Sumitomo Corporation, Delhi V. DDIT, New Delhi

ITA 3676/DEL/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0301 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2002-2003
• Appeal Filed On: 20-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; Business expenditure; Residential status; Double taxation relief; Principle of natural justice; Permanent establishment; Non-deduction of tax; Commercial expediency; Revised return; TDS
• Section: 244A; 142(1); 5(2); 234B; 195

Judgement Text

1 ITA NOS. 3675/DEL/2014 & ORS IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRE SIDENT AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 3675/DEL/2 014 (A.Y 2001-02) I.T.A. NO. 3676/DEL/2 014 (A.Y 2002-03) I.T.A. NO. 3677/DEL/2 014 (A.Y 2003-04) SUMITOMO CORPORATION G-195, SARITA VIHAR NEW DELHI AABCS6011P (APPELLANT) VS DDIT CIRCLE-2(2) INTERNATIONAL TAXATION NEW DELHI (RESPONDENT) I.T.A. NO. 3695/DEL/2014 (A.Y 2001-02) I.T.A. NO. 3696/DEL/2014 (A.Y 2002-03) I.T.A. NO. 3713/DEL/2014 (A.Y 2003-04) I.T.A. NO. 3714/DEL/2014 (A.Y 2004-05) DDIT CIRCLE-2(2) NEW DELHI (APPELLANT) VS SUMITOMO CORPORATION G-195, SARITA VIHAR NEW DELHI AABCS6011P (RESPONDENT) I.T.A. NO. 5964/DEL/201 0 (A.Y 2007-08) SUMITOMO CORPORATION C/O. RKM & ASSOCIATES D-44, KALKAJI NEW DELHI AABCS6011P (APPELLANT) VS ADDL. CIT(A) RANGE-2, INTERNATIONAL TAXATION NEW DELHI I.T.A. NO. 1114/DEL/2015 (A.Y 2010-11) SUMITOMO CORPORATION G-195, SARITA VIHAR NEW DELHI AABCS6011P (APPELLANT) VS DCIT CIRCLE-3(1)(2), INTERNATIONAL TAXATION NEW DELHI I.T.A. NO. 6384/DE L/2015 (A.Y 2011-12) I.T.A. NO. 6385/DE L/2015 (A.Y 2012-13) 2 ITA NOS. 3675/DEL/2014 & ORS SUMITOMO CORPORATION G-195, SARITA VIHAR NEW DELHI AABCS6011P (APPELLANT) VS DCIT (INTERNATIONAL TAXATION) CIRCLE-3(1)(2), NEW DELHI APPELLANT/RESPONDENT BY SH. C. S. AGARWAL, SR. ADV, SH. RAVI P. MALL, ADV & SH. MANISH BANSAL, CA RESPONDENT/APPPELLANT BY SH. G. K. DHALL, CIT(DR), INTL. ORDER PER SUCHITRA KAMBLE, JM THESE APPEALS ARE FILED BY THE ASSESSEE AND THE REV ENUE AGAINST THE SEPARATE ORDERS PASSED BY CIT(A) AS WELL AS BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2001-02, 2002-03, 2003-04, 2004-05 , 2007-08, 2010-11, 2011-12 AND 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 3695/DEL/2014 (A.Y. 2001-02) REVENUES APPEAL 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A PERMANENT ESTABLISHMENT ('PE') IN RELATION TO VARIOUS CONTRAC TS FOR SUPPLIES AND SERVICES EXECUTED IN INDIA FOR M/S MARUTI UDYOG LIMITED ('MU L'). 1.1) THE LD CIT(A) HAS ERRED IN IGNORING THE FINDINGS O F THE ASSESSING OFFICER ('AO') THAT THE ASSESSEE HAD A FIXED-PLACE PE IN IN DIA IN RELATION TO THE CONTRACTS FOR SUPPLIES EXECUTED FOR M/S MUL IN THE FORM OF A LONG-STANDING PRESENCE AT M/S MUL'S SITE IN INDIA AND WHICH OPERA TED AS AN EFFECTIVE SYSTEM TO KNOW THE REQUIREMENTS OF M/S MUL, TO NEGO TIATE THE PURCHASE DATE OF HEARING 15.04.2019 DATE OF PRONOUNCEMENT 01.07.2019 3 ITA NOS. 3675/DEL/2014 & ORS ORDERS, TO PROCURE PURCHASE ORDERS ETC. 1.2) WITHOUT PREJUDICE TO THE FOREGOING, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A SUPERVISORY PE IN RELAT ION TO THE SERVICES OF INSTALLATION, TESTING, COMMISSIONING ETC OF EQUIPME NTS 1.3) THE LD. CIT(A) HAS ERRED IN MECHANICALLY FOLLOWING THE JUDGMENT OF THE HON'BLE ITAT IN ASSESSEE OWN CASE FOR ASSTT YEARS 1 992-93 TO 1994-95 & 1996-97, NOT APPRECIATING THE FACT THAT THE ISSUE O F EXISTENCE OR CONSTITUTION OF THE PE IS ALWAYS YEAR-SPECIFIC AND THEREFORE THE FI NDING WITH REGARDS TO THE EXISTENCE OF PE HAS TO BE EXAMINED AFRESH IN EACH Y EAR ON THE BASIS OF FACTS SPECIFIC TO THE YEAR UNDER CONSIDERATION. 1.4) WITHOUT PREJUDICE TO THE FOREGOING, THE ISSUE OF C ONSTITUTION OF PE IN THOSE YEARS HAS NOT YET ACHIEVED FINALITY AS THE REVENUE HAS FILED A MISCELLANEOUS APPLICATION ('MA') BEFORE THE HON'BLE ITAT TO THE E FFECT THAT THERE ARE MISTAKES APPARENT FROM RECORD REGARDING ASSUMPTION OF FACTS ON THE BASIS OF WHICH DECISION WAS RENDERED BY HON'BLE ITAT. 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT NO PORTION OF THE ASSESSE E'S INCOME FROM THE ACTIVITY OF SUPPLIES OF EQUIPMENTS TO M/S MUL IS TAXABLE IN INDIA 2.1) THE LD CIT(A) HAS ERRED IN HOLDING THAT NO OPERATIO NS IN RELATION TO THE SUPPLIES OF EQUIPMENTS TO MUL WERE UNDERTAKEN IN IN DIA, NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS A PE IN INDIA IN THE FOR M OF LONG-STANDING PRESENCE IN INDIA IN RELATION TO THE SUPPLIES BEING MADE AND SERVICES BEING RENDERED TO MUL FOR THE PAST SEVERAL YEARS. THEREFORE, THE RELI ANCE BY THE LD CIT(A) ON THE JUDGMENT IN THE CASE OF M/S ISHIKAWAJIMA HARIMA HEA VY INDUSTRIES LTD [288 ITR 408 (SC)] WAS MISPLACED AS THE FACTS OF THE CAS E ARE DISTINGUISHABLE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE FACTS, THE LD CIT(A) ERRED IN ING THAT THE REVENUES RECEIVED BY THE ASSE SSEE FROM M/S MUL ON ACCOUNT OF YISORY SERVICES IS CHARGEABLE TO TAX UND ER ARTICLE 12(2) OF THE INDIA- JAPAN DTAA. 3.1. THE LD CIT(A) HAS ERRED IN NOT APPRECIATING TH E FACT THAT THE PROVISIONS OF ARTICLE 12(2) * ARE NOT APPLICABLE WH ERE FEE FOR TECHNICAL 4 ITA NOS. 3675/DEL/2014 & ORS SERVICES HAS BEEN RECEIVED ON ACCOUNT OF SERVICES R ENDERED THROUGH A PE IN INDIA AND SINCE IN THE CASE OF ASSESSEE, THE FEE FO R TECHNICAL SERVICES ARE EFFECTIVELY CONNECTED WITH ITS PE IN INDIA, THE SAI D REVENUE IS LIABLE TO TAX UNDER SECTION 115A OF THE ACT, READ WITH THE PROVIS IONS OF ARTICLE 7 AND ARTICLE 12(5) OF THE INDIA- JAPAN DTAA. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S 234B OF THE ACT AND IN OBSERVING THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION IN THE CASE OF M /S JACABS CIVIL INCORPORATED, MISTUBISHI CORPN & OTHERS [330 ITR 57 8, DELHI. 4.1. THE LD CIT (APPEALS) HAS ERRED IN NOT APPRECI ATING THE FACT THE CASE DOES NOT LAY DOWN A GENERAL PROPOSITION OF LAW THAT INTEREST U/S 234B IS NOT CHARGEABLE IN ALL CASES, PARTICULARLY IN CASES WHER E THE NON-RESIDENT ASSESSEE/PAYEE/DEDUCTEE HAS PLAYED A ROLE IN INDUCI NG NON-DEDUCTION OR SHORT-DEDUCTION ON THE PART OF THE PAYER/DEDUCTOR. 4.2. THE LD CIT(APPEALS) HAS ERRED IN FAILING TO T AKE NOTE OF THE OBSERVATIONS OF THE HON'BLE HIGH COURT IN THE CASE OF M/S MITSUBISHI [330 ITR 578, DEL] THAT THE ROLE OF THE ASSESSE/PAYEE/DEDUCT EE IN SHORT-DEDUCTION OR NON-DEDUCTION OF TAX NEEDS TO BE ASCERTAINED BEFORE CLAIM REGARDING NON- LIABILITY TO INTEREST U/S 234B OF THE ACT IS ACCEPT ED, A PROPOSITION AFFIRMED SUBSEQUENTLY IN THE CASE OF M/S ALCATEL LUCENT (JUD GEMENT OF DELHI HIGH COURT DATED 7.11.2013 IN ITA NO. 327 & ORS OF 2012) AND F OLLOWED BY ITAT DELHI IN THE ORDER DATED 13.06.2014 IN THE CASE OF NORTEL NE TWORK INDIA INTERNATIONAL INC. (ITA NO. 4766/DEL/2011). 3. THE ASSESSEE IS A COMPANY INCORPORATED AS PER TH E LAWS OF JAPAN UNDER TAX RESIDENT IN JAPAN. IT HAD A TRADING HOUSE AND HAD BEEN HAVING LIAISON OFFICE (LO) IN INDIA AT NEW DELHI SINCE 1956 AND HA D SUB LIAISON OFFICES AT MUMBAI, CHENNAI, BANGALORE AND CALCUTTA. THE L.O I N NEW DELHI WAS ESTABLISHED WITH THE APPROVAL OF RESERVE BANK OF IN DIA (RBI) FOR FACILITATING IMPORTS FROM JAPAN AND EXPORTS FROM INDIA. AFTER T HE INTRODUCTION OF THE FERA 5 ITA NOS. 3675/DEL/2014 & ORS IN 1973 ITS LICENSE WAS EXTENDED BY THE RBI OF CONT INUING ITS ACTIVITY. THE LO ACTED AS THE COMMUNICATION CHANNEL BETWEEN INDIAN I MPORTERS AND THE ASSESSEE TO SOLD THEIR GOODS TO THE INDIAN IMPORTE RS ON A PRINCIPAL TO PRINCIPAL BASIS. DURING THE ASSESSMENT YEAR UNDER CONSIDERA TION, THE ASSESSEE HAD VARIOUS PRODUCTS IN HAND ESPECIALLY POWER PROJECTS WHICH WERE BEING EXECUTED THROUGH ITS PROJECT OFFICE SITUATED IN INDIA. THE FOLLOWING WERE THE PROJECTS IN THE HAND OF THE ASSESSEE DURING THE YEAR UNDER QUES TION:- 1. VIJJESHWARAM PROJECT OF APGPCL. 2. BASIN BRIDGE PROJECT FOR TAMIL NADU ELECTRICITY PROJECT. 3. MUL PROJECT FOR MARUTI UDYOG LIMITED. 4. KOYNA HYDRO ELECTRIC PROJECT 5. SARDAR SAROVAR PROJECT THERE WERE NO OFFICES IN RESPECT OF SUPPLY MADE TO M/S MUL, AS PER SUBMISSIONS OF THE ASSESSEE DURING THE ASSESSMENT P ROCEEDINGS. RETURN OF INCOME FOR THE ASSESSMENT YEAR 2001-02 WAS FILED ON 30/10/2001 DECLARING TOTAL INCOME AT RS. 14,73,22,612/-. THE SAME WAS P ROCESSED U/S 143(1)(A) OF THE ACT. SUBSEQUENTLY, THE RETURN WAS PICKED UP FO R SCRUTINY BY ISSUE OF NOTICES U/S 143(2) AND 142(1) OF THE ACT. IN RESPO NSE TO THE SAME, CA AND AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND SUBMITTED THE DETAILS AS CALLED FOR FRO M TIME TO TIME BY THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE WAS UNDERTAKING VARIOUS PROJECTS IN INDIA FOR SUPERVISI ON OF ERECTION, INSTALLATION OR ASSEMBLING OF EQUIPMENT SUPPLIED BY IT. THE ASSE SSEE ADMITTED THAT SOME OF ITS PROJECT LASTED FOR MORE THAN 6 MONTHS AND SOME AS LONG AS 312 DAYS. THE ASSESSING OFFICER OBSERVED THAT SUCH SUPERVISORY PR OJECTS WERE CONTINUING FOR THE LAST SEVERAL YEARS. THE ASSESSEE IS RENDERING S UCH SERVICES FOR THE SAME CLIENT AND AT THE SAME SITE. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS PERMANENT ESTABLISHMENT IN INDIA AS A FIXED PLACE O F BUSINESS, WORKSHOP, INSTALLATION PROJECT SITE AND SUPERVISORY SERVICES PROJECT AT THE SITE OF MUL. ONCE IT IS PROVED THAT THE ASSESSEE HAS A PERMANENT ESTABLISHMENT IN INDIA, THE PROFIT FROM SUPPLY OF EQUIPMENT WILL ALSO BE TA XABLE IN INDIA IN ADDITION TO 6 ITA NOS. 3675/DEL/2014 & ORS THE TAXATION OF FEE FOR TECHNICAL SERVICES RENDERED . FROM THE PURCHASE ORDERS, THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR THE ASSESSEE SUPPLIED EQUIPMENT AND SPARE PARTS WORTH 47,87,00,190 YEN (R S.19,14,80,076). THE ASSESSING OFFICER NOTED THAT THE ASSESSEE DID NOT S UBMIT THE PROFIT AND LOSS ACCOUNT IN RESPECT OF SUPPLIES MADE TO MUL, NEITHER HAS FURNISHED COPIES OF GLOBAL ACCOUNTS. IN ABSENCE OF THE SAME, THE ASSESS ING OFFICER FOUND IT REASONABLE TO ESTIMATE 10% OF THE SUPPLIES MADE AS PROFIT ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT. FROM THE PURCHASE ORDERS, THE ASSESSING OFFICER OBSERVED THAT APART FROM RENDERING SUPERVISORY SERV ICES OF TECHNICAL NATURE, THE ASSESSEE ALSO PROVIDED ENGINEERING SERVICES AND SOFTWARE. THESE ARE TAXABLE AS FTS AND/ OR ROYALTY UNDER INCOME TAX ACT AS WELL AS DTAA BETWEEN INDIA AND JAPAN. THE ASSESSING OFFICER FURTHER HELD THAT THE ASSESSEE HAS PERMANENT ESTABLISHMENT IN INDIA, THE SAME WILL BE TAXABLE @ 20% ON GROSS BASIS IN TERMS OF SECTION 44D R.W.S. 115A. FINALLY, ON CONSIDERATION OF THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS/DISALLOWANCES: COMPUTATION OF INCOME A. PROFIT/LOSS APGPCL PROJECT I) OPERATION & MAINTENANCE CONTRACT (AS DISCUSSED ABOVE) (II) 160 MW GAS TURBINE COMBINED CYCLE POWER STATION 1,70,00,000 TO BE TAXED @20% B. LOSS FROM SARDAR SAROVER PROJECT AS PER THE FIGURE RETURNED (68,35,270) DISALLOWED AS DISCUSSED (125,13,333) C. LOSS OF MUL PROJECT (31,411) D. MUL PROJECT (PROFIT FROM SUPPLY OF EQUIPMENT SPARES) (19,14,8 0,076) F SUPERVISION FEE FOR COMPANIES OTHER THAN MUL 7 ITA NOS. 3675/DEL/2014 & ORS TO BE TAXED @20% 4,37,36,918 G. TAXABLE SUPERVISION FEES FROM MUL 22,25,42,400 TO BE TAXED @ 20% 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE APPEAL O F THE ASSESSEE. 5. THE REVENUE AS WELL AS THE ASSESSEE ARE BEFORE U S. WE ARE TAKING UP REVENUES APPEAL I.E. ITA NO. 3695/DEL/2014. 6. AS REGARDS TO GROUND NO. 1 TO 1.4 AND 2 TO 2.1, THE LD DR RELIED UPON THE ASSESSMENT ORDER AND SUBMITTED THAT THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A PE IN RELATION TO VARIOUS C ONTRACTS FOR SUPPLIES AND SERVICES EXECUTED N INDIA FOR MUL. THE ASSESSING OF FICER OBSERVED THAT THE ASSESSEE HAD A FIXED PLACE PE IN INDIA IN RELATION TO THE CONTRACTS FOR SUPPLIES EXECUTED FOR MUL IN THE FORM OF A LONG-STANDING PRE SENCE AT MULS SITE IN INDIA AND WHICH OPERATED AS AN EFFECTIVE SYSTEM TO KNOW T HE REQUIREMENTS OF MUL, TO NEGOTIATE THE PURCHASE ORDERS, TO PROCURE PURCHASE ORDERS ETC. THE LD. DR FURTHER SUBMITTED THAT WITHOUT PREJUDICE TO THE EAR LIER SUBMISSIONS, THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE SUP ERVISORY PE IN RELATION TO THE SERVICES OF INSTALLATION, TESTING, COMMISSIONIN G ETC OF EQUIPMENTS. THE CIT(A) ERRED IN MECHANICALLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1992-93 TO 1994-95 & 1996-97 WITHOU T APPRECIATING THE FACT THAT THE ISSUE OF EXISTENCE OR CONSTITUTION OF THE PE IS ALWAYS YEAR-SPECIFIC AND THEREFORE, THE FINDING WITH REGARDS TO THE EXISTENC E OF PE HAS TO BE EXAMINED AFRESH IN EACH YEAR ON THE BASIS OF FACTS SPECIFIC TO THE YEAR UNDER CONSIDERATION. THE CIT(A) WAS INCORRECT IN HOLDING THAT NO PORTION OF THE ASSESSEES INCOME FROM THE ACTIVITY OF SUPPLIES OF EQUIPMENTS TO MUL IS TAXABLE IN INDIA. THE CIT(A) IS NOT RIGHT IN HOLDING THAT NO OPERATIONS IN RELATION TO THE SUPPLIES OF EQUIPMENTS TO MUL WERE UNDERTAKEN IN IN DIA, NOT APPRECIATING THE 8 ITA NOS. 3675/DEL/2014 & ORS FACT THAT THE ASSESSEE HAS PE IN INDIA IN THE FORM OF LONG-STANDING PRESENCE IN INDIA IN RELATION TO THE SUPPLIES BEING MADE AND SE RVICES BEING RENDERED TO MUL FOR THE PAST SEVERAL YEARS. THE RELIANCE OF THE DECISION IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (288 ITR 408 (SC)) WAS MISPLACED BY THE CIT(A) AS THE FACTS OF THE SAID CASE ARE DIS TINGUISHABLE TO THE PRESENT ASSESSEES CASE. 7. THE LD. AR SUBMITTED THAT DURING THE YEAR, THE A SSESSEE WAS ENGAGED IN SUPPLY OF EQUIPMENT TO MUL OUTSIDE INDIA. THE SUPPL Y OF EQUIPMENT WAS NOT OFFERED TO TAX ON THE GROUND THAT THE SAME WAS OFFS HORE SUPPLY, WHERE THE RISKS AND TITLE PERTAINING TO THE SAME WERE TRANSFERRED O UTSIDE INDIA BASED ON THE PURCHASE ORDERS. THE SAME WAS NOT OFFERED TO TAX IN THE ABSENCE OF ANY PERMANENT ESTABLISHMENT RELATED TO MUL ACTIVITIES I N INDIA. HOWEVER, THE ASSESSING OFFICER VIDE ITS ORDER HELD THAT THE ASSE SSEE HAS PE IN INDIA UNDER THE FOLLOWING PARAS OF ARTICLE 5: 2(A): PLACE OF MANAGEMENT 2(B): BRANCH 2(C): OFFICE 2(D): INSTALLATION FOR A PERIOD EXCEEDING SIX MONTH S THE LD. AR SUBMITTED THAT AFTER ALLEGING THAT THE ASSESSEE HAS PE IN INDIA, THE ASSESSING OFFICER ATTRIBUTED 100% OF THE SUPPLY TO THE ALLEGED PE IN INDIA. THE ASSESSING OFFICER ALSO ASSUMED AN ARBITR ARY PROFIT RATE OF 10% FOR CALCULATING THE TAXABLE INCOME AS GLOBAL FINANCIALS WERE NOT AVAILABLE ON RECORDS. THEREFORE, OUT OF THE TOTAL SUPPLY OF RS. 191,480,076, 10% OF THE SUPPLIES WERE TO BE TAXED. HOWEVER, AT THE TIME OF PASSING ASSESSMENT ORDER, THE ASSESSING OFFICER TAXED 19,14,80,076 @ 48%. BUT ON RECTIFICATION APPLICATION MADE BY THE ASSESSEE BEFORE THE ASSESSI NG OFFICER, THE SAME WAS RECTIFIED TO RS. 19,148,007/-. THE CIT(A) BASED ON THE FINDINGS OF TRIBUNAL FOR AY 1992-93 TO 1996-97 WHEREIN IT WAS HELD THAT THE ASSESSEE DOES NOT HAVE ANY PE WITH RESPECT TO MUL ACTIVITIES AND JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. HELD THAT ASSESSEE 9 ITA NOS. 3675/DEL/2014 & ORS DID NOT HAVE PE IN INDIA, SO FAR AS ITS OFFSHORE SU PPLY OF EQUIPMENTS TO MUL WAS CONCERNED. THE CIT(A) ALSO OBSERVED THAT RISK A ND TITLE IN RESPECT OF SUPPLY WAS TRANSFERRED OUTSIDE INDIA AND MUL HAS COMPLETED THE CUSTOM CLEARANCE, INLAND TRANSPORT ETC. IN INDIA. THUS, OFFSHORE SUPP LY OF EQUIPMENT IS NOT TAXABLE IN INDIA. THE LD. AR SUBMITTED THAT THE CIT (A) HAS RIGHTLY HELD THAT THE TITLE IN THE EQUIPMENT SUPPLIED TO MUL WAS TRANSFER RED TO MUL OUTSIDE INDIA, AND THE ASSESSEE WAS NOT RESPONSIBLE FOR CUSTOM CLE ARANCE AND INLAND TRANSPORTATION OF THE EQUIPMENT SUPPLIED. THE CUSTO M CLEARANCE, INLAND TRANSPORTATION WAS THE RESPONSIBILITY OF MUL. FURTH ER, WITH RESPECT OF SUCH OFFSHORE SUPPLIES THE ASSESSEE HAS NEITHER ANY PE I N INDIA OF ANY FORM NOR ANY ACTIVITY CARRIED OUT BY THE ASSESSEE IN INDIA FOR M UL OTHER THAN DEPUTING ITS SUPERVISORS FROM JAPAN POST SUPPLY OF EQUIPMENT FOR THE PURPOSE OF SUPERVISION OF INSTALLATION AND COMMISSIONING BY MU L OF SUCH SUPPLIED EQUIPMENTS WHICH IS TAXED AS PER ARTICLE 12(2) OF T HE DTAA. WITH REGARD TO PE THE LD. AR SUBMITTED THAT: * THERE IS NO PLACE OF BUSINESS/MANAGEMENT IN INDIA FOR MUL, THE PLACE OF MANAGEMENT IS IN JAPAN. * NO BRANCH FOR MUL OPERATIONS. * NO OFFICE FOR MUL OPERATIONS, LO WAS CLOSED BEFOR E 2000, WHICH WAS ALSO HELD NOT CONNECTED WITH MUL OPERATIONS BY TRIBUNAL WHICH WAS CONFIRMED BY THE HONBLE DELHI HIGH COURT. * EACH SUPERVISION PURCHASE ORDER IS A SEPARATE CON TRACT AND PERIOD STAY OF SUPERVISOR COULD NOT BE CLUBBED TOGETHER FOR COM PUTING 180 DAYS. PERIOD OF SUPERVISION FOR EACH CONTRACT DOES NOT EXCEEDS 6 MO NTHS. THUS, THERE IS NO SUPERVISION PE. THIS FACT HAS BEEN CONFIRMED BY HON BLE HIGH COURT FOR A.Y. 1992-93 TO 1996-97 IN ASSESSEES OWN CASE AND SLP O F REVENUE IS DISMISSED BY HONBLE SUPREME COURT. * EVEN IN CASE FOR ANY CONTRACT, SUPERVISION PERIOD EXCEEDS 6 MONTHS, IT CANT IMPACT TAXABILITY OF OFFSHORE WHICH IS COMPLE TED BEFORE SUPERVISION IS DONE. * OTHER PROJECTS ARE ENTERED WITH THE OTHER PARTIES IN INDIA AND ARE NOT 10 ITA NOS. 3675/DEL/2014 & ORS CONNECTED TO MUL INCOME. THIS, HAS BEEN CONFIRMED B Y HONBLE HIGH COURT FOR AY 1992-93 TO 1996-97 IN ASSESSEES OWN CASE AND SL P OF REVENUE IS DISMISSED BY HONBLE SUPREME COURT. * CONTRACT WAS ENTERED WITH MUL DIRECTLY BY HEAD OF FICE IN JAPAN, NO OFFICE WAS INVOLVED. 8. THUS, THE LD. AR SUBMITTED THAT THE CIT(A) AFTER OBSERVING THE ABOVE WAS RIGHT IN HOLDING THAT THE ASSESSEE DOES NOT HAVE AN Y PE IN INDIA AND OFFSHORE SUPPLY OF EQUIPMENT ARE NOT TAXABLE IN INDIA. IN FA CT SUCH A CONTENTION RAISED AS ABOVE HAS ALSO BEEN ACCEPTED ALREADY BY THE CIT( A) IN HIS ORDER FOR AY 2006- 07. THE LD. AR SUBMITTED THAT THE ASSESSEE BASED UP ON A SETTLEMENT WITH ASSESSING OFFICER HAD AGREED TO TAX 1/3 RD OF OFFSHORE SUPPLIES, DESPITE THE FACT THAT SUPPLIES WERE MADE BY IT FROM OUTSIDE INDIA. T HIS WAS A MERE CONCESSIONAL AGREEMENT. IN FACT, THE ASSESSING OFFICER UNDER A M ISCONCEPTION OF LAW THAT THE LO WOULD BE REGARDED AS A PERMANENT ESTABLISHMENT ( PE) DESPITE THE FACT THAT IT HAS NO PE IN INDIA AND AGREED TO PAY TAX ON OFFS HORE SUPPLY. THE LD. AR FURTHER SUBMITTED THAT AT THE RELEVANT TIME THERE W AS NO TREATY BETWEEN INDIA AND JAPAN. TREATY CAME ON 29 TH DECEMBER, 1989. THUS, IN THE ABSENCE OF A BRANCH OFFICE OR A PLACE OF BUSINESS, SUPPLIES MADE BY IT FROM JAPAN WITHOUT HAVING ANY PE IS NOT TAXABLE. THE LD. AR FURTHER PO INTED OUT THAT THE ASSESSEE HAD OBTAINED LO WITH THE PERMISSION FROM RBI WITH C OMPLETE RESTRICTION TO CARRY BUSINESS IN INDIA. IN FACT EVEN THE SAID LO C LOSED ITS OPERATIONS IN THE YEAR 1997 AND LO WAS EVENTUALLY CLOSED IN THE YEAR 1999-2000 MUCH BEFORE THE RELEVANT ASSESSMENT YEAR UNDER DISPUTE. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT RECORDS. THIS ISSUE WAS DECIDED BY THE CIT(A) IN ASSESSEES FAVOUR FOR AY 2001-02 TO AY 2006-07 AY 2008-09 AND AY 2009-10. THERE APPEARS TO BE NO APPEAL BY REVENUE FOR AY 2005-06, 2006-07, 2008-09 AND 2009-1 0. THE CIT(A) HELD AS UNDER: (C) FINDINGS IN RELATION TO GROUND NO. 8, 10, 14 & 15 11 ITA NOS. 3675/DEL/2014 & ORS I HAVE DULY CONSIDERED THE CONTENTIONS RAISED BY T HE APPELLANT AND MATERIAL PLACED ON RECORD. IN VIEW OF THE FACT THAT THE PREMISES FORMED BY THE LD. AO WERE SUBSTANTIALLY REBUTTED BY THE APPELLANT THE INFERENCE DRAWN BY THE LD. AO THAT THE APPELLANT HAD A PE FOR THE PURPOSES OF OFFSHORE SUPPLY OF EQUIPMENTS TO MUL IS HELD TO BE ERRONEOUS AND IMPLAUSIBLE. THE JUDGMENT OF THE HONBLE ITAT, NEW DELHI IN THE APPELLANTS OWN CASE FOR AY 1992-93 TO 1996-97 LENDS SUPPORT TO THE CLAIM OF THE APPELLANT THAT IT DID N OT HAVE PE IN INDIA RELATED TO MUL INCOME. THE SUPREME COURT IN CASE OF ISHIKAWAJIMA (SUPRA) BASED ON JAPAN DTAA HAS HELD THAT INCOME ONLY TO THE EXTENT OF OPERATIO N OF PE CAN BE TAXED IN INDIA AND THERE IS NO FORCE OF ATTRACTION IN JAPAN DTAA. IT WAS PLEADED BY THE APPELLANT IN THE LIGHT OF THE FORE REFERRED JUDGMEN T THAT IT SOLD GOODS TO MUL FROM OUTSIDE INDIA WHERE RISK AND TITLE WERE ALSO TRANSF ERRED OUTSIDE INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION ETC WERE DO NE BY MUL ON ITS OWN. NO PE WAS INVOLVED IN THE SALE. SUPERVISION WAS DONE AFTE R SUPPLY OF EQUIPMENT. THUS, NO OPERATION IN RELATION TO SUPPLY WAS CARRIED OUT IN INDIA. CONSIDERING THE ARGUMENT OF THE APPELLANT AND AS A MATTER OF JUDICIAL DISCIPLINE IT IS INFERRED THAT THE APPELLANT DID NO T HAVE PE IN INDIA, SO FAR AS ITS OFFSHORE SUPPLY OF EQUIPMENT TO MUL WAS CONCERNED. THUS, THE GROUND OF THE APPELLANT IS ALLOWED WITH A DIRECTION TO FOLLOW THE VERDICT OF THE HONBLE ITAT, NEW DELHI IN ACCORDANCE WITH WHICH SUPERVISION FEES SHOULD BE TAXED @ 20% AS PER ARTICLE 12(2) OF THE DTAA. IN THE PRESENT CASE THE GOODS WERE SOLD TO MUL FRO M OUTSIDE INDIA. THUS, THE RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE IN DIA AND NO TRANSACTION TOOK PLACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSP ORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVE D IN THE SAID ACTIVITIES. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPER VISION WAS DONE AFTER THE SUPPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLI SH THAT THE ASSESSEE IS HAVING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDU STRIES LTD. (SUPRA) IS 12 ITA NOS. 3675/DEL/2014 & ORS APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 1 TO 1.4 AND 2 TO 2.1 OF THE REVENUES APPEAL IS DISMISSED. 10. AS REGARDS GROUND NOS. 3 AND 3.1 OF THE REVENU ES APPEAL, THE LD. DR SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPLETED PHASE-I OF THE PO NO.MUL/PE/PN/501/IMP(SUP)/118 DAT ED 15/4/1999 FOR S & S PAINT SHOP PROJECT AND RECEIVED SUPERVISION CH ARGES OF 193,000,0000/-. AS PER CLAUSE 6 OF THE PO, THE PROJECT HAS TO BE CO MPLETED IN 3 PHASES. PHASE SUPERVISION CHARGES MAN-DAYS PTAS () MAX MIN PHASE-I 193,000,000 2930 2280 46 PHASE-II 129,760,000 2150 1530 40 PHASE-III 180,120,000 2710 2130 59 THE ASSESSEE HAS INCLUDED 193,000,000 IN THE STAT EMENT OF SUPERVISION CHARGES RECEIVED BY IT DURING THE YEAR AS ENCLOSED TO ITS LETTER DATED 11/3/2004 TO THE ASSESSING OFFICER. THE ASSESSEE ALSO ACCEPT ED THAT THE DURATION OF PO NO MUL/PE/PN/501/IMP(SUP)/1058 FOR THE S & S PAINT SHO P PROJECT WAS 312 DAYS. HENCE, IN VIEW OF THE DECISIONS OF THE TRIBU NAL IN ASSESSEES OWN CASE FOR EARLIER YEARS WHICH IS UPHELD BY HONBLE DELHI HIGH COURT, A SUPERVISORY PERMANENT ESTABLISHMENT (PE) IS CONSTITUTED IN RESP ECT OF THIS PO AND THE AMOUNT RECEIVED DURING THE YEAR AMOUNTING TO 193,0 00,000/- SHOULD BE TAXED UNDER ARTICLE 12(5) OF THE DTAA READ WITH SEC TION 44DA OF THE ACT. 11. THE LD. DR SUBMITTED THAT THERE IS AN EXISTENCE OF SUPERVISORY PERMANENT ESTABLISHMENT (PE) IN THE PRESENT CASE AS THIS ISSUE WAS BEFORE TRIBUNAL AND THE HON'BLE HIGH COURT FOR EARLIER YEA RS AND THE CONTENTION OF THE REVENUE WAS THAT THE ASSESSEE ADMITTEDLY HAD A PERM ANENT ESTABLISHMENT (PE) IN INDIA IN RESPECT OF RAICHUR PROJECT AND BASIN BR IDGE PROJECT. THE ASSESSEE BEING ONE ENTITY, IT IS ENOUGH IF THE ENTERPRISES H AS A PERMANENT ESTABLISHMENT (PE) AND IT IS NOT NECESSARY THAT EACH PROJECT SHOU LD HAVE BEEN A SEPARATE PE. THE LD. DR POINTED OUT THE TRIBUNALS DECISION IN P ARA 43. THE LD. DR FURTHER 13 ITA NOS. 3675/DEL/2014 & ORS SUBMITTED THAT THE ISSUE OF THE EXISTENCE OF FIXED PLACE PE UNDER ARTICLE 5(1) IN THE FORM OF LO WAS ALSO DISCUSSED IN PARA 76 OF THE TRIBUNALS ORDER THEREBY REJECTED THE CONTENTION OF REVENUE. THE OTHER FORMS OF PE UNDER ARTICLE 5 (2) OF THE DTAA WERE NEVER RAISED BY THE REVENUE NOR HAVE BEEN ADJUDICATED UPON. THE TRIBUNAL AFTER CONSIDERING THE FACTS OF THE CAS E HELD THAT SINCE IN NONE OF THE POS THE DURATION EXCEEDS 180 DAYS, NO SUPERVISO RY PE IS CONSTITUTED. THE LD. DR FURTHER SUBMITTED THAT THE CONCLUSION AND FI NDINGS RECORDED BY THE TRIBUNAL ARE IN THE CONTEXT OF THE POS AS STATED IN PARA 61 OF THE ORDER DATED 31/05/2007 AS AGAINST THIS THE FACTS OF THE YEAR UN DER CONSIDERATION ARE DISTINGUISHABLE. LO HAS ALREADY BEEN CLOSED. HENC E, THE QUESTION OF LO BEING PE DOES NOT EXIST/ARISES IN THE PRESENT ASSESSMENT YEAR. AS REGARDS OF SUPERVISION PE, THE SAME BEING BASED ON SPECIFIC DURATION CRITERIA, NEED TO BE EXAMINED AFRESH ON THE FACTS AND CIRCUMSTANCES OF T HE CASE. THE FACTUAL MATRIX ON THE BASIS OF WHICH PURCHASE ORDERS WERE E XAMINED BY THE TRIBUNAL TO HELD THAT NO SUPERVISORY PE EXIST IS SUMMARIZED HER EUNDER:- (I) THESE PURCHASE ORDERS WERE BOOKED BY THE ASSESS EE THROUGH ITS HEAD OFFICE PURSUANT TO COMPETITIVE BIDDING ON GLOBAL TE NDER FLOATED BY MUL. (II) THE TERMS AND CONDITIONS UNDER SUCH PURCHASE O RDER WERE DIFFERENT IN THE SENSE AND NOT LINKED WITH THE OTHER PURCHASE OR DERS. (III) ONE PURCHASE ORDER WAS NOT DEPENDENT ON THE C OMPLETION OF THE WORK OF INSTALLATION OF SOME OTHER PURCHASE ORDER. (IV) EQUIPMENT SUPPLIED UNDER ONE PURCHASE ORDER DI D NOT COMPLEMENT THE EQUIPMENT SUPPLIED IN ANOTHER PURCHASE ORDER. (V) THE TECHNICIANS WERE DEPUTED TO WORK FROM JAPAN . (VI) THERE WERE TECHNICIANS ON THE PAYROLLS OF THE PE IN INDIA ESTABLISHED FOR CONTRACTS WITH MUL FOR THE YEAR UNDER 31 ST MARCH, 1994. HOWEVER, THIS ASPECT ALONE WOULD NOT BE CONCLUSIVE TO PROVE THAT THE PE IN INDIA AND THE CONTRACT FOR RENDERING TECHNICAL SERVICES WERE EFFECTIVELY CONNE CTED. (VII) THE ASSESSEE DID NOT CO-ORDINATE THE WORK OF THE VARIOUS PURCHASE ORDERS AND EACH WAS DONE ACCORDING TO THE TERMS OF THE PURCHASE ORDER, EACH ONE OF WHICH WAS INDEPENDENT BY ITSELF. 14 ITA NOS. 3675/DEL/2014 & ORS (VIII) MUL FLOATED SEPARATE TENDERS FOR EACH OF THE PURCHASE ORDERS AND THE ASSESSEE WAS NOT THE ONLY BIDDER AND THERE WERE OTH ER ENTERPRISES WHICH WERE AWARDED PURCHASE ORDERS. (IX) THE PERIOD OF SUPERVISION UNDER EACH CONTRACT WAS LESS THAN THE PERIOD OF 180 DAYS. (X) ADDITIONALLY, THE SUPERVISORY FEE PAID BY MUL W AS ON THE BASIS OF MAN DAYS. THE NUMBER OF DAYS PER SUPERVISOR WAS CALCU LATED BY DIVIDING MAN DAYS' BY THE NUMBER OF SUPERVISORS. IF 10 SUPER VISORS HAD STAYED FOR 100 MAN DAYS, THE SUPERVISION PERIOD WOULD BE 10 DAY S ONLY, THOUGH THE MAN DAYS ARE 100. THUS, THE PERIOD OF STAY WOULD BE O NLY OF 10 DAYS AND NOT 100 DAYS. (XI) THE ASSESSEE HAS EMPLOYED/EXECUTED A PART OF I TS CONTRACT WITH THE HELP OF SUB-CONTRACTORS AND LOCAL PERSONNEL. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED SUBMISSION DATED 10/12/2009 FOR ASSESSMENT YEAR 2007- 08 WHICH CONTAINS THE DETAILS OF FEW SUCH SUB-CONTR ACTORS. THE PURCHASE ORDERS ALSO CONTAIN CLAUSES FOR SUB-CONTRACTING PAR T OF THE WORK. FOR EXAMPLE, PO NO. MUL/PE/AS/EX2-PBS/812/MOD 306/2190 DATED 10/ 06/1995 PROVIDES FOR EMPLOYMENT OF SUB-CONTRACTORS AND EMPL OYMENT OF LOCAL PERSONNEL. DURATION OF THE PERIOD OF WORK COMPLETED THROUGH SUB-CONTRACTORS ARE NOT INCLUDED IN THE DURATION OF PROJECT AS CLAI MED BY THE ASSESSEE. THUS, FOR EXAMPLE, IN PO NO. MUL/PE/AS/EXH-ANL/1791/MOD-3 023 DATED 25/03/2005 VISIT BY SUB- CONTRACTORS ARE NOT INCLUD ED IN THE DURATION OF THE PROJECT AS CLAIMED BY THE ASSESSEE. THUS, FOR EXAMP LE, IN PO NO. MUL/PE/AS/EXH-ANL/1791/MOD-3023 DT. 25/3/05 VISIT B Y SUB-CONTRACTOR M/S MODI MEASUREMENT NOT INCLUDED IN THE DURATION O F THE PROJECT. THUS, THE LD. DR SUBMITTED THAT THESE ARE ONLY THE FEW EXAMPL ES AND DONT CONSTITUTE THE EXHAUSTIVE LIST. 12. THE LD. DR FURTHER SUBMITTED THAT THE PURCHASE ORDER FOR THE RELEVANT YEAR WHEN EXAMINED IN THE ABOVE CONTEXT REVEALS THE FOLLOWING:- (I) NOT ALL THE PURCHASE ORDERS ARE PROCURED ON THE BASIS OF GLOBAL TENDERS 15 ITA NOS. 3675/DEL/2014 & ORS FLOATED BY MUL AND ON THE BASIS OF SUCH TENDERING P ROCESS. (II) THE DURATION OF PURCHASE ORDERS AS CONTENDED B EFORE THE ITAT WERE NOT PROVIDED TO THE ASSESSING OFFICER FOR VERIFICATION. (II) THE FORMULA FOR CALCULATING THE DURATION (DAYS ) OF THE PURCHASE ORDERS AS STATED BY THE ASSESSEE BEFORE THE HONBLE HIGH COUR T (THE NUMBER OF DAYS FOR SUPERVISOR WAS CALCULATED BY DIVIDING MAN DAYS BY NUMBER OF SUPERVISOR) IS NOT RELIABLE AND CANNOT BE CONSTRUED AS THE CORRECT WAY OF COMPUTING THE DURATION OF THE PROJECT SINCE THE ASSESSEE ITSELF H AS FOLLOWED A DIFFERENT CRITERIA TO CALCULATE THE DURATION OF THE PROJECT. THE LD. A R PROVIDED ANNEXURE 1 DURING THE HEARING WHEREIN HE HAS LISTED A FEW SUCH EXAMPL ES WHERE THE DURATION AS PER POS AS FURNISHED BEFORE THE TRIBUNAL AND DURATI ON AS PER THE METHOD PROPOSED BEFORE HON'BLE HIGH COURT AND FROM THE SAM E IT CAN CLEARLY SEEN THAT BOTH ARE DIFFERENT. (IV) MOREOVER, THE PURCHASE ORDERS IN MOST CASES ON LY SPECIFY THE MAXIMUM AND MINIMUM LIMIT IN RESPECT OF THE NUMBER OF SUPER VISORS AND MAN DAYS AND THE ACTUAL DURATION OF SUPERVISION MAY BE DIFFERENT . (V) THERE ARE PURCHASE ORDERS WHICH NOT ONLY EXCEED THE DURATION OF 180 DAYS BUT ALSO SPREAD OVER SEVERAL YEARS. FOR EXAMPL E, THE ASSESSEE HAS ACCEPTED VIDE ITS LETTER DATED 11/03/2004 THAT THE DURATION OF PO NO. MUL/PE/501/IMP(E)/MOD/1058 DURING ASSESSMENT YEAR 2 001-02 WAS 312 DAYS. A PERUSAL OF CLAUSE 6.1 OF THIS PO REVEALS T HAT THE SAID PURCHASE ORDERS HAS TO BE EXECUTED IN 3 PHASES WITH IDENTICAL MAXIM UM AND MINIMUM MAN DAYS. APART OF THIS PO WAS ALSO EXECUTED DURING A.Y . 2002-03 AND A.Y. 2003- 04, I.E. PO NO. MUL/PE/PN/201/IMP(SUP)/PHASE-II/169 DATED 12/01/2001 AND PO NO. MUL/PE/PN/501/IMP/(SUP)/PH.III/199 DATED 18/12/2001. 13. THE LD. DR FURTHER SUBMITTED THAT THERE IS A FI XED PLACE PE IN THE FORM OF CAPITAL YE2 PROJECT OFFICE AT MUL. THE APPROVAL FO R ESTABLISHING A PROJECT OFFICE (PO) IN CONNECTION WITH MUL WAS GRANTED BY THE RBI VIDE ITS APPROVAL DATED 15 TH SEPTEMBER, 1992. THE APPROVAL WAS GRANTED U/S 29( L) (A) OF THE FERA, 1973 FOR THE PURPOSE OF UNDERTAKING A CONTRACT WITH MUL FOR DESIGNING, 16 ITA NOS. 3675/DEL/2014 & ORS ENGINEERING, SUPPLY AND INSTALLATION FOR YE2 CAR PR OJECT. YE2 CAR PROJECT OF MUL IS AN EXPANSION OF CAR PRODUCTION BETWEEN 70,000 TO 90,000 CARS ( OF CAPACITY 1,000 CC & 1,300 CC) PER YEAR. AS REGARDS THE FUNC TIONS CARRIED OUT BY THE PROJECT OFFICE, THE SAME ARE MUCH WIDER THAN THOSE CARRIED ON BY THE LIAISON OFFICE. THIS DISTINCTION BETWEEN PROJECT OFFICE AN D LIAISON OFFICE HAS BEEN SUCCINCTLY CLARIFIED BY THE HONBLE DELHI HIGH COUR T IN CASE OF NATIONAL PETROLEUM CONSTRUCTION COMPANY (2016-TII-02-HC-DEL- INTL). THE LD. DR FURTHER SUBMITTED THAT THE TRIBUNAL FOR THE EARLIER YEARS R ECORDED A FINDING THAT THE SAID PE IN THE FORM OF PROJECT OFFICE IS NOT EFFECTIVELY CONNECTED WITH THE RENDERING OF TECHNICAL SERVICES. ACCORDINGLY, THE TRIBUNAL OBSE RVED THAT THERE WERE TECHNICIANS ON THE PAY ROLLS OF THE PE IN INDIA EST ABLISHED FOR CONTRACTS WITH MUL FOR THE YEAR ENDING 31 ST MARCH, 1994. HOWEVER, THIS ASPECT ALONE WOULD NOT BE CONCLUSIVE TO PROVE THAT PE IN INDIA AND THE CONTRACT FOR RENDERING TECHNICAL SERVICES WERE EFFECTIVELY CONNECTED. THE ASSESSEE ALSO ACCEPTED THE EXISTENCE OF SUCH FIXED PLACE PE UNDER ARTICLE 5(1) IN THE FORM OF YE2 PROJECT OFFICE AT THE PREMISES OF MUL AND HAS FURNISHED AUD ITED BALANCE-SHEET AND P&L A/C IN RESPECT OF SUCH PE. THE LD. DR FURTHER SUBMITTED THAT EXAMINATION OF THE PURCHASE ORDERS REVEALED THAT THE ACTIVE INV OLVEMENT OF THE MUL PE (PO) IN THEIR PROCURING AS WELL AS EXECUTION. THE LD. D R SUBMITTED THAT NOT ALL POS ARE PROCURED THROUGH HO. THE FIXED PLACED PE AT MU L IN THE FORM OF YE2 PROJECT OFFICE PLAYS A SIGNIFICANT ROLE IN MAKING O FFICES AND PROCURING POS. THERE ARE TECHNICIANS IN THE PAYROLL OF THE PE IN I NDIA ESTABLISHED FOR CONTRACTS WITH MUL IN THE YEAR ENDING 31 ST MARCH, 1994 WHO HAVE PROVIDED SERVICES EVEN BEFORE THE PURCHASE ORDER HAS BEEN FORMALLY ACCEPTE D. THERE ARE SEVERAL ROUNDS OF NEGOTIATIONS BOTH ON TECHNICAL ASPECTS AS WELL AS PRICE BEFORE THE PURCHASE ORDER WAS ISSUED. THE ASSESSEE CLOSED DOW N ITS LIAISON OFFICE DURING THE YEAR. HENCE, IT IS THE PE WHICH WAS INVOLVED IN THESE NEGOTIATIONS. THE LD. DR WHILE TRYING TO PROVE THESE OBSERVATIONS FROM TH E ANALYSIS OF THE FOLLOWING PURCHASE ORDERS: (I) IN RESPECT OF PO NO.MUL/PE/PR/30/24/MOD-1364/3 42 DATED 17 ITA NOS. 3675/DEL/2014 & ORS 18/9/1999, IT CAN BE SEEN THAT THE TENDER FOR THE I TEM WAS FLOATED ON 23/1/1999 AND THE ASSESSEE FURNISHED TECHNICAL OFFE R ON 19/02/1999. THERE WERE NEGOTIATIONS ON 15 TH & 16 TH MARCH, 1999 AND PRICE OFFER WAS MADE ON 14/7/1999 AND AGAIN REVISED ON 20/08/1999. FINAL P URCHASE ORDER WAS PLACED ON 18/9/1999. (II) PO NO. MUL/PE/AS/MODELC-PBS3BOXMODN/1401/MOD17 01 DT. 8/8/00 WHERE THE TENDER FOR THE ITEM WAS FLOATED ON 17/3/00 AND THE ASSESSEE FURNISHED TECHNICAL OFFER ON 29/4/00 WHICH WAS REVI SED ON 6/6/00 AND PRICE OFFER WAS MADE ON 26/6/00 AND AGAIN REVISED ON 13/7 /00. FINAL PURCHASE ORDER WAS PLACED ON 8/8/00. IT MAY BE SEEN THAT THE RE ARE SEVERAL ROUNDS OF NEGOTIATIONS BOTH ON TECHNICAL ASPECT AS WELL AS PR ICE BEFORE THE PURCHASE ORDER WAS ISSUED. (III) PO NO. MUL/EN5/PMC99105-A/PO DT. 8/8/00 IT CAN BE SEEN THAT THE TENDER FOR THE ITEM WAS FLOATED ON 7/10/99. THE ASS ESSEE SEND A FAX ON 20.10.99 AND FURNISHED TECHNO-COMMERCIAL OFFER ON 9 /11/99 ALONG WITH QUOTATION DT. 8/11/99. SUBSEQUENTLY, THE ASSESSEE S ENT SEVERAL LETTERS AND FAXES ON 2/2/00, 3/2/00, 22/2/00, 24/2/00, 4/3/00 & 7/3/00 IN RESPONSE TO WHICH MUL SEND A EMAIL ON 10/3/00. THIS WAS FOLLOWE D BY WHICH WAS REVISED ON 6/6/00, 16/6/00 AND PRICE OFFER WAS MADE ON 26/6 /00 AND AGAIN REVISED ON 13/7/00. FINAL PO WAS PLACED ON 8/8/00. IT MAY BE S EEN THAT THERE ARE SEVERAL ROUNDS OF NEGOTIATIONS BOTH ON TECHNICAL ASPECT AS WELL AS PRICE BEFORE THE PURCHASE ORDER WAS ISSUED. THE ASSESSEE CLOSED DOWN ITS LIAISON OFFICE DURING THE YEAR. HENCE, IT IS THE PE WHICH WAS INVOLVED IN THESE NEGOTIATIONS. (IV) SIMILARLY, FOR PO NO. MUL/PE/EAE/GNT-AL/MOD-15 35 DT. 23/02/00, MUL ISSUED INQUIRY LETTER ON 30/11/99 IN RESPONSE T O WHICH THE ASSESSEE GAVE ITS QUOTATION ON 3/12/99. MUL ISSUED ITS LOI 27/1/0 0 AND PO ON 23/2/00. THE PURCHASE ORDER WAS SIGNED ON 28/2/00 BUT FORMAL ACCEPTANCE WAS ISSUED ON 13/3/00 I.E. AFTER THE PURCHASE ORDER WAS ACCEPT ED THEREBY ESTABLISHING THE INVOLVEMENT OF THE PE. (V) ORIGINAL PO NO. MUL/PE/PN/501/IMP(SUP)/118 WAS ISSUED ON 15/4/99. THIS WAS AMENDED AND PO NO- MUL/PE/PN/501/ IMP(E)/MOD-1058 18 ITA NOS. 3675/DEL/2014 & ORS WAS ISSUED ON 15/4/99. THIS WAS AGAIN AMENDED ON 18 /8/99 BY WAY OF AMENDED PO NO. MUL/PE/PN/501/IMP(E)/MOD-1058A. SUBS EQUENTLY, MOM (MINUTES OF MEETING) WAS HELD AT MUL WORKS, GURGAON ON 18/2/00. THE PURCHASE ORDER WAS MODIFIED AND ANOTHER PO NO. MUL/PE/PN/501/IMP(E)/PHASE-II/MOD-1058 WAS ISSUED O N 2/3/00. THIS WAS ACCEPTED AND SIGNED BY Y. FUJIURA ON 17/3/00. THIS PURCHASE ORDER WAS AMENDED AND A FRESH PO NO. MUL/PE//PN/501/IMP(E)/PH ASE-II/MOD-1548A WAS ISSUED ON 28/8/00. ANOTHER MOM HELD AT MUL WORK S ON 7/11/00 AND SUBSEQUENT DISCUSSIONS WERE HELD AT MUL WORKS, GURG AON ON 14/12/00 & 15/12/00. ANOTHER MOM HELD AT MUL WORKS AGAIN ON 9/ 1/01 AND THE PURCHASE ORDER WAS AMENDED AND NEW PO NO. MUL/PE/PN/501/IMP(E)/PHASE-II/MOD-1548B WAS ISSUED ON 12/1/01. THIS WAS SIGNED AND ACCEPTED BY S. OMORI ON 20/2/01. ONC E AGAIN ANOTHER MOM WAS HELD ON 18/2/00 AT MUL WORK, GURGAON AND THE OR IGINAL PO NO. MUL/PE/PN/501/IMP (SUP)/118 DT. 15/4/99 WAS AMENDED AGAIN AND NEW PURCHASE ORDER NO. MUL/PE/PN/501/IMP (SUP)/PHASE-II /147 WAS ISSUED ON 2/3/00. THIS WAS SIGNED AND ACCEPTED BY Y. FUJIURA ON 17/3/00. THIS WAS FURTHER AMENDED AND NEW PO NO. MUL/PE/PN/201/IMP (S UP)/PHASE-II/169 DT. 12/1/01 WHICH WAS SIGNED AND ACCEPTED BY S. OMO RI ON 20/2/01. AFTER ANOTHER MOM AT MUL ON 5/8/00, PO NO. MUL/PE/PN/501/ IMP(SUP)/PHASE- II/147 DT. 2/3/00 WAS FURTHER AMENDED ON 18/8/00 AN D NEW PO NO. MUL/PE/PN/501/IMP(SUP)/MOD-A/163 WAS ISSUED ON 18/8 /00 WHICH WAS ACCEPTED BY Y. FUJIURA ON 5/9/00. AFTER ANOTHER MOM ON 5/8/00 AT MUL WORK, THE PO NO. MUL/PE/PN/501/IMP(E)/PHASE-II/MOD-1548 D T. 2.3.00 WAS MODIFIED AND NEW PO NO. MUL/PE/PN/201/IMP(E)/MOD-A/ MOD-1723 WAS ISSUED ON 18/8/00. THIS WAS ACCEPTED BY Y. FUJIURA ON 5/9/00. THIS PURCHASE ORDER WAS AGAIN AMENDED O 5/6/01 AND THE ASSESSEE H AS TO REFUND THE AMOUNT RECEIVED BY IT FROM MUL AND THE CUSTOM DUTY AND MOD VAT PAID BY MUL THROUGH DR. NOTE. SIMILARLY, PO NO. MUL/PE/PN/501/I MP(SUP)/PHASE-II/147 DT. 2.3.00 WAS MODIFIED AGAIN AND NEW PO NO. MUL/PE/PN/501/IMP(SUP)/MOD-C/161 WAS ISSUED SUBSEQU ENT TO MOM AT 19 ITA NOS. 3675/DEL/2014 & ORS MUL PLACE ON 18/2/00. PO NO-MUL/PE/PN/501/IMP(E)/PH ASE-II/MOD-1548 DT. 2.3.00 WAS MODIFIED AND NEW PO NO.MUL/PE/PN/501 /IMP(E)/MOD- C/MOD-1707 WAS ISSUED ON 8/8/00. 14. THE LD. DR SUBMITTED THAT ALL THE ABOVE INSTANC ES CLEARLY PORTRAYS THE CONTINUOUS ACTIVE INVOLVEMENT OF THE MUL PE YEAR AF TER YEAR IN PROCURING ORDERS, PARTICIPATING IN THE MEETINGS WITH MUL AS E VIDENCED BY SERIES OF MOMS, AMENDMENTS TO EXISTING PURCHASE ORDERS ETC. MOREOVE R, THE FACT THAT THE ASSESSEE HAS TO REFUND THE AMOUNT RECEIVED BY IT F ROM MUL AND THE CUSTOM DUTY AND MODVAT PAID BY MUL AS HAS BEEN DISCUSSED A BOVE CLEARLY GOES ON TO DISPROVE THE CONTENTION BY THE ASSESSEE THAT TRANSF ER OF TITLE AND RISK WITH REFERENCE TO OFFSHORE SALES TAKES PLACE OUTSIDE IND IA. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS EMPLOYED/EXECUTED A PART OF ITS CO NTRACTS WITH THE HELP OF SUB- CONTRACTORS AND LOCAL PERSONNEL. THE LD. DR FURT HER SUBMITTED THAT THE ASSESSEE ACCEPTS THE EXISTENCE OF FIXED PLACE PE UN DER ARTICLE 5(1) IN THE FORM OF YE2 PROJECT OFFICE AT THE PREMISES OF MUL. IT H AS BEEN FILING THE AUDITED ACCOUNTS OF SUCH PROJECT OFFICE AS WELL. HOWEVER, I T HAS BEEN THE CONSISTENT CLAIM OF THE ASSESSEE THAT THE SAID PROJECT OFFICE IS NOT ASSOCIATED WITH THE PROCURING OF PURCHASE ORDERS AND HENCE NO PART OF T HE SUPPLY OR SUPERVISION CHARGES CAN BE ATTRIBUTED TO SUCH PE. IT HAS ALREA DY BEEN ESTABLISHED AS PER THE LD. DR THAT THE YE2 PROJECT OFFICE PLAYS AN ACT IVE ROLE IN PROCURING THE PURCHASE ORDERS AND PROVIDING SUPERVISORY ASSISTANC E. THE ASSESSEE ALSO ACCEPTS THE ACTIVE INVOLVEMENT OF YE2 PROJECT OFFIC E IN THE PROJECTS (PURCHASE ORDERS) AS ALTHOUGH ON THE ONE HAND, IT CLAIMS THAT THE YE2 PO IS NOT ASSOCIATED WITH ANY PART OF THE PROJECTS (PURCHASE ORDERS ISSU ED BY MUL), YET CONTRASTINGLY, IN THE OTHER HAND, IT CONTINUES TO I NCLUDE AND SHOW THE TDS DEDUCTED BY MUL FROM THE PAYMENTS MADE BY IT AGAINS T THE PURCHASE ORDERS AS A PART OF THE BALANCE-SHEET OF THE YE2 PE IN THE FO RM OF LOANS AND ADVANCES. IN VIEW OF THESE SUBMISSIONS, THE LD. DR SUBMITTED THAT IT IS NOT ONLY ESTABLISHED THAT THERE ARE PURCHASE ORDERS WHICH EX CEEDS THE MINIMUM DURATION TEST FOR PE UNDER ARTICLE 5(4), EVEN WHER E SUCH TEST IS NOT SATISFIED, 20 ITA NOS. 3675/DEL/2014 & ORS THE INVOLVEMENT OF THE FIXED PLACE PE UNDER ARTICLE 5(1) IN THE FORM OF YE2 PROJECT OFFICE AT THE PREMISES OF MUL IN PROCURING THE PURCHASE ORDERS AND ASSISTING IN THE SERVICES ARE ALSO ESTABLISHED THER EBY ATTRACTING THE PROVISIONS OF ARTICLE 12(5). ACCORDINGLY, THE DECISION OF THE AS SESSING OFFICER IN ATTRACTING THE YE2 PE AND BRINGING INTO TAX BOTH THE SUPPLIES MADE AND SUPERVISION CHARGES RECEIVED BY THE ASSESSEE FROM MUL SHOULD BE UPHELD. 15. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS A PE UNDER ARTICLE 5(1) AND ARTICLE 5(2) IN EARLIER YEARS. THE LD. AR SUBMITTED THAT PE WAS NOT CONNECTED DIRECTLY OR INDIRECTLY WITH SUPERVISION INCOME. THE TRIBUNAL IN EARLIER ORDER FOR AY 1992-93 TO 1996-97 HAS DULY EXAMINED ALL FORMS O F PE AND IN CONNECTION WITH SUPERVISORY ACTIVITIES. THE SAME HAS BEEN DULY DISCUSSED AT PARA 26, 27 AND 28 OF THE SAID ORDER IN ITA NO. 3943 TO 3945/DE L/1999 AND 5882 TO 5884/DEL/1998 ORDER DATED 31.05.2007). THE ASSESSEE S PLEA HAS BEEN SUBMITTED AT PARA 31 AND THE POINTS FOR CONSIDERATI ON WHICH HAVE BEEN DISCUSSED IN DETAIL BY THE TRIBUNAL HAVE BEEN PLACE D AT PARA 32 WHICH CLEARLY SHOWS THAT THE TRIBUNAL HAS DEALT IN DETAIL THE QUE STION OF EXISTENCE OF ALL KINDS OF PE LIKE 5(1) AS WELL AS 5(2). IN FACT, THE TRIBUNAL HAS NOTED CONTENTIONS OF REVENUE IN RESPECT OF ALL KINDS OF PE IN PARA 73 , NOTED REBUTTAL OF ASSESSEE AT PARA 74 AND THEREAFTER FROM PARA 75 TO 80 EXAMINED THE LEGAL AND FACTUAL ARGUMENTS. IT WAS FINALLY HELD BY THE TRIBUNAL THAT NO PE WAS EFFECTIVELY CONNECTED TO SUPERVISORY ACTIVITIES AND THUS SUM IS TAXABLE UNDER ARTICLE 12(2). THE LD. DR IS INCORRECT IN ARGUING THAT ARTICLE 5(2 ) WAS NEVER RAISED BY REVENUE NOR ADJUDICATED BY THE TRIBUNAL. THE LD. AR SUBMITT ED THAT IT HAD A FIXED PLACE PE IN THE FORM OF YE2K PROJECT OFFICE; BUT THAT PRO JECT OFFICE WAS ONLY IN RESPECT OF INSTALLATION ACTIVITY UNDERTAKEN BY IT FOR A SPE CIFIC EQUIPMENT. THE LD. AR SUBMITTED THAT YE2 WAS A PROJECT OFFICE ONLY IN REL ATION TO INSTALLATION ACTIVITIES AND NO MORE. THERE WERE PURCHASE ORDERS FOR SUPERVI SION ISSUED BEFORE AS WELL AS AFTER THE CLOSURE OF YE2 PROJECT. THUS, THERE CA NT BE A PRESUMPTION ON ANY ROLE OF YE2 PROJECT IN SUPERVISORY PROJECT OFFICE. THE SAID FIXED PLACE PE HAD NO EFFECTIVE CONNECTION EITHER OF SUPPLIES MADE FROM J APAN OR OF SUPERVISORY 21 ITA NOS. 3675/DEL/2014 & ORS SERVICES IN INDIA. ON THE CONTRARY, ALL PURCHASE OR DERS IN RESPECT OF EITHER SUPPLY OR OF RENDERING SUPERVISORY SERVICES WAS REC EIVED BY IT IN JAPAN. COPIES OF ALL SUCH PURCHASE ORDERS HAVE BEEN PLACED ON REC ORD BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A). IN FACT WHEN COMPARED SUBJECT YEAR PURCHASE ORDERS WITH PRECEDING YEARS OR EVEN LATER YEARS, THEY ARE FOUND TO BE IDENTICAL. AS MENTIONED ABOVE, ALL THESE ISSUES HAV E BEEN DEALT BY TRIBUNAL IN ITS ORDER FOR AY 1992-93 TO 1996-97. THE LD. DR ARG UED THAT TECHNICIANS ON PAYROLL OF YE2 MUL PROJECT HAD PROVIDED SUPERVISORY SERVICE BEFORE PURCHASE ORDER FOR SUPERVISION FEE WAS ACCEPTED. THE LD. DR IGNORED THE ESTABLISHED FACT THAT FOR PROVIDING SUPERVISION FEE SERVICE, TECHNIC IANS HAVE COME DIRECTLY FROM JAPAN AS MENTIONED IN THE PURCHASE ORDER. THERE IS NO FRESH FACT BROUGHT THAT REVEALS THAT TECHNICIANS WERE ON PAYROLL OF INDIA. IN FACT, IT CAN BE SEEN FROM THE SUPERVISION DETAILS SUBMITTED TO THE ASSESSING OFFICER THAT ALL TECHNICIANS ARE DIFFERENT FOR DIFFERENT SUPERVISORY ACTIVITIES, WHO HAVE COME TO INDIA ON A SPECIFIC DATE AND EXIT ON A SPECIFIC DATE AND EXIT ON A SPECIFIC DATE. SO, THEY CANNOT BE ALLEGED TO BE ON THE PAYROLL OF PE. THIS ARGUMENT WAS ALSO TAKEN IN EARLIER YEAR, MENTIONED IN PARA 62 OF THE EARLIER Y EAR ORDER OF THE TRIBUNAL. THE LD. AR POINTED OUT THAT THE LD. DR IS RELYING UPON PAYROLL OF PE FOR MARCH 1994 WHILE DEALING WITH MATTER OF AY 2001-02 WITHOU T ANY EVIDENCE ON RECORDS. THE LD. DR ALSO NOTED ONE EXCEPTIONAL PURCHASE ORDE R WHEREIN PURCHASE ORDER WAS ISSUED BUT BEFORE ITS ACCEPTANCE, SERVICES WERE STARTED. THE LD. AR SUBMITTED THAT THIS EXCEPTION CAN BE DUE TO SOME CO MMERCIAL REASON. THIS DOES NOT ESTABLISH THE FACT THAT THE TECHNICIANS WE RE ON THE PAYROLL OF YE2 MUL PROJECT OFFICE. IF THAT BE SO, THEN WHY DIFFERENT T ECHNICIANS HAVE COME FOR DIFFERENT PURCHASE ORDER, WHICH INDICATES THAT DIFF ERENT TECHNICIANS ARE REQUIRED FOR DIFFERENT SUPERVISORY PROJECTS. EVEN M UL HAS BORNE THE COST OF AIR TICKETS FROM JAPAN TO INDIA AS MENTIONED IN THE PUR CHASE ORDER. THUS, THE CONCLUSION DRAWN BY THE LD. DR IS PURELY BASED ON A SSUMPTIONS. THE LD. AR FURTHER SUBMITTED THAT MOST OF THE PURCHASE ORDERS ARE BASED ON GLOBAL TENDER (10 OUT OF 14 AS HIGHLIGHTED BY THE LD. DR HIMSELF) . EVEN IF CERTAIN PURCHASE ORDER ARE ISSUED BY MUL WITHOUT GLOBAL TENDER BUT B ASED ON REQUEST FOR 22 ITA NOS. 3675/DEL/2014 & ORS PROPOSAL. IT DOES NOT MEAN THAT THOSE ARE NOT INDEP ENDENT OR UNDERTAKEN BY YE2 PROJECT OFFICE. FURTHER, DURING THE EARLIER YEA RS ALSO THERE WERE SUCH PURCHASE ORDERS WHICH WERE THERE WITHOUT ANY TENDER AND ASSESSEE WORKED ON PROPOSAL BASIS. THE LD. AR SUBMITTED ONE EXAMPLE OF THE PURCHASE ORDER WHEREIN THERE IS NO REFERENCE TO GLOBAL TENDER AND INFERRED THAT THE FACTS FOR THE CASE FOR AY 2001-02 ARE SIMILAR TO AY 1992-93 T O 1996-97 FOR WHICH THE TRIBUNAL HAVE ALREADY DISPOSED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD. AR SUBMITTED THAT ALL THE PURCHASE ORDERS ALONG WITH D ETAILS OF STAY BY SUPERVISORS WERE FILED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND THE SAME WERE ACCEPTED BY THE ASSES SING OFFICER WITHOUT ANY ADVERSE COMMENT ON CALCULATION OF THE NUMBER OF DAY S OF STAY IN INDIA. THE LD. AR FURTHER SUBMITTED THAT THE PURCHASE ORDER PROVID ES AN ESTIMATED STAY FOR SUPERVISION ACTIVITIES WHICH MAY BE DIFFERENT WHILE ACTUALLY EXECUTING THE WORK. THE PE OF THE ASSESSEE SHOULD BE SEEN BASED ON THE ACTUAL TIME SPENT IN INDIA WHICH WAS DULY SUBMITTED ALONG WITH ENTRY AND EXIT DATE OF EACH SUPERVISOR AND ACCEPTED BY THE ASSESSING OFFICER. THE LD. AR P OINTED OUT THAT THE ASSESSEE HAS NOT DISPUTED THE POSITION WHERE ANY PU RCHASE ORDER HAS EXCEEDED 180 DAYS OR 6 MONTHS STAY IN INDIA AND SHOULD BE TA XED AS PER ASSESSMENT ORDER. THE LD. AR SUBMITTED THAT SUPERVISION FEE WA S EITHER FIXED OR BASED ON PER MAN DAY BASIS, WHICH IS A COMMERCIAL TERM AGREE MENT BETWEEN THE ASSESSEE AND MUL. THE LD. AR SUBMITTED THAT THE SUB MISSIONS OF LD. DR ARE HIGHLY VAGUE AND WITHOUT ANY BASIS. THE CALCULATION HAS BEEN MADE IN IDENTICAL MANNER IN EACH YEAR AND THE SAME IS ACCEPTED BY THE TRIBUNAL. FOR THE PURPOSE OF CALCULATING THE PERIOD OF 6 MONTHS, THE ONLY METHOD ACCEPTED BY THE TRIBUNAL IS GIVEN BELOW: * THE DAYS MUST BE COUNTED FROM THE ENTRY OF SUPERV ISORS IN INDIA TILL THE DATE OF HIS EXIT * THERE IS A DIFFERENCE BETWEEN MAN DAYS AND DAY S. TO CALCULATE A DAY, FOR EXAMPLE IF 10 SUPERVISORS COME FOR A DAY, THEN MAN DAYS ARE 10 AND NUMBER OF DAYS IS ONE. THUS, IN ORDER TO DETERMIN E NUMBER OF DAYS FOR THE PURPOSE OF ARTICLE 5, PERIOD SHOULD BE TAKEN AS ON E DAY AND NOT 10 MAN 23 ITA NOS. 3675/DEL/2014 & ORS DAYS. * THIS WAS DULY AFFIRMED BY TRIBUNAL AS WELL AS BY THE HONBLE HIGH COURT. THE LD. AR SUBMITTED THAT THERE WAS ONLY ONE PURCH ASE ORDER WHICH HAS BEEN MENTIONED BY THE ASSESSING OFFICER IN HIS ORDE R WHICH HAS CROSSED A PERIOD OF 6 MONTHS AND THE SAME IS DATED 15.04.1999 . THE SUPERVISION SERVICES FOR THE SAME WERE PROVIDED WITHIN A PERIOD OF 26.09 .1999 TO 02.08.2000. EVEN THE CIT(A) HAS NOT GRANTED RELIEF ON SUCH PURCHASE ORDER AND ASSESSEE HAS NOT CHALLENGED THE SAME BEFORE THE TRIBUNAL. 16. IN RESPECT OF PO NO. MUL/PE/PR/30/24/MOD-1364/3 42 DT. 18/9/99, THE LD. DR REFERRED ONLY FOUR PURCHASE ORDERS OUT O F 13 PURCHASE ORDERS FOR THE SUBJECT YEAR FOR ALLEGING THAT SUPERVISORY SERVICE IS CONNECTED TO MUL PROJECT OFFICE. HE HAS REFERRED TO VARIOUS LETTERS EXCHANGE D BETWEEN THE ASSESSEE AND MUL. FOR ONE PURCHASE ORDER, THERE WAS MEETING AS W ELL WHERE PEOPLE FROM JAPAN TRAVELLED TO INDIA TO UNDERSTAND THE REQUIREM ENT OF MUL. BASED ON ABOVE THE LD. DR ARRIVED AT A CONCLUSION THAT THERE WAS SEVERAL ROUNDS OF NEGOTIATION AND AS LIAISON OFFICE WAS CLOSED DURING THE YEAR, EXISTED PE I.E. MUL YE2 PROJECT OFFICE WAS INVOLVED IN SUCH NEGOTIA TION. IN THIS REGARDS, THE LD. AR SUBMITTED AS UNDER: THE PURCHASE ORDERS FOR SUPERVISION HAS BEEN ISSUED PURSUANT TO GLOBAL TENDER AS WELL AS REQUEST FOR PROPOSAL BY MUL. PURSUANT TO ABOVE, THE ASSESSEE FROM ITS HEAD OFFIC E IN JAPAN AS WELL AS MUL EXCHANGED VARIOUS COMMUNICATION AND IN FEW ORDE RS EVEN HAD FEW MEETING IF REQUIRED FOR SOME DISCUSSION DULY REFERR ED IN PURCHASE ORDERS. AFTER ALL SUCH COMMUNICATION AND DISCUSSION, THE DECISION WAS TAKEN IN JAPAN AND COMMUNICATED THROUGH LETTERS. THE LD. AR SUBMITTED THAT THE LD. DRS ALLEGATION, THAT INDIAN PE WAS INVOLVED IN SUCH EXC HANGE OF LETTERS OR MEETING, IS PURELY ON ASSUMPTIONS AND WITHOUT ANY FACT ON RE CORDS. THE ASSESSEE HAD BEEN SUBMITTING SINCE AY 1992-93 THAT ALL COMMUNICA TION AND DECISION HAS 24 ITA NOS. 3675/DEL/2014 & ORS BEEN TAKING PLACE BETWEEN MUL AND HO IN JAPAN. NEIT HER ASSESSING OFFICER NOR LD. DR HAS BROUGHT ANY EVIDENCE EXCEPT REFERRIN G TO CERTAIN PURCHASE ORDERS FROM WHERE A PRESUMPTION HAS BEEN DRAWN THAT PE WAS INVOLVED IN NEGOTIATION. THE LD. AR POINTED OUT THAT YE2 PROJECT OFFICE IN M UL WAS CREATED FOR SPECIFIC PURPOSE FOR INSTALLATION ACTIVITIES OF PAR TICULAR PLANTS IN MUL. THIS PROJECT OFFICE HAS BEEN CREATED FOR SPECIFIC PURPOS E WHICH WAS APPROVED BY RBI AND CANNOT UNDERTAKE ANY OTHER ACTIVITY WITHOUT RBI APPROVAL. THE LD. AR SUBMITTED THAT THE REVENUE PURELY ON ASSUMPTION, CA NNOT ALLEGED THAT SUCH PROJECT OFFICE HAD EXCEEDED ITS AUTHORITY AND DID S OME ACTIVITIES RELATING TO NEGOTIATION OF PURCHASE ORDER FOR SUPERVISION. THE LD. AR POINTED OUT THAT ASSESSEE HAS BEEN DOING SUPERVISION ACTIVITIES PRIO R TO SUCH PROJECT OFFICE AS WELL AS SUBSEQUENT TO CLOSURE OF SUCH PROJECT OFFIC E. THE LD. AR POINTED OUT THAT THE ASSESSEE HAS BEEN T AKING SUPPORT FROM SUMITOMO CORPORATION INDIA FOR EXCHANGING THE COMMU NICATION WITH MUL FOR WHICH SERVICE FEE AT ARMS LENGTH PRICE HAD BEEN PA ID AND ACCEPTED BY TAX DEPARTMENT. HOWEVER, ALL SUPERVISORY SERVICES WERE PROVIDED BY TECHNICIAN TRAVELLED FROM JAPAN WHOSE TRAVEL COST WAS DULY BOR NE BY MUL AS REFERRED IN THE PURCHASE ORDERS. FURTHER, AS REGARDS ALLEGATION REGARDING TO SEVERAL ROUNDS OF NEGOTIATIONS ON TECHNICAL AS WELL AS PRICE BEFORE PURCHASE ORDER S ISSUED, THE LD. AR SUBMITTED THAT THE SAME WAS ALSO PRESENT IN AY 1992 -93. THERE ARE SIMILAR REFERENCES IN MANY OTHER PURCHASE ORDERS. THE ASSES SEE VISITED FOR MEETINGS DURING THE EARLIER YEARS PROJECT OFFICE AS WELL. DU RING THE EARLIER YEARS ALSO, THERE WERE SUCH PURCHASE ORDERS WHICH WERE THERE WI THOUT ANY TENDER AND WORKED ON PROPOSAL BASIS. AS REGARDS THE ALLEGATION OF THE LD. DR THAT IT IS NOT ONLY THE PURCHASE ORDER EXCEED MINIMUM DURATION TES T FOR PE UNDER ART. 5(4), EVEN WHERE SUCH TEST IS NOT SATISFIED, THE INVOLVEM ENT OF FIXED PLACE PE IN TERMS OF YE2 PROJECT OFFICE OF MUL ARE ESTABLISHED THEREB Y ATTRACTING THE PROVISION OF 25 ITA NOS. 3675/DEL/2014 & ORS ART 12(5) OF THE DTAA, THE LD. AR SUBMITTED THAT TH E PERIOD OF STAY IN ALL PURCHASE ORDER, WHICH ARE NOT ONLY INDEPENDENT TO E ACH OTHER BUT ALSO INDEPENDENT TO ANY PROJECT OFFICE THE ASSESSEE HAD IN INDIA, IS LESS THAN 6 MONTHS EXCEPT ONE PURCHASE ORDER. THUS, THERE IS NO PE IN ART 5(4) OF THE DTAA. THE LD. DR ALLEGED BY REFERRING TO FEW PURCHA SE ORDERS (4 OUT OF 13) THAT YE2 PROJECT OFFICE WAS INVOLVED IN NEGOTIATION OF T HE PURCHASE ORDER FOR SUPERVISION SERVICES AND THUS, ART. 12(5) SHOULD BE ATTRACTED. IN THIS CONNECTION, THE LD. AR SUBMITTED AS UNDER: FROM THE SUBMISSION ABOVE ON VARIOUS ALLEGATIONS BY THE LD. DR, IT WAS CLEARLY ESTABLISHED THAT IT WAS HEAD OFFICE, JAPAN WHO WAS EXCHANGING LETTER AND HAD FEW MEETING WITH MUL. THERE WAS NO EVIDENCE BUT ONLY ASSUMPTION OF FACTS THAT THERE WAS YE2 PROJECT OFFICE WHICH WAS I NVOLVED WHEREAS PER RBI APPROVAL SUCH PROJECT OFFICE WAS ONLY FOR INSTALLAT ION SERVICES THAT TOO FOR FEW YEARS. THE SAME WAS DULY EXAMINED IN EARLIER YEARS ON IDENTICAL PURCHASE ORDER TERMS. IN ORDER TO ATTRACT ART. 12 (5), IT SHOULD BE ESTAB LISHED BEYOND DOUBT THAT SUPERVISION SERVICES WAS RENDERED THROUGH THAT PE S O AS TO ARGUE THAT FTS IS EFFECTIVE CONNECTED WITH SUCH PE. EVEN WHERE THE AS SESSEES LO WAS INVOLVED AS COMMUNICATION CHANNEL, IT WAS HELD NOT A PE BY T HE TRIBUNAL IN EARLIER YEARS, THUS, IT CANNOT BE SAID WITHOUT ANY EVIDENCE THAT LO OR ANY PROJECT OFFICE WAS INVOLVED IN RENDERING SERVICES TO ATTRACT ART 1 2(5). IN VIEW OF THE ABOVE, ART 12(5) CANNOT BE ATTRACTED. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2001-02 ( ITA NO. 3694/DEL/2014 ORDER DATED 09.05.2018) HELD AS UNDER: 25. SECOND GRIEVANCE OF THE REVENUE RELATES TO THE TAXABILITY OF SUPERVISION FEES RECEIVED FROM M/S MARUTI UDYOG LTD . 26. THIS ISSUE WAS CONSIDERED BY THE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1992-93 TO 1996-97 WHEREIN THE 26 ITA NOS. 3675/DEL/2014 & ORS HONBLE HIGH COURT HAS HELD THAT SUPERVISION FEE IS TAXABLE UNDER ARTICLE 12(2) OF THE DTAA AND CONCUR WITH THE VIEW OF THE TRIBUNA L THAT FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12(2) OF THE DTAA. TH E QUESTION WAS ACCORDINGLY ANSWERED IN THE NEGATIVE I.E. IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 27. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT ON RECORD, RESPECTFULLY FOLLOWING THE FINDING S OF THE HONBLE JURISDICTIONAL HIGH COURT (SUPRA) THIS GROUND IS DISMISSED. THE TRIBUNAL IN A.Y. 1992-93 TO 1996-97 (SUPRA) HE LD AS UNDER: 79. THE ABOVE RULE IS HOWEVER SUBJECT TO EXCEPTION S, VIZ., WHERE EACH BUILDING SITE OR INSTALLATION SITE FORM A COHERENT WHOLE IN THE OTHER COUNTRY AND ARE OPERATED AT ONE PLACE AND THE SAME ORDERING PARTY. THE THRUST OF THE ARGUMENT OF THE LD. COUNSEL FOR THE REVENUE HAS BEE N ON THIS EXCEPTION TO THE RULE. WE ARE OF THE VIEW THAT THE CASE OF THE ASSES SEE DOES NOT FALL WITHIN THE EXCEPTION TO THE RULE. WE HAVE ALREADY HIGHLIGHTED THE FACT THAT EACH PO WAS INDEPENDENT AND DID NOT COMPLEMENT EACH OTHER. THE MUL YE2 PROJECT WOULD NOT STAND CONCLUDED WITH EXECUTION OF THESE PURCHAS E ORDERS. THE ASSESSEE WAS NOT THE ONLY PERSON RENDERING SUPERVISORY SERVI CES. THE SITES WERE LOCATED AT DIFFERENT PLACES VIZ., ASSEMBLY FLOOR, P AINT SHOP OR WELD SHOP. IT CANNOT BE SAID ALL CONTRACTS PUT TOGETHER FORMED A COHERENT WHOLE, COMMERCIALLY OR GEOGRAPHICALLY. EVEN POS RELATE TO DIFFERENT AREAS OF MANUFACTURE OF A CAR. HOW THEY ARE COMMERCIALLY A C OHERENT WHOLE IS NOT SPELT OUT IN THE ORDER OF THE ASSESSING OFFICER. SU CH FINDING CANNOT BE GIVEN WITHOUT ANY BASIS. AS ALREADY STATED, PERUSAL OF PO S CLEARLY INDICATE THAT THE VARIOUS CONTRACTS WERE INDEPENDENT AND WERE NOT CAP ABLE OF BRINGING IN A COHERENT WHOLE COMMERCIALLY. MERE COMMONALITY OF TH E PRINCIPAL CANNOT BE SUFFICIENT IN THIS REGARD. WE THEREFORE, HELD THAT THERE EXISTED NO PE WITHIN THE MEANING OF ARTICLE 5(4) OF THE DTAA. 80. THE INCOME IN QUESTION FOR ALL THESE YEARS WERE THEREFORE TO BE BROUGHT TO TAX UNDER ARTICLE 12(2) OF THE DTAA. THE ASSESSEE HAS OFFERED TO TAX INCOME IN QUESTION IN ACCORDANCE WITH ARTICLE 1 2(2) OF THE DTAA AND IS THE 27 ITA NOS. 3675/DEL/2014 & ORS SAME IS DIRECTED TO BE ACCEPTED. THE HONBLE HIGH COURT (ITA NO. 717/2014 ORDER DATE D 16.11.2015) HELD AS UNDER: 32. FOR THE AFORESAID REASONS, THE COURT CONCURS W ITH THE VIEWS OF THE ITAT THAT IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12(2) OF THE DTAA. THE QUESTION IS ACCORDIN GLY ANSWERED IN THE NEGATIVE, I.E. IN FAVOUR OF THE ASSESSEE AND AGAINS T THE REVENUE. THE HONBLE SUPREME COURT (CC NO. 9158/2016 ORDER D ATED 29.06.2016) HELD AS UNDER: THE ESSENTIAL QUESTION IS WHETHER ARTICLE 12(2) OR 12(5) OF THE AGREEMENT WHICH IS APPLICABLE IN THESE CASES. IN THE FACTS OF THESE CASES, WE ARE NOT INCLINED TO GO INTO THIS ASPECT. THE SPECIAL LEAVE PETITIONS ARE, ACCORDINGLY, DISMI SSED. IN THE PRESENT ASSESSMENT YEAR 2001-02, THE ASSESSE E GAVE TABLE SUMMARIZING THE VARIOUS PURCHASE ORDERS ISSUED BY M UL FOR SUPPLY OF EQUIPMENT AND SUPERVISION OF INSTALLATION THEREOF & THE AMOUNT OF SUPERVISION FEE RECEIVED UNDER EACH PURCHASE ORDER WAS ALSO PRO VIDED. THERE IS ONE PURCHASE ORDER NO. MUL/PE/PN/501/IMP(E)/MOD/1058 AM OUNTING TO 193,000,000 AS SUPERVISION FEE, DATE OF START IS 2 6/09/1999 AND DATE OF FINISH IS 02/08/2000. THE CONTRACT WISE NO. OF DAYS WERE 3 12, RATE WAS 21%, ISSUED ON 25/09/2000. THE ASSESSEEE IS NOT DENYING THIS PU RCHASE ORDER BEING MENTIONING MORE THAN 180 DAYS WHICH AMOUNTS TO SUPE RVISORY PE IN THIS PARTICULAR PURCHASE ORDER. BUT THE OTHER PURCHASE O RDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. THE ASSESSEE ALSO ACCEPTED THIS PURCHASE ORDER BE TAXED ACCORDINGLY. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEA TURES EMERGE THAT IN ALL THE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPA N AND MUL BEARS THE COST OF THEIR AIR TICKET AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDIA. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRAC TS DID NOT EXCEED A PERIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HE REINABOVE AND THEY DID 28 ITA NOS. 3675/DEL/2014 & ORS NOT CONSTITUTE SUPERVISORY PE IN TERMS OF ARTICLE 5 (4) OF THE DTAA. THE LD. DRS ISOLATED PURCHASE ORDER HAVING MORE THAN 180 DAYS C ANNOT ESTABLISH THAT EACH INDIVIDUAL PURCHASE ORDERS ARE INTERLINKED. IN FACT , THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. THE LD. AR ALSO SUBMITTED DURING THE HEARING THAT THE SOLE PURCHASE ORDER WHICH HAS MORE THAN 180 DAYS HAS BEEN OFFERED TO TAX IN EARLIER ASSESSMENT YEAR I.E. 1999-00. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE I S SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRMED BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREM E COURT. THUS, IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12(2) OF THE DTAA. HENCE, GROUND NOS. 3 TO 3.1 IN REVENUES APPEAL ARE DISMISSED. 18. AS REGARDS TO GROUND NO. 4 TO 4.2, THE LD. DR R ELIED UPON THE ASSESSMENT ORDER. 19. THE LD. AR SUBMITTED THAT THE PROVISIONS OF SEC TION 234B OF THE ACT ARE APPLICABLE IN CASES WHERE AN ASSESSEE WHO IS LIABLE TO PAY ADVANCE TAX DEFAULTS IN PAYMENT OF SUCH ADVANCE TAX. ACCORDINGLY, IN ORD ER TO BE LIABLE TO INTEREST UNDER SECTION 234B OF THE ACT, THE ASSESSEE FIRST N EEDS TO BE LIABLE TO PAY ADVANCE TAX UNDER PROVISIONS OF SECTION 208 OF THE ACT. SECTION 208 OF THE ACT PROVIDES THAT THE ADVANCE TAX PAYABLE DURING THE FI NANCIAL YEAR WOULD BE COMPUTED IN ACCORDANCE WITH PROVISIONS OF CHAPTER X VIIC OF THE ACT. SECTION 209 OF THE ACT PROVIDES FOR A DETAILED COMPUTATIONA L MECHANISM FOR THE CALCULATION OF ADVANCE TAX LIABILITY. THE LD. AR S UBMITTED THAT AS PER SECTION 209(1)(D) OF THE ACT, THE AMOUNT OF INCOME TAX TO B E PAID BY WAY OF ADVANCE TAX SHALL BE CALCULATED BY REDUCING FROM THE TOTAL AMOU NT OF TAX LIABILITY, THE AMOUNT OF INCOME TAX DEDUCTIBLE OR COLLECTIBLE AT S OURCE ON THE INCOME. THE RELEVANT EXTRACT OF THE PROVISION OF SECTION 209 (1 ) OF THE ACT IS AS UNDER: THE AMOUNT OF ADVANCE TAX PAYABLE BY AN ASSESSEE I N THE FINANCIAL YEAR SHALL, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) AND (3), BE COMPUTED AS 29 ITA NOS. 3675/DEL/2014 & ORS FOLLOWS, NAMELY: (A) ..... (B) . (C) .. (D) THE INCOME-TAX CALCULATED UNDER CLAUSE (A) OR C LAUSE (B) OR CLAUSE (C) SHALL, IN EACH CASE, BE REDUCED BY THE AMOUNT OF INCOME-TA X WHICH WOULD BE DEDUCTIBLE (OR COLLECTIBLE) AT SOURCE DURING THE SA ID FINANCIAL YEAR UNDER ANY PROVISION OF THIS ACT FROM ANY INCOME (AS COMPUTED BEFORE ALLOWING ANY DEDUCTIONS ADMISSIBLE UNDER THIS ACT) WHICH HAS BEE N TAKEN INTO ACCOUNT IN COMPUTING THE CURRENT INCOME OR, AS THE CASE MAY BE , THE TOTAL INCOME AFORESAID; AND THE AMOUNT OF INCOME-TAX AS SO REDUC ED SHALL BE THE ADVANCE TAX PAYABLE. THUS, IT FOLLOWS FROM THE ABOVE THAT INTEREST UNDER SECTION 234B OF THE ACT CAN BE LEVIED ONLY ON THE UNPAID TAX LIABILITY, IF ANY, AFTER REDUCING THE AMOUNT OF TAXES DEDUCTIBLE AND COLLECTIBLE AT SOURCE. UNDER S ECTION 195 OF THE ACT, TAX IS DEDUCTIBLE AT SOURCE FROM PAYMENTS MADE TO NON-RESI DENTS. SINCE THE ASSESSEE IS A NON-RESIDENT, TAX IS DEDUCTIBLE AT SOURCE FROM THE ENTIRE PAYMENTS MADE TO THE ASSESSEE AS PER THE PROVISIONS OF SECTION 195 O F THE ACT. ACCORDINGLY, SINCE TAX WAS DEDUCTIBLE AT SOURCE AND WAS CORRECTLY DEDU CTED ON ALL THE PAYMENTS MADE TO THE ASSESSEE, NO ADVANCE TAX WAS PAYABLE BY THE ASSESSEE AS PER THE PROVISIONS OF SECTION 208 READ WITH SECTION 209(1)( D) OF THE ACT. CONSEQUENTLY, IN THE ABSENCE OF ANY LIABILITY FOR PAYMENT OF ADVA NCE TAX, THE PROVISIONS OF SECTION 234B OF THE ACT WOULD NOT BE APPLICABLE IN THE ASSESSEES CASE. THE LD. AR RELIED UPON THE FOLLOWING DECISIONS: DIT VS. MITSUBISHI CORPORATION (ITA NOS. 209, 299, 282, 283, 297, 301, 316, 320 OF 2009 (DEL.) AND DIT VS. JACOBS INCORPOR ATED WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HAS CATEGORICALLY HELD TH AT INTEREST IS NOT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. FURTHER, THE ABOVE LAW LAID DOWN BY THE HONBLE JUR ISDICTIONAL HIGH COURT HAS BEEN AGAIN AFFIRMED BY THE HONBLE JURISD ICTIONAL HIGH COURT IN CASE 30 ITA NOS. 3675/DEL/2014 & ORS OF DIT VS. GE PACKAGED POWER INC. (ITA NO. 352/2014 TO 402/2014) WHEREIN IT HAS BEEN HELD THAT THE POSITION OF LAW LAID DOWN IN JACOBS IS CORRECT AND IS NOT DILUTED AND HENCE, THE LIABILITY OF THE PAYER IS AB SOLUTE. IN THE CASE OF DIT VS. NGC NETWORK ASIA LLC (313 IT R 187), THE HONBLE BOMBAY HIGH COURT HELD THAT THE ASSESSEE WAS A NON- RESIDENT COMPANY AND ITS ENTIRE INCOME CHARGEABLE TO TAX IN INDIA WAS SUBJEC T TO TDS UNDER SECTION 195 OF THE ACT. THEREFORE, NO INTEREST UNDER SECTION 23 4B OF THE ACT COULD BE CHARGED EVEN IF THE PAYER HAD NOT DEDUCTED TAX AT S OURCE. IN CIT VS. MADRAS FERTILIZERS LTD. (149 ITR 703, TH E HONBLE MADRAS HIGH COURT HELD THAT THE LIABILITY TO PAY ADVANCE TAX DI D NOT ARISE WHERE THE INCOME WAS SUBJECT TO DEDUCTION OF TAX AT SOURCE. THE HONBLE UTTARNCHAL HIGH COURT IN CASES OF CIT V S. HALLIBURTON OFFSHORE SERVICES INC. (2004) AND CIT VS. READING A ND BATES EXPLORATION CO. (2005) (278 ITR 47) HAS HELD THAT WHERE THE EMPLOYE R-COMPANY HAS NOT DEDUCTED TAXES AT SOURCE ACCORDING TO THE LAW PREVA ILING THE ASSESSEE EMPLOYEE SHOULD NOT BE FAULTED FOR SUCH DEFAULT BY LEVY OF I NTEREST. THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COU RT AND THE VARIOUS HIGH COURTS INCLUDING JURISDICTIONAL HIGH COURT, RE NDERED IN THE CONTEXT OF THE ACT, CONTINUE TO HOLD GOOD AND ACCORDINGLY, THE LD. AR SUBMITTED THAT IN THE FACTS OF THE ASSESSEE, THERE WAS NO REQUIREMENT TO PAY ADVANCE TAXES IN RESPECT OF INCOME WHICH WAS LIABLE TO TAX DEDUCTION AT SOUR CE. HENCE, NO INTEREST UNDER SECTION 234B OF THE ACT IS LEVIABLE. FOR THE AY 2007-08, AT THE OUTSET, THE LD. AR SUBMI TTED THAT SINCE NEITHER IN THE COMPUTATION SHEET NOR IN THE DEMAND NOTICE ANY INTEREST HAS BEEN CHARGED, THE GROUND RAISED IN THE APPEAL IS NOW OF ACADEMIC INTEREST. FURTHER, THE LD. AR SUBMITTED THAT A PERIOD OF 4 YEARS HAS A LSO ELAPSED AND NO INTEREST HAS BEEN COMPUTED/LEVIED ON THE ASSESSEE. 31 ITA NOS. 3675/DEL/2014 & ORS 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS ISSUE IS COVERED IN FAVO UR OF THE ASSESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI COR PORATION (SUPRA) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS NOT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND NOS. 4 TO 4.2 ARE DISMISSED. 21. IN RESULT, ITA NO. 3695/DEL/2014 IS DISMISSED. 22. NOW WE ARE TAKING UP ASSESSEES APPEAL 3675/ DEL/2014 (A.Y. 2001-02) ASSESSEES APPEAL 1. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN DISALLOWING THE BUSINESS LOSS OF RS 23, 780 CLAIMED BY THE PROJECT OFFICE (PO) OF THE APPELLANT UNDER THE O&M CONTRA CT WITH M/S ANDHRA PRADESH GAS POWER CORPORATION LIMITED (APGPCL) BY MERELY FOLLOWING THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) FOR THE ASSESSMENT YEAR 1999-2000 AND WITHOUT INDEPENDENTLY EXAMINING THE CLAIM OF THE APPELLANT. 1.1 THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW IN SUBJECTING THE BUSINESS INCOME ARISING TO THE PO OF THE APPELLANT UNDER O&M CONTRACT WITH APGPCL AS FEES FOR TECHNICAL SER VICES. 1.2 THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW BRING TO TAX BUSINESS INCOME ARISING TO THE PO OF THE A PPELLANT UNDER O&M CONTRACT WITH APGPCL AS FEES FOR TECHNICAL SERVICE S UNDER SECTION 44D OF THE ACT, WITHOUT APPRECIATING THAT THIS METHOD OF T AXATION CAUSES DISCRIMINATION AND THUS VIOLATES THE SPIRIT AND INT ENT OF ARTICLE 24 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA A ND JAPAN (DTAA). VIJJESWARAM PROJECT - ERECTION, PROCUREMENT AND CON STRUCTION (EPC) CONTRACT 32 ITA NOS. 3675/DEL/2014 & ORS 2. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND ON FACTS IN BRINGING TO TAX THE GROSS RECEIPT OF RS . 1,70,00,000/- BEING THE ADDITIONAL CONSIDERATION FOR THE ADDITIONAL WORK IN RELATION TO THE ERECTION, PROCUREMENT AND CONSTRUCTION CONTRACT WITH M/S ANDH RA PRADESH GAS POWER CORPORATION LTD (APGPCL FOR 160MW GAS TURBINE CYCLE POWER STATION AT VIJJESWARAM AS AGAINST THE BUSINESS INCOME OF RS 9 66,870 (NET) DECLARED BY THE PROJECT OFFICE (PO) OF APPELLANT UNDER THE ER ECTION, PROCUREMENT AND CONSTRUCTION (EPC) CONTRACT WITH APGPCL. 2.1. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS COMPLETELY FAILED TO APPRECIATE THAT ADDITIONAL COMPENSATION O F RS 1,70,00,000 RECEIVED FROM APGPCL, WAS SPECIFICALLY TOWARDS THE EPC CONTR ACT, AND THERE WAS NO MATERIAL WHAT SO EVER TO CONCLUDE THAT THE ADDITION AL COMPENSATIONS WAS TOWARDS O&M CONTRACT. 2.2. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS GROSSLY ERRED IN HOLDING THAT EVEN IF THE ADDITIONAL CONSID ERATION WAS TOWARDS EPC CONTRACT, IT HAS THE NATURE OF FEE FOR TECHNICAL SE RVICES FAILING TO APPRECIATE THAT THERE IS NO MATERIAL OR EVIDENCE BROUGHT ON RE CORD TO HOLD THAT ADDITIONAL WORK DONE UNDER THE EPC CONTRACT WAS IN THE NATURE OF TECHNICAL SERVICES AS PROVIDED UNDER EXPLANATION-2 TO SECTION 9(1)(VII). 2.3. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT IN RESPECT OF T HE ADDITIONAL WORK UNDER EPC CONTRACT, APPELLANT MADE ADDITIONAL CLAIM OF RS. 2. 47 CRORES AND A SUM OF RS. 1.70 CRORE WAS RECEIVED DURING THE YEAR AND REMAINI NG SUM OF RS. 77,00,000/- WAS RECEIVED IN AY 2003-2004, WHEREIN A FTER CLAIMING THE EXPENDITURE, NET INCOME OF RS. 31,98,979/- WAS OFFE RED FOR TAXATION, AND SAME HAS ALSO BEEN ACCEPTED BY THE LEARNED ASSESSIN G OFFICER. 2.4. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN LAW AND ON FACTS IN NOT ALLOWING THE PAYMENTS AMOUN TING TO RS 1,50,00,000 TO M/S DELTA MECHCONS (INDIA) LIMITED, A VENDOR, TO WARDS SUPPLY OF SPARES AND RELATED SERVICES AGAINST THE ADDITIONAL COMPENS ATION RECEIVED BY YOUR APPELLANT FROM APGPCL, AS DEDUCTIBLE EXPENDITURE. 33 ITA NOS. 3675/DEL/2014 & ORS 2.5.THAT LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW IN CONCLUDING THAT SECTION 44D OF THE ACT APPLIES TO T HE INSTANT CASE, WITHOUT APPRECIATING THAT THIS METHOD OF TAXATION CAUSES DI SCRIMINATION AND THUS VIOLATES THE SPIRIT AND INTENT OF ARTICLE 24 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND JAPAN (DTAA). SARDAR SAROVAR NARMADA NIGAM LIMITED (SSNNL) PROJ ECT 3. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN LAW AND ON FACTS IN TREATING THE PAYMENT OF RS 12,513,333 MADE TO EXPRESS TRANSPORT PRIVATE LIMITED (ETPL), A SUB-CON TRACTOR FOR CUSTOM CLEARANCE AND INLAND TRANSPORTATION SERVICES, TOWAR DS CONTRACTUAL PRICE ADJUSTMENT FOR SERVICES RENDERED BY ETPL, AS CONTIN GENT LIABILITY, SINCE IT WAS NOT VERIFIED BY SARDAR SAROVAR NARMADA NIGAM LIMITE D (SSNNL), THE CONTRACT AWARDING AUTHORITY. 3.1. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT PAYMENT OF THE AFORESAID SUM HAS NOT BEEN DISPUTED BY THE LEARNED AO NOR IT IS IN DISPUTE THA T ETPL HAS RENDERED SERVICES AS A SUB-CONTRACTOR FOR CUSTOM CLEARANCE A ND INLAND TRANSPORTATION SERVICES, HENCE THE FINDING THAT AFORESAID EXPENDIT URE IS CONTINGENT LIABILITY WHICH IS SOLELY BASED ON THE FINDING THAT THE ADDIT IONAL CLAIM MADE TO SSNNL IS NOT FINAL, IS WHOLLY UNSUSTAINABLE. 3.2. THAT LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE PAYMENT TO ETPI IS IN RESPECT OF SERVICES RENDERED AS A SUBCONTRACTOR FOR CUSTOM CLEARANCE AN D INLAND TRANSPORTATION SERVICES FOR THE APPELLANT AND HENCE THE LIABILITY TO PAY TO ETPL WAS OF THE APPELLANT AND SUCH A PAYMENT WAS NOT DEPENDENT ON C LAIM MADE TO SSNNL. 3.3. THAT LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS FAILED TO APPRECIATE THAT THE EXPENDITURE INCURRED BY THE APPELLANT OF RS 12,513,333 BEING THE PAYMENT MADE TO ETPL TOWARDS C ONTRACTUAL OBLIGATION IS BUSINESS EXPENDITURE INCURRED DURING THE NORMAL COURSE OF BUSINESS ON 34 ITA NOS. 3675/DEL/2014 & ORS ACCOUNT COMMERCIAL EXPEDIENCY . 23. AS REGARD TO GROUND NO. 1 TO 1.2, THE LD. AR SU BMITTED THAT THE VIJJESWARAM PROJECT WAS ENTERED INTO BETWEEN THE AS SESSEE AND APGPCL AFTER THE COMPLETION OF 160 MW GAS TURBINE COMBINED CYCLE POWER STATION. THIS PROJECT WAS TOWARDS OPERATION & MAINTENANCE (O&M) O F THE SAID POWER STATION FOR WHICH SEPARATE BOOKS OF ACCOUNT WERE PREPARED B Y THE ASSESSEE AND LOSSES FOR BOTH AY 2000-01 AND 2001-02 RESPECTIVELY WERE R EPORTED IN THE INCOME TAX RETURN FOR SUBJECT YEAR ON A NET INCOME BASIS FRO M THE ABOVE CONTRACT. THE METHOD OF REPORTING AND COMPUTATION OF INCOME WAS I N LINE WITH ARTICLE 7 OF INDIA JAPAN TREATY FOR AVOIDANCE OF DOUBLE TAXATION (DTA) SINCE THE ASSESSEE HAD ESTABLISHED A PROJECT OFFICE/PERMANENT ESTABLIS HMENT IN INDIA FOR EXECUTING THIS PROJECT. THE SCOPE OF WORK UNDER THE O&M PROJECT WAS AS FOLLOWS AS IS EVIDENT FROM SPECIFICATION OF THE CONTRACT EX TRACTS OF WHICH ARE AS FOLLOWS: TRAINING ENGINEERS OF APGPCL AND ANDHRA PRADESH ST ATE ELECTRICITY BOARD TO MAKE THEM AWARE OF THE FUNCTIONING OF THE PLANT; TECHNICAL GUIDANCE AND COUNSELING ON THE PLANT OPER ATION AND MAINTENANCE; ENSURE ZERO BREAKDOWNS AND PROVIDING REPORTS OF BRE AKDOWNS TO SUPPLIERS FOR WARRANTY REPLACEMENTS; SUPERVISION OF RECTIFICATION AND REPAIR WORK ON FAI LED EQUIPMENT AND PARTS, AND ENSURE UTILIZATION OF THE CORRECT SPARES ; WITH RESPECT TO O&M PROJECT, THE ASSESSEE CLAIMED L OSS AMOUNTING TO RS. 5,38,740/- AND RS. 23,780 FOR AY 2000-01 AND AY 200 1-02 RESPECTIVELY. HOWEVER, THE ASSESSING OFFICER WHILE RELYING UPON T HE FINDINGS OF HIS PREDECESSOR FOR AY 1999-00 DISALLOWED THE RETURNED LOSS FOR BOTH THE AY 2000- 01 AND AY 2001-02 HOLDING THAT THE RECEIPTS FROM O& M CONTRACT IS IN THE NATURE OF FEE FOR TECHNICAL SERVICES AND IS TO BE T AXED ON GROSS BASIS WITHOUT ALLOWING ANY DEDUCTION FOR EXPENDITURE UNDER SECTIO N 44D OF THE ACT. THE 35 ITA NOS. 3675/DEL/2014 & ORS ASSESSING OFFICER FURTHER WENT ON TO CONCLUDE THAT THERE WAS NO CASE FOR ALLOWING ANY LOSS IRRESPECTIVE OF THE FACT THAT THE RE WERE NO RECEIPTS FROM THE CONTRACT THIS YEAR. THE CIT(A) HELD THAT THE ISSUE IS COVERED BY THE EARLIER ORDER OF HIS PREDECESSOR IN AY 1999-2000 WHEREIN IT WAS H ELD THAT AS PER SECTION 44D, NO DEDUCTION WILL BE ALLOWED TO THE O&M PROJEC T WHICH WAS INVOLVED IN PROVIDING TECHNICAL SERVICES TO THE CONTRACTEE APGP CL IN INDIA. THE LD. AR SUBMITTED THAT FOR AY 1999-2000, THE TRIBUNAL REVER SED THE ORDER OF THE CIT(A) ON WHICH RELIANCE WAS PLACED BY THE CIT(A) FOR AY 2 001-02 WHILE CONFIRMING ADDITION. THE LD. AR SUBMITTED THAT THERE IS NO DIS PUTE ON THE FACT THAT THE ASSESSEE HAS PE IN TERMS OF ARTICLE 7 OF DTAA IN RE SPECT OF THE OPERATION AND MAINTENANCE (O&M) CONTRACT OF THE VIJESHWARAM PROJE CT OFFICE. THE ABOVE CONCLUSION BY THE CIT(A) BY INVOKING PROVISIONS CON TAINED IN ARTICLE 7(3) OF DTAA READ WITH SECTION 44D OF THE ACT IS NEITHER BA SED ON PROPER APPRECIATION OF THE FACTS OF THE CASE AND, NOR THE CORRECT INTER PRETATION OF THE PROVISIONS OF THE DTAA AND THE ACT. ARTICLE 7(3) OF THE DTAA PROV IDES THAT EXPENSES HAVE TO BE ALLOWED. THE DTAA ALONG WITH THE PROTOCOL PROVID ES THAT, DEDUCTION ALLOWABLE SHOULD NOT BE LESS THAN THAT PROVIDED UND ER THE ACT AND, NOT THAT NO DEDUCTION IS ALLOWABLE AT ALL. THIS IS ALSO LIMITED TO EXPENSES, IN RESPECT OF GENERAL ADMINISTRATIVE EXPENSES AND, NO MORE. THE A RTICLE 7(3) DOESNT PROVIDE THAT THE DEDUCTION HAS TO BE ALLOWED AS PER ANY SPE CIFIC PROVISION OF LOCAL LAW UNLIKE DTAA BETWEEN INDIA-US. THE LD. AR SUBMITTED THAT IN THE PRESENT CASE SECTION 44D OF THE ACT IS NOT APPLICABLE SINCE 9(1) (VII) APPLIES TO A CASE WHERE PERSON IS NOT CARRYING ON BUSINESS DCIT VS. SCHLU MBERGER SEACO INC. (50 ITD 346) AND CIRCULAR NO. 202 DATED 5.7.1976 (105 ITR 2 5 (STATUTES)). ALSO, ONCE SUPERVISORY FEES HAS BEEN CHARACTERIZED AS BUSINESS PROFITS, SECTION 44D OF THE ACT WILL NOT APPLY. IN OTHER WORDS, ONCE THE ASSESS EE HAS A PE IN INDIA AND, CONSEQUENTLY THE INCOME IS COVERED UNDER SECTION 28 OF THE ACT, THEN THE COMPUTATION WOULD BE MADE IN ACCORDANCE WITH SECTIO N 30 TO 43D, WHICH APPARENTLY EXCLUDES THE OPERATION OF SECTION 44D OF THE ACT. THE LD. AR SUBMITTED THAT TAXATION ON GROSS BASIS IN THE INSTA NT CASE AS UPHELD BY THE CIT(A) IS AN ARBITRARY AND ABSURD INTERPRETATION. T HE LD. AR RELIED UPON THE 36 ITA NOS. 3675/DEL/2014 & ORS DECISIONS IN CASES OF BOSTON CONSULTING 94 ITD 31 ( MUM) AND HORIZONTAL DRILLING 237 ITR 142 (AAR). THE LD. AR FURTHER SUBM ITTED THAT IT IS ALSO SETTLED THAT, AN INTERPRETATION, WHICH LEAD TO ABSURDITY, O THERWISE SHOULD NOT BE PREFERRED. FURTHER, THE LD. AR SUBMITTED THAT AS PE R ARTICLE 24(2) OF THE INDIA- JAPAN DTAA, THE INCOME OF THE PE SHOULD NOT BE TAXE D LESS FAVORABLY THAN THE RESIDENT OF INDIA DOING SIMILAR BUSINESS AS IN CASE RESIDENT WOULD BE TAXED ON NET INCOME FOR THE SIMILAR SERVICES AND WOULD NOT B E SUBJECT TO SECTION 44D OF THE ACT, BY VIRTUE OF ARTICLE 24(2) OF DTAA, THE NO N-RESIDENT SHOULD ALSO BE TAXED NOT LESS FAVORABLY. BY TAXING ASSESSEE, BEING NON-RESIDENT, ON GROSS BASIS, IT IS GETTING TAXED LESS FAVORABLY THAN COMP ARED TO RESIDENT OF INDIA FOR SIMILAR BUSINESS ACTIVITIES. THUS, THE INCOME OF TH E PE SHOULD BE TAXED ON NET BASIS. THE LD. AR RELIED UPON THE DECISION OF THE A GRA SPECIAL BENCH TRIBUNAL IN CASE OF RAJEEV SURESHBHAI GAJWANI VS. ACIT 8 ITR 616. IN ADDITION, THE LD. AR SUBMITTED THAT THIS ISSUE IS COVERED BY THE ORDE R OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1999-00 (ITA NO. 867/DEL /2006), WHEREIN, AFTER GOING THE FACTS OF THE CASE THE TRIBUNAL HELD THAT THE SERVICES RECEIVED BY THE ASSESSEE DOES NOT FALL UNDER FTS AND HAS TO BE CONS IDERED AS SERVICE IN RELATION TO CONSTRUCTION, ASSEMBLY OF PROJECT. AS THE INCOME IS NOT IN THE NATURE OF FTS, SECTION 44D WILL ALSO NOT APPLY. THUS, THE AMOUNT R ECEIVED UNDER O&M AGREEMENT IS BUSINESS INCOME AND TAXABLE UNDER ARTI CLE 7(3) OF DTAA ON NET BASIS. THE LD. AR ALSO RELIED UPON THE ORDER OF THE TRIBUNAL FOR AY 2000-01 (ITA NO. 3694/DEL/2014) IN ASSESSEES OWN CASE. 24. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 25. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS ISSUE IS COVERED BY THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1999-00, WHEREIN THE TRI BUNAL HELD THAT THE SERVICES RECEIVED BY THE ASSESSEE DOES NOT FALL UND ER FTS AND HAS TO BE CONSIDERED AS SERVICE IN RELATION TO CONSTRUCTION, ASSEMBLY OF PROJECT. AS THE INCOME IS NOT IN THE NATURE OF FTS, SECTION 44D WIL L ALSO NOT APPLY. THUS, THE 37 ITA NOS. 3675/DEL/2014 & ORS AMOUNT RECEIVED UNDER O&M AGREEMENT IS BUSINESS INC OME AND TAXABLE UNDER ARTICLE 7(3) OF DTAA ON NET BASIS. HENCE, GROUND NO . 1 TO 1.2 ARE ALLOWED. 26. AS REGARDS TO GROUND NO. 2 TO 2.5 OF THE ASSESS EES APPEAL, THE LD. AR SUBMITTED THAT DURING THE YEAR, THE ASSESSEE AND AP GPCL ENTERED INTO AN AGREEMENT TO EXECUTE TWO CONTRACTS. AS PER TERMS OF THE CONTRACT, THE ASSESSEE HAS MADE AN EXTRA CLAIM TO APGPCL ADDITIONAL WORK D ONE IN THE COURSE OF THE ERECTION AND COMMISSIONING AND ADDITIONAL RESOURCE USED TO ENSURE TIMELY COMPLETION OF THE PROJECT IN SPITE OF DELAYS CAUSED BY APGPCL. THE EXTRA CLAIM WAS ACCEPTED BY APGPCL AND THEY MADE A PARTIAL SETT LEMENT OF RS. 1,70,00,000. ACCORDINGLY, THE ASSESSEE OFFERED THE INCOME TO TAX ON NET BASIS CLAIMING THE RELEVANT EXPENSES PERTAINING TO SUCH C ONTRACTS. HOWEVER, THE ASSESSING OFFICER HELD THAT RECEIPTS ARE IN NATURE OF FTS AND HENCE TAXABLE ON GROSS BASIS U/S 44D. THE ASSESSING OFFICER ERRONEOU SLY CONSIDERED EPC CONTRACT SIMILAR TO ITS FINDING FOR O&M CONTRACT AN D TAXED INCOME ON GROSS BASIS AS PER AY 1999-00 ASSESSMENT ORDER. THE CIT(A ) HELD THAT IT IS NOT CLEAR THAT THE EXTRA AMOUNT WAS PAID FOR EPC CONTRACT OR O&M PROJECT. THE CIT(A) FURTHER HELD THAT IF THE SAID AMOUNT WAS PAID FOR E PC CONTRACT IT HAS THE NATURE OF FTS. THE CIT(A) OBSERVED THAT NO COGENT E VIDENCES WERE FILED TO PROVE THAT INCOME WAS FROM EPC OR O&M. THEREFORE, IT SHOU LD BE ASSESSED TO TAX @ 20% OF GROSS RECEIPTS. ACCORDINGLY, THE GROUND OF A PPEAL WAS DISMISSED. THE CIT(A) FURTHER HELD THAT AMOUNT PAID TO DELTA MECHO NS WAS NOT CLEAR, HENCE NOT ALLOWED AS DEDUCTION. THE LD. AR SUBMITTED THAT THE EPC CONTRACT WAS COMPLETED DURING THE ACCOUNTING PERIOD RELATING TO AY 1998-99. DURING THE PREVIOUS YEARS, THE INCOMES OF THE PROJECT WERE OFF ERED TO TAX BY SUMITOMO CORPORATION ON A NET INCOME BASIS WHICH WAS ACCEP TED BY THE ASSESSING OFFICER. AT THE TIME OF THE COMPLETION OF THE EPC C ONTRACT, SUMITOMO CORPORATION CLAIMED COMPENSATION FOR SOME ADDITIONA L WORK CARRIED OUT BY IT IN COURSE OF THE CONSTRUCTION. THE CLAIM FOR ADDITIONA L WORK WAS FILED FOR AN AMOUNT OF RS. 2.47 CRORES OF WHICH SUMITOMO CORPORA TION GOT A PARTIAL ACCEPTANCE AND PAYMENT AMOUNTING TO RS. 1.70 CRORES DURING THE ACCOUNTING 38 ITA NOS. 3675/DEL/2014 & ORS YEAR RELEVANT TO AY 2001-02 AND THE BALANCE WAS ACC EPTED DURING THE ACCOUNTING YEAR RELEVANT TO AY 2003-04. THE ASSESSE E IN TURN HAD AGREED ON 28/12/98 WITH THEIR PRINCIPAL SUB-CONTRACTOR M/S DE LTA MECHONS LIMITED THAT ASSESSEE WOULD PAY DELTA MECHONS LTD. THE ADDITIONA L SUMS CLAIMED BY THEM, FOR THE ADDITIONAL WORK DONE BY THEM IN CASE OF ACC EPTANCE BY APGPCL OF ASSESSEES CLAIM FOR SUCH PAYMENTS. THE ASSESSING O FFICER ERRONEOUSLY TREATED THE ENTIRE GROSS AMOUNT RECEIVED BY SC BY WAY OF AD DITIONAL COMPENSATION FOR THE EPC CONTRACT AS RECEIPTS FROM O&M PROJECT AND C ONSIDERED IT AS FEES FOR TECHNICAL SERVICES: AND ASSESSED IT TO TAX AT 20% O F THE GROSS RECEIPTS (1,70,00,000 @ 20%) WITHOUT DEDUCTION OF EXPENSES W ITHOUT APPRECIATING THAT THE AFORESAID SUM DID NOT REPRESENT FEE FOR TECHNIC AL SERVICES, BUT REPRESENTED BUSINESS RECEIPTS. THE LD. AR FURTHER REITERATED TH AT THE RECEIPT OF RS. 1.7 CRORES WAS FOR THE ERECTION, PROCUREMENT AND CONSTR UCTION CONTRACT, INCOME FROM WHICH HAS BEEN TREATED BY THE ASSESSING OFFICE R AS BUSINESS INCOME SUBJECT TO TAX AFTER DEDUCTION OF EXPENSES AS ALLOW ABLE UNDER THE LAW IN EARLIER YEARS. IN ADDITION, THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1999-00, WHEREIN AFTER GOING THROUGH THE FACTS OF O&M CONTRACT, HELD THAT THE SERVICES RECEIVED BY THE ASSESSEE DOES NOT FALL UNDER FTS AND HAS TO BE CONSIDERED AS SERVICE IN RELATION TO CONSTRUCTION, ASSEMBLY OF PROJECT I.E. BUSINESS INCOME. THUS, THE AMOUNT RECEIVED UNDER O&M AGREEMENT IS BUSINESS INC OME AND TAXABLE UNDER ARTICLE 7(3) OF DTAA ON NET BASIS. 27. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 28. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS ISSUE IS COVERED BY THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1999-00, WHEREIN AFTER G OING THROUGH THE FACTS OF O&M CONTRACT, HELD THAT THE SERVICES RECEIVED BY TH E ASSESSEE DOES NOT FALL UNDER FTS AND HAS TO BE CONSIDERED AS SERVICE IN RE LATION TO CONSTRUCTION, ASSEMBLY OF PROJECT I.E. BUSINESS INCOME. THUS, THE AMOUNT RECEIVED UNDER O&M AGREEMENT IS BUSINESS INCOME AND TAXABLE UNDER ARTICLE 7(3) OF DTAA ON 39 ITA NOS. 3675/DEL/2014 & ORS NET BASIS. HENCE GROUND NOS. 2 TO 2.5 ARE ALLOWED . 29. AS REGARDS TO GROUND NOS. 3 TO 3.3 ARE CONCERNE D, THE LD. AR SUBMITTED THAT THE ASSESSEE INCURRED AN EXPENDITURE IN RESPEC T OF TRANSPORTATION OF THE MATERIAL SUPPLIED WHICH WAS AN EXISTING & ASCERTAIN ED LIABILITY AND WAS ALLOWED AS BUSINESS EXPENDITURE. THE FINDING OF THE ASSESSING OFFICER IS UPHELD BY THE CIT(A) THAT LIABILITY WAS NOT CRYSTALLIZED A S CLAIM TO SARDAR SAROVAR NARMADA NIGAM LIMITED (SSNNL) IS NOT FINAL, IS MISC ONCEIVED. THE LD. AR SUBMITTED THAT THE AUTHORITIES HAVE FAILED TO APPRE CIATE THAT THE MERE FACT UNDER THE AGREEMENT THE EXPENDITURE ON TRANSPORTATI ON WAS DIRECTLY COLLECTED FROM SSNNL WAS INSUFFICIENT TO HOLD THAT THE LIABIL ITY INCURRED ON TRANSPORTATION WAS NOT THAT OF THE ASSESSEE BUT WAS THAT OF SSNNL. UNDER ARTICLE 5 OF THE AGREEMENT BETWEEN ASSESSEE AND ETP L, HOWEVER, THE ASSESSEE HAD AUTHORIZED, WHICH MERELY ENTITLED ETPL TO COLLE CT & RECEIVE CONTRACT PRICE FROM SSNNL FOR EACH PORTION. THE LD. AR FURTHER SUB MITTED THAT THERE IS A DIFFERENCE BETWEEN ACCRUAL OF INCOME AND INCURRING OF EXPENDITURE. THE LD. AR SUBMITTED THAT UNDER THE AGREEMENT ENTERED BY ASSES SEE WITH ETPL, IT HAS INCURRED A LIABILITY AND IN FACT PAID THE SAID SUM ON TRANSPORTATION TO ETPL. IT IS NOT DENIED THAT ASSESSEE UNDER THE CONTRACT WITH SSNNL COULD HAVE RECOVERED THE AMOUNT. HOWEVER, IN THE ABSENCE OF AN Y AGREEMENT WITH SSNNL, TO PAY THE EXTRA AMOUNT DUE TO ESCALATION OF COST, NO INCOME HAS EITHER ACCRUED OR WAS RECEIVED BY THE ASSESSEE. IN FACT, I T IS NOT A FINDING THAT ASSESSEE HAS NOT HONORED THE COMMITMENT. THUS, THE ASSESSEE HAS PAID TO ETPL UNDER ITS CONTRACTUAL LIABILITY EVEN THOUGH TH E SAME COULD NOT BE RECOVERED FROM SSNNL. THE FINDINGS OF THE AUTHORITI ES BELOW I.E. OF THE ASSESSING OFFICER AND CIT(A) IS MISCONCEIVED. THERE FORE, THE LD. AR PRAYED THAT THE DISALLOWANCE MADE OF THE EXPENDITURE INCURRED O F RS. 1,25,13,333/- WHICH HAS BEEN PHYSICALLY PAID SHOULD BE DIRECTED TO BE A LLOWED. THE LD. AR REITERATED THAT THE ASSESSEE IN THE COURSE OF ITS B USINESS WAS UNDER AN OBLIGATION TO INCUR AN EXPENDITURE ON INLAND TRANSP ORTATION ETC. OF THE MATERIAL SUPPLIED. THUS, THE ASSESSEE HAS DEBITED IN THE ACC OUNT OF COST OF SALES AN 40 ITA NOS. 3675/DEL/2014 & ORS AGGREGATE SUM OF RS. 1,96,73,260/- ON TRANSPORTATIO N OF EQUIPMENT TO SSNNL. HOWEVER, THE ASSESSING OFFICER HAS DISALLOWED RS. 1 ,25,13,333/-, ON ASSUMPTION THAT THE SAID SUM HAS BEEN PAID BY THE A SSESSEE TO ETPL. HOWEVER, THE FACT OF MATTER REMAINS THAT THE SAID SUM REPRESENTS AN AMOUNT OF EXPENDITURE INCURRED ON TRANSPORTATION AND HAS B EEN DIRECTLY PAID BY SSNNL TO ETPL, WHICH SUM IS LIKE AN EXPENDITURE INCURRED BY THE ASSESSEE OF RS. 1,25,13,333/- AND PAID BY SSNNL TOWARDS TRANSPORTAT ION. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT IN THE SIMILAR MANNER WHAT HAD BEEN PAID IN THE PRECEDING YEAR AY 2000-01, BY SSNNL TO ETPL WHICH HAD NOT BEEN DISALLOWED, COULD NOT HAVE BEEN DISALLOWED IN AY 2001-02 ALSO; WHEREAS WITHOUT DISPUTING THAT THERE WAS AN EXPENDITURE INCURRED ON TRANSPORTATION WHICH WAS THE LIABILITY OF THE ASSESSEE HAS EVEN BEEN DISALLOWED I.E. OF RS. 1,25,13,333/-. THE CIT( A) FAILED TO APPRECIATE THAT DISALLOWANCE MADE IN THE PRECEDING YEAR OF SIMILAR NATURE AND CHARACTER HAD BEEN ALLOWED. HOWEVER, THE LD. AR SUBMITTED THAT TH E ASSESSEE HAS NOT AS SUCH MADE ANY EFFECTIVE CLAIM OF AN EXPENDITURE OF RS. 1 ,25,13,333/-, SINCE WHAT HAS BEEN PAID BY SSNNL HAS BEEN CREDITED TO THE ACC OUNT OF SALE REVENUE AND WHAT HAS BEEN PAID BY SSNNL DIRECTLY TO ETPL HA S BEEN DEBITED IN COST OF SALES. FOR AY 2000-01 WHAT HAD BEEN DISALLOWED BY THE ASSESSING OFFICER WAS AN ENTIRELY DIFFERENT SUM I.E. THE CHARACTER OF THE EXPENDITURE INCURRED AND CLAIMED IN THAT YEAR WAS DIFFERENT THAN THE NATURE AND CHARACTER OF THE AMOUNT DISALLOWED IN THE YEAR IN QUESTION. FOR THE INSTANT ASSESSMENT YEAR, THE EXPENDITURE WHICH HAS BEEN INCURRED AND CLAIMED BEI NG AN ADDITIONAL LIABILITY IS OF RS. 71,59,932/- WHICH SUM HAS NOT BEEN DISALL OWED BY THE ASSESSING OFFICER. THUS THE ASSESSING OFFICER ON COMPLETE MIS CONCEPTION HAS MADE DISALLOWANCE OF THE SAID SUM OF RS. 1,25,13,333/- W HICH SUM IS AN EXPENDITURE INCURRED AND HAS BEEN REIMBURSED TO IT BY THE SSNNL . THEREFORE, THE LD. AR SUBMITTED THAT THE DISALLOWANCE MADE OF RS. 1,25,13 ,333/- IS APPARENTLY MISCONCEIVED. 30. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 41 ITA NOS. 3675/DEL/2014 & ORS 31. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THIS ISSUE IS COVERED BY THE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR AY 2000-01. THE TRIBUNAL IN A.Y. 2000- 01 HELD AS UNDER: 20. IN OUR CONSIDERED OPINION, THIS CLAUSE OF THE SUPPLEMENTARY DEED CANNOT BE READ IN ISOLATION AND IT HAS TO BE CONSID ERED IN THE CONTEXT AS A WHOL. THERE IS NO EVIDENCE BROUGHT ON RECORD TO SUG GEST THAT ETPL HAS REPAID THIS AMOUNT TO THE ASSESSEE. CLAUSE REFERRED BY THE LD. DR IS FROM AGREEMENT MADE ON 18.9.1992 AND WE ARE IN THE MONTH OF MAY 20 18 MORE THAN 25 YEARS HAVE SINCE ELAPSED BUT NOTHING TO THE CONTRARY HAS BEEN PROVED BY THE REVENUE. MOREOVER, THE REVENUE AUTHORITIES HAVE NOT MADE ANY VERIFICATION FROM ETPL TO DISPROVE THE PAYMENTS MADE BY THE ASSE SSEE. FURTHER, THE SAID CLAUSE WAS ENTERED TO THE SUPPLEMENTARY AGREEMENT T O PROTECT THE INTEREST OF THE ASSESSEE TO ENABLE THE ASSESSEE TO MAKE A CLAIM FROM SSNNL. THOUGH ATTEMPTS HAVE BEEN MADE TO RECOVER THE AMOUNT, BUT SSNL HAS NEVER PAID ANY AMOUNT TILL DATE. MOREOVER, THERE ARE SPECIFIC PROVISIONS IN THE ACT BY WHICH ANY AMOUNT RECOVERED BY THE ASSESSEE CAN BE T AXED AS INCOME IN THE YEAR OF RECEIPT. THEREFORE, IN OUR UNDERSTANDING OF LAW AND THE FACTS, THE LIABILITY TO PAY HAS DEFINITELY CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND BEING ASCERTAINED LIABILITY INCURRED IN THE ORD INARY COURSE OF BUSINESS, THE SAME HAS TO BE ALLOWED. WE ACCORDINGLY SET ASID E THE FINDINGS OF THE CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 93,64,921/-. GROUND NO. 2 IS ALLOWED. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. IN THE PRESENT ASSESSMENT YEAR, THE ASSESSEE INCURR ED AN EXPENDITURE IN RESPECT OF TRANSPORTATION OF THE MATERIAL SUPPLIED WHICH WAS AN EXISTING & ASCERTAINED LIABILITY AND WAS ALLOWED AS BUSINESS E XPENDITURE. UNDER ARTICLE 5 OF THE AGREEMENT BETWEEN ASSESSEE AND ETPL, HOWEVER , THE ASSESSEE HAD AUTHORIZED, WHICH MERELY ENTITLED ETPL TO COLLECT & RECEIVE CONTRACT PRICE FROM SSNNL FOR EACH PORTION. THE LD. AR RIGHTLY SUBMITTE D THAT THERE IS A DIFFERENCE 42 ITA NOS. 3675/DEL/2014 & ORS BETWEEN ACCRUAL OF INCOME AND INCURRING OF EXPENDIT URE. UNDER THE AGREEMENT ENTERED BY ASSESSEE WITH ETPL, IT HAS INCURRED A LI ABILITY AND IN FACT PAID THE SAID SUM ON TRANSPORTATION TO ETPL. IT IS NOT DENIE D THAT THE ASSESSEE UNDER THE CONTRACT WITH SSNNL COULD HAVE RECOVERED THE AM OUNT. HOWEVER, IN THE ABSENCE OF ANY AGREEMENT WITH SSNNL, TO PAY THE EXT RA AMOUNT DUE TO ESCALATION OF COST, NO INCOME HAS EITHER ACCRUED OR WAS RECEIVED BY THE ASSESSEE. THERE IS NO A FINDING GIVEN BY THE ASSESS ING OFFICER THAT ASSESSEE HAS NOT HONORED THE COMMITMENT. THUS, THE ASSESSEE HAS PAID TO ETPL UNDER ITS CONTRACTUAL LIABILITY EVEN THOUGH THE SAME COULD NO T BE RECOVERED FROM SSNNL. THEREFORE, THE DISALLOWANCE MADE OF THE EXPENDITURE INCURRED OF RS. 1,25,13,333/- WHICH HAS BEEN PHYSICALLY PAID BY THE ASSESSEE IS TO BE ALLOWED BY THE ASSESSING OFFICER. WE DIRECT ACCORDINGLY. HE NCE, GROUND NO. 3 TO 3.3 ARE ALLOWED. 32. IN RESULT, ITA NO. 3675/DEL/2014 IS ALLOWED. 33. NOW WE TAKE UP ITA NO. 3696/DEL/2014 FOR A.Y. 2 002-03 FILED BY THE REVENUE. 3696/DEL/2014 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A PERMANENT ESTABLISHMENT ( 'PE') IN RELATION TO VARIOUS CONTRA CTS FOR SUPPLIES AND SERVICES EXECUTED IN INDIA FOR M/S MARUTI UDYOG LIMITED ('MU L'). 1.1) THE LD CIT(A) HAS ERRED IN IGNORING THE FINDINGS OF THE ASSESSING OFFICER ('AO') THAT THE ASSESSEE HAD A FIXED-PLACE PE IN IN DIA IN RELATION TO THE CONTRACTS FOR SUPPLIES EXECUTED FOR M/S MUL IN THE FORM OF A LONG-STANDING PRESENCE AT M/S MUL'S SITE IN INDIA AND WHICH OPERA TED AS AN EFFECTIVE SYSTEM TO KNOW THE REQUIREMENTS OF M/S MUL, TO NEGO TIATE THE PURCHASE ORDERS, TO PROCURE PURCHASE ORDERS ETC. 43 ITA NOS. 3675/DEL/2014 & ORS 1.2) WITHOUT PREJUDICE TO THE FOREGOING, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A SUPERVISORY PE IN RELAT ION TO THE SERVICES OF INSTALLATION, TESTING, COMMISSIONING ETC OF EQUIPME NTS 1.3) THE LD. CIT(A) HAS ERRED IN MECHANICALLY FOLLOWING THE JUDGMENT OF THE HON'BLE ITAT IN ASSESSEE OWN CASE FOR ASSTT YEARS 1 992-93 TO 1994-95 & 1996-97, NOT APPRECIATING THE FACT THAT THE ISSUE O F EXISTENCE OR CONSTITUTION OF THE PE IS ALWAYS YEAR-SPECIFIC AND THEREFORE THE FI NDING WITH REGARDS TO THE EXISTENCE OF PE HAS TO BE EXAMINED AFRESH IN EACH Y EAR ON THE BASIS OF FACTS SPECIFIC TO THE YEAR UNDER CONSIDERATION. 1.4) WITHOUT PREJUDICE TO THE FOREGOING, THE ISSUE OF C ONSTITUTION OF PE IN THOSE YEARS HAS NOT YET ACHIEVED FINALITY AS THE REVENUE HAS FILED A MISCELLANEOUS APPLICATION ('MA') BEFORE THE HON'BLE ITAT TO THE E FFECT THAT THERE ARE MISTAKES APPARENT FROM RECORD REGARDING ASSUMPTION OF FACTS ON THE BASIS OF WHICH DECISION WAS RENDERED BY HON'BLE ITAT. 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT NO PORTION OF THE ASSESSE E'S INCOME FROM THE ACTIVITY OF SUPPLIES OF EQUIPMENTS TO M/S MUL IS TAXABLE IN INDIA 2.1) THE LD CIT(A) HAS ERRED IN HOLDING THAT NO OPERATIO NS IN RELATION TO THE SUPPLIES OF EQUIPMENTS TO MUL WERE UNDERTAKEN IN IN DIA, NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS A PE IN INDIA IN THE FOR M OF LONG-STANDING PRESENCE IN INDIA IN RELATION TO THE SUPPLIES BEING MADE AND SERVICES BEING RENDERED TO MUL FOR THE PAST SEVERAL YEARS. THEREFORE, THE RELI ANCE BY THE LD CIT(A) ON THE JUDGMENT IN THE CASE OF M/S ISHIKAWAJIMA HARIMA HEA VY INDUSTRIES LTD [288 ITR 408 (SC)] WAS MISPLACED AS THE FACTS OF THE CAS E ARE DISTINGUISHABLE. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE FACTS, THE LD CIT(A) ERRED IN HOLDING REVENUES RECEIVED BY THE ASSESSEE FROM M/S MUL ON ACCOUNT OF SUPERVISORY SERVICES IS CHARGEABLE TO TAX AT THE RATE OF 20% UNDER ARTICLE 12(2) OF THE INDIA-JAPAN DTAA AS AGAINST THE RATE O F 30% APPLIED BY THE AO. 44 ITA NOS. 3675/DEL/2014 & ORS 3.1) THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT THE PROVISIONS OF ARTICLE 12(2) ARE NOT APPLICABLE WHERE FEE FOR TECH NICAL SERVICES HAS BEEN RECEIVED ON ACCOUNT OF SERVICES RENDERED THROUGH A PE IN INDIA AND SINCE IN THE CASE OF ASSESSEE, THE FEE FOR TECHNICAL SERVICE S ARE EFFECTIVELY CONNECTED WITH ITS PE IN INDIA, THE SAID REVENUE IS LIABLE TO TAX @30% UNDER SECTION 115A OF THE ACT, READ WITH THE PROVISIONS OF ARTICLE 7 A ND ARTICLE 12(5) OF THE INDIA- JAPAN DTAA. 4) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S 234B OF THE ACT AND IN OBSERVING THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION IN THE CASE OF M /S JACABS CIVIL INCORPORATED, MISTUBISHI CORPN & OTHERS [330 ITR 57 8, DELHI] 4.1) THE LD CIT(APPEALS) HAS ERRED IN NOT APPRECIATING THE FACT THE CASE DOES NOT LAY DOWN A GENERAL PROPOSITION OF LAW THAT INTE REST U/S 234B IS NOT CHARGEABLE IN ALL CASES, PARTICULARLY IN CASES WHER E THE NON-RESIDENT ASSESSEE/ PAYEE/ DEDUCTEE HAS PLAYED A ROLE IN INDU CING NON-DEDUCTION OR SHORT-DEDUCTION ON THE PART OF THE PAYER/DEDUCTOR. 4.2) THE LD CIT(APPEALS) HAS ERRED IN FAILING TO TAKE N OTE OF THE OBSERVATIONS OF THE HON'BLE HIGH COURT IN THE CASE OF M/S MITSUBISH I [330 ITR 578, DEL] THAT THE ROLE OF THE ASSESSE/PAYEE/DEDUCTEE IN SHORT-DED UCTION OR NON-DEDUCTION OF TAX NEEDS TO BE ASCERTAINED BEFORE CLAIM REGARDI NG NON-LIABILITY TO INTEREST U/S 234B OF THE ACT IS ACCEPTED, A PROPOSITION AFFI RMED SUBSEQUENTLY IN THE CASE OF M/S ALCATEL LUCENT (JUDGEMENT OF DELHI HIGH COURT DATED 7.11.2013 IN ITA NO. 327 & ORS OF 2012) AND FOLLOWED BY ITAT DEL HI IN THE ORDER DATED 13.06.2014 IN THE CASE OF NORTEL NETWORK INDIA INTE RNATIONAL INC. (ITA NO. 4766/DEL/2011) 45 ITA NOS. 3675/DEL/2014 & ORS 34. LIKEWISE AY 2001-02, THE ASSESSING VIDE ASSESSM ENT ORDER CONCLUDED THAT THE ASSESSEE HAS PE IN INDIA ON VARIOUS GROUND S, AND HENCE, TAXED RS. 34,827,076 TAKING 5% OF TOTAL SUPPLY AS PROFIT RATI O AND ATTRIBUTING 100% OF THE PROFIT AS INCOME ATTRIBUTABLE TO TAX IN INDIA. THE LD. CIT ALLOWED THE GROUNDS OF ASSESSEE ON SIMILAR LINES AS IN THE CASE OF AY 2001-02. 35. AS REGARDS TO GROUND NO. 1 TO 1.4 AND 2 TO 2.1 OF THE REVENUES APPEAL, THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001-02 AS GROUND NOS. 1 TO 1 TO 1.4 AND 2 TO 2.1. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL AND IN FACT F ACTUAL ASPECTS ALSO REMAIN SAME. 36. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 9 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2002-03 ALSO THE GOODS WERE SOLD TO MUL FROM OUTSIDE INDIA. THUS, THE RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 1 TO 1.4 AND 2 TO 2.1 OF THE REVENUES APPEAL IS DISMISSED. 37. AS REGARDS TO GROUND NO. 3 TO 3.1 OF THE REVENU ES APPEAL, THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVE NUES APPEAL FOR A.Y. 2001- 02 AS GROUND NOS. 3 TO 3.1. THE LD. AR ALSO SUBMITT ED THAT THE ISSUE IS IDENTICAL AND IN FACT FACTUAL ASPECTS ALSO REMAIN T HE SAME. 46 ITA NOS. 3675/DEL/2014 & ORS 38. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 17 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2002-03 ALSO, THE PURCHASE ORDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEATURES EMERGE THAT IN ALL T HE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPAN AND MUL BEARS T HE COST OF THEIR AIR TICKET AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDI A. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRACTS DID NOT EXCEED A PE RIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HEREINABOVE AND THEY D ID NOT CONSTITUTE SUPERVISORY PE IN TERMS OF ARTICLE 5(4) OF THE DTAA . IN FACT, THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRME D BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREME COURT. THUS , IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12( 2) OF THE DTAA. HENCE, GROUND NOS. 3 TO 3.1 IN REVENUES APPEAL ARE DISMIS SED. 39. AS REGARDS TO GROUND NO. 4 TO 4.2 OF THE REVENU ES APPEAL, THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVE NUES APPEAL FOR A.Y. 2001- 02 AS GROUND NOS. 4 TO 4.2. THE LD. AR ALSO SUBMITT ED THAT THE ISSUE IS IDENTICAL AND IN FACT FACTUAL ASPECTS ALSO REMAIN T HE SAME. 40. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2002-03 ALSO, THIS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASS ESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI CORPORATION (SUPRA ) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS N OT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND NOS. 4 TO 4.2 ARE DISMISSED. 47 ITA NOS. 3675/DEL/2014 & ORS 41. IN RESULT, ITA NO. 3696/DEL/2014 IS DISMISSED. 42. NOW WE TAKE UP ITA NO. 3676/DEL/2014 FOR A.Y. 2 002-03 FILED BY THE ASSESSEE. 3676/DEL/2014 1. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS GROSSLY ERRED IN LAW AND ON FACTS IN TREATING THE PAYMENT OF RS 1,73 ,16,892 MADE TO EXPRESS TRANSPORT PRIVATE LIMITED (ETPL), A SUB-CONTRACTOR FOR CUSTOM CLEARANCE AND INLAND TRANSPORTATION SERVICES, TOWARDS CONTRACTUAL PRICE ADJUSTMENT FOR SERVICES RENDERED BY ETPL, AS CONTINGENT LIABILITY, SINCE IT WAS NOT VERIFIED BY SARDAR SAROVAR NARMADA NIGAM LIMITED (SSNNL), THE CONTRACT AWARDING AUTHORITY. 1.1 THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS GROSSLY ERRED IN FAILING TO APPRECIATE THAT PAYMENT OF THE AFORESAID SUM HAS NOT BEEN DISPUTED BY THE LEARNED AO NOR IT IS IN DISPUTE THAT ETPL HA S RENDERED SERVICES AS A SUB-CONTRACTOR FOR CUSTOM CLEARANCE AND INLAND TRAN SPORTATION SERVICES, HENCE THE FINDING THAT AFORESAID EXPENDITURE IS CONTINGEN T LIABILITY WHICH IS SOLELY BASED ON THE FINDING THAT THE ADDITIONAL CLAIM MADE TO SSNNL IS NOT FINAL, IS WHOLLY UNSUSTAINABLE. 1.2 THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE PAYMENT TO ETPL IS I N RESPECT OF SERVICES RENDERED AS A SUBCONTRACTOR FOR CUSTOM CLEARANCE AN D INLAND TRANSPORTATION SERVICES FOR THE APPELLANT AND HENCE THE LIABILITY TO PAY TO ETPL WAS OF THE APPELLANT AND SUCH A PAYMENT WAS NOT DEPENDENT ON C LAIM MADE TO SSNNL. 1.3 THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS FAILED TO APPRECIATE THAT THE EXPENDITURE INCURRED BY THE APP ELLANT OF RS 1,73,16,892 BEING THE PAYMENT MADE TO ETPL TOWARDS CONTRACTUAL OBLIGATION IS BUSINESS EXPENDITURE INCURRED DURING THE NORMAL COURSE OF B USINESS ON ACCOUNT 48 ITA NOS. 3675/DEL/2014 & ORS COMMERCIAL EXPEDIENCY THE ASSESSEE HAS DEBITED IN THE ACCOUNT OF COST OF SALES AN AGGREGATE SUM OF RS. 1,73,16,890/- ON TRANSPORTATION OF MATERIAL SUPPLIED TO SSNNL. THE ASSESSING OFFICER DISALLOWED RS.1,73,16,890/-, WHIC H INCLUDES RS 1,41,32,974/- PAID BY SSNNL TO ETPL AND RS. 31,83,9 16/- PAID BY THE ASSESSEE TO ETPL, AND FURTHER MENTIONED THAT AMOUNT PAID BY ASSESSEE SHOULD BE DISALLOWED BASED ON ASSESSMENT ORDER OF AY 2000- 01. 43. THE LD. AR SUBMITTED THAT THE FACT OF THE MATTE R REMAINS THAT RS 1,41,32,974/- REPRESENTS AN AMOUNT OF EXPENDITURE I NCURRED ON TRANSPORTATION AND HAS BEEN DIRECTLY PAID BY SSNNL TO ETPL AND THE ASSESSEE HAS THUS NOT MADE ANY EFFECTIVE CLAIM OF RS. 1,41,32,974/-. THE ASSESSING OFFICER HAS FAILED TO APPRECIATE THAT IN THE SIMILAR MANNER WHAT HAD B EEN PAID IN AY 2000-01, BY SSNNL TO ETPL HAD NOT BEEN DISALLOWED WHEREAS FOR T HE SAID YEAR WITHOUT DISPUTING THAT THERE WAS AN EXPENDITURE INCURRED ON TRANSPORTATION WHICH WAS THE LIABILITY OF THE ASSESSEE HAS EVEN BEEN DISALLO WED. THE LD. AR SUBMITTED THAT OUT OF THE CLAIM OF EXPENDITURE RS. 31,83,916/ - IS A SUM WHICH WAS PAID BY THE ASSESSEE TO ETPL HAS ALSO BEEN DISALLOWED. T HE CHARACTER AND NATURE OF THE SAID SUM IS OF SIMILAR CHARACTER AS IS INCURRED FOR THE AY 2000-01 AND IS OF RS. 93,64,921/-.THE LD. AR THEREFORE SUBMITTED THAT THE DISALLOWANCE MADE OF RS. 1,73,16,892/- IS APPARENTLY MISCONCEIVED. 44. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 45. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALREADY DECIDED THIS I SSUE IN THE ABOVE PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PR ESENT ASSESSMENT YEAR 2002- 03 ALSO, THIS ISSUE IS IDENTICAL. IN THE PRESENT AS SESSMENT YEAR, THE ASSESSEE INCURRED AN EXPENDITURE IN RESPECT OF TRANSPORTATIO N OF THE MATERIAL SUPPLIED WHICH WAS AN EXISTING & ASCERTAINED LIABILITY AND W AS ALLOWED AS BUSINESS 49 ITA NOS. 3675/DEL/2014 & ORS EXPENDITURE. UNDER ARTICLE 5 OF THE AGREEMENT BETWE EN ASSESSEE AND ETPL, HOWEVER, THE ASSESSEE HAD AUTHORIZED, WHICH MERELY ENTITLED ETPL TO COLLECT & RECEIVE CONTRACT PRICE FROM SSNNL FOR EACH PORTION. THE LD. AR RIGHTLY SUBMITTED THAT THERE IS A DIFFERENCE BETWEEN ACCRUA L OF INCOME AND INCURRING OF EXPENDITURE. UNDER THE AGREEMENT ENTERED BY ASSESSE E WITH ETPL, IT HAS INCURRED A LIABILITY AND IN FACT PAID THE SAID SUM ON TRANSPORTATION TO ETPL. IT IS NOT DENIED THAT THE ASSESSEE UNDER THE CONTRACT WITH SSNNL COULD HAVE RECOVERED THE AMOUNT. HOWEVER, IN THE ABSENCE OF AN Y AGREEMENT WITH SSNNL, TO PAY THE EXTRA AMOUNT DUE TO ESCALATION OF COST, NO INCOME HAS EITHER ACCRUED OR WAS RECEIVED BY THE ASSESSEE. THERE IS N O A FINDING GIVEN BY THE ASSESSING OFFICER THAT ASSESSEE HAS NOT HONORED THE COMMITMENT. THUS, THE ASSESSEE HAS PAID TO ETPL UNDER ITS CONTRACTUAL LIA BILITY EVEN THOUGH THE SAME COULD NOT BE RECOVERED FROM SSNNL. THEREFORE, THE D ISALLOWANCE MADE OF THE EXPENDITURE INCURRED OF RS. 1,73,16,892/- WHICH HAS BEEN PHYSICALLY PAID BY THE ASSESSEE IS TO BE ALLOWED BY THE ASSESSING OFFI CER. WE DIRECT ACCORDINGLY. HENCE, GROUND NO. 3 TO 3.3 ARE ALLOWED. 46. IN RESULT, ITA NO. 3676/DEL/2014 IS ALLOWED. 47. NOW WE ARE TAKING UP ITA NO. 3713/DEL/2014 A.Y. 2003-04 FILED BY THE REVENUE. 3713/DEL/2014 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT NO PORTION OF THE THE INC OME OF THE ASSESSEE FROM 'OFFSHORE' SUPPLY OF PLANT & EQUIPMENTS TO M/S SARD AR SAROVAR NARMADA NIGAM LIMITED ('SSNNL') IS TAXABLE IN INDIA. 1.1) THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT THE CONTRACT WITH M/S SSNNL WAS A INTEGRATED/COMPOSITE CONTRACT INVOL VING 50 ITA NOS. 3675/DEL/2014 & ORS SUPPLY/PROCUREMENT, TRANSPORTATION, SUPERVISION OF ERECTION COMMISSIONING & TESTING OF EQUIPMENT AT THE SITE OF SSNNL AND CONSI DERING THE SCOPE OF THE CONTRACT, THE SUPPLY OBLIGATIONS (WHETHER ONSHORE O R OFFSHORE), WERE INEXTRICABLY CONNECTED WITH THE EXECUTION OF THE CO NTACT AS A WHOLE IN INDIA. 1.2) THE LD CIT(A) HAS ERRED IN HOLDING THAT NO ACTIVIT Y IN RELATION TO THE 'OFFHSORE' SUPPLY OF EQUIPMENTS WAS UNDERTAKEN IN I NDIA, NOT APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER ('AO') THAT A) NE GOTIATIONS AND SIGNING OF THE CONTRACTS TOOK PLACE IN INDIA, B) THE RISK AND RESP ONSIBILITY ASSOCIATED WITH THE SUPPLY REMAINED WITH THE ASSESSEE TILL SUCCESSFUL I NSTALLATION & COMMISSIONING OF THE EQUIPMENT, C) THERE WAS CLOSE INTERACTION BETWEEN TECHNICAL PERSONNEL OF ASSESSEE AND M/S SSNNL RESUL TING INTO ESTABLISHMENT OF ASSESSEE'S PERMANENT ESTABLISHMENT ( PE) IN INDI A WHICH WAS INVOLVED IN THE EXECUTION OF A CONTRACT OF COMPOSITE NATURE. 1.3) THE LD CIT(A) ERRED IN PLACING RELIANCE ON THE JUD GMENT IN THE CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD [288 ITR 4 08 (SC)] AS THE FACTS OF THE CASE ARE DISTINGUISHABLE. 2. ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT ASSESSEE DID NOT HAVE A P ERMANENT ESTABLISHMENT ('PE') IN RELATION TO VARIOUS CONTRACTS FOR SUPPLIE S AND SERVICES EXECUTED IN INDIA FOR M/S MARUTI UDYOG LIMITED ('MUL'). 2.1. THE LD CIT(A) HAS ERRED IN IGNORING THE EVIDE NCE MARSHALLED BY THE AO ESTABLISHING THAT THE ASSESSEE HAD A PE IN INDIA IN THE FORM OF ITS SUBSIDIARY COMPANY, M/S SUMITOMO CORPORATION OF IND IA PVT. LTD ( SCIPL), AND THROUGH WHICH VARIOUS ACTIVITIES IN RELATION TO THE CONTRACTS WITH M/S MUL FOR SUPPLIES & SERVICES WERE CARRIED OUT IN INDIA. 2.2. WITHOUT PREJUDICE TO THE FOREGOING, THE LD CI T(A) HAS ERRED IN NOT APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER ( 'AO') THAT THE ASSESSEE HAD A FIXED-PLACE PE IN INDIA IN LATION TO THE CONTRACT S FOR SUPPLIES EXECUTED FOR 51 ITA NOS. 3675/DEL/2014 & ORS M/S MUL IN THE FORM OF A LONG-STANDING ENCE AT M/S MUL'S SITE IN INDIA AND WHICH OPERATED AS AN EFFECTIVE SYSTEM TO KNOW THE L IREMENTS OF M/S MUL, TO NEGOTIATE THE PURCHASE ORDERS, TO PROCURE PURCHASE ORDERS 2.3. WITHOUT PREJUDICE TO THE FOREGOING, THE LD CI T(A) HAS ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A SUPERVISOR Y PE IN RELATION TO THE SERVICES OF INSTALLATION, TESTING, COMMISSIONING ET C OF EQUIPMENTS 2.4. THE LD. CIT(A) HAS ERRED IN MECHANICALLY FOLL OWING THE JUDGMENT OF THE HON'BLE IT AT IN ASSESSEE OWN CASE FOR ASSTT YE ARS 1992-93 TO 1994-95 & 1996-97, NOT APPRECIATING THE FACT THAT THE FACTS H AVING A BEARING ON THE ISSUE OF EXISTENCE OR CONSTITUTION OF THE PE ARE DIFFEREN T THIS YEAR AND THAT, IN ANY CASE, THE ISSUE OF EXISTENCE/CONSTITUTION OF PE IS ALWAYS YEAR-SPECIFIC AND THEREFORE THE FINDING WITH REGARDS TO THE EXISTENCE OF PE HAS TO BE EXAMINED AFRESH IN EACH YEAR. 2.5 WITHOUT PREJUDICE TO THE FOREGOING, THE ISSUE OF CONSTITUTION OF PE IN THOSE YEARS HAS NOT YET ACHIEVED FINALITY AS THE RE VENUE HAS FILED A MISCELLANEOUS APPLICATION ('MA') BEFORE THE HON'BLE ITAT TO THE EFFECT THAT THERE ARE MISTAKES APPARENT FROM RECORD REGARDING ASSUMPT ION OF FACTS ON THE BASIS OF WHICH DECISION WAS RENDERED BY HON'BLE ITAT. 3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT NO PORTION OF THE ASSESSE E'S INCOME FROM THE ACTIVITY OF SUPPLIES OF EQUIPMENTS TO M/S MUL IS TAXABLE IN INDIA 3.1) THE LD CIT(A) HAS ERRED IN HOLDING THAT NO OPERATI ONS IN RELATION TO THE SUPPLIES OF EQUIPMENTS TO MUL WERE UNDERTAKEN IN IN DIA, NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS A PE IN INDIA IN THE FOR M OF M/S SCIPL AS WELL AS IN THE FORM OF A LONG-STANDING PRESENCE IN INDIA TH ROUGH WHICH VARIOUS ACTIVITIES WERE CARRIED OUT IN INDIA IN RELATION TO THE SUPPLIES BEING MADE AND SERVICES BEING RENDERED TO MUL. THEREFORE, THE RELI ANCE BY THE LD CIT(A) ON THE JUDGMENT IN THE CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD 52 ITA NOS. 3675/DEL/2014 & ORS [288 ITR 408 (SC)] WAS MISPLACED AS THE FACTS OF TH E CASE ARE DISTINGUISHABLE. 4) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE FACTS, THE LD CIT (A) ERRED IN HOLDING THAT THE REVENUES RECEIVED BY THE ASSESSEE FROM M/S MUL ON ACCOUNT OF SUPERVISORY SERVICES IS CHARGEABLE TO TA X UNDER ARTICLE 12(2) OF THE INDIA-JAPAN DTAA. 4.1) THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FAC T THAT THE PROVISIONS OF ARTICLE 12(2) ARE NOT APPLICABLE WHERE FEE FOR TECH NICAL SERVICES HAS BEEN RECEIVED ON ACCOUNT OF SERVICES RENDERED THROUGH A PE IN INDIA AND SINCE IN THE CASE OF ASSESSEE, THE FEE FOR TECHNICAL SERVICE S ARE EFFECTIVELY CONNECTED WITH ITS PE IN INDIA, THE SAID REVENUE IS LIABLE TO TAX UNDER SECTION 115A OF THE ACT, READ WITH THE PROVISIONS OF ARTICLE 7 AND ARTI CLE 12(5) OF THE INDIA-JAPAN DTAA. 5) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S 234B OF THE ACT AND IN OBSERVING THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION IN THE CASE OF M /S JACABS CIVIL INCORPORATED, MISTUBISHI CORPN & OTHERS [330 ITR 57 8, DELHI] 5.1) THE LD CIT(APPEALS) HAS ERRED IN NOT APPRECIATING THE FACT THE CASE DOES NOT LAY DOWN A GENERAL PROPOSITION OF LAW THAT INTE REST U/S 234B IS NOT CHARGEABLE IN ALL CASES, PARTICULARLY IN CASES WHER E THE NON-RESIDENT ASSESSEE/PAYEE/DEDUCTEE HAS PLAYED A ROLE IN INDUCI NG NON-DEDUCTION OR SHORT-DEDUCTION ON THE PART OF THE PAYER/DEDUCTOR. 5.2) 5.2. THE LD CIT(APPEALS) HAS ERRED IN FAILING TO TA KE NOTE OF THE OBSERVATIONS OF THE HONBLE HIGH COURT IN THE CASE OF M/S MITSUBISHI [330 ITR 578, DEL] THAT THE ROLE OF THE ASSESSEE/PAYEE/DEDUC TEE IN SHORT-DEDUCTION OR NON-DEDUCTION OF TAX NEEDS TO BE ASCERTAINED BEFORE CLAIM REGARDING NON- LIABILITY TO INTEREST U/S 234B OF THE ACT IS ACCEPT ED, A PROPOSITION AFFIRMED SUBSEQUENTLY IN THE CASE OF M/S ALCATEL LUCENT (JUD GEMENT OF DELHI HIGH COURT 53 ITA NOS. 3675/DEL/2014 & ORS DATED 7.11.2013 IN IT A NO. 327 & ORS OF 2012) AND FOLLOWED BY ITAT DELHI IN THE ORDER DATED 13.06.2014 IN THE CASE OF NORTEL NE TWORK INDIA INTERNATIONAL INC [ITA NO. 4766/DEL/2011]. 48. LIKEWISE IN AY 2001-02, THE ASSESSING OFFICER VIDE ASSESSMENT ORDER CONCLUDED THAT THE ASSESSEE HAS PE IN INDIA ON VARI OUS GROUNDS. THE ASSESSING OFFICER ALSO HELD THAT SUMITOMO CORPORATI ON INDIA PRIVATE LIMITED I.E. THE SUBSIDIARY OF THE ASSESSEE WAS ALSO ENGAGE D IN NEGOTIATION AND SIGNING OF PURCHASE ORDER OF THE ASSESSEE. THUS, THE ASSESS ING OFFICER HAS TAKEN 5.38% AS GLOBAL PROFIT MARGIN TO COMPUTE PROFIT FROM SALE OF EQUIPMENT AND ATTRIBUTED 50% OF SUCH PROFIT AMOUNTING TO RS. 12,266,873 TO T HE INDIAN OPERATIONS. THE CIT(A) ALLOWED THE GROUNDS OF ASSESSEE ON SIMILAR L INES AS IN THE CASE OF AY 2001-02. 49. AS REGARDS TO GROUND NO. 1 TO 1.3, IN RESPECT O F THE SSNNL PROJECT, THE ASSESSING OFFICER HELD THAT THE INCOME EARNED BY TH E ASSESSEE FROM OFFSHORE SUPPLY OF THE PLANT AND EQUIPMENT TO SSNL FROM JAPA N IS TAXABLE IN INDIA. THE ASSESSING OFFICER DETERMINED 50% OF THE GROSS TRADI NG PROFIT RATIO @ 5.38% IN AY 2003-04 AND 5.46% IN AY 2004-05 AS PER THE GLOBA L BALANCE SHEET OF THE ASSESSEE AS INCOME ACCRUING TO THE ASSESSEE ON SUPP LY OF EQUIPMENT IN INDIA. THE CIT(A) OBSERVED THAT THE ASSESSEE HAS ALREADY O FFERED TO TAX THE INCOME WHICH IS TAXABLE IN INDIA FOR THE WORK DONE IN INDI A. THE CIT(A) FURTHER OBSERVED THAT THE OFFSHORE SUPPLY WAS MADE FROM OUT SIDE INDIA WHERE THE RISK AND TITLE WAS TRANSFERRED OUTSIDE INDIA. THUS, THE SALE WAS COMPLETED OUTSIDE INDIA. ACCORDINGLY, THE ADDITION ON OFFSHORE SUPPLY WAS DELETED. 50. THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTI CAL TO THE REVENUES APPEAL FOR A.Y. 2001-02 AS GROUND NOS. 1 TO 1.4 AND 2 TO 2.1. 51. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDE NTICAL AND IN FACT FACTUAL 54 ITA NOS. 3675/DEL/2014 & ORS ASPECTS ALSO REMAIN THE SAME. THE LD. AR FURTHER SU BMITTED THAT THE ASSESSEE WAS NOT ENGAGED IN ACTUAL INSTALLATION & COMMISSION ING OF THE EQUIPMENT. THE ASSESSEES ROLE WAS LIMITED TO SUPERVISION OF INSTA LLATION & COMMISSIONING AT THE BUYERS I.E. SSNNL SITE. THE OBSERVATIONS MADE BY THE ASSESSING OFFICER WERE FACTUALLY INCORRECT AS TO THE INCOME EARNED BY THE ASSESSEE FROM OFFSHORE SUPPLY OF THE PLANT AND EQUIPMENT TO SSNL FROM JAPA N IS TAXABLE IN INDIA. THE ACTIVITIES SUCH AS INLAND TRANSPORTATION, INLAND IN SURANCE, SUPERVISION OF STORAGE ETC. WERE UNDERTAKEN BY THE ASSESSEE ON BEH ALF OF SSNNL. THE COST OF THESE SERVICES WAS REIMBURSED BY SSNNL TO THE ASSES SEE. THE LD. AR SUBMITTED THAT THESE SERVICES CANNOT BE LINKED TO S UPPLY OF EQUIPMENT AS WERE RENDERED ON BEHEST OF SSNNL AND NOT ON ITS OWN ACCO UNT BY THE ASSESSEE. FURTHER, INCOME FROM ANY ACTIVITY IN INDIA THROUGH PROJECT OFFICE WAS DULY OFFERED TO TAX. AS PER ARTICLE 24.1 OF THE CONTRACT AGREEMENT, IT WAS SPECIFIED THAT BOTH LEGAL AND EQUITABLE TITLE TO ALL THE MATE RIALS, EQUIPMENT AND APPARATUS COVERED BY THE CONTRACT SHALL BE PASSED T O THE BUYER AT THE TIME OF SUCH MATERIALS, EQUIPMENT AND APPARATUS IS ACTUALLY LOADED FREE ON BOARD THE CARGO VESSEL AT THE PORT OF SHIPMENT, FOB JAPAN. TH US, TRANSFER OF TITLE IN EQUIPMENT TAKES PLACE OUTSIDE INDIA WHEN THE GOODS ARE BOARDED ON VESSEL IN JAPAN AND THE DOCUMENTS OF TITLE ARE TENDERED IN FA VOUR OF THE BUYER I.E. SSNNL. THE LD. AR SUBMITTED THAT IT IS WELL SETTLED POSITION THAT IF THE SUPPLY OF EQUIPMENT IS MADE OUTSIDE INDIA, NO BUSINESS CON NECTION COULD BE SAID TO EXIST BETWEEN THE NON-RESIDENT EXPORTER AND THE IND IAN IMPORTER AND CONSEQUENTLY, NO INCOME COULD BE DEEMED TO ARISE TO THE NON-RESIDENT FROM SUCH SUPPLY FROM OUTSIDE INDIA. THE LD. AR RELIED U PON THE FOLLOWING DECISIONS: I. ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LIMITED 288 ITR 408 (SC) II. HYUNDAI HEAVY INDUSTRIES COMPANY LIMITED 210 CT R 178 (SC) III. CIT VS. TOSHOKU LTD. 125 ITR 525 (SC) IV. DCIT VS. ALCATEL 47 ITD 275 V. CIT VS. FRIED KRUPP INDUSTRIES 128 ITR 27 VI. CARBORANDUM CO VS. CIT 108 ITR 335 AS REGARDS THE RISK AND RESPONSIBILITY, THE LD. AR SUBMITTED THAT IT IS EVIDENT 55 ITA NOS. 3675/DEL/2014 & ORS FROM BOTH THE BILL OF ENTRY AND BILL OF LADING AS B OTH WERE EXECUTED IN THE NAME OF SSNNL AS THE CONSIGNER. THIS READ WITH THE PROVISIONS OF ARTICLE 24.1 (TRANSFER OF OWNERSHIP), CLEARLY EXHIBITS THE INTEN TION OF THE CONTRACTING PARTIES. MERELY BY STATING THAT ASSESSEE WAS RESPON SIBLE FOR RISK AND RESPONSIBILITY OF THE EQUIPMENT, DOES NOT, IN ANY W AY EFFECTS THE INTENTION OF THE PARTIES. THE PARTIES AGREED TO TRANSFER OF TITLE F OB WHICH HAS BEEN EXECUTED AS SUCH. WITHOUT PREJUDICE TO THE ABOVE, THE LD. AR FU RTHER SUBMITTED THAT THE ASSESSING OFFICER ERRONEOUSLY ADOPTED THE GROSS PRO FIT RATE INSTEAD OF OPERATING PROFIT RATE AND HAS MADE HIGH ATTRIBUTION OF 50% CO NSIDERING SIGNIFICANT OPERATION OF SUCH ALLEGED PE IN INDIA FOR OFFSHORE SUPPLY. 52. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2003-04 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT CASE THE GOODS WERE SOLD TO SSNNL FROM OUTSIDE INDIA. THUS, THE RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE SSNNL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 1 TO 1.3 OF THE REVEN UES APPEAL IS DISMISSED. 53. AS REGARDS TO GROUND NO. 2 TO 2.5 AND 3 TO 3.1, THE LD. DR SUBMITTED THAT THE SAME IS IDENTICAL WITH THE ISSUE DECIDED I N RESPECT OF GROUND NO. 1 TO 1.3 HEREINABOVE FOR A.Y. 2003-04 AND GROUND NO. 1 T O 1.4 AND 2 TO 2.1 FOR A.Y. 2001-02 AS THIS INVOLVES OFFSHORE SUPPLIES AND EQUI PMENTS TO MUL. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL. THE LD. AR FURTHER SUBMITTED THAT THE TITLE IN THE EQUIPMENT WAS TRANSFERRED TO MUL O UTSIDE INDIA. THE ASSESSEE WAS NOT RESPONSIBLE FOR ANY CUSTOM CLEARANCE AND TR ANSPORTATION OF THE 56 ITA NOS. 3675/DEL/2014 & ORS EQUIPMENT. THIS RESPONSIBILITY BELONGED TO MUL AND THE SAME IS ALSO EVIDENT FROM THE PURCHASE ORDERS. 54. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2003-04 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT CASE THE GOODS WERE SOLD TO MUL FROM OUTSIDE INDIA. THUS, TH E RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 2 TO 2.5 AND 3 TO 3.1 OF THE REVENUES APPEAL IS DISMISSED. 55. AS REGARDS TO GROUND NOS. 4 TO 4.1, THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001 -02 AS GROUND NOS. 3 TO 3.1. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTIC AL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 56. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 17 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2003-04 ALSO, THE PURCHASE ORDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEATURES EMERGE THAT IN ALL T HE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPAN AND MUL BEARS T HE COST OF THEIR AIR TICKET AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDI A. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRACTS DID NOT EXCEED A PE RIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HEREINABOVE AND THEY D ID NOT CONSTITUTE 57 ITA NOS. 3675/DEL/2014 & ORS SUPERVISORY PE IN TERMS OF ARTICLE 5(4) OF THE DTAA . IN FACT, THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRME D BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREME COURT. THUS , IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12( 2) OF THE DTAA. HENCE, GROUND NOS. 4 TO 4.1 IN REVENUES APPEAL ARE DISMIS SED. 57. AS REGARDS TO GROUND NO. 5 TO 5.2, THE LD. DR S UBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001 -02 AS GROUND NOS. 4 TO 4.2. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTIC AL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 58. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2003-04 ALSO, THIS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASS ESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI CORPORATION (SUPRA ) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS N OT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND NOS. 5 TO 5.2 ARE DISMISSED. 59. IN RESULT, ITA NO. 3713/DEL/2014 FOR A.Y. 2003- 04 FILED BY THE REVENUE IS DISMISSED. 60. NOW WE ARE TAKING UP ITA NO. 3677/DEL/2014 FOR A.Y. 2003-04 FILED BY THE ASSESSEE. 3677/DEL/2014 1. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS GROSSLY ERRED IN 58 ITA NOS. 3675/DEL/2014 & ORS LAW AND ON FACTS IN TREATING THE PAYMENT OF RS 16,8 0,400 MADE TO EXPRESS TRANSPORT PRIVATE LIMITED (ETPL), A SUB-CONTRACTOR FOR CUSTOM CLEARANCE AND INLAND TRANSPORTATION SERVICES, TOWARDS CONTRACTUAL PRICE ADJUSTMENT FOR SERVICES RENDERED BY ETPL, AS CONTINGENT LIABILITY, SINCE IT WAS NOT VERIFIED BY SARDAR SAROVAR NARMADA NIGAM LIMITED (SSNNL), THE CONTRACT AWARDING AUTHORITY. 1.1 THAT LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT PAYMENT OF THE AFORESAID SUM HAS NOT BEEN DISPUTED BY THE LEARNED AO NOR IT IS IN DISPUTE THA T ETPL HAS RENDERED SERVICES AS A SUB-CONTRACTOR FOR CUSTOM CLEARANCE A ND INLAND TRANSPORTATION SERVICES, HENCE THE FINDING THAT AFORESAID EXPENDIT URE IS CONTINGENT LIABILITY WHICH IS SOLELY BASED ON THE FINDING THAT THE ADDIT IONAL CLAIM MADE TO SSNNL IS NOT FINAL, IS WHOLLY UNSUSTAINABLE. 1.2. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE PAYMENT TO ETPL IS IN RESPECT OF SERVICES RENDERED AS A SUBCONTRACTOR FOR CUSTOM CLEARANCE AN D INLAND TRANSPORTATION SERVICES FOR THE APPELLANT AND HENCE THE LIABILITY TO PAY TO ETPL WAS OF THE APPELLANT AND SUCH A PAYMENT WAS NOT DEPENDENT ON C LAIM MADE TO SSNNL. 1.3. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS FAILED TO APPRECIATE THAT THE EXPENDITURE INCURRED BY THE APP ELLANT OF RS 16,80,400 BEING THE PAYMENT MADE TO ETPL TOWARDS CONTRACTUAL OBLIGATION IS BUSINESS EXPENDITURE INCURRED DURING THE NORMAL COURSE OF BU SINESS ON ACCOUNT COMMERCIAL EXPEDIENCY. 61. AS REGARDS TO GROUND NO. 1 TO 1.3 OF THE ASSESS EES APPEAL IN RESPECT OF THE CLAIM OF DEDUCTION OF RS. 16,80,400/-, THE FACT OF AY 2003-04 IS SIMILAR TO THE FACTS OF 2000-01, WHEREIN THE ASSESSING OFFICER DISALLOWED THE AMOUNT PAID BY THE ASSESSEE ON THE GROUND THAT LIABILITY DOESN T RELATE TO THE ASSESSEE. 59 ITA NOS. 3675/DEL/2014 & ORS 62. THE LD. AR SUBMITTED SUCH A CONCLUSION IS ENTIR ELY MISCONCEIVED. IN FACT THE ENTIRE LIABILITY IS THAT OF ASSESSEE AND NOT TH AT OF SSNNL WHICH IS IN RESPECT OF THE TRANSPORTATION OF GOODS, CUSTOM CLEARANCES E TC AS PER AGREEMENT BETWEEN ASSESSEE AND ETPL. IT IS HOWEVER NOT DENIED THAT UN DER ARRANGEMENT BETWEEN ASSESSEE, SSNNL AND ETPL, SUCH A LIABILITY COULD BE DIRECTLY DISCHARGED BY SSNNL ON MAKING PAYMENT TO ETPL AND IS EVIDENT FROM THE ACCOUNT ITSELF AND HAS BEEN ADMITTEDLY ALLOWED BY THE ASSESSING OFFICE R. IT IS THUS MANIFESTLY EVIDENT THAT THE ASSESSING OFFICER PROCEEDED ON MIS CONCEPTION OF THE FACTS AND ON MISREADING OF THE AGREEMENT. THUS, THE DISALLOWA NCE MADE AND SUSTAINED BY THE CIT(A) OF RS. 16,80,400/- IS ENTIR ELY MISCONCEIVED. IN THE INSTANT ASSESSMENT YEAR THE ASSESSEE HAD DEBITED C OST OF SALES OF RS. 21,41,447/- AND CREDITED RS. 6,21,063/-. OUT OF THE SAID SUM RS. 6,21,063/- HAD BEEN DIRECTLY PAID BY SSNNL TO ETPL; WHEREAS TH E ASSESSEE HAS INCURRED A LIABILITY OF RS. 21,41,447/- AND THUS HAD PAID THE SAID SUM OF RS. 15,20,384/- WHICH SUM HAS BEEN CLAIMED AS EXPENDITURE WHICH IS AN ACCRUED LIABILITY AND IS NOT A CONTINGENT LIABILITY. IN FACT THE DISALLOW ANCE MADE OF RS. 16,80,400/- IS APPARENTLY MISCONCEIVED AND IT DOES NOT TAKE INTO C ONSIDERATION THAT OUT OF THIS RS. 1,60,017/- IS IN RESPECT OF THE TRANSPORTA TION OF MATERIAL SUPPLIED TO NIPPON. 63. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT(A). 64. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALRE ADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT YEAR 2003-04 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT ASSESSMENT YEAR, THE ASSESSEE INCURRED AN EXPENDITU RE IN RESPECT OF TRANSPORTATION OF THE MATERIAL SUPPLIED WHICH WAS A N EXISTING & ASCERTAINED LIABILITY AND WAS ALLOWED AS BUSINESS EXPENDITURE. UNDER ARTICLE 5 OF THE 60 ITA NOS. 3675/DEL/2014 & ORS AGREEMENT BETWEEN ASSESSEE AND ETPL, HOWEVER, THE A SSESSEE HAD AUTHORIZED, WHICH MERELY ENTITLED ETPL TO COLLECT & RECEIVE CON TRACT PRICE FROM SSNNL FOR EACH PORTION. THE LD. AR RIGHTLY SUBMITTED THAT THE RE IS A DIFFERENCE BETWEEN ACCRUAL OF INCOME AND INCURRING OF EXPENDITURE. UND ER THE AGREEMENT ENTERED BY ASSESSEE WITH ETPL, IT HAS INCURRED A LIABILITY AND IN FACT PAID THE SAID SUM ON TRANSPORTATION TO ETPL. IT IS NOT DENIED THAT TH E ASSESSEE UNDER THE CONTRACT WITH SSNNL COULD HAVE RECOVERED THE AMOUNT. HOWEVER , IN THE ABSENCE OF ANY AGREEMENT WITH SSNNL, TO PAY THE EXTRA AMOUNT DUE T O ESCALATION OF COST, NO INCOME HAS EITHER ACCRUED OR WAS RECEIVED BY THE AS SESSEE. THERE IS NO A FINDING GIVEN BY THE ASSESSING OFFICER THAT ASSESSE E HAS NOT HONORED THE COMMITMENT. THUS, THE ASSESSEE HAS PAID TO ETPL UND ER ITS CONTRACTUAL LIABILITY EVEN THOUGH THE SAME COULD NOT BE RECOVER ED FROM SSNNL. THEREFORE, THE DISALLOWANCE MADE OF THE EXPENDITURE INCURRED O F RS. 16,80,400/- WHICH HAS BEEN PHYSICALLY PAID BY THE ASSESSEE IS TO BE A LLOWED BY THE ASSESSING OFFICER. WE DIRECT ACCORDINGLY. HENCE, GROUND NO. 1 TO 1.3 ARE ALLOWED. 65. IN RESULT, ITA NO. 3677/DEL/2014 FOR A.Y. 2003- 04 FILED BY THE ASSESSEE IS ALLOWED. 66. NOW WE TAKE UP ITA NO. 3714/DEL/2014 FOR A.Y. 2 003-04 FILED BY THE REVENUE. 3714/DEL/2014 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT NO PORTION OF THE INCOME OF THE ASSESSEE FROM 'OFFSHORE' SUPPLY OF PLANT & EQUIPMENTS TO M/S SARD AR SAROVAR NARMADA NIGAM LIMITED ('SSNNL') IS TAXABLE IN INDIA. 1.1) THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT THE CONTRACT WITH M/S SSNNL WAS A INTEGRATED/COMPOSITE CONTRACT INVOL VING SUPPLY/PROCUREMENT, TRANSPORTATION, SUPERVISION OF ERECTION COMMISSIONING & 61 ITA NOS. 3675/DEL/2014 & ORS TESTING OF EQUIPMENT AT THE SITE OF SSNNL AND CONSI DERING THE SCOPE OF THE CONTRACT, THE SUPPLY OBLIGATIONS (WHETHER ONSHORE O R OFFSHORE), WERE INEXTRICABLY CONNECTED WITH THE EXECUTION OF THE CO NTACT AS A WHOLE IN INDIA. 1.2) THE LD CIT(A) HAS ERRED IN HOLDING THAT NO ACTIVIT Y IN RELATION TO THE 'OFFHSORE' SUPPLY OF EQUIPMENTS WAS UNDERTAKEN IN I NDIA, NOT APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER ('AO') THAT A) NE GOTIATIONS AND SIGNING OF THE CONTRACTS TOOK PLACE IN INDIA, B) THE RISK AND RESP ONSIBILITY ASSOCIATED WITH THE SUPPLY REMAINED WITH THE ASSESSEE TILL SUCCESSFUL I NSTALLATION & COMMISSIONING OF THE EQUIPMENT, C) THERE WAS CLOSE INTERACTION BETWEEN TECHNICAL PERSONNEL OF ASSESSEE AND M/S SSNNL RESUL TING INTO ESTABLISHMENT OF ASSESSEE'S PERMANENT ESTABLISHMENT ( PE) IN INDI A WHICH WAS INVOLVED IN THE EXECUTION OF A CONTRACT OF COMPOSITE NATURE. 1.3) THE LD CIT(A) ERRED IN PLACING RELIANCE ON THE JUD GMENT IN THE CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD [288 ITR 4 08 (SC)] AS THE FACTS OF THE CASE ARE DISTINGUISHABLE. 2. ) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT ASSESSEE DID NOT HAVE A P ERMANENT ESTABLISHMENT ( 'PE') IN RELATION TO VARIOUS CONTRACTS FOR SUPPLIES AND SERVICES EXECUTED IN INDIA FOR M/S MARUTI UDYOG LIMITED ('MUL'). 2.1) THE LD CIT(A) HAS ERRED IN IGNORING THE EVIDENCE M ARSHALLED BY THE AO ESTABLISHING THAT THE ASSESSEE HAD A PE IN INDIA IN THE FORM OF ITS SUBSIDIARY COMPANY, M/S SUMITOMO CORPORATION OF INDIA PVT. LTD ( SCIPL), AND THROUGH WHICH VARIOUS ACTIVITIES IN RELATION TO THE CONTRAC TS WITH M/S MUL FOR SUPPLIES & SERVICES WERE CARRIED OUT IN INDIA. 2.2) WITHOUT PREJUDICE TO THE FOREGOING, THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER ( 'AO') THAT THE ASSESSEE HAD A FIXED-PLACE PE IN INDIA IN RELATION TO THE CONTRA CTS FOR SUPPLIES EXECUTED FOR M/S MUL IN THE FORM OF A LONG-STANDING PRESENCE AT M/S MUL'S SITE IN INDIA 62 ITA NOS. 3675/DEL/2014 & ORS AND WHICH OPERATED AS AN EFFECTIVE SYSTEM TO KNOW T HE REQUIREMENTS OF M/S MUL, TO NEGOTIATE THE PURCHASE ORDERS, TO PROCURE P URCHASE ORDERS. 2.3) WITHOUT PREJUDICE TO THE FOREGOING, THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A SUPERVISORY PE IN RELAT ION TO THE SERVICES OF INSTALLATION, TESTING, COMMISSIONING ETC OF EQUIPME NTS 2.4) THE LD. CIT(A) HAS ERRED IN MECHANICALLY FOLLOWING THE JUDGMENT OF THE HON'BLE ITAT IN ASSESSEE OWN CASE FOR ASSTT YEARS 1 992-93 TO 1994-95 & 1996-97, NOT APPRECIATING THE FACT THAT THE FACTS H AVING A BEARING ON THE ISSUE OF EXISTENCE OR CONSTITUTION OF THE PE ARE DIFFEREN T THIS YEAR AND THAT, IN ANY CASE, THE ISSUE OF EXISTENCE/CONSTITUTION OF PE IS ALWAYS YEAR-SPECIFIC AND THEREFORE THE FINDING WITH REGARDS TO THE EXISTENCE OF PE HAS TO BE EXAMINED AFRESH IN EACH YEAR. 2.5) WITHOUT PREJUDICE TO THE FOREGOING, THE ISSUE OF C ONSTITUTION OF PE IN THOSE YEARS HAS NOT YET ACHIEVED FINALITY AS THE REVENUE HAS FILED A MISCELLANEOUS APPLICATION ('MA') BEFORE THE HON'BLE ITAT TO THE E FFECT THAT THERE ARE MISTAKES APPARENT FROM RECORD REGARDING ASSUMPTION OF FACTS ON THE BASIS OF WHICH DECISION WAS RENDERED BY HON'BLE ITAT. 3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT(A) HAS ERRED IN HOLDING THAT NO PORTION OF THE ASSESSE E'S INCOME FROM THE ACTIVITY OF SUPPLIES OF EQUIPMENTS TO M/S MUL IS TAXABLE IN INDIA. 3.1) THE LD CIT(A) HAS ERRED IN HOLDING THAT NO OPERATI ONS IN RELATION TO THE SUPPLIES OF EQUIPMENTS TO MUL WERE UNDERTAKEN IN IN DIA, NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS A PE IN INDIA IN THE FOR M OF M/S SCIPL AS WELL AS IN THE FORM OF A LONG-STANDING PRESENCE IN INDIA TH ROUGH WHICH VARIOUS ACTIVITIES WERE CARRIED OUT IN INDIA IN RELATION TO THE SUPPLIES BEING MADE AND SERVICES BEING RENDERED TO MUL. THEREFORE, THE RELI ANCE BY THE LD CIT(A) ON THE JUDGMENT IN THE CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD [288 ITR 408 (SC)] WAS MISPLACED AS THE FACTS OF TH E CASE ARE DISTINGUISHABLE. 63 ITA NOS. 3675/DEL/2014 & ORS 4) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE FACTS, THE LD CIT(A) ERRED IN HOLDING THAT THE REVENUES RECEIVED BY THE ASSESSEE FROM M/S MUL ON ACCOUNT OF SUPERVISORY SERVICES IS CHARGEABLE TO TA X UNDER ARTICLE 12(2) OF THE INDIA-JAPAN DTAA. 4.1) THE LD CIT(A) HAS ERRED IN NOT APPRECIATING THE FA CT THAT THE PROVISIONS OF ARTICLE 12(2) ARE NOT APPLICABLE WHERE FEE FOR TECH NICAL SERVICES HAS BEEN RECEIVED ON ACCOUNT OF SERVICES RENDERED THROUGH A PE IN INDIA AND SINCE IN THE CASE OF ASSESSEE, THE FEE FOR TECHNICAL SERVICE S ARE EFFECTIVELY CONNECTED WITH ITS PE IN INDIA, THE SAID REVENUE IS LIABLE TO TAX UNDER SECTION 115A OF THE ACT, READ WITH THE PROVISIONS OF ARTICLE 7 AND ARTI CLE 12(5) OF THE INDIA- JAPAN DTAA. 5) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD CIT (APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S 234B OF THE ACT AND IN OBSERVING THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION IN THE CASE OF M/S JACABS CIVI L INCORPORATED, MISTUBISHI CORPN & OTHERS [330 ITR 578, DELHI] 5.1) THE LD CIT(APPEALS) HAS ERRED IN NOT APPRECIATING THE FACT THE CASE DOES NOT LAY DOWN A GENERAL PROPOSITION OF LAW THAT INTE REST U/S 234B IS NOT CHARGEABLE IN ALL CASES, PARTICULARLY IN CASES WHER E THE NON-RESIDENT ASSESSEE/PAYEE/DEDUCTEE HAS PLAYED A ROLE IN INDUCI NG NON-DEDUCTION OR SHORT-DEDUCTION ON THE PART OF THE PAYER/DEDUCTOR. 5.2) THE LD CIT(APPEALS) HAS ERRED IN FAILING TO TAKE N OTE OF THE OBSERVATIONS OF THE HON'BJE HIGH COURT IN THE CASE OF M/S MITSUBISH I [330 ITR 578, DEL] THAT THE ROLE OF ASSESSE/ PAYEE/ DEDUCTEE IN SHORT-DEDUC TION OR NON-DEDUCTION OF TAX NEEDS TO BE ASCERTAINED BEFORE CLAIM REGARDING NON-LIABILITY TO INTEREST U/S 234B OF THE ACT IS ACCEPTEI A PROPOSITION AFFIRMED SUBSEQUENTLY IN THE CASE OF M/S ALCATEL LUCENT (JUDGEMENT OF DEIH; HIGH COURT D ATED 7.11.2013 IN ITA NO. 327 & ORS OF 2012) AND FOLLOWED BY ITAT DELHI IN THE ORDER DA TED 13.06.2014 64 ITA NOS. 3675/DEL/2014 & ORS IN THE CASE OF NORTEL NETWORK INDIA INTERNATIONAL I NC [ITA NO. 4766/DEL/2011]. 67. AS REGARDS TO GROUND NOS. 1 TO 1.3, IN RESPECT OF THE SSNNL PROJECT, THE ASSESSING OFFICER HELD THAT THE INCOME EARNED BY TH E ASSESSEE FROM OFFSHORE SUPPLY OF THE PLANT AND EQUIPMENT TO SSNL FROM JAPA N IS TAXABLE IN INDIA. THE ASSESSING OFFICER DETERMINED 50% OF GROSS TRADING P ROFIT RATIO @ 5.46% IN AY 2004-05 AS PER THE GLOBAL BALANCE SHEET OF THE ASSE SSEE AS INCOME ACCRUING TO THE ASSESSEE ON SUPPLY OF EQUIPMENT IN INDIA. THE C IT(A) OBSERVED THAT THE ASSESSEE HAS ALREADY OFFERED TO TAX THE INCOME WHIC H IS TAXABLE IN INDIA FOR THE WORK DONE IN INDIA. THE CIT(A) FURTHER OBSERVED THA T THE OFFSHORE SUPPLY WAS MADE FROM OUTSIDE INDIA WHERE THE RISK AND TITLE WA S TRANSFERRED OUTSIDE INDIA. THUS, THE SALE WAS COMPLETED OUTSIDE INDIA. ACCORDI NGLY, THE ADDITION ON OFFSHORE SUPPLY WAS DELETED. 68. AS REGARDS TO GROUND NOS. 1 TO 1.3, THE LD. DR SUBMITTED THAT THE FACTS ARE IDENTICAL TO THAT OF A.Y. 2003-04 WHICH HAS ALS O MENTIONED THE DETERMINATION OF THE GROSS PROFIT RATIO WHILE DISCU SSING THE FACTS OF THE SAID CASE HEREINABOVE PARAS. THE LD. DR SUBMITTED THAT T HE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001-02 AS GROUND NOS . 1 TO 1.4 AND 2 TO 2.1. 69. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDE NTICAL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. THE LD. AR FURTHER SU BMITTED THAT THE ASSESSEE WAS NOT ENGAGED IN ACTUAL INSTALLATION & COMMISSION ING OF THE EQUIPMENT. THE ASSESSEES ROLE WAS LIMITED TO SUPERVISION OF INSTA LLATION & COMMISSIONING AT THE BUYERS I.E. SSNNL SITE. THE OBSERVATIONS MADE BY THE ASSESSING OFFICER WERE FACTUALLY INCORRECT AS TO THE INCOME EARNED BY THE ASSESSEE FROM OFFSHORE SUPPLY OF THE PLANT AND EQUIPMENT TO SSNL FROM JAPA N IS TAXABLE IN INDIA. THE ACTIVITIES SUCH AS INLAND TRANSPORTATION, INLAND IN SURANCE, SUPERVISION OF STORAGE ETC. WERE UNDERTAKEN BY THE ASSESSEE ON BEH ALF OF SSNNL. THE COST OF THESE SERVICES WAS REIMBURSED BY SSNNL TO THE ASSES SEE. THE LD. AR 65 ITA NOS. 3675/DEL/2014 & ORS SUBMITTED THAT THESE SERVICES CANNOT BE LINKED TO S UPPLY OF EQUIPMENT AS WERE RENDERED ON BEHEST OF SSNNL AND NOT ON ITS OWN ACCO UNT BY THE ASSESSEE. FURTHER, INCOME FROM ANY ACTIVITY IN INDIA THROUGH PROJECT OFFICE WAS DULY OFFERED TO TAX. AS PER ARTICLE 24.1 OF THE CONTRACT AGREEMENT, IT WAS SPECIFIED THAT BOTH LEGAL AND EQUITABLE TITLE TO ALL THE MATE RIALS, EQUIPMENT AND APPARATUS COVERED BY THE CONTRACT SHALL BE PASSED T O THE BUYER AT THE TIME OF SUCH MATERIALS, EQUIPMENT AND APPARATUS IS ACTUALLY LOADED FREE ON BOARD THE CARGO VESSEL AT THE PORT OF SHIPMENT, FOB JAPAN. TH US, TRANSFER OF TITLE IN EQUIPMENT TAKES PLACE OUTSIDE INDIA WHEN THE GOODS ARE BOARDED ON VESSEL IN JAPAN AND THE DOCUMENTS OF TITLE ARE TENDERED IN FA VOUR OF THE BUYER I.E. SSNNL. THE LD. AR SUBMITTED THAT IT IS WELL SETTLED POSITION THAT IF THE SUPPLY OF EQUIPMENT IS MADE OUTSIDE INDIA, NO BUSINESS CON NECTION COULD BE SAID TO EXIST BETWEEN THE NON-RESIDENT EXPORTER AND THE IND IAN IMPORTER AND CONSEQUENTLY, NO INCOME COULD BE DEEMED TO ARISE TO THE NON-RESIDENT FROM SUCH SUPPLY FROM OUTSIDE INDIA. THE LD. AR RELIED U PON THE FOLLOWING DECISIONS: I. ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LIMITED 288 ITR 408 (SC) II. HYUNDAI HEAVY INDUSTRIES COMPANY LIMITED 210 CT R 178 (SC) III. CIT VS. TOSHOKU LTD. 125 ITR 525 (SC) IV. DCIT VS. ALCATEL 47 ITD 275 V. CIT VS. FRIED KRUPP INDUSTRIES 128 ITR 27 VI. CARBORANDUM CO VS. CIT 108 ITR 335 AS REGARDS THE RISK AND RESPONSIBILITY, THE LD. AR SUBMITTED THAT IT IS EVIDENT FROM BOTH THE BILL OF ENTRY AND BILL OF LADING AS B OTH WERE EXECUTED IN THE NAME OF SSNNL AS THE CONSIGNER. THIS READ WITH THE PROVISIONS OF ARTICLE 24.1 (TRANSFER OF OWNERSHIP), CLEARLY EXHIBITS THE INTEN TION OF THE CONTRACTING PARTIES. MERELY BY STATING THAT ASSESSEE WAS RESPON SIBLE FOR RISK AND RESPONSIBILITY OF THE EQUIPMENT, DOES NOT, IN ANY W AY EFFECTS THE INTENTION OF THE PARTIES. THE PARTIES AGREED TO TRANSFER OF TITLE F OB WHICH HAS BEEN EXECUTED AS SUCH. WITHOUT PREJUDICE TO THE ABOVE, THE LD. AR FU RTHER SUBMITTED THAT THE ASSESSING OFFICER ERRONEOUSLY ADOPTED THE GROSS PRO FIT RATE INSTEAD OF OPERATING PROFIT RATE AND HAS MADE HIGH ATTRIBUTION OF 50% CO NSIDERING SIGNIFICANT 66 ITA NOS. 3675/DEL/2014 & ORS OPERATION OF SUCH ALLEGED PE IN INDIA FOR OFFSHORE SUPPLY. 70. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2004-05 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT CASE THE GOODS WERE SOLD TO SSNNL FROM OUTSIDE INDIA. THUS, THE RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE SSNNL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 1 TO 1.3 OF THE REVEN UES APPEAL IS DISMISSED. 71. AS REGARDS TO GROUND NOS. 2 TO 2.5 AND 3 TO 3.1 , THE LD. DR SUBMITTED THAT THE SAME IS IDENTICAL WITH THE ISSUE DECIDED I N RESPECT OF GROUND NO. 1 TO 1.3 HEREINABOVE FOR A.Y. 2004-05 AND GROUND NO. 1 T O 1.4 AND 2 TO 2.1 FOR A.Y. 2001-02 AS THIS INVOLVES OFFSHORE SUPPLIES AND EQUI PMENTS TO MUL. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL. THE LD. AR FURTHER SUBMITTED THAT THE TITLE IN THE EQUIPMENT WAS TRANSFERRED TO MUL O UTSIDE INDIA. THE ASSESSEE WAS NOT RESPONSIBLE FOR ANY CUSTOM CLEARANCE AND TR ANSPORTATION OF THE EQUIPMENT. THIS RESPONSIBILITY BELONGED TO MUL AND THE SAME IS ALSO EVIDENT FROM THE PURCHASE ORDERS. 72. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2004-05 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT CASE THE GOODS WERE SOLD TO MUL FROM OUTSIDE INDIA. THUS, TH E RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND 67 ITA NOS. 3675/DEL/2014 & ORS ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 2 TO 2.5 AND 3 TO 3.1 OF THE REVENUES APPEAL IS DISMISSED. 73. AS REGARDS TO GROUND NOS. 4 TO 4.1, THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001 -02 AS GROUND NOS. 3 TO 3.1. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTIC AL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 74. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 17 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2004-05 ALSO, THE PURCHASE ORDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEATURES EMERGE THAT IN ALL T HE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPAN AND MUL BEARS T HE COST OF THEIR AIR TICKET AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDI A. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRACTS DID NOT EXCEED A PE RIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HEREINABOVE AND THEY D ID NOT CONSTITUTE SUPERVISORY PE IN TERMS OF ARTICLE 5(4) OF THE DTAA . IN FACT, THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRME D BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREME COURT. THUS , IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12( 2) OF THE DTAA. HENCE, GROUND NOS. 4 TO 4.1 IN REVENUES APPEAL ARE DISMIS SED. 68 ITA NOS. 3675/DEL/2014 & ORS 75. AS REGARDS TO GROUND NO. 5 TO 5.2, THE LD. DR S UBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001 -02 AS GROUND NOS. 4 TO 4.2. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTIC AL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 76. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2004-05 ALSO, THIS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASS ESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI CORPORATION (SUPRA ) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS N OT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND NOS. 5 TO 5.2 ARE DISMISSED. 77. IN RESULT, ITA NO. 3714/DEL/2014 FOR A.Y. 2004- 05 FILED BY THE REVENUE IS DISMISSED. 78. NOW WE ARE TAKING UP ITA NO. 5964/DEL/2010 FOR A.Y. 2007-08 FILED BY THE ASSESSEE. 5964/DEL/2010 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLANT RESPECTFULLY SUBMITS: 1. THAT THE LEARNED ASSESSING OFFICER HAS ERRED BOTH O N FACTS AND IN LAW, IN COMPUTING THE TOTAL INCOME OF THE APPELLANT COMPANY AT RS. 27,92,83,790/-, AGAINST AN AGGREGATE TOTAL INCOME DECLARED OF RS. 1 5,23,80,734 (I.E. RS. 12,35,58,219/- AND RS. 2,88,22,515/- AS INTEREST I NCOME) REPRESENTING INTEREST INCOME. THE ADDITION MADE THUS OF RS. 2,88 ,22,515/- IS HIGHLY MISCONCEIVED AND THE HONBLE DISPUTE RESOLUTION PEN AL ( HONBLE DRP) HAS ALSO ERRED IN NOT DIRECTING THE SAID SUM AS ALREADY OFFERED TO TAX AS A PART OF TOTAL INCOME, TO BE EXCLUDED. 69 ITA NOS. 3675/DEL/2014 & ORS 2. THAT THE LEARNED ASSESSING OFFICER (LEARNED AO) HAS FAILED TO APPRECIATE THAT, THE ASSESSEE IS A TAX RESIDENT OF JAPAN AND I S REQUIRED TO BE ASSESSED IN ACCORDANCE WITH THE PROVISIONS OF DOUBLE TAX AVOIDA NCE AGREEMENT BETWEEN INDIA AND JAPAN AND THE ASSESSEE, SINCE HAD NO PERM ANENT ESTABLISHMENT IN INDIA, IT IS THE INCOME ATTRIBUTABLE TO THE PERMANE NT ESTABLISHMENT ONLY, IN RESPECT OF SUCH PROJECTS EXECUTED BY IT, COULD BE A SSESSED TO TAX, WHICH SUMS OF INCOME HAD DULY BEEN OFFERED TO TAX FOR ASSESSME NT, AND WAS IN ACCORDANCE WITH THE ACCEPTED METHOD OF COMPUTATION OF TOTAL INCOME AND AS SUCH NO FURTHER INCOME COULD BE HELD TO BE ATTRIBUT ABLE TO PERMANENT ESTABLISHMENT. 2. THAT THE LEARNED AO HAS ERRED IN MAKING ADDITION O F RS. 1,27,32,484/- IN RESPECT OF AN AMOUNT STATED TO BE AN INCOME ATTRIBUTABLE TO MARUTI UDHYOG LIMITED (MUL) PROJECT (I.E. THE ESTIM ATED AND ASSUMED SUM) ON THE SUPPLIES MADE BY IT FROM JAPAN COULD VALIDLY HA VE BEEN MADE. THE LEARNED AO, HAS ERRED IN NOT APPRECIATING THAT SUCH INCOME, AS HAS BEEN HELD TO BE ATTRIBUTABLE ON THE SUPPLIES MADE, SINCE WAS NOT ATTRIBUTABLE TO ITS PERMANENT ESTABLISHMENT HAS BEEN MISCONCEIVED AND T HE ADDITION SO MADE BE THUS HELD UNTENABLE AND DESERVES TO BE DELETED. 2.1 THAT THE HONBLE DRP/LEARNED AO HAS ERRED IN HOLDIN G THAT THE PROFIT OF SUPPLIES OF EQUIPMENT BY THE ASSESSEE TO MUL ARE TA XABLE IN INDIA EVEN KNOWING THAT TITLE OF EQUIPMENT AND SUPPLIES HAD BE EN MADE BY THE APPELLANT OUTSIDE INDIA AND NO INCOME THUS HAD ACCRUED TO THE ASSESSEE IN INDIA. 2.2 THAT THE HONBLE DRP/LEANED AO HAS ERRED IN HOLDIN G THAT THE ASSESSEE HAS A PE IN INDIA UNDER ARTICLE 5 OF THE DOUBLE TAX ATION AVOIDANCE AGREEMENT BETWEEN INDIA AND JAPAN ('DTAA OR 'TREATY) 2.3 WITHOUT PREJUDICE AND IN THE ALTERNATIVE EVEN IF I T IS HELD THAT THE APPELLANT HAD A PE IN INDIA THEN ALSO, NO AMOUNT OF THE ALLEG ED PROFITS FROM SUPPLY OF EQUIPMENT TO MUL COULD BE TAXED IN INDIA, SINCE NO SUCH ALLEGED PROFITS COULD 70 ITA NOS. 3675/DEL/2014 & ORS BE ATTRIBUTED TO SUCH PE IN INDIA AS PER ARTICLE 7 OF THE DTAA. 3.4. THAT FURTHER THE HONBLE DRP HAS ERRED IN ENHA NCING THE PERCENTAGE OF ALLEGED ATTRIBUTION TO 50% FROM 25% ADOPTED BY A SSESSING OFFICER, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CAS E AND ALSO BY FAILING TO APPRECIATE THE ALLEGED INSTANCE OF SO CALLED COMPAR ABLES WERE WHOLLY INAPPLICABLE AND FURTHER IN ANY CASE THERE WAS A CO MPLETE VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, WHEN THE ASSESSEE HA D NOT BEEN CONFRONTED WITH ANY OF THE DETAILS OF THE SO CALLED COMPARABLES TO REBUT THE ASSUMPTION, THAT THE ALLEGED INSTANCES COULD NOT BE COMPARED WITH TH AT OF THE ASSESSEE COMPANY, SO AS TO ADOPT 50% OF THE PROFIT AS ATTRIB UTABLE AGAINST 25% ADOPTED BY THE LEARNED AO. 3.5. THAT IN THE ALTERNATIVE AND WITHOUT PREJUDICE THE AFORESAID ADDITION MADE OF A SUM OF RS. 1,27,32,484/- BEING THE SUM AL LEGEDLY ATTRIBUTABLE TO THE MUL PROJECT AND ASSESSABLE TO TAX IS HIGHLY EXC ESSIVE. 3.6. THAT THE HONBLE DRP/LEAMED AO HAS ERRED IN AT TRIBUTING 50% OF THE PROFIT TO THE ALLEGED PE OF THE APPELLANT IN INDIA WITHOUT ANY BASIS SUCH A CONCLUSION IS ARBITRARY AND IS UNTENABLE. 4. THAT THE LEARNED AO HAS FURTHER ERRED IN MAKING ADDITION OF RS. 12,69,03,057/- BEING THE INCOME ATTRIBUTABLE AS SUP ERVISION FEES FROM MARUTI UDYOG LTD (MUL)., TO BE ASSESSED @ 10% WITHOUT APPR ECIATING THAT THE AFORESAID SUM WAS MERELY INCIDENTAL TO THE SUPPLY O F EQUIPMENT WHICH SUPPLIES WERE MADE OUTSIDE INDIA AND AS SUCH THE AD DITION MADE WAS TOTALLY ARBITRARY. THE NECESSARY EVIDENCES IN SUPPORT OF TH E SUBMISSIONS FURNISHED HAVE ARBITRARILY BEEN BRUSHED ASIDE. 4.1 THAT THE HONBLE DRP/LEARNED AO HAS ERRED IN TA XING SUPERVISION INCOME AS FEE FOR TECHNICAL SERVICES @10% GROSS UND ER SECTION 115A READ WITH ARTICLE 12 OF DTAA ON THE REASONING THAT IT IS NOT INEXTRICABLY LINKED AND INCIDENTAL TO THE SUPPLY OF EQUIPMENT TO MUL. THE F INDINGS AND CONCLUSIONS 71 ITA NOS. 3675/DEL/2014 & ORS ARRIVED AT CONTRADICTORY. 4.2. THE FINDING OF THE HON'BLE DRP/LEARNED AO THAT THE SUPERVISION ACTIVITIES COULD HAVE BEEN DIRECTLY PERFORMED BY OR IGINAL EQUIPMENT MANUFACTURER (OEM) OR A COMPANY OTHER THAN THE APPE LLANT IS BASED ON NO MATERIAL AND IS CONTRARY TO TERMS OF THE AGREEMENT WITH MUL UNDER WHICH IT WAS THE APPELLANT ALONE TO PROVIDE SUCH SERVICES AN D COULD NOT BE PERFORMED BY ANYONE ELSE. THUS, THE FINDINGS OF THE LEARNED A O ARE ARBITRARY AND UNTENABLE. 4.3. THAT THE HONBLE DRP/LEARNED AO HAS ERRONEOUSL Y ASSUMED AND HELD WITHOUT ANY BASIS THAT THE APPELLANT HAS ADMIT TED THAT IT CONSTITUTES A SERVICE PE AS UNDER ARTICLE 5 OF THE INDIA - JAPAN DTAA. 4.4. THAT THE HONBLE DRP/LEAMED AO WITHOUT PREJUDI CE TO ABOVE GROUND THAT SUPERVISION INCOME IS NOT TAXABLE, HAS ERRED I N TAXING SUPERVISION INCOME @10% GROSS WHEN THE SAME SHOULD HAVE BEEN TAXED IN THE SIMILAR MANNER IN WHICH SHE HAS TAXED THE EQUIPMENT SUPPLY INCOME. 5. THAT THE FINDING RECORDED BY THE LEARNED AO THAT THE RECEIPTS FROM MUL., ARE HELD TO BE TAXABLE AS FEE FOR TECHNICAL SERVICE S U/S 9(L)(VII) READ WITH SECTION 115A OF THE INCOME TAX ACT AS PER ARTICLE 1 2 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA AND JAPAN IS MISC ONCEIVED AND IS NOT BASED ON THE PROPER APPRECIATION OF THE FACTS AND T HE STATUTORY PROVISIONS RELATING THERETO. 6. THAT THE LEARNED AO HAS ERRED IN HOLDING THAT, T HE PURCHASE ORDERS WERE ONLY FOR SUPERVISION OF INSTALLATION, TRIALS, TESTI NG AND COMMISSIONING OF EQUIPMENT, WHEREAS, THE PURCHASE ORDERS WERE LINKED TO THE SUPPLIES OF EQUIPMENT. THE SUPERVISION WAS LIMITED TO THE SUPPL IES OF EQUIPMENT AND MERELY BECAUSE FEE WAS SEPARATELY INDICATED AND WAS OVER AND ABOVE THE VALUE OF SUPPLY COULD NOT MEAN OR, TO MEAN THAT THE PURCHASE ORDERS WERE FOR THE SUPERVISION OF INSTALLATION, TRIALS, TESTING AN D COMMISSIONING OF EQUIPMENT 72 ITA NOS. 3675/DEL/2014 & ORS INDEPENDENTLY AND THE SUPERVISION FEE THOUGH SEPARA TELY INDICATED WAS NOT INCIDENTAL TO THE SUPPLIES MADE. 7. THAT THE HON'BLE DRP/LEARNED AO ERRED IN ADDING INTEREST INCOME OF RS 28,822,515 WHICH SUM OF INCOME HAD BEEN ALREADY OFF ERED TO TAX BY THE APPELLANT BY, ERRONEOUSLY OBSERVING AND HOLDING THA T THE INTEREST INCOME WAS NOT DISCLOSED EITHER IN THE ORIGINAL RETURN OR IN T HE REVISED RETURN OF INCOME AND THE SAME WAS DISCLOSED ONLY WHEN ENQUIRY WAS MA DE DURING ASSESSMENT PROCEEDING. FURTHER, THE LEARNED ASSESSI NG OFFICER HAS ERRED IN INITIATING THE PENALTY PROCEEDING UNDER SECTION 271 (1)( C) OF THE ACT WHERE THE APPELLANT HAS NOT CONCEALED ANY INCOME OR HAS FURNI SHED ANY INACCURATE PARTICULAR OF INCOME. 8. THAT THE LEARNED AO HAS FURTHER ERRED IN LEVYIN G INTEREST U/S 234B OF THE ACT AND HOLDING THAT THE APPELLANT HAD COMMITTED A DEFAULT IN PAYMENT OF ADVANCE TAX, AS THE INCOME COMPUTED BY HIM WAS HIGH ER. 9. THAT THE FURTHER FININGS RECORDED BY THE LEARNE D AO IN HIS ORDER THAT, APPELLANT HAD DELIBERATELY TRIED TO EVADE THE PAYME NT OF TAXES BY FURNISHING INACCURATE PARTICULARS IS WHOLLY UNJUSTIFIED AND IS BASED ON FACTUAL CONCEIVED OPINION. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJU DICE TO EACH OTHER. 79. AS RELATES TO GROUND NOS. 1 AND 7 RELATING TO I NTEREST INCOME NOT DECLARED AMOUNTING TO RS. 2,88,22,515/-, THE ASSESS ING OFFICER HELD THAT THE ASSESSEE HAS NOT DISCLOSED THE INTEREST INCOME EARN ED IN THE ORIGINAL RETURN OF INCOME AND ALSO THE REVISED RETURN OF INCOME. FURTH ER, THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME WAS DISCLOSED ONLY WH EN ENQUIRY WAS MADE DURING ASSESSMENT PROCEEDINGS, HENCE INCOME WAS CON CEALED. THE DRP HELD THAT INTEREST INCOME WAS DECLARED BY THE ASSESSEE F OR THE FIRST TIME IN RESPONSE TO REQUEST BY THE ASSESSING OFFICER TO SUBMIT COMPL ETE COMPUTATION OF INCOME. THUS, THERE IS NO INFIRMITY IN THE DRAFT ORDER OF T HE ASSESSING OFFICER ON THIS 73 ITA NOS. 3675/DEL/2014 & ORS ISSUE. 80. THE LD. AR SUBMITTED THAT DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE SUBMITTED REVISED RETURN OF INCOME FILED O N 30 TH MARCH, 2009 VIDE E- FILING ACKNOWLEDGMENT IN WHICH THE INTEREST INCOME WAS DISCLOSED AND TAX WAS PAID ON IT. INADVERTENTLY, THE INCOME WAS NOT CAPTU RED IN THE HEAD OF INCOME FROM OTHER SOURCES, HOWEVER, THE SAME WAS DULY INC LUDED IN THE TAX PAYABLE AND TAX WAS PAID ON IT. FURTHER, THE ASSESSEE FILED SUBMISSION ON 8 TH SEPTEMBER, 2009 WITH THE ASSESSING OFFICER INFORMIN G ABOUT THE REVISED COMPUTING OF INCOME WHEREIN INTEREST INCOME WAS DIS CLOSED IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER HAS HELD THAT THE ASSESSEE HAS NOT DISCLOSED THE INTEREST INCOME EARNED IN THE ORIGINAL RETURN O F INCOME AND ALSO THE REVISED RETURN OF INCOME. FURTHER, THE ASSESSING OFFICER HE LD THAT THE INTEREST INCOME WAS DISCLOSED ONLY WHEN ENQUIRY WAS MADE DURING ASS ESSMENT PROCEEDING, HENCE INCOME WAS CONCEALED. THE LD. AR SUBMITTED TH AT THE ASSESSEE COMPLETELY DISCLOSED THE INTEREST INCOME IN SCHEDUL E S1 OF THE REVISED RETURN OF INCOME FORM FILED ON 30 TH MARCH, 2009. HOWEVER, BY INADVERTENT ERROR IN FILI NG UP THE FORM SAME WAS NOT CAPTURED IN THE TOTAL INCO ME BUT TAX WAS SHOWN AS PAYABLE ON THE SAME AND IT WAS ACTUALLY PAID IN THE REVISED RETURN. AS THE COMPUTATION OF INCOME IS NOT TO BE FILED WITH THE E LECTRONIC RETURN, THE SAME WAS DULY DISCLOSED IN THE REVISED COMPUTATION OF IN COME WHICH WAS FILED BEFORE THE ASSESSING OFFICER SUBSEQUENT TO FILING OF THE R ETURN. THE LD. AR FURTHER SUBMITTED THAT THERE WAS NO INTENTION OF THE ASSESS EE TO CONCEAL ANY INCOME AS THE ASSESSEE ITSELF PROVIDED THE REVISED COMPUTATIO N OF INCOME DURING THE ASSESSMENT PROCEEDING SHOWING THE INTEREST INCOME A ND TDS CLAIM THEREON. FURTHER, AS PER THE NEW RULES OF ELECTRONIC RETURN, THE ASSESSEE COULD NOT FILED THE TAX COMPUTATION WITH THE RETURN AND THEREFORE, THE SAME WAS FILED WITH THE ASSESSING OFFICER WHICH SHOWS THE INTEREST INCOME A ND ALSO SAME TAX LIABILITY AS PER THE ELECTRONIC RETURN. THUS, THE TAX WAS PAI D SUO-MOTO BEFORE THE ENQUIRY BY THE ASSESSING OFFICER. 74 ITA NOS. 3675/DEL/2014 & ORS 81. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE DIRECTIONS OF THE DRP. 82. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS IT CAN BE SEE N THAT DURING THE ASSESSMENT PROCEEDING, THE ASSESSEE SUBMITTED REVIS ED RETURN OF INCOME FILED ON 30 TH MARCH, 2009 VIDE E-FILING ACKNOWLEDGMENT IN WHICH THE INTEREST INCOME WAS DISCLOSED AND TAX WAS PAID ON IT. INADVERTENTLY , THE INCOME WAS NOT CAPTURED IN THE HEAD OF INCOME FROM OTHER SOURCES , HOWEVER, THE SAME WAS DULY INCLUDED IN THE TAX PAYABLE AND TAX WAS PAID O N IT. FURTHER, THE ASSESSEE FILED SUBMISSION ON 8 TH SEPTEMBER, 2009 WITH THE ASSESSING OFFICER INFORMI NG ABOUT THE REVISED COMPUTING OF INCOME WHEREIN INTER EST INCOME WAS DISCLOSED IN THE COMPUTATION OF INCOME. THUS, THE ASSESSEE CO MPLETELY DISCLOSED THE INTEREST INCOME IN SCHEDULE S1 OF THE REVISED RETUR N OF INCOME FORM FILED ON 30 TH MARCH, 2009. IT IS ONLY INADVERTENT ERROR IN THE F ILING OF THE REVISED RETURN FORM BUT THE TAX WAS PAID SUO-MOTO BEFORE THE ENQUI RY OF THE ASSESSING OFFICER. THEREFORE, IT IS NOT A DELIBERATE MISTAKE ON PART O F THE ASSESSEE AND THE TAX IS ALSO DULY PAID BY THE ASSESSEE. THEREFORE, THE ASSE SSING OFFICER WAS NOT RIGHT IN MAKING THE SAID ADDITION. WE, THEREFORE, DELETE THI S ADDITION. GROUND NO. 1 AND 7 ARE ALLOWED. 83. AS REGARDS TO GROUND NOS. 2 AND 3 TO 3.6, THE LD. AR SUBMITTED THAT LIKEWISE AY 2000-01, THE ASSESSING OFFICER VIDE ASS ESSMENT ORDER HELD THAT ASSESSEE HAS PE IN INDIA, AND THE SUPPLIES IN QUEST ION HAVE BEEN MADE THROUGH THE SAID PE. HENCE, THE OPERATING PROFIT @ 1.93% WAS APPLIED TO COMPUTE THE SALE OF EQUIPMENT AND ATTRIBUTED @ 25%. THE DRP PANEL ALSO HELD THAT ASSESSEE HAS PE IN INDIA AND THE SUPPLIES IN Q UESTION HAVE BEEN MADE THROUGH THE SAID PE. FURTHER, DRP ENHANCED THE ATTR IBUTION FOR 25% TO 50% ON THE BASIS OF OTHER JAPANESE COMPANY WITHOUT APPLICA TION OF MIND. 75 ITA NOS. 3675/DEL/2014 & ORS 84. THE LD. DR ALSO SUBMITTED THAT THE ISSUE IS IDE NTICAL WITH THE ISSUE DECIDED IN RESPECT OF GROUND NO. 1 TO 1.4 AND 2 TO 2.1 FOR A.Y. 2001-02 AS THIS INVOLVES OFFSHORE SUPPLIES AND EQUIPMENTS TO MUL. T HE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL. THE LD. AR FURTHER SUB MITTED THAT THE TITLE IN THE EQUIPMENT WAS TRANSFERRED TO MUL OUTSIDE INDIA. THE ASSESSEE WAS NOT RESPONSIBLE FOR ANY CUSTOM CLEARANCE AND TRANSPORTA TION OF THE EQUIPMENT. THIS RESPONSIBILITY BELONGED TO MUL AND THE SAME IS ALSO EVIDENT FROM THE PURCHASE ORDERS. 85. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2007-08 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT CASE THE GOODS WERE SOLD TO MUL FROM OUTSIDE INDIA. THUS, TH E RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 2 AND 3 TO 3.6 OF THE ASSESSEES APPEAL IS ALLOWED. 86. AS REGARDS TO GROUND NO. 4 TO 4.4, 5 AND 6, THE THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPE AL FOR A.Y. 2001-02 AS GROUND NOS. 3 TO 3.1. THE LD. AR ALSO SUBMITTED THA T THE ISSUE IS IDENTICAL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 87. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 17 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2007-08 ALSO, THE PURCHASE ORDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF 76 ITA NOS. 3675/DEL/2014 & ORS WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEATURES EMERGE THAT IN ALL T HE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPAN AND MUL BEARS T HE COST OF THEIR AIR TICKET AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDI A. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRACTS DID NOT EXCEED A PE RIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HEREINABOVE AND THEY D ID NOT CONSTITUTE SUPERVISORY PE IN TERMS OF ARTICLE 5(4) OF THE DTAA . IN FACT, THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRME D BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREME COURT. THUS , IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12( 2) OF THE DTAA. HENCE, GROUND NOS. 4 TO 4.4, 5 AND 6 IN ASSESSEES APPEAL ARE ALLOWED. 88. AS REGARDS TO GROUND NO. 8, THE LD. DR SUBMITTE D THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001-02 AS GROUND NOS. 4 TO 4.2. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL A ND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 89. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2007-08 ALSO, THIS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASS ESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI CORPORATION (SUPRA ) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS N OT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND NOS. 8 IS ALLOWED. 90. IN RESULT, ITA NO. 5964/DEL/2014 IN A.Y. 2007-0 8 FILED BY THE ASSESSEE IS ALLOWED. 77 ITA NOS. 3675/DEL/2014 & ORS 91. NOW WE ARE TAKING UP ITA NO. 1114/DEL/2015 IN A .Y. 2010-11 FILED BY THE ASSESSEE. 1114/DEL/2015 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLANT RESPECTFULLY SUBMITS: 1. THAT THE LEARNED ASSESSING OFFICER HAS ERRED BOTH O N FACTS AND IN LAW, IN COMPUTING THE TOTAL INCOME OF THE APPELLANT COMPANY AT RS. 93,50,29,200/-, AGAINST AN AGGREGATE TOTAL INCOME DECLARED OF RS. 7 8,70,00,832 (I.E. RS. 77,78,79,900/- AND RS. 91,20,932/- REPRESENTING SUP ERVISION/TECHNICAL FEE AND INTEREST INCOME). THE ADDITION MADE OF RS.2,00, 32,227/- IS HIGHLY MISCONCEIVED AND THE HONBLE DISPUTE RESOLUTION PAN EL (HONBLE DRP) HAS ALSO ERRED IN NOT DIRECTING THE SAID SUM TO BE EXCL UDED. 2. THAT THE LEARNED ASSESSING OFFICER (LEARNED AO) HAS FAILED TO APPRECIATE THAT, THE APPELLANT IS A TAX RESIDENT OF JAPAN AND IS REQUIRED TO BE ASSESSED IN ACCORDANCE WITH THE PROVISIONS OF DOUBLE TAX AVO IDANCE AGREEMENT BETWEEN INDIA AND JAPAN AND THE APPELLANT, SINCE HA D NO PERMANENT ESTABLISHMENT (PE) IN INDIA FOR SUPPLY MADE TO MARU TI SUZUKI INDIA LIMITED (MSIL) NO INCOME COULD BE HELD TO BE TAXABLE IN IND IA. 3. THAT THE LEARNED AO HAS ERRED IN MAKING ADDITION OF RS. 2,00,32,227/- IN RESPECT OF AN AMOUNT STATED TO BE AN INCOME ATTRIBU TABLE FOR SUPPLIES MADE BY APPELLANT TO MSIL (I.E. THE ESTIMATED AND ASSUMED S UM) FROM JAPAN. THE LEARNED AO, HAS ERRED IN NOT APPRECIATING THAT SUCH INCOME, AS HAS BEEN HELD TO BE ATTRIBUTABLE ON THE SUPPLIES MADE, SINCE WAS NOT ATTRIBUTABLE TO ITS PERMANENT ESTABLISHMENT HAS BEEN MISCONCEIVED AND T HE ADDITION SO MADE BE THUS HELD AS UNTENABLE WHICH ADDITION DESERVES T O BE DELETED. 3.1 THAT THE HON'BLE DRP/LEARNED AO HAS ERRED IN HOLDIN G THAT THE PROFIT OF SUPPLIES OF EQUIPMENT BY THE APPELLANT TO MSIL ARE TAXABLE IN INDIA DESPITE 78 ITA NOS. 3675/DEL/2014 & ORS THE FACT THAT TITLE OF EQUIPMENT HAD PASSED IN JAPA N AND SUPPLIES HAD ALSO BEEN MADE IN JAPAN AND NOT IN INDIA AND THUS NO INC OME HAD ACCRUED TO THE APPELLANT IN INDIA. 3.2 THAT THE HONBLE DRP/LEANED AO HAS ERRED IN HOLDING , THAT THE APPELLANT HAS A PE IN INDIA UNDER ARTICLE 5 OF THE DOUBLE TAX ATION AVOIDANCE AGREEMENT BETWEEN INDIA AND JAPAN ('DTAA OR 'TREATY) AND SU CH PE WAS INVOLVED IN PORT CLEARANCE, LOCAL TRANSPORTATION, COMMISSIONING AND TESTING OF EQUIPMENT IN INDIA. THE AFORESAID FINDINGS ARE BASED ON NO MA TERIAL WHATSOEVER. 3.3 THAT THE HONBLE DRP/LEARNED AO HAS ERRED IN HOLDIN G, WITHOUT ANY BASIS, THAT THE NEGOTIATION AND SIGNING OF THE CONTRACT TO OK PLACE IN INDIA AND THUS PE WAS ESTABLISHED WITHOUT CONSIDERING THE FACT THA T EVEN THE CONTRACTS WERE SIGNED OUTSIDE INDIA AND NO NEGOTIATION TOOK PLACE IN INDIA IN RESPECT OF SUCH OFFSHORE SUPPLY. 3.4 THAT THE HON'BLE DRP/LEAMED AO HAS ERRED ON FACTS I N HOLDING AND THAT TO WITHOUT ANY BASIS, THAT THE APPELLANT HAS ENTERED I NTO INTEGRATED CONTRACT FOR SUPPLY OF EQUIPMENT AND COMMISSIONING, AND PE WAS E STABLISHED TO UNDERTAKE THE CONTRACTUAL OBLIGATION. IN-FACT THE A SSESSEE DID NOT CARRY OUT ANY ACTIVITY IN INDIA IN RESPECT OF SUCH OFFSHORE S UPPLIES. THUS, THE ALLEGATION OF THE LEARNED AO IS TOTALLY BASELESS. 3.5 WITHOUT PREJUDICE AND IN THE ALTERNATIVE EVEN IF IT IS HELD THAT THE APPELLANT HAD A PE IN INDIA THEN ALSO, NO AMOUNT OF THE ALLEG ED PROFITS FROM SUPPLY OF EQUIPMENT TO MSIL COULD BE TAXED IN INDIA, SINCE NO SUCH ALLEGED PROFITS COULD BE ATTRIBUTED TO SUCH PE IN INDIA AS PER ARTICLE 7 OF THE DTAA. 3.6. THAT THE HONBLE DRP/LEAMED AO HAS ERRED IN AT TRIBUTING 50% OF THE PROFIT IN RESPECT OF OFFSHORE SUPPLIES TO THE ALLEG ED PE OF THE APPELLANT IN INDIA WITHOUT ANY BASIS SUCH A CONCLUSION IS ARBITRARY AN D IS UNTENABLE. 79 ITA NOS. 3675/DEL/2014 & ORS 3.7. WITHOUT PREJUDICE TO ABOVE THAT OFFSHORE SUPPL Y IS NOT TAXABLE IN INDIA, THE AUTHORITIES BELOW HAVE ERRED IN NOT ALLO WING SET-OFF OF THE BROUGHT FORWARD BUSINESS LOSSES AGAINST INCOME FROM SUPPLY OF EQUIPMENT. 4. THAT THE AUTHORITIES BELOW HAVE ERRED IN HOLDING THAT THE AGGREGATE SUPERVISION FEE OF RS. 90,58,76,041 IS TAXABLE @ 10 % UNDER SECTION 115A OF THE ACT READ WITH ARTICLE 12 INSPITE OF THE FACT TH AT THE SAID FEE WAS TO BE TAXED ONLY UNDER ARTICLE 12(2) AND NOT UNDER ARTICL E 12(5) OF THE DTAA WARRANTING NO LEVY OF SURCHARGE AND EDUCATION CESS. THUS, IN EFFECT NO SURCHARGE OF RS 22,87,492 AND EDUCATION CESS OF RS. 28,04,016 COULD HAVE BEEN LEVIED. 4.1 THAT THE AUTHORITIES BELOW HAVE ERRED IN HOLDIN G THAT THE ASSESSEE HAD A SUPERVISORY PE IN INDIA AND HAVE FURTHER ERRE D IN ASSUMING AND THAT WITHOUT ANY MATERIAL THAT IT HAD A SERVICE PE IN IN DIA WHICH IS ALSO CONCEPTUALLY INCORRECT IN ABSENCE OF ANY SUCH CONCE PT OF SERVICE PE UNDER ARTICLE 5 OF THE INDIA-JAPAN DTAA. 4.2. THAT THE LEARNED AO HAS FAILED TO ADOPT FOR CO MPUTING THE PERIOD OF SUPERVISION UNDERTAKEN BY THE APPELLANT BY ADOPTING AGGREGATING PERIOD OF ALL THE PURCHASE ORDER OF SUPERVISION WHICH WERE OTHERW ISE ADMITTED BY THE LEARNED AO AS INDEPENDENT AND SEPARATE. 4.3 IN VIEW OF THE AFORESAID ERRONEOUS APPROACH THE AUTHORITIES BELOW HAVE ERRED IN NOT ACCEPTING THE CONTENTION OF THE A PPELLANT THAT THE FEE FOR SUPERVISION WAS TAXABLE UNDER ARTICLE 12(2) OF THE DTAA, AND NOT UNDER ARTICLE 12(5) OF DTAA OR SECTION 9(1 )(VII) OF THE ACT. 5. THAT THE HON'BLE DRP/LEARNED AO, WITHOUT ANY BAS IS, ERRED IN LEVYING SURCHARGE AND EDUCATION CESS ON THE INCOME OF RS. 7 8,70,00,832 ALREADY OFFERED TO TAX IN THE RETURN OF INCOME IN ACCORDANC E TO ARTICLE 12(2) AND 11(2) OF THE INDIA - JAPAN DTAA WHEREIN TAX CANNOT BE LEV IED MORE THAN 10%. 80 ITA NOS. 3675/DEL/2014 & ORS 6. THAT THE LEARNED AO, WITHOUT ANY BASIS, HAS ERRE D IN NOT GRANTING THE CREDIT OF TAX DEDUCTED AT SOURCE TO AN EXTENT OF RS . 2,86,48,984 CLAIMED IN THE RETURN OF INCOME. 7. THAT THE HONBLE DRP/LEAMED AO HAS FURTHER ER RED IN LEVYING INTEREST U/S 234B OF THE ACT AND HOLDING THAT THE APPELLANT HAD COMMITTED A DEFAULT IN PAYMENT OF ADVANCE TAX, AS THE INCOME COMPUTED B Y HIM WAS HIGHER. 8. THAT THE LEARNED AO HAS ERRED IN INITIATING T HE PENALTY PROCEEDING UNDER SECTION 271 (1 )(C) OF THE ACT WHERE THE APPELLANT HAS NOT CONCEALED ANY INCOME OR HAS FURNISHED ANY INACCURATE PARTICULAR O F INCOME. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJU DICE TO EACH OTHER. 92. AS REGARDS TO GROUND NO. 1, THE SAME IS GENERAL IN NATURE HENCE NOT ADJUDICATED UPON HEREIN. 93. AS REGARDS TO GROUND NOS. 2 AND 3 TO 3.5, THE L D. AR SUBMITTED THAT THE ISSUE IS IDENTICAL. THE LD. AR FURTHER SUBMITTED TH AT THE TITLE IN THE EQUIPMENT WAS TRANSFERRED TO MUL OUTSIDE INDIA. THE ASSESSEE WAS NOT RESPONSIBLE FOR ANY CUSTOM CLEARANCE AND TRANSPORTATION OF THE EQUIPMEN T. THIS RESPONSIBILITY BELONGED TO MUL AND THE SAME IS ALSO EVIDENT FROM T HE PURCHASE ORDERS. THE LD. DR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL W ITH THE ISSUE DECIDED IN RESPECT OF GROUND NO. 1 TO 1.4 AND 2 TO 2.1 FOR A.Y . 2001-02 AS THIS INVOLVES OFFSHORE SUPPLIES AND EQUIPMENTS TO MUL. 94. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2010-11 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT CASE THE GOODS WERE SOLD TO MUL FROM OUTSIDE INDIA. THUS, TH E RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND 81 ITA NOS. 3675/DEL/2014 & ORS ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 2 AND 3 TO 3.5 OF THE ASSESSEES APPEAL IS ALLOWED. 96. AS REGARDS TO GROUND NO. 4 TO 4.3 AND 5, THE LD . DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A. Y. 2001-02 AS GROUND NOS. 3 TO 3.1. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 97. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOVE PARA NO. 17 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2010-11 ALSO, THE PURCHASE ORDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEATURES EMERGE THAT IN ALL T HE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPAN AND MUL BEARS T HE COST OF THEIR AIR TICKET AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDI A. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRACTS DID NOT EXCEED A PE RIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HEREINABOVE AND THEY D ID NOT CONSTITUTE SUPERVISORY PE IN TERMS OF ARTICLE 5(4) OF THE DTAA . IN FACT, THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRME D BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREME COURT. THUS , IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12( 2) OF THE DTAA. HENCE, GROUND NOS. 4 TO 4.3 AND 5 IN ASSESSEES APPEAL ARE ALLOWED. 82 ITA NOS. 3675/DEL/2014 & ORS 98. AS REGARDS TO GROUND NO. 6, THE LD. AR SUBMITTE D THAT THE ASSESSING OFFICER ERRED IN NOT GRANTING THE CREDIT OF TAX DED UCTED AT SOURCE TO AN EXTENT OF RS. 2,86,48,984 CLAIMED IN THE RETURN OF INCOME. TH E LD. AR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY REASON AS T O THE NON GRANTING OF THE CREDIT OF TAX DEDUCTED AT SOURCE DESPITE GIVING DET AILS. 99. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 100. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF RECORD IT CAN BE SEEN THAT THE ASSESSEE FILED ALL THE DETAILS BEFORE THE ASSESSING OFFICER AND THEREFORE, THE NON GRANTING OF CREDIT OF TAX DEDUCTED AT SOURCE IS UNCALLED FOR . THEREFORE, WE DIRECT THE ASSESSING OFFICER TO GRANT THE CREDIT OF TAX DEDUCT ED AT SOURCE IN CONSONANCE WITH THE DETAILS FILED BY THE ASSESSING OFFICER. TH US, GROUND NO. 6 IS ALLOWED. 101. AS REGARDS TO GROUND NO. 7, THE LD. DR SUBMITT ED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001-02 AS GROUND NOS. 4 TO 4.2. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL A ND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 102. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOV E PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2010-11 ALSO, THIS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASS ESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI CORPORATION (SUPRA ) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS N OT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND NOS. 7 IS ALLOWED. 103. IN RESULT, ITA NO. 1114/DEL/2015 IN A.Y. 2010- 11 FILED BY THE ASSESSEE IS ALLOWED. 83 ITA NOS. 3675/DEL/2014 & ORS 104. NOW WE ARE TAKING UP ITA NO. 6384/DEL/2015 FOR A.Y. 2011-12 FILED BY THE ASSESSEE. 6384/DEL/2015 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT RESPECTFULLY SUBMITS: 1. THAT THE LEARNED ASSESSING OFFICER (LD. AO) HAS E RRED BOTH ON FACTS AND IN LAW, IN COMPUTING THE TOTAL INCOME OF THE APPELLANT COMPANY AT RS. 40,19,93,628/-, AGAINST AN AGGREGATE TOTAL INCOME D ECLARED OF RS. 38,10,74,285/- INCLUDING THE FEE FOR SUPERVISION OF RS. 15,19,06,086/- OFFERED DURING THE ASSESSMENT PROCEEDINGS. THE ADDITION MAD E OF RS. 2,09,19,343/- IS HIGHLY MISCONCEIVED AND THE LEARNED DISPUTE RESO LUTION PANEL (LD. DRP) HAS ALSO ERRED IN NOT DIRECTING THE SAID SUM TO BE DELETED. 2. THAT THE LD. DRP/LD. AO HAS FAILED TO APPRECIATE TH AT THE APPELLANT IS A TAX RESIDENT OF JAPAN AND WAS REQUIRED TO BE ASSESS ED IN ACCORDANCE WITH THE PROVISIONS OF DOUBLE TAX AVOIDANCE AGREEMENT BE TWEEN INDIA AND JAPAN (DTAA). 3. THAT THE AUTHORITIES HAVE FAILED TO APPRECIATE THAT THE ASSESSEE HAD NO PERMANENT ESTABLISHMENT (PE) IN INDIA AND THAT THE SUPPLIES MADE TO MARUTI SUZUKI INDIA LIMITED (MSIL) WERE MADE FROM OUTSID E INDIA AND HENCE NO INCOME COULD BE HELD TO BE TAXABLE IN INDIA AS NO S UCH INCOME ACCRUED IN INDIA. 3.1 THAT THE LD. DRP/LD. AO HAS ERRED IN MAKING ADDITIO N OF RS. 2,09,19,343/- IN RESPECT OF AN AMOUNT STATED TO BE AN INCOME ATTRIBUTABLE FOR SUPPLIES MADE BY APPELLANT TO MSIL (I.E. THE ESTIMA TED AND ASSUMED SUM) FROM JAPAN. THE LD. DRP/LD. AO HAS ERRED IN NOT APP RECIATING THAT SUCH INCOME, AS HAS BEEN HELD TO BE ATTRIBUTABLE ON THE SUPPLIES MADE, SINCE COULD NOT BE ATTRIBUTABLE TO ITS ALLEGED PERMANENT ESTABL ISHMENT, THE ADDITION SO 84 ITA NOS. 3675/DEL/2014 & ORS MADE BE THUS HELD AS UNTENABLE, WHICH ADDITION DESE RVES TO BE DELETED. 3.2 WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNATIVE EVEN IF IT IS HELD THAT THE APPELLANT HAD A PE IN INDIA THEN ALSO, NO AMOUNT OF THE ALLEGED PROFITS FROM SUPPLY OF EQUIPMENT TO MSIL COULD BE TAXED IN INDIA , SINCE NO SUCH ALLEGED PROFITS COULD BE ATTRIBUTED TO SUCH PE IN INDIA AS PER ARTICLE 7 OF THE DTAA. 3.3 WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE THE L D. DRP / LD. AO HAS ERRED IN ATTRIBUTING 50% OF THE PROFIT TO THE ALLEG ED PE OF THE ASSESSEE IN INDIA WITHOUT ANY BASIS SUCH A CONCLUSION IS ARBITRARY AN D IS UNTENABLE. IT IS SETTLED LAW THAT EVEN AN ESTIMATE, WHERE IT IS REQUIRED TO BE MADE, SHOULD BE ON VALID BASIS AFTER CONFRONTING THE SAME WITH THE ASSESSEE FOR THEIR REBUTTAL. THUS, ASSESSMENT MADE IS BAD IN LAW. 3.4 WITHOUT PREJUDICE TO ABOVE THAT OFFSHORE SUPPLY IS NOT TAXABLE IN INDIA, LD. DRP/LD. AO HAS ERRED IN NOT ALLOWING SET-OFF OF THE BUSINESS LOSSES AGAINST INCOME FROM SUPPLY OF EQUIPMENT. 4. THAT THE LD. DRP/LD. AO, EVEN AFTER OBSERVING TH AT THE APPELLANT DOES NOT HAVE SUPERVISORY PE IN INDIA AND THUS SUPERVISION F EES ARE TAXABLE UNDER ARTICLE 12(2) OF DTAA, HAS ERRED IN APPLYING THE RA TE @ 20% ON AGGREGATE SUPERVISION INCOME OF RS. 36,97,27,985 THEREBY IGNO RING THE FACT THAT CORRECT RATE AS PER ARTICLE 12(2) OF THE DTAA FOR AY 2011-1 2 WHEREIN TAX CANNOT BE LEVIED MORE THAN IS 10% GROSS. 5. THAT THE LD. AO HAS ERRED IN APPLYING SURCHARGE AND EDUCATION CESS ON THE AGGREGATE SUPERVISION FEE OF RS. 36,97,27,985 O FFERED TO TAX BY THE APPELLANT UNDER ARTICLE 12(2) OF THE DTAA COMPLETEL Y IGNORING THE DIRECTIONS OF LD. DRP THAT THE SUPERVISION FEE WAS TO BE TAXED ON LY UNDER ARTICLE 12(2) OF THE DTAA. 6. THAT THE LD. AO, WITHOUT ANY BASIS, ERRED IN LEV YING SURCHARGE AND EDUCATION CESS ON THE INTEREST INCOME OF RS. 1,13,4 6,300 ALREADY OFFERED TO 85 ITA NOS. 3675/DEL/2014 & ORS TAX IN THE RETURN OF INCOME IN ACCORDANCE TO ARTICL E 11(2) OF THE INDIA - JAPAN DTAA WHEREIN TAX CANNOT BE LEVIED MORE THAN 10% GRO SS. 7. THAT THE LD. DRP/LD. AO HAS ERRED IN NOT ALLOWIN G LOSS OF RS. 112,745 FROM BBMB PROJECT CLAIMED IN THE RETURN OF INCOME. THE LD. DRP HAS ALSO ERRED IN HOLDING THAT THE ASSESSE HAS NOT EXPLAINED ABOUT THE PROJECT BEING PE COMPLETELY IGNORING THE SUBMISSION MADE IN THIS REG ARD. 8. THAT THE LD. AO HAS ERRED IN LEVYING AND COMPUTI NG INTEREST U/S 234B OF THE ACT AMOUNTING TO RS. 2,24,59,195 AND HOLDING TH AT THE APPELLANT HAD COMMITTED A DEFAULT IN PAYMENT OF ADVANCE TAX WHERE AS THE ENTIRE TAX DEMAND IS COVERED BY TAX DEDUCTED OR DEDUCTIBLE. 9. THAT THE LD. AO HAS ERRED IN LEVYING AND COMPUTI NG INTEREST UNDER SECTION 234A OF THE ACT AMOUNTING TO RS. 816,698 WHEREAS AP PELLANT HAD FILED RETURN OF INCOME WITHIN THE TIME PRESCRIBED UNDER SECTION 139(1) OF THE ACT. 10. THAT THE LD. AO HAS ERRED IN LEVYING AND COMPUT ING THE INTEREST UNDER SECTION 234D OF THE ACT ON THE INTEREST GRANT ED ON REFUND UNDER SECTION 244A BEING WITHDRAWN WHEREAS INTEREST UNDER SECTION 234D IS APPLICABLE ONLY ON THE EXCESS REFUND ONLY AND NOT ON INTEREST. 11. THAT THE LD. AO HAS ERRED IN INITIATING THE PEN ALTY PROCEEDING UNDER SECTION 271 (L)(C) OF THE ACT WHERE THE APPEL LANT HAS NOT CONCEALED ANY INCOME OR HAS FURNISHED ANY INACCURATE PARTICULAR O F INCOME. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJU DICE TO EACH OTHER. 105. AS REGARDS TO GROUND NO. 1 TO 2, THE SAME ARE GENERAL IN NATURE HENCE NOT ADJUDICATED. 106. AS REGARDS TO GROUND NOS. 3 TO 3.4, THE LD. AR SUBMITTED THAT THE ISSUE IS IDENTICAL. THE LD. AR FURTHER SUBMITTED THAT THE TITLE IN THE EQUIPMENT WAS 86 ITA NOS. 3675/DEL/2014 & ORS TRANSFERRED TO MUL OUTSIDE INDIA. THE ASSESSEE WAS NOT RESPONSIBLE FOR ANY CUSTOM CLEARANCE AND TRANSPORTATION OF THE EQUIPMEN T. THIS RESPONSIBILITY BELONGED TO MUL AND THE SAME IS ALSO EVIDENT FROM T HE PURCHASE ORDERS. THE LD. DR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL W ITH THE ISSUE DECIDED IN RESPECT OF GROUND NO. 1 TO 1.4 AND 2 TO 2.1 FOR A.Y . 2001-02 AS THIS INVOLVES OFFSHORE SUPPLIES AND EQUIPMENTS TO MUL. 107. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOV E PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2011-12 ALSO, THIS ISSUE IS IDENTIC AL. IN THE PRESENT CASE THE GOODS WERE SOLD TO MUL FROM OUTSIDE INDIA. THUS, TH E RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK P LACE IN INDIA. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIE S. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SU PPLY OF EQUIPMENTS. THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HA VING FIXED PLACE PE OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIKAWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) I S APPLICABLE IN THE PRESENT CASE. THEREFORE, GROUND NOS. 3 TO 3.4 OF THE ASSES SEES APPEAL IS ALLOWED. 108. AS REGARDS TO GROUND NO. 4, 5 AND 6, THE LD. D R SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A. Y. 2001-02 AS GROUND NOS. 3 TO 3.1. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 109. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOV E PARA NO. 17 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2011-12 ALSO, THE PURCHASE ORDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEATURES EMERGE THAT IN ALL T HE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPAN AND MUL BEARS T HE COST OF THEIR AIR TICKET 87 ITA NOS. 3675/DEL/2014 & ORS AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDI A. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRACTS DID NOT EXCEED A PE RIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HEREINABOVE AND THEY D ID NOT CONSTITUTE SUPERVISORY PE IN TERMS OF ARTICLE 5(4) OF THE DTAA . IN FACT, THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRME D BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREME COURT. THUS , IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12( 2) OF THE DTAA. HENCE, GROUND NOS. 4, 5 AND 6 IN ASSESSEES APPEAL ARE ALL OWED. 110. AS REGARDS TO GROUND NO. 7 RELATING TO NOT ALL OWING OF CARRY FORWARD LOSSES, THE LD. AR SUBMITTED THAT 111. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 112. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. 113. AS REGARDS TO GROUND NO. 8, THE LD. DR SUBMITT ED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001-02 AS GROUND NOS. 4 TO 4.2. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL A ND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 114. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOV E PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2011-12 ALSO, THIS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASS ESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI CORPORATION (SUPRA ) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS N OT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND 88 ITA NOS. 3675/DEL/2014 & ORS NOS. 8 IS ALLOWED. 115. AS REGARDS TO GROUND NOS. 9 AND 10 RELATING TO LEVY OF INTEREST U/S 234A, THE LD. AR SUBMITTED THAT 116. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 117. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. 118. IN RESULT, ITA NO. 6385/DEL/2015 IN A.Y. 2011- 12 FILED BY THE ASSESSEE IS ALLOWED. 119. NOW WE ARE TAKING UP ITA NO. 6385/DEL/2015 IN A.Y. 2012-13 FILED BY THE ASSESSEE. 6385/DEL/2015 BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE APPELLANT RESPECTFULLY SUBMITS: 1. THAT THE LEARNED ASSESSING OFFICER (LD. AO) HAS E RRED BOTH ON FACTS AND IN LAW, IN COMPUTING THE TOTAL INCOME OF THE APPELLANT COMPANY AT RS. 33,00,06,004/-, AGAINST AN AGGREGATE TOTAL INCOME D ECLARED OF RS. 29,19,97,155/- INCLUDING THE FEE FOR SUPERVISION. FURTHER ADDITION MADE OF RS. 3,81,38,635/- IS HIGHLY MISCONCEIVED AND THE LE ARNED DISPUTE RESOLUTION PANEL (LD. DRP) HAS ALSO ERRED IN NOT DIRECTING T HE SAID SUM TO BE DELETED. 2. THAT THE LD. DRP/LD. AO HAS FAILED TO APPRECIATE TH AT THE APPELLANT IS A TAX RESIDENT OF JAPAN AND WAS REQUIRED TO BE ASSESS ED IN ACCORDANCE WITH THE PROVISIONS OF DOUBLE TAX AVOIDANCE AGREEMENT BE TWEEN INDIA AND JAPAN (DTAA). 89 ITA NOS. 3675/DEL/2014 & ORS 3. THAT THE AUTHORITIES HAVE FAILED TO APPRECIATE THAT THE ASSESSEE HAD NO PERMANENT ESTABLISHMENT (PE) IN INDIA AND THAT THE SUPPLIES MADE TO MARUTI SUZUKI INDIA LIMITED (MSIL) WERE MADE FROM OUTSID E INDIA AND HENCE NO INCOME COULD BE HELD TO BE TAXABLE IN INDIA AS NO S UCH INCOME ACCRUED IN INDIA. 3.1. THAT THE LD. DRP/LD. AO HAS ERRED IN MAKING AD DITION OF RS. 3,81,38,635/- IN RESPECT OF AN AMOUNT STATED TO BE AN INCOME ATTRIBUTABLE FOR SUPPLIES MADE BY APPELLANT TO MSIL (I.E. THE ESTIMA TED AND ASSUMED SUM) FROM JAPAN. THE LD. DRP/LD. AO HAS ERRED IN NOT APP RECIATING THAT SUCH INCOME, AS HAS BEEN HELD TO BE ATTRIBUTABLE ON THE SUPPLIES MADE, SINCE COULD NOT BE ATTRIBUTABLE TO ITS ALLEGED PERMANENT ESTABL ISHMENT, THE ADDITION SO MADE BE THUS HELD AS UNTENABLE, WHICH ADDITION DESE RVES TO BE DELETED. 3.2. WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNAT IVE EVEN IF IT IS HELD THAT THE APPELLANT HAD A PE IN INDIA THEN ALSO, NO AMOUNT OF THE ALLEGED PROFITS FROM SUPPLY OF EQUIPMENT TO MSIL COULD BE TAXED IN INDIA , SINCE NO SUCH ALLEGED PROFITS COULD BE ATTRIBUTED TO SUCH PE IN INDIA AS PER ARTICLE 7 OF THE DTAA. 3.3. WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE THE LD. DRP/LD. AO HAS ERRED IN ATTRIBUTING 50% OF THE PROFIT TO THE ALLEG ED PE OF THE ASSESSEE IN INDIA WITHOUT ANY BASIS SUCH A CONCLUSION IS ARBITRARY AN D IS UNTENABLE. IT IS SETTLED LAW THAT EVEN AN ESTIMATE, WHERE IT IS REQUIRED TO BE MADE, SHOULD BE ON VALID BASIS AFTER CONFRONTING THE SAME WITH THE ASSESSEE FOR THEIR REBUTTAL. THUS, ASSESSMENT MADE IS BAD IN LAW. 3.4. WITHOUT PREJUDICE TO ABOVE THAT OFFSHORE SUPPL Y IS NOT TAXABLE IN INDIA, LD. DRP/LD. AO HAS ERRED IN NOT ALLOWING SET-OFF OF THE BUSINESS LOSSES AGAINST INCOME FROM SUPPLY OF EQUIPMENT. 4. THAT THE LD. DRP/LD. AO, EVEN AFTER OBSERVING TH AT THE APPELLANT DOES NOT HAVE SUPERVISORY PE IN INDIA AND THUS SUPERVISION F EES ARE TAXABLE UNDER ARTICLE 12(2) OF DTAA, HAS ERRED IN APPLYING THE RA TE @ 20% ON AGGREGATE 90 ITA NOS. 3675/DEL/2014 & ORS SUPERVISION INCOME OF RS. 28,93,52,067 THEREBY IGNO RING THE FACT THAT CORRECT RATE AS PER ARTICLE 12(2) OF THE DTAA FOR AY 2012-1 3 WHEREIN TAX CANNOT BE LEVIED MORE THAN IS 10% GROSS. 5. THAT THE LD. AO HAS ERRED IN APPLYING SURCHARGE AND EDUCATION CESS ON THE AGGREGATE SUPERVISION FEE OF RS. 28,93,52,067 OFFER ED TO TAX BY THE APPELLANT UNDER ARTICLE 12(2) OF THE DTAA COMPLETELY IGNORING THE DIRECTIONS OF LD. DRP THAT THE SUPERVISION FEE WAS TO BE TAXED ONLY UNDER ARTICLE 12(2) OF THE DTAA. 6. THAT THE LD. AO, WITHOUT ANY BASIS, ERRED IN LEV YING SURCHARGE AND EDUCATION CESS ON THE INTEREST INCOME OF RS. 26,45, 088 ALREADY OFFERED TO TAX IN THE RETURN OF INCOME IN ACCORDANCE TO ARTICLE 11 (2) OF THE INDIA - JAPAN DTAA WHEREIN TAX CANNOT BE LEVIED MORE THAN 10% GRO SS. 7. THAT THE LD. AO HAS ERRED IN GRANTING SHORT CRED IT OF TAX DEDUCTED AT SOURCE (TDS) CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. 8. THAT THE LD AO HAS ERRED IN LEVYING AND COMPUTIN G INTEREST U/S 234B AND 234C OF THE ACT AMOUNTING TO RS. 2,71,40,350 & RS. 57,170 AND HOLDING THAT THE APPELLANT HAD COMMITTED A DEFAULT IN PAYME NT OF ADVANCE TAX WHEREAS THE ENTIRE TAX DEMAND IS COVERED BY TAX DED UCTED OR DEDUCTIBLE. FURTHER, INTEREST UNDER SECTION 234C IS LEVIABLE ON LY ON RETURNED INCOME AND NOT ON ASSESSED INCOME. 9. THAT THE LEARNED AO HAS ERRED IN INITIATING THE PENALTY PROCEEDING UNDER SECTION 271 (L)(C) OF THE ACT WHERE THE APPEL LANT HAS NOT CONCEALED ANY INCOME OR HAS FURNISHED ANY INACCURATE PARTICULAR O F INCOME. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJ UDICE TO EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUPPLEME NT, AMEND, VARY, WITHDRAW OR OTHERWISE MODIFY THE GROUND MENTIONED H EREIN ABOVE AT OR BEFORE THE TIME OF HEARING. 91 ITA NOS. 3675/DEL/2014 & ORS 120. AS REGARDS TO GROUND NO. 1 AND 2, THE SAME ARE GENERAL HENCE NOT ADJUDICATED. 121. AS REGARDS TO GROUND NO. 3 TO 3.4, THE LD. AR SUBMITTED THAT THE ISSUE IS IDENTICAL. THE LD. AR FURTHER SUBMITTED THAT THE TI TLE IN THE EQUIPMENT WAS TRANSFERRED TO MUL OUTSIDE INDIA. THE ASSESSEE WAS NOT RESPONSIBLE FOR ANY CUSTOM CLEARANCE AND TRANSPORTATION OF THE EQUIPMEN T. THIS RESPONSIBILITY BELONGED TO MUL AND THE SAME IS ALSO EVIDENT FROM T HE PURCHASE ORDERS. THE LD. DR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL W ITH THE ISSUE DECIDED IN RESPECT OF GROUND NO. 1 TO 1.4 AND 2 TO 2.1 FOR A.Y . 2001-02 AS THIS INVOLVES OFFSHORE SUPPLIES AND EQUIPMENTS TO MUL. 122. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOV E PARA NO. 9 OF THIS ORDER WHILE DECIDING A.Y. 2001-02. WE ONCE AGAIN FIND THA T IN THE PRESENT ASSESSMENT YEAR 2012-13 ALSO, THIS ISSUE IS IDENTICAL. IN THE PRESENT CASE THE GOODS WERE SOLD TO MUL FROM OUTSIDE INDIA. THUS, THE RISK AND TITLE WERE ALSO TRANSFERRED OUTSIDE INDIA AND NO TRANSACTION TOOK PLACE IN INDI A. THE CUSTOM CLEARANCE, INLAND TRANSPORTATION WERE ALSO DONE BY THE MUL ON ITS OWN AND ASSESSEE AT NO STAGE INVOLVED IN THE SAID ACTIVITIES. THERE WAS NO PE INVOLVED IN THE SALE. IN FACT SUPERVISION WAS DONE AFTER THE SUPPLY OF EQUIPMENTS . THE REVENUE COULD NOT ESTABLISH THAT THE ASSESSEE IS HAVING FIXED PLACE P E OR SUPERVISORY PE. THE RATIO LAID BY THE HONBLE APEX COURT IN CASE OF M/S ISHIK AWAJIMA HARIMA HEAVY INDUSTRIES LTD. (SUPRA) IS APPLICABLE IN THE PRESEN T CASE. THEREFORE, GROUND NOS. 3 TO 3.4 OF THE ASSESSEES APPEAL IS ALLOWED. 123. AS REGARDS TO GROUND NOS. 4, 5 AND 6, THE LD. DR SUBMITTED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A. Y. 2001-02 AS GROUND NOS. 3 92 ITA NOS. 3675/DEL/2014 & ORS TO 3.1. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL AND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 123. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOV E PARA NO. 17 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2012-13 ALSO, THE PURCHASE ORDERS MENTIONED THEREIN ARE SEPARATE AND HAVE DISTINCT ELEMENT OF WORK AND WILL NOT CONSTITUTE ANY PE IN INDIA. FROM THE VARIOUS PURCHASE ORDERS, THE IDENTICAL FEATURES EMERGE THAT IN ALL T HE PURCHASE ORDERS, SUPERVISORS WERE TO COME FROM JAPAN AND MUL BEARS T HE COST OF THEIR AIR TICKET AND PROVIDES FOR THEIR BOARDING AND LODGING IN INDI A. THE PERIOD OF SUPERVISION IN CASE OF INDIVIDUAL CONTRACTS DID NOT EXCEED A PE RIOD OF 180 DAYS EXCEPT THE ONE PURCHASE ORDER MENTIONED HEREINABOVE AND THEY D ID NOT CONSTITUTE SUPERVISORY PE IN TERMS OF ARTICLE 5(4) OF THE DTAA . IN FACT, THESE PURCHASE ORDERS ARE VERY MUCH INDEPENDENT AND SEPARATE FROM EACH OTHER AND THUS, DOES NOT CONSTITUTE THE SUPERVISORY PE OR FIXED PE. HENCE, THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR A.Y. 1999-00 WHICH IS NOW CONFIRME D BY THE HONBLE HIGH COURT AS WELL AS BY THE HONBLE SUPREME COURT. THUS , IN THE PRESENT CASE THE FTS WAS LIABLE TO BE TAXED AT 20% UNDER ARTICLE 12( 2) OF THE DTAA. HENCE, GROUND NOS. 4, 5 AND 6 IN ASSESSEES APPEAL ARE ALL OWED. 124. AS REGARDS TO GROUND NO. 7, THE LD. AR SUBMITT ED THAT THE ASSESSING OFFICER ERRED IN NOT GRANTING THE CREDIT OF TAX DED UCTED CLAIMED IN THE RETURN OF INCOME. THE LD. AR SUBMITTED THAT THE ASSESSING OFF ICER HAS NOT GIVEN ANY REASON AS TO THE NON GRANTING OF THE CREDIT OF TAX DEDUCTED AT SOURCE DESPITE GIVING DETAILS. 125. THE LD. DR RELIED UPON THE ASSESSMENT ORDER. 126. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE PERUSAL OF RECORD IT CAN BE SEEN THAT THE ASSESSEE 93 ITA NOS. 3675/DEL/2014 & ORS FILED ALL THE DETAILS BEFORE THE ASSESSING OFFICER AND THEREFORE, THE NON GRANTING OF CREDIT OF TAX DEDUCTED AT SOURCE IS UNCALLED FOR . THEREFORE, WE DIRECT THE ASSESSING OFFICER TO GRANT THE CREDIT OF TAX DEDUCT ED AT SOURCE IN CONSONANCE WITH THE DETAILS FILED BY THE ASSESSING OFFICER. TH E ISSUE IS IDENTICAL TO THAT OF A.Y. 2010-11 AND WE HAVE ALREADY DECIDED IN FAVOUR OF ASSESSEE HEREINABOVE PARA 100. THUS, GROUND NO. 7 IS ALLOWED. 127. AS REGARDS TO GROUND NO. 8, THE LD. DR SUBMITT ED THAT THE ISSUES ARE IDENTICAL TO THE REVENUES APPEAL FOR A.Y. 2001-02 AS GROUND NOS. 4 TO 4.2. THE LD. AR ALSO SUBMITTED THAT THE ISSUE IS IDENTICAL A ND IN FACT FACTUAL ASPECTS ALSO REMAIN THE SAME. 128. WE HAVE ALREADY DECIDED THIS ISSUE IN THE ABOV E PARA NO. 20 OF THIS ORDER. WE ONCE AGAIN FIND THAT IN THE PRESENT ASSESSMENT Y EAR 2012-13 ALSO, THIS ISSUE IS IDENTICAL AND COVERED IN FAVOUR OF THE ASS ESSEE BY THE JURISDICTIONAL HIGH COURT IN CASE OF MITSUBISHI CORPORATION (SUPRA ) AND JACOBS INCORPORATED WHEREIN IT IS CATEGORICALLY HELD THAT INTEREST IS N OT LEVIABLE ON THE ASSESSEE SINCE ITS ENTIRE INCOME IS SUBJECT TO TAX DEDUCTION AT SOURCE. HENCE, GROUND NOS. 8 IS ALLOWED. 129. NOW WE ARE TAKING UP ITA NO. 6385/DEL/2015 FOR A.Y. 2012-13 FILED BY THE ASSESSEE. 130. IN RESULT, ALL THE APPEALS FILED BY THE REVEN UE ARE DISMISSED AND ALL THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST JULY, 2019 . SD/- SD/- (G. D. AGRAWAL) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER DATED: 01/07/2019 R. NAHEED * 94 ITA NOS. 3675/DEL/2014 & ORS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 15.04.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 15.04.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 0 1 . 0 7 . 2 0 1 9 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 0 1 . 0 7 . 2 0 1 9 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 0 1 . 0 7 . 2 0 1 9 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK