR SUPPLYING THE LOCAL EQUIPMENT AND PARTS OF ERECTION WORK THE SAME WAS DONE WITH THE CONSENT OF THE ASSESSEE AND THE WORK HAD TO BE DONE UNDER THE I.T.A. NO. 2353 /DEL/2008 9/28 COMPLETE SUPERVISORY CONTROL OF THE ASSESSEE. HE FURTHER DREW OUR ATTENTION TO PARA 4.2.11 OF THE CO NTRACT TO SHOW THAT THE ERECTION OF THE UNIT WAS DEEMED TO BE COMPLETED ONLY WHEN ALL THE EQUIPMENTS FOR THE NORM AL FUNCTIONING OF THE UNIT WAS ERECTED AT THE SITE AND THE CERTIFICATE FOR MECHANICAL COMPLETION IS ISSUED AS PER THE TERMS OF THE SCHEDULE 10. HE FURTHER DREW OUR ATTENTION TO CLAUSE 4.2.12, WHICH SPECIFIES THAT TH E DEMONSTRATION OF THE PERFORMANCE GUARANTEE COMPLETE D WHEN THE ASSESSEE HAS DEMONSTRATED AND HAS ACHIEVED THE PERFORMANCE GUARANTEE VALUE AS PER THE SCHEDULE 9. HE FURTHER DREW OUR ATTENTION TO CLAUSE 4.2.14, WHI CH SPECIFIED THAT THE ASSESSEE SHALL RENDER TIMELY AND ADEQUATE TECHNICAL SERVICES THROUGH ITS EXPERTS TO ENSURE COMPLETION OF CIVIL WORK, ERECTION COMMISSIONING AN D DEMONSTRATING THE PERFORMANCE GUARANTEE AS PER SCHEDULE 10. HE FURTHER DREW OUR ATTENTION TO CLAU SE 4.8, WHICH SPECIFIED THE TIME SCHEDULE OF THE ACTIV ITIES WHICH READS AS UNDER: THE BAR CHART ANNEXED TO THE SCHEDULE SHOWS THAT COMMENCEMENT AND COMPLETION OF ALL ACTIVITIES LIKE DEVELOPMENT OF ENABLING WORKS, BASIC ENGINEERING AND APPROVAL, DE4TIAL DESIGN INCLUDING DESIGN MODIFICATION AND ENGINEERING, PLACEMENT OF ORDERS FOR AUXILIARIES, ISSUE OF DRAWINGS, CIVIL WORK, MANUFACTURING, INSPECTION, DELIVERY AND ERECTION OF MATERIAL & EQUIPMENT AND TESTING, TRIAL RUNS AND I.T.A. NO. 2353 /DEL/2008 10/28 COMMISSIONING INCLUDING PERFORMANCE GUARANTEE TESTS OF ALL MATERIAL & EQUIPMENT UNDER THE SCOPE O F CONTRACTOR. THESE MILESTONES SHALL BE BINDING ON T HE CONTRACTOR AND FORM AN INTEGRAL PART OF THE CONTRACT. 6. IT WAS THE SUBMISSION THAT AS PER THE TIME SCHED ULE, THE ASSESSEE WAS SOLELY RESPONSIBLE FOR THE ERECTION OF MATERIAL AND EQUIPMENT AND TESTING, TRIAL RUN AND E VEN THE CIVIL WORK AND COMMISSIONING INCLUDING THE PERFORMANCE GUARANTEE TEST OF ALL MATERIAL AND EQUIPMENT. IT WAS THE SUBMISSION THAT AS PER THE CONTRACT THE ASSESSEE WAS DUTY BOUND TO COMPLETE TH E TURNKEY PROJECT LOCK STOCK AND BARREL WITHIN THE TI ME SPECIFIED AND THE ASSESSEE HAD THE RESPONSIBILITY T O SEE TO IT THAT THE SUB-CONTRACTOR AND OTHER CONTRACTORS WHO WERE FUNCTIONING IN THE COMPLETION OF THE CONTRACT, COMPLETE THEIR ALLOTTED WORK WITHIN THE TIME FRAME ITSELF. OTHERWISE THE ASSESSEE HAS TO DO SUCH WORK TO SEE TO IT THAT THE PROJECT IS COMPLETED ON TIME. I T WAS THE SUBMISSION THAT AS PER CLAUSE 4.9 THE ASSESSEE WAS LIABLE FOR LIQUIDATED DAMAGES IN THE EVENT OF ANY F AILURE OTHER THAN THE REASON OF FORCE MAJEURE AND THOSE ATTRIBUTABLE TO OHPC. IT WAS THUS THE SUBMISSION T HAT AS PER THE TERMS OF CONTRACT ENTERED INTO BY THE AS SESSEE WITH OHPC, IT WAS THE SOLE AND EXCLUSIVE RESPONSIBI LITY I.T.A. NO. 2353 /DEL/2008 11/28 OF THE ASSESSEE TO HANDOVER THE TURNKEY PLANT FULLY FUNCTIONAL TO OHPC WITHIN THE TIME FRAME SPECIFIED. HE ALSO DREW OUR ATTENTION TO THE PROVISIONS OF SEC TION 9(VII) OF THE I. T. ACT, 1961, WHICH FOR THE BETTER UNDERSTANDING, IS EXTRACTED AS FOLLOWS: 9. (1) THE FOLLOWING INCOMES SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA:- (VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY - (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILIZED IN A BUSINESS OR PROFESSION CARRIED ON BY SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FORM ANY SOURCE OUTSIDE INDIA; OR EXPLANATION (2) FOR THE PURPOSES OF THIS CLAUSE, FEES FOR TECHNICAL SERVICES MEANS ANY CONSIDERATION INCLUDING ANY LUMP SUM CONSIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIENT CHARGEABLE UNDER THE HEAD SALARIES. 7. IT WAS THE SUBMISSION THAT AS PER EXPLANATION (2 ) TO SECTION 9(1)(VII), THE FEE FOR TECHNICAL SERVICES M EANT CONSIDERATION RECEIVED FOR RENDERING ANY MANAGERIAL , TECHNICAL OR CONSULTANCY SERVICES INCLUDING THE SUPERVISION OF SERVICES OF TECHNICAL AND OTHER PERS ONNEL I.T.A. NO. 2353 /DEL/2008 12/28 BUT DID NOT INCLUDE CONSIDERATION FOR ANY CONSTRUCT ION, ASSEMBLY, MINING OR LIKE PROJECT UNDERTAKEN BY THE RECIPIENT. IT WAS THE SUBMISSION THAT AS PER THE DEFINITION OF THE TERM SUPERVISION AS PROVIDED IN CLAUSE 1.27 OF THE AGREEMENT AND A COMPLETE READING OF CONTRACT, THE ASSESSEE WAS NOT RENDERING ANY MANAGE RIAL TECHNICAL AND CONSULTANCY SERVICES. IT WAS THE SUBMISSION THAT AS PER THE CONTRACT ITSELF, THE ASS ESSEE WAS NOT A CONSULTANT. THE WORK OF THE ASSESSEE AS PER THE CONTRACT WAS NOT MANAGERIAL IN INDIA AND NEITHE R COULD THE WORK OF THE ASSESSEE AS SPECIFIED IN THE CONTRACT BE TERMED AS A PLAIN AND SIMPLE TECHNICAL SERVICES. IT WAS THE SUBMISSION THAT THE SCOPE OF WORK AS SPECIFIED IN THE CONTRACT AND AS EXTRACTED ABOVE IN CLAUSE 2.1 OF THE CONTRACT CLEARLY SHOWED THAT THE WORK OF THE ASSESSEE INCLUDED THE DESIGN, MODIFICATION, ENGINEERING AS ALSO THE WORK OF ERECTION AND ALSO S UCH WORK WHICH WERE REQUIRED FOR THE SUCCESSFUL COMMISSIONING OF THE MATERIAL AND EQUIPMENT UP TO I TS HANDING OVER TO OHPC AN OPERATING PLANT. IT WAS TH E SUBMISSION THAT THIS WAS MORE IN THE NATURE OF CONSTRUCTION AND ASSEMBLY OF A TURNKEY POWER PLANT. IT WAS THUS A SUBMISSION THAT IN VIEW OF THE EXCLUSION AS PROVIDED IN EXPLANATION (2) TO SECTION 9(1)(VII) TH E I.T.A. NO. 2353 /DEL/2008 13/28 INCOME DERIVED BY THE ASSESSEE FROM THE CONTRACT MO RE SPECIFICALLY THE PORTION RELATING TO THE SUPERVISI ON CHARGES DURING ERECTION, STARTUP AND COMMISSIONING ETC DID NOT FALL WITHIN THE MISCHIEF OF THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT. 8. HE FURTHER DREW OUR ATTENTION TO SECTION 44BBB O F THE ACT WHICH IS EXTRACTED AS BELOW: SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF FOREIGN COMPANIES ENGAGED IN THE BUSINESS OF CIV IL CONSTRUCTION, ETC., IN CERTAIN TURNKEY POWER PROJEC TS. 44BBB (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 44AA, IN THE CASE OF AN ASSESSEE, BEING A FOREIGN COMPANY, ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION OR TH E BUSINESS OF ERECTION OF PLANT OR MACHINERY OR TESTI NG OR COMMISSIONING THEREOF, IN CONNECTION WITH A TURNKEY POWER PROJECT APPROVED BY THE CENTRAL GOVERNMENT IN THIS BEHALF, A SUM EQUAL TO TEN PER CENT OF THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT OF INDIA) TO THE SAID ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON ACCOUNT OF SUCH CIVIL CONSTRUCTION, ERECTION, TESTING OR COMMISSIONING SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. 9. IT WAS THE SUBMISSION THAT AS PER THE PROVISIONS OF SECTION 44BBB THE CONDITIONS SPECIFIED WERE (I) T HE ASSESSEE SHOULD BE A FOREIGN COMPANY, WHICH THE ASSESSEE IS, (II) IT SHOULD BE ENGAGED IN THE BUSIN ESS OF CIVIL CONSTRUCTION OR THE BUSINESS OF ERECTION OF P LANT & I.T.A. NO. 2353 /DEL/2008 14/28 MACHINERY OR TESTING AND COMMISSION THEREOF. IT WA S THE SUBMISSION THAT THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION BUT IS IN THE BUSINE SS OF ERECTION OF PLANT & MACHINERY AND IS ALSO IN THE BUSINESS OF TESTING AND COMMISSIONING OF SUCH PLANT & MACHINERY; (III) THE BUSINESS MENTIONED IN (II) ABO VE SHOULD BE IN CONNECTION WITH THE TURNKEY POWER PROJ ECT WHICH IN THE PRESENT CASE IS, AND (IV) THE SAID POW ER PROJECT SHOULD BE APPROVED BY THE CENTRAL GOVERNMEN T IN THIS BEHALF WHICH IN THE PRESENT CASE IS ALSO AD MITTED. THUS, IT WAS THE SUBMISSION THAT THE ASSESSEE FALLS WITHIN THE FOUR PARAMETERS LAID DOWN IN THE PROVISI ONS OF SECTION 44BBB AND CONSEQUENTLY THE INCOME OF THE ASSESSEE WAS LIABLE TO BE TAXED ONLY UNDER THE PROVISIONS OF SECTION 44BBB. IT WAS THE FURTHER SUBMISSION THAT THE SUBMISSION OF THE ASSESSEE COVE RS GROUNDS NOS. 2, 3 & 4 IN A CONSOLIDATED MANNER. IT WAS THE FURTHER SUBMISSION THAT IN RESPECT OF GROUND NO .6 THE ASSESSEE DID NOT WISH TO PRESS THE GROUND IN RE SPECT OF LEVY OF INTEREST U/S 234A AND 234D OF THE ACT. IT WAS THE SUBMISSION THAT ONLY IN RESPECT OF LEVY OF INTE REST U/S 234B, IT WAS THE SUBMISSION THAT AS THE INCOME OF THE ASSESSEE WAS LIABLE FOR TDS UNDER THE PROVISION S OF SECTION 195, NO INTEREST U/S 234B WAS LEVIABLE IN V IEW I.T.A. NO. 2353 /DEL/2008 15/28 OF THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL I N THE CASE OF MOTOROLA REPORTED IN 95 ITD 269 (DEL.) (S.B .). 10. IN REPLY, THE LD. D.R. SUBMITTED THAT IN VIEW O F THE FACT THAT THE ASSESSEE HAD NOT PRESSED GROUND NO.5 OF TH E ASSESSEES APPEAL THE EXISTENCE OF PE OF THE ASSESS EE IN INDIA STOOD AFFIRMED. IT WAS THE SUBMISSION THAT I T IS ADMITTED, THAT UNDER THE PROVISIONS OF SECTION 44BB B, THE REQUIREMENT THAT THE PROJECT IS A TURNKEY POWER PROJECT, IS ADMITTED THAT THE POWER PROJECT IS APPR OVED BY THE CENTRAL GOVERNMENT, IS ADMITTED, THAT THE ASSESSEE IS A FOREIGN COMPANY IS ALSO ADMITTED. IT IS ALSO ADMITTED THAT THE BUSINESS OF THE ASSESSEE IS NOT CIVIL CONSTRUCTION, HOWEVER IT WAS DISPUTED THAT TH E BUSINESS OF THE ASSESSEE IS ERECTION OF PLANT & MACHINERY. NOR IS THE ASSESSEE IN THE BUSINESS OF TESTING OR THE BUSINESS OF COMMISSIONING ANY SUCH TURNKEY POWER PROJECT. IT WAS ALSO THE SUBMISSION THAT THE BUSINESS OF ERECTION OF PLANT & MACHINERY AND TESTING AND COMMISSIONING THEREOF WAS TO BE READ TOGETHER IN CONNECTION WITH THE TURNKEY POWER PROJE CT APPROVED BY THE CENTRAL GOVERNMENT AND THE TESTING AND THE COMMISSIONING WAS NOT TO BE READ DISJUNCT O F THE BUSINESS OF ERECTION OF PLANT & MACHINERY. HE FURTHER DREW OUR ATTENTION TO THE CONTRACT ENTERED INTO BY I.T.A. NO. 2353 /DEL/2008 16/28 THE ASSESSEE WITH OHPC IN ARTICLE 1.1 AND 1.2 WHICH READS AS FOLLOWS: ARTICLE 1: 1.1 IN CONSIDERATION OF THE PRICE OF EURO 12 817 348 (TWELVE MILLION EIGHT HUNDRED SEVENTEEN THOUSAND THREE HUNDRED FORTY EIGHT EURO) TO BE PAID BY THE PURCHASER TO THE CONTRCTOR, THE CONTRACTOR HEREBY COVENANTS WITH THE PURCHASER TO UNDERTAKE DESIGN INCLUDING DESIGN MODIFICATION, ENGINEERING, MANUFACTURE, SHOP TESTIN G AND INSPECTION FOR AND SUPPLY OF IMPORTED EQUIPMENT AND MATERIALS INCLUDING COMMISSIONING SPARES, MANDATORY SPARES, SPARS FOR TWO YEARS NORMAL OPERATION AND MAINTENANCE, DRAWINGS AND DOCUMENTS ON CIF BASIS (INCOTERMS 2000), TRAINING OF PURCHASERS PERSONNEL IN GERMANY AND SUPERVISION OF ERECTION, TESTING, COMMISSIONING AND DEMONSTRATION, AND ESTABLISHMENT OF PERFORMANCE GUARANTEE PARAMETERS AND HANDING OVER REQUIRED FOR RENOVATION. MODERNIZATION & UPRATING WORK AS DETAILED IN SCHEDULE 2 SCOPE OF SUPPLIES AND SCHEDULE 8 CONTRACT SPECIFICATION TO THIS CONTRACT SUBJECT TO AND ON THE TERMS AND CONDITIONS CONTAINED HEREINAFTER. 1.2 THE CONTRACTOR SHALL BE SOLELY RESPONSIBLE AND UNDERTAKE FULL AND EXCLUSIVE RESPONSIBILITY TOWARDS THE PURCHASER FOR TIMELY MANUFACTURE AND SUPPLY OF IMPORTED EQUIPMENT AND MATERIALS COMPLETE IN ALL RESPECTS AND PROVIDE SUPERVISION SERVICES IN ACCORDANCE WITH THE CONTRACT SPECIFICATION AS PER SCHEDULE 8 AND WITHIN THE TIME SCHEDULE AS PER SCHEDULE 4 OF THE CONTRACT. I.T.A. NO. 2353 /DEL/2008 17/28 11. IT WAS THE SUBMISSION THAT THE ARTICLE 1.1 AND 1.2 OF THE CONTRACT CLEARLY SPECIFIES THAT THE CONTRACT WAS FO R THE SUPPLY OF DESIGN, EQUIPMENT AND THE SUPERVISION OF THE ERECTION, TESTING, COMMISSIONING AND DEMONSTRATION AND ESTABLISHMENT OF PERFORMANCE GUARANTEE PARAMETERS. IT WAS THE SUBMISSION THAT THE CONTRACT WAS A PURELY SUPERVISION CONTRACT IN RESPECT OF ERECTION, TESTIN G & DEMONSTRATION OF ESTABLISHMENT OF PERFORMANCE GUARANTEE PARAMETERS. HE FURTHER DREW OUR ATTENTIO N TO PAGE 5 OF THE ORDER OF LD. CIT(A) WHEREIN THE LD. CIT(A) HAD SPECIFICALLY RECORDED THAT THE SCOPE OF WORK OF SIEMENS LTD. (INDIAN COMPANY) UNDER THE AGREEMEN T INCLUDED THE SUPPLY OF INDIGENOUS EQUIPMENT, PLANNI NG, DISMANTLING, REPAIRING AND ERECTION, TESTING AND COMMISSIONING. IT WAS THE SUBMISSION THAT THE ASSE SSEE HAD GUARANTEED TO OHPC THE DUTY PERFORMANCE AND CONTRACTUAL OBLIGATION BY SIEMENS LTD. AND THIS WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT(A). IT WAS THE SUBMISSION THAT THE SIEMENS LTD. WAS CAPABL E OF ERECTION AND COMMISSIONING AND HAD DONE IT. IT WAS THE FURTHER SUBMISSION THAT IT WAS NOT THE ASSESSEE WHO HAD DONE THE COMPLETION OF THE CONTRACT IN INDIA BU T THE ASSESSEE HAD BEEN CONTRACTED THE WORK TO A SUB- CONTRACTOR WHO HAD DONE THE WORK ON BEHALF OF THE I.T.A. NO. 2353 /DEL/2008 18/28 ASSESSEE AND THE EMPLOYEES OF THE ASSESSEE HAD ONLY VISITED INDIA IN CONNECTION WITH THE SUPERVISION WO RK AND FOR THE FINAL TESTING AND ESTABLISHMENT OF PERFORMANCE GUARANTEE PARAMETERS. IT WAS THE SUBMISSION THAT THE ASSESSEE WAS ONLY SUPERVISING T HE ERECTION, TESTING AND COMMISSIONING WORK DONE BY SIEMENS LTD. AND IT DID NOT MAKE THE WORK OF SIEMEN S LTD. THE WORK OF THE ASSESSEE IN SO FAR AS THE ASSE SSEE DID NOT HAVE ANY CONTRACTUAL AGREEMENT WITH SIEMENS LTD. THE CONTRACTUAL AGREEMENT WAS BETWEEN THE ASSESSEE AND THE OHPC AND THE AGREEMENT WITH SIEMENS LTD. WAS WITH OHPC AND THERE WAS NO TRIPARTITE AGREEMENT. IT WAS THE FURTHER SUBMISSIO N THAT THE PERFORMANCE GUARANTEE TEST WAS BASICALLY TO TES T WHETHER THE ERECTIONS AS DONE BY SIEMENS UNDER THE SUPERVISION OF THE ASSESSEE WAS PROPERLY DONE. IT WAS THE FURTHER SUBMISSION THAT THE SUPERVISION RESPONSIBILITY OF THE ASSESSEE EXTENDED TO THE LAST STAGE TO SEE TO IT THAT THE ERECTION AND COMMISSIONING HA D BEEN DONE PROPERLY PRIOR TO THE HANDING OVER OF THE PROJECT. IT WAS THE FURTHER SUBMISSION THAT IN THE PROVISIONS OF SECTION 44BBB THE WORDS USED WERE BUSINESS OF ERECTION OF PLANT & MACHINERY AND THE T ERM SUPERVISION WAS ABSENT. IT WAS THE SUBMISSION THAT IT I.T.A. NO. 2353 /DEL/2008 19/28 WAS NOT AS IF THE LEGISLATURE DID NOT UNDERSTAND TH E MEANING OF THE CONCEPT OF SUPERVISION REGARDING PROVIDING THE SERVICES AS IN THE PROVISIONS OF SECT ION 44BB THE WORDS BUSINESS OF PROVIDING SERVICES OR FACILITIES IS USED. IT WAS THE FURTHER SUBMISSION THAT EXPLANATION (2) TO SECTION 9(1)(VII) PROVIDED FOR T HE EXCLUSION OF RECEIPTS FOR CONSTRUCTION, ASSEMBLY, M INING OR LIKE PROJECTS UNDERTAKEN BY THE RECIPIENT. IN T HE ASSESSEES CASE, THE ASSESSEE DID NOT RECEIVE ANY CONSIDERATION FOR ANY CONSTRUCTION OR ASSEMBLY OR MINING OR LIKE PROJECTS BUT THE ASSESSEE HAD RECEIV ED SUPERVISORY CHARGES FOR THE TECHNICAL SERVICES PROV IDED BY THE ASSESSEE AND CONSEQUENTLY THE ASSESSEES CAS E DID NOT FALL WITHIN THE EXCLUSION PROVIDED IN EXPLANATI ON (2) TO SECTION 9(1(VII). IT WAS THE FURTHER SUBMISSION THAT AS PER CLAUSE 2.1 OF CONTRACT, WHICH SPECIFIES THE SCO PE OF WORK, ASSEMBLING WAS NOT PROVIDED. THUS, IT WAS T HE SUBMISSION THAT THE CASE OF THE ASSESSEE DID NOT FA LL WITHIN THE EXCLUSION PROVIDED IN EXPLANATION (2) TO SECTION 9(1)(VII)NOR DID IT FALL WITHIN THE PROVISI ONS OF SECTION 44BBB BUT IT WAS A PURELY SUPERVISORY WORK THE CONSIDERATION FOR WHICH WAS IN THE NATURE OF FEE FO R TECHNICAL SERVICES WHICH F ALLS WITHIN THE PROVISIO NS OF SECTION 9(1) (VII) AND CONSEQUENTLY WAS RIGHTLY TAX ED BY I.T.A. NO. 2353 /DEL/2008 20/28 APPLYING THE PROVISIONS OF ARTICLE 7 OF DTAA WITH GERMANY READ WITH SECTION 44D AND SECTION 115A OF THE I. T. ACT. 12. IN REPLY THE LD. A.R. SUBMITTED THAT SECTION 44 BB IS IN RESPECT OF EXPLORATION FOR MINERALS OILS AND IT APP LIES TO A DIFFERENT SET OF ACTIVITIES, WHICH DID NOT HAVE A NY ASSEMBLY OR COMMISSIONING BUT WAS PURELY SERVICE- ORIENTED ACTIVITIES. IT WAS THE SUBMISSION THAT TH E CONTRACT ENTERED INTO BY THE ASSESSEE WITH OHPC WAS A CONTRACT FOR PROVIDING A TURNKEY POWER PLANT AND IN SETTING UP A TURNKEY POWER PLANT THE ASSESSEE HAD T O DO ASSEMBLY, COMMISSIONING, ERECTION AND TESTING OF TH E PLANT AND MACHINERY AND THE DEFINITION OF SUPERVISO RY ACTIVITIES AS SPECIFIED IN THE CONTRACT CLEARLY SHO WED THAT IT WAS NOT A SIMPLE CLAUSE OF SUPERVISION PER SE BU T AN IN DEPTH INVOLVEMENT OF THE ASSESSEE IN THE ERECTION, TESTING AND COMMISSIONING OF THE PLANT AND MACHINER Y WHICH HAVE BEEN IMPORTED FORM GERMANY AS ALSO LOCALLY SOURCED. IT WAS THE FURTHER SUBMISISON THA T THE ASSESSEE WAS IN THE POSSESSION AND CONTROL OF TOTAL PLANT TILL THE SUCCESSFUL COMMISSIONING, COMPLETION AND PERFORMANCE GUARANTEE TEST AND HANDING OVER OF THE FUNCTIONAL TURNKEY POWER PLANT TO OHPC. THIS WAS T HE SUBMISSION THAT THE ASSESSEE WAS LIABLE TO BE ASSES SED I.T.A. NO. 2353 /DEL/2008 21/28 ONLY BY APPLYING THE PROVISIONS OF SECTION 44BBB OF THE ACT. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE ORDERS OF THE LOWER AUTHORITIES AND THE PAPER B OOK FILED BY THE ASSESSEE. HERE WE WOULD LIKE TO REFER TO THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH M/S VOI TH SIEMENS HYDRO PRIVATE LIMITED (VSHPL) ON 1 ST OCTOBER 2003. THIS AGREEMENT WAS FOUND AT PAGES 12 AND 13 OF THE PAPER BOOK. THIS AGREEMENT IT IS FOUN D HAS BEEN PRODUCED BEFORE BOTH THE LOWER AUTHORITIES BUT NEITHER HAS REFERRED FROM THE SAME. EVEN IN THE COU RSE OF THE ARGUMENTS, OTHER THAN REFERRING TO THIS AGRE EMENT AS THE AGREEMENT IN REGARD TO THE SUB-CONTRACTING O F THE CONTRACT WORK ENTERED INTO BY THE ASSESSEE WITH OHP C, NO DETAILED REFERENCE HAS BEEN MADE TO IT. BUT THIS AGREEMENT, IT IS NOTICED DOES GIVE A CLEAR PICTURE OF THE NATURE OF THE WORK AND THE SCOPE OF WORK OF THE ASS ESSEE IN THE MAIN CONTRACT WITH OHPC. FOR BETTER APPRECIA TION THE SAID CONTRACT IS EXTRACTED HERE:- AGREEMENT THIS AGREEMENT IS MADE ON 1 ST DAY OF OCTOBER, TWO THOUSAND AND THREE. BETWEEN I.T.A. NO. 2353 /DEL/2008 22/28 VOITH SIEMENS HYDRO KRAFTWORKSTECHNIK GMBH & CO. KG HAVING ITS REGISTERED OFFICE AT ALEXANDERSTR. 11 , D- 89522 HEIDENHEIM, GERMANY, HEREINAFTER REFERRED TO AS VSHK AND SHALL INCLUDE ITS SUCCESSORS AND PERMITT ED ASSIGNS ON ONE PART. AND VOITH SIEMENS HYDRO PRIVATE LIMITED, HAVING ITS REGISTERED OFFICE AT PO INDUSTRIAL ESTATE, NACHARAM , HYDERABAD 500076(A.P.), INDIA, AND HEREINAFTER REFERRED TO AS VSID AND SHALL INCLUDE ITS SUCCESS ORS AND PERMITTED ASSIGNS ON THE OTHER PART. HEREINAFTER INDIVIDUALLY REFERRED O AS VSHK OR VSID AS THE CASE MAY BE OR PARTY OR COLLECTIVEL Y REFERRED TO AS PARTIES. WHEREAS VSHK ENTERED INTO AN AGREEMENT WITH ORISSA HYDRO POWER CORPORATION (OHPC) FOR EXECUTION OF THE CONTRACT FOR RENOVATION, MODERNIZATION AND UPRATING OF UNITS 3 & 4 OF HIRAKU ND POWER HOUSE NO.1 AT BURLA, ORISSA. WHEREAS THE SCOPE OF WORK ALSO INCLUDES SUPERVISION OF DISMANTLING, SUPERVISION OF REPAIRING AND SUPERV ISION OF ERECTION AND WHEREAS VSID HAS EXPRESSED ITS INTEREST IN CARRYING OUT THE SUPERVISORY SCOPE OF W ORK. IT IS NOW MUTUALLY AGREED THAT THE SUPERVISORY SCOP E OF WORK BE SUB-CONTRACTED BY VSHK TO VSID. NOW THEREFORE THE PARTIES HERETO HEREBY AGREE AS UNDER: 1. THE SUB-CONTRACTOR SHALL PERFORM THE SUPERVISION SERVICES MEETING THE REQUIREME4NTS AND TERMS OF THE MAIN CONTRACT. I.T.A. NO. 2353 /DEL/2008 23/28 2. THE PARTIES HEREBY AGREE TO AMEND OR MODIFY ANY PROVISION OF THIS AGREEMENT WHICH IS DECLARE INVALI D OR CONTRARY TO LAW, CONSISTENT WITH THE ECONOMIC OBJECT OF THE PROJECT THEREOF. 3. ANY DIFFERENCE OR DISPUTE ARISING FROM THIS CONT RACT, SHALL BE SETTLED BY AN AMICABLE EFFORT OF THE PARTI ES CONCERNED. 4. VSID WILL CHARGE VSHK AT THE FOLLOWING FIXED RAT S FOR CARRYING OUT THE SUPERVISORY SERVICES: MAIN SUPERVISOR :EURO 11,000 PER CALENDAR MONTH ASSTT. SUPERVISOR : EURO 8,000 PER CALENDAR MONTH IN ADDITION VSHK SHALL ALSO REIMBURSE ASSOCIATED TRAVEL COSTS INCURRED BY VSID. IN WITNESS WHEREOF THE PARTIES HERETO HAVE SIGNED THIS AGREEMENT AT NEW DELHI BY THEIR DULY AUTHORIZED REPRESENTATIVES ON THE DATE, MONTH & YEA R FIRST MENTIONED HEREINABOVE. FOR & ON BEHALF OF FOR & ON BEHALF OF VOITH SIEMENS HYDRO VOITH SIEMENS KRAFTWERKSTECHNIK HYDRO P. LTD. GMBH & CO.KG SD./- SD./- PLACE: NEW DELHI NEW DELHI DATE: 01.10.2003 01.10.2003 IN PRESENCE OF WITNESSES: 1. I.T.A. NO. 2353 /DEL/2008 24/28 2. 13.1 A PERUSAL OF THE ABOVE MENTIONED AGREEMENT CLE ARLY SHOWS THAT THE ASSESSEE HAS SUB-CONTRACTOR THE SUPERVISI ON SERVICES THAT THE ASSESSEE WAS TO DO UNDER THE MAI N CONTRACT BETWEEN HE ASSESSEE AND OHPC. THUS ACCEPTI NG THE ARGUMENTS OF THE ASSESSEE THAT THE TERMS OF THE CONTRACT ARE TO BE GIVEN THE MEANING AS SPECIFIED IN THE AGR EEMENT AND NOT THE ORDINARY OR GENERAL MEANING, IF THE SUB CONTRACT AGREEMENT IS SEEN, THE SUB CONTRACTOR IS T O PERFORM THE SUPERVISION SERVICES MEETING THE REQUIREMENTS A ND TERMS OF THE MAIN CONTRACT BEING THE ONE BETWEEN TH E ASSESSEE AND OHPC. FOR THIS PURPOSE THE ASSESSEE HA S AGREED TO PAY THE SUB-CONTRACTOR EURO 11,000/- PER CALENDAR MONTH PER MAIN SUPERVISOR AND EURO 8,000/- PER CALENDAR MONTH PER ASSISTANT SUPERVISOR. WHAT IS NO TICED HERE IS THAT AS PER THE SUB-CONTRACT THE PAYMENT IS NOT FOR ANY CONSTRUCTION WORK OR ANY ASSEMBLY WORK OR ANY DISMANTLING OR REPAIR OR ERECTION WORK THAT IS TO B E DONE BY THE SUB-CONTRACTOR. THE SUB-CONTRACT IS FOR THE SUP PLY OF SUPERVISORS FOR THE SUPERVISION OF THE PROJECT CONT RACT ENTERED INTO BY THE ASSESSEE WITH OHPC. HERE IT IS ALSO NOTICED THAT THE ASSESSEE HAS NOT PRODUCED BEFORE A NY OF THE LOWER AUTHORITIES OR BEFORE US ANY EVIDENCE TO SHOW HOW THE ASSESSEE OR THE ASSESSEE THRU ITS SUB-CONTR ACTOR HAS I.T.A. NO. 2353 /DEL/2008 25/28 INDULGED IN ANY ACTIVITIES, WHICH CAN BE TERMED CONSTRUCTION, ASSEMBLY OR ERECTION. THE ASSESSEE IF HAS INDULGED IN ANY OF THE SAID ACTIVITIES WOULD HAVE I NCURRED SUBSTANTIAL EXPENSES IN THE FORM OF WAGES, TOOLS, E TC. NO SUCH EXPENSES HAVING BEEN INCURRED HAVE BEEN SHOWN. JUST BECAUSE THE EMPLOYEES OF THE ASSESSEE OR ITS SUB-CO NTRACTOR HAVE GIVEN DIRECTIONS TO THE PERSONAL WORKING AT TH E SITE BUT EMPLOYED WITH ANOTHER CONTRACTOR IT CANNOT BE S AID THAT THE ASSESSEE HAS DONE THE BUSINESS OF ERECTION OR T HE WORK OF ASSEMBLY OF THE PLANT OR MACHINERY. IN SUCH CIRCUMSTANCES IT CAN ONLY BE SAID THAT THE ASSESSEE HAS DONE THE WORK OF SUPERVISION SIMPLICITER. EVEN THOU GH IN THE CONTRACT BETWEEN THE ASSESSEE AND OHPC THE TERM 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 GENERAL MEA NING. 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 I.T.A. NO. 2353 /DEL/2008 26/28 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 SECTION 44BBB, OR TO FALL WITH IN THE MEANING OF THE TERMS, 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 PHYSICAL AC TIVITIES OF THE BUSINESS OF ASSEMBLY OR ERECTION OF THE PLANT O R MACHINERY OR TESTING OR COMMISSIONING OF THE POWER PROJECT BUT HAS ONLY DONE THE SUPERVISION SIMPLICIT ER OF THE SAME THE ASSESSEE WOULD NOT BE ELIGIBLE TO BE TAXED UNDER THE PROVISIONS OF SECTION 44BBB NOR WOULD THE RECEI PTS FALL WITHIN THE EXCLUSIONS PROVIDED IN EXPLANATION 2 TO SECTION 9 (1) OF THE ACT. FURTHER AS THE ASSESSEE H AS ALSO NOT CHALLENGED THE EXISTENCE OF THE PERMANENT ESTABLISH MENT IN INDIA, THE FINDINGS OF THE AO AND THE LD. CIT(A) IN HOLDING THAT THE BUSINESS PROFITS OF THE ASSESSEE I S FROM THE SUPERVISION CHARGES ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES FROM THE RENDERING OF SUPERVISION SERVICE S IN CONNECTION WITH THE ERECTION, TESTING AND COMMISSIO NING OF THE POWER PROJECT IS LIABLE TO BE UPHELD AND WE DO SO. IN THE CIRCUMSTANCES THE FINDING OF THE LD. CIT(A) THA T THE I.T.A. NO. 2353 /DEL/2008 27/28 PROVISIONS OF ARTICLE 7 OF THE DTAA READ WITH SECTI ON 44D AND SECTION 115A OF THE ACT APPLY TO THE BUSINESS P ROFITS OF THE ASSESSEE IS UPHELD. CONSEQUENTLY GROUNDS 2 TO 5 OF THE ASSESSES GROUNDS OF APPEAL ARE DISMISSED. 13.2 AS THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 6 IN REGARD TO THE LEVY OF INTEREST UNDER SECTION 234A AND 234D , THE SAME ARE DISMISSED AS NOT PRESSED. IN REGARD TO THE GROUND AGAINST THE LEVY OF INTEREST UNDER SECTION 234 B IT IS NOTICED THAT THE RECEIPTS OF THE ASSESSEE ARE LIABL E FOR TAX DEDUCTION UNDER THE PROVISIONS OF SECTION 195 OF TH E ACT. IT IS ALSO NOTICED THAT M/S OHPC HAS DEDUCTED TAX AT S OURCE ON THE PAYMENTS MADE TO THE ASSESSEE. WHETHER THE TA X DEDUCTED A SOURCE HAS BEEN CORRECTLY DEDUCTED OR NO T IS NOT THE ISSUE BEFORE US, BUT THE FACT REMAINS 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 A LLOWED. I.T.A. NO. 2353 /DEL/2008 28/28 14. GROUNDS NO. 1 AND 7 OF THE ASSESSEES APPEAL ARE GENERAL IN NATURE AND DOE NOT CALL FOR ANY ADJUDICATION. 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. 16. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 05 TH MARCH 2010. SD./- SD./- (K. G. BANSAL) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:05 TH MAR., 2009 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI
