ADIT, Dehradun V. M/s. Oil & Natural Gas Corporation Ltd. as Representative Assessee of M/s. Brush Electrical Machines Ltd., UK, Dehradun

ITA 4653/DEL/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6654 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 21-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: KAVISH SYAL
• Keywords: Double taxation relief; Retrospective amendment; Permanent establishment
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SMT BEENA A . PILLAI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER I TA NO .4653/DEL/2013 (ASSESSMENT YEAR: 2010 - 11 ) ADIT 13A, SUBHASH ROAD, AAYAKAR BHAWAN, DEHRADUN VS. OIL AND NATURAL GAS CORPORATION LTD. AS REPRESENTATIVE ASSESSEE OF M/S. BRUSH ELECTRICAL MACHINES LTD., UK, ONGC LTD, CORPORATE TAX DIVISION, ROOM NO.244, TEL BHYAWAN, DEHRADUN PAN:AAACO1598A (APPELLANT) (RESPONDENT) REVENUE BY : SH. RAJESH KUMAR, SR. DR ASSESSEE BY: SH. KAVISH SYAL, CA DATE OF HEARING 21/02/2017 DATE OF PRONOUNCEMENT 27 /02/2017 O R D E R PER PRASHANT MAHARISHI , A . M . 1. THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - II, FILES THIS APPEAL , DEHRADUN DATED 21.05.2013 FOR AY 2010 - 11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 4653/DEL2013: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN REVERSING THE FINDING OF THE AO THAT THE ENTIRE RECEIPTS OF THE ASSESSEE FROM ONGC UNDER THE AGREEMENT DATED 29.04.2009 FOR REWINDING OF GENERATOR ROTOR GT - 1 ARE IN THE NATURE OF 'FEE FOR TECHNICAL NATURE' (FTS) UNDER SECTION 9(1){VII) OF THE IT ACT READ WITH ARTICLE 13 OF INDO - UK DTAA. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN HOLDING THAT OUT OF THE ENTIRE RECEIPTS FOR THE WORK OF REWINDING OF THE GENERATOR ROTOR, ONLY PART PAYMENT GBP 9609 WITH RESPECT TO SUPERVISION WORK OF PACKING OF ROTOR IN INDIA IS LIABLE TO TAX IN INDIA, AND IN FURTHER DIRECTING THAT INCOME OF THE ASSESSEE MAY COMPUTED BY TREATING 25% OF THE SAID AMOUNT OF GBP 9609. 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN IGNORING THE FACT THAT THE ENTIRE SCOPE OF WORK UNDER THE AGREEMENT, INCLUDING PRE - D ISMANTLING TESTS, SUPPLYING OF PACKING CASE, DISMANTLING OF ROTOR, SUPERVISION OF PACKING OF ROTOR, REWINDING AND REFITTING OF ROTOR, WERE AN INTEGRAL PART OF EXECUTION OF THE SINGLE COMPOSITE CONTRACT AND THEREFORE ENTIRE RECEIPTS FOR THE CONTRACT WERE LI ABLE TO TAX AS FTS. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN RELYING ON THE JUDGMENT IN THE CASE OF CIT VS. RD AGARWAL & CO. (56 ITR 20 SC) IGNORING THE FACT THAT THE DEFINITION OF FTS UNDER THE IT ACT AND THE INDO - UK DTAA STANDS ON ITS OWN TERMS AND SO LONG AS A PAYMENT QUALIFIES AS FTS UNDER THE DEFINITION, THERE IS NO REQUIREMENT OF ESTABLISHING BUSINESS CONNECTION 3. THE BRIEF FACTS OF THE CASE IS THAT ONGC LTD, HAZIR A PLANT AWARDED A CONTRACT ON 29.04.2009 TO M/S. BRUSH ELECTRICAL MACHINES LTD. UK FOR RE WINDING OF GENERATOR ROTO R OF GT#1. THE SCOPE OF THE ABOVE WORK INCLUDED SUPPLY OF PACKING CASES, SUPERVISION OF PACKING OF ROT O R AT ON GC, HAZIRA AND REBINDING OF ROTO R. THE TOTAL CONTRACT PRICE WAS GBP OF 25 2099 . THE CONTRACT PRICE WAS FURTHER BIFURCATED AS PER CLAUSE NO. 3 OF THE AGREEMENT AS UNDER: - SR. NO. DESCRIPTION AMOUNT (GBP) 1. SUPPLY OF PACKING CASE OF TRANSPORTATION OF ROTAR FROM ONGC HAZIRA TO M/S. BRUSH, UK 4433.00 2. SUPERVISION OF PACKING OF ROTOR FOR RETURN TO M/S. BRUSH 9609.00 3. REWINDING OF ROTOR AT CONTRACTORS WORKS, UK 2385057.00 TOTAL 252099.00 4. THE ASSESSEE FILED RETURN OF INCOME ON 13.09.2010 SHOWING INCOME OF RS. 75840/ - OFFERING ONLY INCOME WITH RESPECT TO SUPERVISION CHARGES AMOUNTING TO GBP 9609. THE OTHER TWO COMPONENTS OF INCOME WERE NOT OFFERED FOR TAX FOR THE REASON THAT THE SERVICES WER E NOT RENDERED IN INDIA. THE ASSESSMENT U/S 143(3) OF THE ACT WAS PASSED PURSUANT TO DIRECTION OF DRP U/S 144C(3)(B) OF THE ACT HOLDING THAT COMPLETE RECEIPT OF THE CONTRACT IS CHARGEABLE TO TAX IN INDIA AS FEES FOR TECHNICAL SERVICES CHARGEABLE TO TAX U/S 9(1)(VII) OF THE ACT AND CHARGE TO TAX ON GROSS BASIS AS PER PROVISIONS OF SECTION 115A OF THE ACT. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE LD ASSESSING OFFICER PREFERRED AN APPEAL BEFORE THE LD CIT(A), WHO HELD THAT ONLY SUPERVISION CHARGES PE RTAINS TO ACTIVITY ON INDIAN SOIL WHILE ALL OTHER ACTIVITIES ARE OUTSIDE INDIA AS PART OF BUSINESS OF THE APPELLANT AND THEREFORE HE HELD THAT ONLY ON SUPERVISION CHARGES THE ASSESSEE IS LIABLE TO TAXATION IN INDIA. AGGRIEVED BY THE ORDER OF THE LD CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 5. THE LD DR VEHEMENTLY CONTESTED THAT THERE IS NO DISTINCTION IF THE SERVICES RENDERED IN INDIA OR RENDERED OUTSIDE INDIA. HE FURTHER REFERRED THAT FOR THE PURPOSE OF TAXABILITY OF FEES FOR TECHNICAL SERVICES IT IS NOT T O BE SEEN WHERE THE SERVICES ARE RENDERED. HE THEREFORE VEHEMENTLY SUPPORTED THE ORDER OF THE LD ASSESSING OFFICER. 6. THE LD AR VEHEMENTLY SUPPORTED THE ORDER OF THE LD CIT(A) AND SUBMITTED THAT THE SERVICES ARE NOT RENDERED IN INDIA THE INCOME CANNOT BE TA XED U/S 9(1)(I) OF THE ACT OR U/S 9(1)(VII) OF THE ACT. IN THE END HE FURTHER SUBMITTED THAT EVEN OTHERWISE THE CLAIM OF THE ASSESSEE IS COVERED ACCORDING TO ARTICLE 13 OF DTAA BETWEEN INDIA AND UK FOR WHICH THE BENEFIT SHOULD BE AVAILABLE TO THE ASSESSEE. HE FURTHER STATED THAT ASSESSEE DOES NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA THEREFORE, THE INCOME OF THE ASSESSEE FROM BUSINESS IS NOT CHARGEABLE TO TAX IN INDIA BUT IN UK. WITH RESPECT TO TAXABILITY IS FEES FOR TECHNICAL SERVICES HE SUBMITTED THAT THERE IS NO MAKE AVAILABLE CONDITION SATISFACTION IN THIS WORK AND HENCE, IT IS NOT CHARGEABLE TO TAX AS FTS ALSO. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. WE DO NOT AGREE WITH THE VIEW OF THE LD CIT(A) FOR THE PURPOSE OF TAXABILITY OF FEES FOR TECHNICAL SERVICES U/S 9(1)(VII) THE PLACE OF RENDERING THE SERVICE AT ALL MAKES ANY DIFFERENCE. THE EXPLANATION IN SERTED W.E.F. FINANCE ACT 2010 WITH RETROSPECTIVE EFFECT FROM 01.06.1976 PROVIDES THAT INCOME OF NON - RESIDENT SHALL BE DEEMED TO APPROVAL ARISE IN INDIA WITH RESPECT O FTS AND SHALL BE INCLUDED IN THE TOTAL INCOME OF THE NON - RESIDENT WHETHER THE NON - RESIDE NT HAS RENDERED SERVICES IN INDIA. THEREFORE, THE INCOME OF THE ASSESSEE IS CHARGEABLE TO TAX AS FEES FOR TECHNICAL SERVICES ACCORDING TO SECTION 9(1)(VII) OF THE ACT. FURTHER, THE CONDITION OF THE BUSINESS COLLECTION IN INDIA IN TERMS OF SECTION 9(1)(I) I S ALSO SATISFIED AS SOURCE OF INCOME IS IN INDIA. THEREFORE, INCOME OF THE ASSESSEE IS CHARGEABLE TO TAX ACCORDING TO THE INCOME TAX ACT, 1961 HOWEVER, AS THE ASSESSEE IS NON - RESIDENT, AND THEN IT IS ENTITLED TO MORE BENEFICIAL TREATMENT AVAILABLE UNDER EI THER DTAA OR DOMESTIC TAX LAWS. AS THE ASSESSEE HAS SUBMITTED BEFORE THE LD ASSESSING OFFICER THAT THE INCOME OF THE ASSESSEE DOES NOT FALL UNDER DEFINITION OF FEES FOR TECHNICAL SERVICES AS MAKE AVAILABLE CRITERIA IS NOT SATISFIED. THE LD CIT(A) HAS NOT DEALT WITH THE ABOVE ARGUMENT OF THE ASSESSEE . THEREFORE , IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ISSUE TO THE FILE OF THE LD CIT(A) TO EXAMINE WHETHER THE INCOME OF THE ASSESSEE IS CHARGEABLE TO TAX IN INDIA ACCORDING TO THE PROVISIONS OF INDO - UK DT AA VIS - - VIS ELIGIBILITY OF THE ASSESSEE FOR ENTITLEMENT OF THE BENEFIT OF THAT DTAA. IN VIEW OF THIS THE APPEAL OF THE REVENUE IS ALLOWED WITH ABOVE DIRECTION. ORDER PRONOUNCED IN THE OPEN COURT ON 27 /02/2017 . - SD/ - - SD/ - ( BEENA A. PILLAI) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 /02 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI