ADIT (I.T) - 1(2), MUMBAI V. M/s. CO-OPERATIVE CENTRALE RAIFFEISEN BOERENLEENBANK BA, MUMBAI

ITA 4632/MUM/2006

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92229 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: L
• Next Hearing Date: 17-03-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 14-08-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P J PARDIWALA
• Keywords: Business income; Double taxation relief; Permanent establishment; Wholly owned subsidiary
• Section: 5(2)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMB AI - L BENCH , , BEFORE S/SH. I P BANSAL,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.4632/MUM/2006, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2002-03 ADIT (IT) - 1(2) , R.NO. 132, 1 ST FLOOR, N.M. ROAD,MUMBAI-38. VS M/S CO - OPERATIVE CENTRALE RAIFFEISEN, C/O. BHARAT S RAUT & CO. KPMG HOUSE, KAMALA MILLS COMPOUND 448, S.B. MARG, LOWER PAREL, MUMBAI-13 PAN:AACCC1331M ( #$ / ASSESSEE) ( %&#$ / RESPONDENT) /. ITA NO.3633/MUM/2007, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2003-04 DDIT (IT) - 1(2) , R.NO. 117, 1 ST FLOOR, SCINDIA HOUSE,BALLARD PIER MUMBAI-38. VS M/S CO - OPERATIVE CENTRALE RAIFFEISEN BOERENLEENBANK B.A., C/O. BSR & CO. KPMG HOUSE, KAMALA MILLS COMPOUND 448, S.B. MARG, LOWER PAREL, MUMBAI-13 PAN:AACCC1331M ( #$ / ASSESSEE) ( %&#$ / RESPONDENT) /. ITA NO.5056/MUM/2010, ! ! ! ! ' ' ' ' / ASSESSMENT YEAR-2005-06 DDIT (IT)-1(2), R.NO. 119, 1 ST FLOOR, SCINDIA HOUSE, BALLARD ESTATE, N.M.ROAD, MUMBAI-38. VS M/S CO-OPERATIVE CENTRALE RAIFFEISEN BOERENLEENBANK B.A., C/O. BSR & CO. KPMG HOUSE, KAMALA MILLS COMPOUND 448, S.B. MARG, LOWER PAREL, MUMBAI-13 PAN:AACCC1331M ( #$ / ASSESSEE) ( %&#$ / RESPONDENT) ' ( / REVENUE BY :SHRI S.D.SRIVASTAVA ! )* ! )* ! )* ! )* ( ( ( ( /ASSESSEE BY :SHRI P.J.PARDIWALA & NIRAJ SETH ! ! ! ! ' '' ' *+ *+ *+ *+ / DATE OF HEARING :23 - 03 -2015 ,-' ' *+ / DATE OF PRONOUNCEMENT :01 -04-2015 ! ! ! ! , 1961 ' '' ' 254(1) *.* *.* *.* *.* / / / / ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH CHALLENGING THE ORDERS DT.15.05.2006,31.01.2007 & 2 9.03.2010 OF THE CIT(A)-XXXI, MUMBAI, ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NO. 4632/MUM/2006-AY-2002-03 1.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE COMPANY DOES NOT HAVE ANY PE IN INDIA WITHIN THE MEANING OF ARTICLE 5(1),5(2) AND 5(3) AND ARTICLE 5(5)'. 2.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT RABO INDIA IS AN INDEPENDENT ORGANIZAT ION AND IT HAS NOT ACTED AS AN AGENCY OF THE ASSESSEE COMPANY AND THEREFORE, CANNOT BE HELD TO BE AGENCY PE AS PER ARTICLE 5(5)OF THE DTAA.' 3.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THAT NONE OF THE RECEIPTS COMPRISING IN TOT AL AMOUNT OF RS. 1,30,21,079/-, IS TAXABLE IN INDIA'. 2 ITA NOS. 4632/M/2006 & ORS. M/S CO-OPERATIVE CENTRA LE RAIFFEISEN 4.'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE BUSINESS PROFITS OF THE ASSESSEE C OMPANY ARE NOT TAXABLE IN INDIA IN THE ABSENCE OF ANY PE IN INDIA WITHIN THE MEANING OF AR TICLE 5 OF DTAA'. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) ON THE ABOVE GROUNDS SET ASIDE AND THAT OF THE AO RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR LATER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 3633/MUM/2007-AY-2003-04 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA, ACCORDINGLY ITS BUSINESS PROFITS ARE NOT TAXABLE IN INDIA. 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE OF RS. 1,50,75,790. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA NO. 5056/MUM/2010-AY-2005-06 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE DID NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A ) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. ASSESSEE,AN ASSOCIATION OF PERSONS (AOP),IS A CO-OP ERATIVE MEMBERSHIP INSTITUTION ESTABLISHED IN THE NETHERLANDS AND IS A PART OF RABO BANK GROUP WORLDWIDE.THE DETAILS OF DATES OF FILING OF RETURNS,RETURNED INCOMES,DATES OF ASSESSMENT ORDERS AND ASSESSED INCOMES,FOR THE ABOVE MENTIONED ASSESSMENT YEARS CAN BE SUMMARISED AS UND ER: AY.S. RETURN FILED ON RETURNED INCOME ASSESSMENT D T. ASSESSED INCOME 2003-03 31.03.2003 NIL 28.03.2005 31,25,060/- 2003-04 28.11.2003 NIL 07.03.2006 1,50,75,790/- 2005-06 07.12.2005 1,75,92,262 19.12.2008 4,64,91, 194/- ITA/4632/MUM/2006-AY-2002-03 THE FIRST TWO GROUNDS OF APPEAL ARE ABOUT PERMANENT ESTABLISHMENT (PE) OF THE ASSESSEE IN INDIA WITHIN THE MEANING OF ARTICLE 5(1), 5(2), 5(3) & 5( 5) OF THE ARTICLE.NEXT TWO GROUNDS ARE ABOUT TAXABILITY OF RS. 1.30 CRORES.THE ISSUE OF PE HAS A LSO BEEN RAISED IN THESE GROUNDS. 2. THE AO,WHILE COMPLETING THE ASSESSMENT ORDER HELD T HAT RECEIPTS ON ACCOUNT OF ADVISORY SERVICES AND GUARANTEE COMMISSION HAD TO BE ASSESSE D IN INDIA. THE FACTS OF THE CASE ARE THAT RPG LIFE SCIENCES LTD.(RPG),AN INDIAN COMPANY,ENGAGED R ABO INDIA (RI) TO ADVISE IT IN THE SALE OF ITS AGROCHEMICAL BUSINESS.IN TURN,RI ENTERED INTO AN AG REEMENT WITH THE MILAN BRANCH OF THE ASSESSEE FOR PROVIDING THE SAME SERVICES.THE SERVICES INCLUD ED INTRODUCING POTENTIAL STRATEGIC PARTNER ACTING ON BEHALF OF RI,PARTICIPATING IN MEETINGS BE TWEEN RPG AND THE INTERESTED PARTNERS, PROVIDING DOCUMENTATION, DEPUTING ITS OFFICERS TO S UPPORT THE STAFF OF RI,WORKING IN TANDEM WITH RI FOR DEVELOPING TRANSACTION STRUCTURE ETC.THE FEE S WAS DETERMINED TO BE 32.5%(RS.15.39 LAKHS) OF THE FEE WHICH RI WOULD RECEIVE FROM RPG.SIMILARL Y,MILAN BRACH OF THE ASESSEE PROVIDED IDENTICAL TYPE OF SERVICES TO RI IN THE MATTERS OF PIONEERS INVESTMENT MANAGEMENT INC.AND INVESTMENT TRUST OF INDIA.SUCH SERVICES WERE RENDER ED IN CONNECTION WITH THE SALE OF THE ENTIRE SHARE HOLDING IN PIONEER CAPITAL ITIAMC LTD. FOR TH E SAID SERVICES,THE ASSESSEE RECEIVED FEES, AMOUNTING TO RS. 5.34 LAKHS. 3 ITA NOS. 4632/M/2006 & ORS. M/S CO-OPERATIVE CENTRA LE RAIFFEISEN AS STATED EARLIER,RI HAD ALSO PAID GUARANTEE COMMIS SION TO THE ASESSEE.AS PER THE AO,M/S. GEEPEE LEVAL PROTEENS & INVESTMENTS PVT. LTD.,AN IN DIAN COMPANY, REQUIRED BANKING AND CREDIT FACILITIES, THAT THE SINGAPORE BRANCH OF THE ASSESS EE ALLOCATED AN AMOUNT EQUIVALENT TO US$ 40,00,000 TO RI.IT WAS FOUND THAT TERM AND CONDITIO N OF THE INDEMNITY WERE MENTIONED IN THE LETTER DATED 30.08.2001,AS AGREED BETWEEN RI AND TH E SINGAPORE BRANCH OF THE ASSESSEE. FOR THE SERVICES RENDERED BY THE ASSESSEE,AN AMOUNT OF RS. 4.37 LAKHS WAS RECEIVED FROM RI.IT WAS ALSO FOUND THAT UTRECHE(NETHERLANDS) BRANCH OF THE ASSES SEE HAD ALLOCATED 1 MILLION US$, ON 11.02.2000,TO RI IN FAVOUR OF M/S BANNER PHARMA CAP S (INDIA) PVT. LTD.,IN THE FORM OF WORKING CAPITAL FACILITY AND THE GUARRANTEE/INDEMNITY FEE.O N 22.02.2000 THE SAME BRANCH OF THE ASSESSEEE ALLOCATED FURTHER 1 MILLION US$ TO RI FOR THE SAME CLIENT AND FOR THE SAME FACILITY.ON BOTH THE OCCASIONS GUARANTEE/INDEMNITY FEE WAS MENTIONED AT 5/8 OF THE MARGIN RECEIVED.THUS, THE ASSESSEE RECEIVED RS. 19.30 LAKHS (4.37+15.73 LAKHS ).IT WAS FURTHER FOUND THAT THE ASSESSEE HAD CLAIMED THAT IT HAD RECEIVED CERTAIN AMOUNTS(RS.85. 04 LAKHS)THAT WERE TREATED AS REIMBURSEMENT OF EXPENSES, THAT IT INCLUDED REPAYMENT OF STORAGE CHA RGES AND THE SAID SUM WAS PAID BY LANYARD FOODS LTD.ON BEHALF OF THE SINGAPORE BRANCH OF THE ASSESSEE REIMBURSEMENT OF TRAINING EXPENSES OF THE EMPLOYEES OF RI, AMOUNTING TO RS. 73,890/- W AS ALSO RECEIVED.AS PER THE AO, THE ASSESSEE HAD NOT FURNISHED THE COPY OF THE AGREEMENT WITH RE GARD TO THE TRANSACTION WHICH LED TO THE RECOVERY OF STORAGE CHARGES BY RI ON BEHALF OF SING APORE BRANCH OF THE ASSESSEE. CONSIDERING THE ABOVE FACTS,THE AO HELD THAT THE AS SESSEE WAS IN PRACTICE OF USING OF GOOD OFFICES OF RI FOR CONDUCTING ITS OWN BUSINESS,THAT IN ALL T HE CASES THE ACTIVITY OF RI WAS BASICALLY LINKED WITH THE BUSINESS OPERATION OF THE ASSESSEE, THAT O N THE FACE IT MIGHT APPEAR THAT RI HAD ENTERED INTO A BUSINESS AGREEMENT AND IN TURN APPROACHED TH E ASSESSEE FOR ADVISORY OR FINANCIAL SUPPORT BUT IN EFFECT THE BUSINESS OF THE ASSESSEE WAS BEIN G CARRIED OUT IN INDIA THROUGH RI, THAT THE ASSESSEE WAS INDIRECTLY HOLDING 75% OF THE SHARE CA PITAL THROUGH ITS WHOLLY OWNED SUBSIDIARY- RABO BANK INTERNATIONAL B.B.-AS ON 31.03.2002, THAT THE CONTROL OVER RI WAS EVIDENT FROM THE FACT THAT RI HAD EXPATRIATE DIRECTOR DEPUTED BY THE ASSE SSEE WHOSE SALARY WAS PAID BY IT AND WAS REIMBURSED BY RI.HE FURTHER HELD THAT THE BUSINESS OF RI WAS COMPLETELY INTERTWINED AND WAS DEPENDENT ON THE BUSINESS OF THE ASSESSEEE,THAT THE CONTRACTS/AGREEMENTS ENTERED INTO BY RI WERE BASICALLY FOR THE PURPOSE OF EXTENDING BUSINESS OPE RATIONS OF THE ASSESSEE INTO INDIA, THAT THE DOCUMENTS INDICATED THAT FOR EVERY TRANSACTION RI F ELL BACK UPON THE ASSESSEE FOR COMPLETION OF THE ASSIGNMENTS.FINALLY,THE AO HELD THAT WHOLISTIC VIEWOF THE FACTS PROVED THAT RI CONSTITUTED PE OF THE ASESSEE IN INDIA UNDER ARTICLE 5(5)OF THE DTAA,THAT THE ARGUMENT OF THE ASESSEE THAT IT DID NOT HAVE PE IN INDIA WAS UNACCEPTABLE,THAT A LA RGE PERCENTAGE OF RIS INCOME WAS PASSED ON TO THE ASESSEE THROUGH ITS BACK TO BACK ARRANGEMENT ,THAT THE TRANSACTIONS PERTAINED TO FINANCIAL SECTOR,THAT THE ASESSEE WAS RECEIVING ADIVISORY FEE S,GUARANTEE FEE/INDEMNITY FEES OF RI AND OTHER REMITTANCES GUISED IN THE FORMS OF REIMBURSEMENT,TH AT 80% OF THE OPERATIONS WERE ATTRIBUTABLE TO INDIA.ACCORDINGLY,REVENUE ATTRIBUTABLE TO INDIA FRO M ITS PE IN INDIA WAS COMPUTED AT 80% OF RS. 1.30 CRORES(19.30LAKHS+4.37LAKHS+20.74 LAKHS +85.04 LAKHS+73,809/-)I.E.AT RS.1.04 CRORES.THE AO FURTHER HELD THAT THE ASESSEE WAS ENGAGED IN FIN ANCIAL SECTOR AND ESPECIALLY ENGAGED IN PROVIDING CREDIT FACILITY AND ADVISORY SERVICES,THA T 30% OF THE ABOVE (RS.31.25LAKHS)WAS TO BE TAKEN TO BE PROFITS OF THE ASESSEE FROM ITS INDIAN OPERATIONS. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASESSEE PREFER RED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT WAS ARGUED THAT THE AS SESSEE DID NOT HAVE A PE IN INDIA,THAT THE CONCEPT OF FIXED PLACE PE REQUIRED THE ENTERPRISES TO HAVE FIXED PLACE OF BUSINESS OF INDIA OR TO HAVE A PLACE OF MANAGEMENT INDIA/HAVE A BRANCH IN I NDIA/OR AN OFFICE IN INDIA,THAT THE ASSESSEE HAD NOT OFFICE/BRANCH/PLACE OF MANAGEMENT/FIXED PLA CE OF BUSINESS OF INDIA, THAT THE ACTIVITIES OF RI DID NOT RESULT IN CONSTITUTION OF AGENCY PE OF T HE ASSESSEE,THAT RI DID NOT HAVE ANY AUTHORITY TO CONCLUDE CONTRACT ON BEHALF OF THE ASSESSEE,THAT IT DID NOT MAINTAIN ANY STOCK OF ANY GOODS/ MERCHANDISE OF THE ASSESSEE,THAT IT DID NOT SECURE ORDERS ON BEHALF OF THE ASSESSEE,THAT IT WAS ECONOMICALLY AND LEGALLY INDEPENDENT,THAT IT WAS AC TING IN ORDINARY COURSE OF ITS BUSINESS AND WAS NOT DEPENDENT ON THE ASSESSEE, THAT DURING THE YEAR UNDER APPEAL RI HAD INCOME FROM VARIOUS 4 ITA NOS. 4632/M/2006 & ORS. M/S CO-OPERATIVE CENTRA LE RAIFFEISEN SOURCES AMOUNTING TO RS. 1386.73 MILLIONS, THAT THE ASSESSEE HAD RECEIVED PROFESSIONAL INCOME AND GUARANTEE COMMISSION AMOUNTING TO RS. 20.74 LAK HS AND 23.68 LAKHS RESPECTIVELY FROM RI, THAT IN TOTALITY IT WAS .32% OF INCOME EARNED BY RI , THAT THERE WAS ALSO CERTAIN REIMBURSEMENTS OF EXPENSES BY RI TO THE ASSESSEE, THAT THE INCOME EAR NED BY THE ASSESSEE WAS A VERY MINISCULE PERCENTAGE OF THE INCOME EARNED BY RI, THAT RI WOUL D USE THE SERVICES OF THE ASSESSEE ONLY FOR CERTAIN MANDATES AND THAT TOO ON A PRINCIPLE TO PRI NCIPLE BASIS, THAT FOR THE CLIENTS ONLY RI WOULD INTERACT WITH THEM AND WAS RESPONSIBLE TO THEM FOR DELIVERY OF THE MANDATED WORK,THAT BY MERELY BEING A SUBSIDIARY RI WOULD NOT BE AGENT OF THE ASS ESSEE, THAT THE ASSESSEE HAD NOT NOMINATED ANY DIRECTOR ON THE BOARD OF RI, THAT THE DTAA DID NOT PROVIDE FOR ANY SERVICE PE. IT WAS FURTHER ARGUED THAT THE PAYMENT OF RS. 85.04 LAKHS WAS ACTU ALLY REIMBURSEMENTS, THAT THE ASSESSEES BRANCH IN SINGAPORE HAD WON A CASE IN LITIGATION, T HAT RABO SINGAPORE HAD AUTHORISED RI TO COLLECT PAYMENT ON ITS BEHALF FROM DEBT RECOVERY APPELLATE TRIBUNAL(DRAT)AND TO REMIT IT TO RABO SINGAPORE,THAT THE INCOME WAS WRONGLY ASSESSED IN T HE HANDS OF THE ASSESSEE,THE COPY OF THE DRAT ORDER AND THE BANK ACCOUNT OF RI SHOWED THAT T HE ENTIRE AMOUNT WAS REMITTED TO RABO SINGAPORE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER,THE FAA HELD THAT THE AO HAD RELIED UPON TWO TRANSACTIONS OF ADVISORY SER VICES AND TWO TRANSACTION OF GUARANTEE COMMISSION TO CONCLUDE THE CONCLUSION THAT RI WAS T HE PE OF THE ASSESSEE IN INDIA,THAT HE HAD NOT BOUGHT ANY MATERIAL TO SHOW THAT THE ASSESSEE HAD A NY OFFICE OR BRANCH OR ANY PLACE OF BUSINESS/MANAGEMENT IN INDIA, THAT THERE WAS NOTHIN G ON RECORD TO SHOW THAT ASSESSEE WAS COVERED BY THE PROVISIONS OF ARTICLE 5(2) OF THE DT AA,THAT THE AO HAD HELD THAT ASSESSEE HAD AN AGENCY PE IN INDIA AND THAT RI CONSTITUTED A PE OF THE ASSESSEE UNDER ARTICLE 5(5) OF THE DTAA,THAT THE AO HAD ARRIVED AT THE CONCLUSION THAT RI WOULD FALL BACK UPON THE ASSESSEE FOR THE COMPLETION OF ASSIGNMENTS PROCURED BY IT I.E. RI. T HE FAA ANALYSED THE ADVISORY AGREEMENTS ENTERED INTO BY RI AND HELD THAT IN BOTH THE CASES, PIONEER ITIAMC LTD. AND RPG LIFE SCIENCES LTD.,SERVICES WERE PROVIDED OUTSIDE INDIA,THAT RI H AD PROCURED THE CONTRACT OF PROVISION OF SERVICES OF TWO PARTIES, THAT IT HAD FURTHER ENTERE D AN AGREEMENT WITH THE ASSESSEE TO PROVIDE SERVICES FOR A CONSIDERATION PAID BY RI,THAT IT COU LD NOT BE HELD THAT RI WAS ACTING AS AGENT OF THE ASSESSEE,THAT IT HAD OBTAINED CONTRACT INDEPENDENTL Y AND THEREAFTER SUB-CONTACTED A PART TO THE ASSESSEE.HE ALSO DISCUSSED THE GUARANTEE COMMISSION AGREEMENTS ENTERED INTO BY RI AND HELD THAT PERUSAL OF THE AGREEMENTS BETWEEN THE ASSESSEE AND RI PROVED THAT RI HAD NOT ACTED AGENT OF THE ASSESSEE, THAT LOAN WAS ADVANCED BY RI, THAT TO SAF EGUARDS ITS OWN FINANCIAL INTERESTS RI HAD ENTERED INTO AN AGREEMENT WITH THE ASSESSEE REQUIRI NG IT TO STAND AS GUARANTOR ON PAYMENT OF GUARANTEE COMMISSION,THAT RI HAD NOT AT ALL ACTED A S AGENT OF THE ASSESSEE, THAT DEPUTING OF AN EXPATRIATE DIRECTOR BY THE ASSESSEE TO RI DID NOT M AKE AN RI AND AGENCY PE OF THE ASSESSEE,THAT RI WAS AN INDEPENDENT ORGANISATION.WITH REGARD TO AMOU NT COLLECTED BY RI ON BEHALF OF RABO SINGAPORE,THE FAA HELD THAT PERUSAL OF THE ORDER OF THE DRAT,LETTERS OF VARIOUS AUTHORITIES AND THE BANK ACCOUNT OF RI PROVED THAT RI HAD COLLECTED THE PAYMENT FROM DRAT ON BEHALF OF ITS COUNTER PART OF SINGAPORE AND THEREAFTER REMITTED I T TO SINGAPORE,THAT THERE WAS NO INCOME ELEMENT INVOLVED IN TRANSFER OF FUNDS,THAT THE AO HAD INCOR RECTLY ADDED THE AMOUNT IN QUESTION AS PART OF THE INCOME OF THE ASSESSEE.HE FURTHER HELD THAT THE BUSINESS PROFITS OF THE ASSESSEE WERE NOT TAXABLE IN INDIA IN VIEW OF ARTICLE 7(1) OF THE DTA A,THAT THE AO HAD HELD THAT ENTIRE RECEIPT WERE IN NATURE OF BUSINESS INCOME, THAT IN THE ABSENCE O F A PE IN INDIA, IF ANY, BUSINESS INCOME WAS ARISING TO THE ASSESSEE IN INDIA NO SUCH BUSINESS P ROFIT WERE TAXABLE IN INDIAFINALLY, THE FAA ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)ARGUED THA T THE ASSESSEE WAS CARRYING OUT BUSINESS ACTIVITIES IN INDIA,THAT RI WAS AGENT OF THE ASSESS EE,THAT IT HAD DEPUTED AN DIRECTOR ON THE BOARD OF RI,THAT THE AO HAD SPECIFICALLY MENTIONED THAT THE ASSESSEE HAD NOT PROVIDED IT THE COPY OF THE AGREEMENT THAT WOULD DECIDE THE TAXABILITY OF INCOM E OF THE ASSESSEE,THAT THE AO HAD RIGHTLY INVOKED THE PROVISIONS OF ARTICLE 5 OF THE DTAA.AUT HORISED REPRESENTATIVE(AR)SUPPORTED THE ORDER OF THE FAA AND CONTENDED THAT THE ASESSEE WAS NOT HAVING PE IN INDIA,THAT PROVISIONS OF 5 ITA NOS. 4632/M/2006 & ORS. M/S CO-OPERATIVE CENTRA LE RAIFFEISEN ARTICLE 5(1)WERE NOT APPLICABLE,THAT RI WAS TAKING HELP OF THE ASSESSEE BUT THE ASSESSEE WAS NOT TAKING ANY HELP OF RI IN CARRYING OUT ITS BUSINESS ,THAT RPG OR OTHER PARTIES HAD MADE PAYMENT TO RI AND RI IN TURN HAD PAID SOME AMOUNT TO THE ASSES SEE, THAT ALL THE WORK DONE BY THE ASSESSEE WERE PERFORMED OUTSIDE INDIA,THAT THERE WAS NO WORK OFFICE OF THE ASSESSEE IN INDIA,THAT NO PERSONNEL OF THE ASSESSEE WAS WORKING IN INDIA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT RI HAD MADE PAYMENT TO THE ASESSEE FOR PROVIDING ADVISORY SERVICES TO IT AND UNDER THE HEAD GUARANTEE COMMISSION,THAT RI WAS PAYING THE ASESSEE MORE THAN 30% OF ITS INCOME,THAT THE BASIC DISPUTE BETWEEN THE AO AND THE ASESSEE IS AS TO WHETHER THE ASESSEE HAD PERMANENT ESTABLISHMENT IN INDIA OR NOT AND AS TO WHETHER THE SERVICES RENDERED BY R I COULD BE TREATED ACTIVITIES CARRIED OUT BY THE ASESSEE.BEFORE PROCEEDING FURTHER,WE ARE OF THE OPI NION THAT THERE IS NOTHING ON RECORD TO PROVE THAT PROVISIONS OF ARTICLE5(1)OF THE AGREEMENT ARE APPLICABLE.ARTICLE 5(1) STIPULATES THAT PE FOR THE PURPOSE OF CONVENTION MEANT A FIXED OF BUSINES S THROUGH WHICH THE BUSINESS OF THE ENTERPRISE WAS WHOLLY OR PARTLY CARRIED ON.FROM THE FACTS AVAI LABLE ON RECORD,IT IS CLEAR THAT THE ASESSEE WAS NOT HAVING FIXED PLACE OF BUSINESS IN INDIA.THEREFO RE,IN OUR OPINION THE FAA HAD RIGHTLY HELD THAT PROVISIONS OF SAID ARTICLES I.E.5(1)WERE NOT APPLIC ABLE. NOW,WE WOULD TAKE THE OTHER ISSUES RAISED BY THE AO .IN OUR OPINION,FOR ASCERTAINING WHETHER PARTICULAR ARTICLES OF THE AGREEMENT OF THE AVOIDA NCE OF DOUBLE TAXATION BETWEEN INDIA AND NETHERLANDS WERE APPLICABLE OR NOT,THE EXACT WORKIN G OF RI, THE CORRESPONDENCE BETWEEN RI AND THE ASESSEE AND THE MODE OF THEIR FUNCTIONING AND O PERATIONS WOULD HAVE TO BE EXAMINED IN TOTO. THE QUANTUM OF WORK DONE,THE SERVICES RENDERED, THE CONTRACTS UNDERTAKEN FOR OUTSIDERS WOULD HAVE TO BE EXAMINED TO DETERMINE WHETHER RI WAS AN AGENT HAVING INDEPENDENT STATUS OR WAS MERELY WORKING ON BEHALF OF THE ASESSEE,AS ALLEGED BY THE AO. IN ABSENCE OF SUCH BASIC MATERIAL FACTS,IT IS NOT POSSIBLE TO COME TO A CONCLUSION AS TO WHETHER THE ASESSEE HAD PE IN INDIA OR NOT. THERE IS NO MATERIAL AVAILABLE ON RECORD TO PROVE A S TO WHETHER RI HAD SIGNIFICANT INDEPENDENT ACTIVITIES ON ITS OWN OR NOT.THE FAA,WHILE ALLOWING THE APPEAL HAS DEALT WITH THE DTAA AND HELD THAT PROVISIONS OF ARTICLE 5 (1)5(2)OF DTAA OF INDO -NETHERLAND WERE NOT APPLICABLE.BUT,HE HAS NOT DISCUSSED THE ACTUAL WORK AND THE NATURE OF THE JOB DONE BY THE ASESSEE FOR RI NOR HAS HE GIVEN THE REASONS AS TO HOW HE ARRIVED AT THE SAID CONCLU SION.IN OUR OPINION, THE ASSERTION-THAT ADVISORY SERVICES WERE RENDERED OR THAT GUARANTEE COMMISSION WAS RECEIVED FOR THE JOB OUTSIDE INDIA OR THAT RI WAS RENDERING SERVICES INDEPENDENTLY IN ITSELF-I S NOT SUFFICIENT TO PROVE OR DISPROVE THE CLAIM MADE BY THE ASESSEE.SUCH A CLAIM HAS TO PROVED BY F ACTS.THE AGREEMENTS ENTERED INTO BY RI WITH OUTSIDERS AND THE AGREEMENTS ENTERED IN TO BY RI WI TH THE ASESSEE HAVE TO EXAMINED TO UNDERSTAND THE REAL NATURE OF THE TRANSACTION.IT ALSO APPEARS THAT SOME MATERIAL WAS MADE AVAILABLE TO THE FAA,BUT IT IS FOUND THAT HE DID NOT CALL FOR A REMA ND REPORT FROM THE AO IN THAT REGARD.THE ROLE OF EXPATRIATE DIRECTOR DEPUTED TO INDIA HAS NOT BEEN I NQUIRED IN TO.WHAT WERE HIS DUTIES AND WHAT FUNCTION ACTUALLY HE HAD PERFORMED,IS NOT KNOWN. SI MILARLY, THE CIRCUMSTANCES IN WHICH GUARANTEE COMMISSION WAS PAID BY RI TO THE ASESSEE ARE NOT DI SCUSSED BY THE FAA.THE CIRCUMSTANCES,UNDER WHICH RI FOR APPROACHED THE ASESSEE WHICH ENTITLED IT TO GET ROUGHLY ONE THIRD OF THE COMMISSION,ARE NOT KNOWN.IN SHORT,THE APPEAL HAS BE EN DECIDED BY DISCUSSING THE PRINCIPLES GOVERNING DTAA AND NOT MENTIONING AS TO HOW THOSE P RINCIPLES WERE APPLICABLE TO THE FACTS OF THE CASE.IN OUR OPINION,THE MATTER NEEDS FURTHER IN VESTIGATION.THEREFORE, IN THE INTEREST OF JUSTICE, THE MATTER IS RESTORED BACK TO THE FILE OF THE AO T O DETERMINE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASESSEE.T HIRD GROUND OF APPEAL FILED BY THE AO IS ALLOWED IN HIS FAVOUR,IN PART. ITA/3633 & 5056/MUM /2007 & 2010,AY.S.-2003-04 & 2005-06 THE FACTS AND CIRCUMSTANCES OF THE CASES ARE IDENTI CAL TO THE FACTS OF THE YEAR 2001-02.AS WE HAVE ALREADY RESTORED BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION FOR THAT YEAR, SO FOLLOWING THE SAME,WE DECIDE EFFECTIVE GROUND OF AP PEALS IN FAVOUR OF THE AO, IN PART FOR BOTH THE AY.S. 6 ITA NOS. 4632/M/2006 & ORS. M/S CO-OPERATIVE CENTRA LE RAIFFEISEN AS A RESULT,APPEALS FILED BY THE AO FOR ALL THE THREE AY.S. STAND PARTLY ALLOWED. 0*1 ! )* + 2 3 ' .4 *!5 !.'7 ' 8 /*1 9 ' * :; . ORDER PRONOUNCED IN THE OPEN COURT ON 1ST APRIL,201 5. / ' ,-' 8 %*> %*> %*> ?>'* ?>'* ?>'* ?>'* / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / #$ 2. RESPONDENT / %&#$ 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR L BENCH, ITAT, MUMBAI / >B. %*! , . . . 6. GUARD FILE/ . 0 &>* %* //TRUE COPY// /! / BY ORDER, C / : DY./ASST. REGISTRAR , /ITAT, MUMBAI.