DCIT (International Taxation), New Delhi V. M/s National Petroleum Construction Co., New Delhi

ITA 5552/DEL/2016

• Counselvise Citation: [2019] 114 COUNSELVISE.COM (IT) 2187 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 28-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G K DHALL
• Keywords: Double taxation relief; Permanent establishment
• Section: 201

Judgement Text

PAGE | 1 INCOME TAX PPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI G.S. PANNU, HONBLE VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.5552/DEL/2016 (ASSESSMENT YEAR: 2013-14) DCIT (INTERNATIONAL TAXATION) CIRCLE 2(2)(2), NEW DELHI. VS M/S NATIONAL PETROLEUM CONSTRUCTION CO., C/O NANGIA& CO., SUITE-4A, PLAZA, M-6, JASOLA, NEW DELHI. PAN; AAACN7799J APPELLANT RESPONDENT REVENUE BY : SHRI G.K. DHALL, CIT- DR ASSESSEE BY: SHRI AMIT ARORA, CA DATE OF HEARING: 05.11.2019 DATE OF PRONOUNCEMENT: 18.11.2019 O R D E R PER K. NARASIMHA CHARY, JM THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER DATED 26.8.2016 PASSED BY THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS)- 43, NEW DELHI (CIT(A)) FOR THE ASSTT. YEAR 2013-1 4. PAGE | 2 2. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE LAWS OF UAE AND IS A TAX RESIDENT THEREOF. THE PRINCIPAL ACTIV ITIES OF THE ASSESSEE INCLUDE FABRICATION AND INSTALLATION OF ONSHORE AND OFFSHORE PLATFORMS, SUBMARINE PIPELINES AND PIPELINE COATING. FOR THE ASSTT. YEAR 2013-14, RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 30.9. 2013 DECLARING NIL INCOME STATING THAT THE ASSESSEE DOES NOT HAVE ANY PERMANENT ESTABLISHMENT (PE) IN INDIA AND ACCORDINGLY, THE RE CEIPTS FROM THE CONTRACTS DURING FINANCIAL YEAR 2012-13 BOTH TOWARD S INSIDE INDIA AND OUTSIDE INDIA ACTIVITIES ARE NOT TAXABLE IN INDIA. 3. LD. AO, HOWEVER, BY ORDER DATED 14.3.2016, WHILE FOLLOWING HIS OWN ORDERS FOR THE ASSTT. YEARS 2009-10 AND 2010-11 HELD THAT IN TERMS OF ARTICLE 5 OF THE DTAA BETWEEN INDIA AND UAE, THE ASSESSEE HAS FIXED PLACE PE IN INDIA IN THE FORM OF PROJECT OFFICE (PO ); INSTALLATION PE IN INDIA DUE TO INSTALLATION ACTIVITIES CARRIED OUT IN INDIA AND DEPENDANT AGENT PE (DAPE) IN INDIA IN THE FORM OF ARCADIA SHIPPING LTD . (ARCADIA) AND WHILE APPLYING THE PRINCIPLES OF RULE 10 OF THE INCOME-TA X RULES, 1962, MADE AN ADDITION OF RS.11,17,72,307/- ON ACCOUNT OF OFFSHOR E SUPPLY SEGMENT AND RS.34,53,78,302/- ON ACCOUNT OF ONSHORE SERVICE SEG MENT. 4. ACCORDING TO THE ASSESSEE, DURING THE FY 2012-13 THEY EARNED REVENUE FROM C-SERIES CONTRACT, RS-12 PROJECT, B-22 PROJECT, B SERIES CONTRACT AND OUT OF THE CONTRACTS MENTIONED ABOVE, FIRST FOUR CONTRACTS WERE SIGNED AND EXECUTED IN EARLIER YEARS. HOWEVER , THE ASSESSEE EARNED REVENUE FROM WO-16 AND SB-14 CONTRACT WITH ONGC FOR THE FIRST TIME DURING RELEVANT FINANCIAL YEAR. ALL THESE CONTRACT S WITH ONGC INVOLVED FABRICATION AND INSTALLATION OF PLATFORMS FOR EXTRA CTION OF OIL IN PREVIOUS FINANCIAL YEARS RELEVANT TO THE ASSTT. YEAR UNDER C ONSIDERATION. PAGE | 3 5. ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT (A) AND ARGUED THAT THE LEARNED AO MECHANICALLY RELIED UPON CERTAI N SELECTIVE PORTIONS OF ORDER FOR THE AY 2009-10 AND 2010-11 IGNORING TH E FACT THAT WHILE PASSING THE ASSESSMENT ORDER FOR AY 2009-10 AND 201 0-11, RELIANCE WAS PLACED ON THE ASSESSMENT ORDERS FOR THE AYS 2007-08 AND 2008-09 WHICH WERE TURNED DOWN AT THE LEVEL OF THE HONBLE DELHI HIGH COURT IN ASSESSEES OWN CASE IN ITA NO.143 OF 2013. IT WAS FURTHER ARGUED BY THE ASSESSEE THAT TAXABILITY OF RECEIPTS FROM C SERIES CONTRACTS HAS ALREADY BEEN EXAMINED BY THE HONBLE HIGH COURT WHILE PASSI NG THE ORDER FOR AYS 2007-08 AND 2008-09 BUT THE LD. AO FAILED TO APPREC IATE THE SCOPE AND OBLIGATIONS OF THE ASSESSEE UNDER CONTRACTS WITH ON GC, WHICH ARE UNDER CONSIDERATION DURING THE YEAR ARE IDENTICAL TO THE SCOPE AND OBLIGATIONS OF THE ASSESSEE UNDER THE CONTRACT WHOSE TAXABILITY WAS EXAMINED BY THE HONBLE HIGH COURT FOR THE AY 2007-08 AND 2008-09. 6. LEARNED CIT(A) CONSIDERED THE MATERIAL BEFORE HI M IN THE LIGHT OF THE ORDERS OF THE HONBLE HIGH COURT AND ALSO THE O RDER OF A COORDINATE BENCH OF THIS TRIBUNAL IN ITA N.2004/DEL/2014 IN AS SESSEES OWN CASE FOR THE AY 2009-10 AND ANSWERED THE ISSUE WHETHER THE A SSESSEE HAD PERMANENT ESTABLISHMENT IN INDIA DURING THE FY 2012 -13 IN TERMS OF ARTICLE 5 OF THE DTAA BETWEEN INDIA AND UAE, IN NEG ATIVE. 7. CHALLENGING THE SAME, REVENUE PREFERRED THIS APP EAL STATING THAT IN REACHING SUCH A CONCLUSION THAT THE PROJECT OFFI CE OF THE ASSESSEE IN INDIA IS NOT A FIXED PLACE OF BUSINESS AND PERMANEN T ESTABLISHMENT AS DEFINED U/S 5(2)(C) OF THE DTAA BETWEEN INDIA AND UAE OR THAT THE ACTIVITIES OF THE PO OF THE ASSESSEE WAS PREPARATOR Y AND AUXILIARY IN NATURE IN TERMS OF ARTICLE 5(3)(E) OF THE DTAA, LEA RNED CIT(A) COMMITTED PAGE | 4 AN ERROR IN PROPER APPRECIATION OF THE FACTS AND AP PLICATION OF LAW. ACCORDING TO THE LEARNED DR, M/S ARCADIA SHIPPING L TD. WAS A DEPENDENT AGENT PERMANENT ESTABLISHMENT UNDER ARTICLE 5(4) OF THE DTAA AND ON ALL COUNTS OF ARTICLE 5(2)(C), 5(2)(E), 5(2)(H) AND 5(4 ) OF THE DTAA, THE ASSESSEE SHOULD HAVE HELD TO HAVE PE IN INDIA AND T HE PROFITS ATTRIBUTABLE TO THE ASSESSEES PE AT 1.92% OF ITS OFFSHORE SUPPL Y SEGMENT AND 14.79% OF ITS ONSHORE SERVICE SEGMENT WAS TAXABLE IN INDIA . 8. AT THE OUTSET, LEARNED AR BROUGHT IT TO OUR NOTI CE THAT AS IS EVIDENCED BY THE ASSESSMENT ORDER, LD. AO PLACED HE AVY RELIANCE ON ASSESSMENT ORDERS IN ASSESSEES OWN CASE FOR THE AY S 2009-10 AND 2010- 11 WHICH IN TURN WERE PASSED WHILE FOLLOWING THE AS SESSMENT ORDERS FOR THE AYS 2007-08 AND 2008-09. HE SUBMITTED THAT THE SCOPE AND OBLIGATIONS OF THE ASSESSEE IN ONGC WAS CONSIDERED AT LENGTH AND THE HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE FOR THE AYS 2007- 08 AND 2008-09 REACHED A CONCLUSION THAT THE ASSESS EE HAD NO PE IN INDIA AND THE REVENUE FROM CONTRACTS ARE NOT TAXABLE IN I NDIA. HE FILED THE COPIES OF THE ORDERS DATED 29.1.2016 OF THE HONBLE HIGH COURT FOR THE ASSTT. YEARS 2007-08 AND 2008-09 IN ITA NO.143 OF 2 013 AND BATCH. HE FURTHER FILED A COPY OF THE ORDER DATED 21.6.2016 I N ITA NO.2004/DEL/2014 PASSED BY A COORDINATE BENCH OF TH IS TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2007-08 AND 2008-09 WHEREIN THE BENCH FOLLOWED THE ORDERS OF THE HONBLE HIGH COURT. HE FURTHER FILED THE ORDER DATED 30.5.2018 IN ITA NO.1468/DEL/2015 WHICH CASE WAS DISPOSED OF BY A COORDINATE BENCH OF THIS TRIBUNAL WHILE FOLLOWING THE DECISION OF THE HONBLE HIGH COURT AS WELL AS THE TRIBUNAL IN ITA N O.2004/DEL/2014. PAGE | 5 9. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT IS NOT IN DISPUTE THAT IN ASSESSEES OWN CASE FOR THE AYS 2007-08 AND 2008-09 REPORTED IN (2016) 383 ITR 648 (DEL), THE HONBLE HIGH COURT HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. IT COULD BE SEEN FROM THE RECORD THAT THE ORDERS PASSED BY A CO ORDINATE BENCH OF THIS TRIBUNAL FOR THE AYS 2009-10 AND 2010-11 WERE UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO.882 OF 2016 BY ORDER DATED 3.2.2017AND ITA NO.204 OF 2019 BY ORDER DATED 22.7. 2019 RESPECTIVELY. THE ISSUE IS NO LONGER RES INTEGRA AND COVERED BY T HE ORDERS OF THE HONBLE HIGH COURT IN ASSESSEES OWN CASE FOR THE A YS 2007-08 TO 2010- 11. WE, THEREFORE, DO NOT FIND ANY ILLEGALITY OR IR REGULARITY IN THE FINDING REACHED BY THE LEARNED CIT(A) AND CONSEQUENTLY, FIN D THE GROUNDS OF APPEAL OF THE REVENUE AS DEVOID OF MERITS. APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2019. SD/- SD/- ( G.S. PANNU) (K. NARASIMHA CHARY) VICE PRESIDENT JUD ICIAL MEMBER DATED: 18 TH NOVEMBER, 2019. VJ COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI PAGE | 6 DATE OF DICTATION 05.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05.11.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 06.11.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/ PS 20.11.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 20.11.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 20.11.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 20.11.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20 .11.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER