LINTAS & PAINES NOW LINIKLETERS, V. ITO (IT) RG 1(1)(2),

MA 223/MUM/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9726 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: L
• Assessment Year: 1995-1996
• Appeal Filed On: 08-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S E DASTUR; NIRAV SHETH
• Keywords: Depreciation; Rectification of order; Double taxation relief; Services rendered outside India; Permanent establishment; Question of law; Unabsorbed depreciation
• Section: 6; 56; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI P.M.JAGTAP, ACCOUNTANT MEMBER M.A. NO. 223/MUM/2011. (IN ITA NO. 2896 & 5085/MUM/2003) ASSESS MENT YEAR : 1995-96. M/S LINKLATERS & PAINES THE INCOME-TAX OFFICER, (NOW LINKLATERS), VS . (INTERNATIONAL TAXATION), C/O DELOTTE HASKINS & SELLS, 1(1)(2), MUMBAI. 264-265, DR. ANNIE BASANT ROAD, WORLI, MUMBAI 400 030. APPLICANT. RESPONDENT. APPLICANT BY : SHRI S.E. DASTUR & SHRI NIRAV SHETH. RESPONDENT BY : SHRI MAHESH KUMAR. DATE OF HEA RING : 23-11-2012. DATE OF PRONOUNCEM ENT : 19 -12-2012 O R D E R PER P.M. JAGTAP, A.M. : BY THIS MISCELLANEOUS APPLICATION, THE ASSESSEE IS SEEKING RECTIFICATION OF MISTAKE ALLEGED TO HAVE CREPT IN THE COMMON ORDER O F THE TRIBUNAL DATED 16 TH JULY,2010 PASSED IN ITA NO. 4896/MUM/2003 AND 5085/ MUM/2003. 2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT ONE OF THE ISSUES RAISED BY THE REVENUE IN ITS APPEAL BEING ITA NO. 5085/MUM /2003 WAS RELATING TO APPLICATION OF FORCE OF ATTRACTION PRINCIPLE IN COM PUTATION OF PROFITS ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT. HE SUBMITTED THAT THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP FIRM OF SOLICITORS HAVING ITS HEAD OFFI CE AT LONDON WITH NO BRANCH 2 M.A.NO.223/MUM/2011 OFFICE OR ANY OTHER FORM OF PHYSICAL PRESENCE IN I NDIA. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CARRIED OUT CERTAIN WOR K ON INDIAN PROJECTS, MAJORITY OF WHICH WAS DONE IN U.K. AND SOME OF THE WORK WAS DON E IN INDIA BY PERSONS WHO VISITED FOR SHORT PERIOD OF TIME. HE SUBMITTED THAT THE MAIN ISSUE INVOLVED IN THE ASSESSEES CASE WAS WHETHER THE ASSESSEE HAD A PERM ANENT ESTABLISHMENT IN INDIA AND THE TRIBUNAL VIDE ITS ORDER DATED 16 TH JULY, 2010 (SUPRA) DECIDED THE SAME AGAINST THE ASSESSEE BY UPHOLDING THE DECISION OF T HE AO THAT THE ASSESSEE HAD A SERVICE PE IN INDIA.. HE SUBMITTED THAT THE AO HAD BROUGHT TO TAX IN INDIA THE ENTIRE INCOME EARNED BY THE ASSESSEE FROM INDIAN PR OJECTS ALTHOUGH ONLY A PART OF THE SERVICES IN RELATION TO THE SAID PROJECTS WAS P ERFORMED IN INDIA. HE SUBMITTED THAT THE LEARNED CIT(APPEALS), HOWEVER, AGREED WIT H THE STAND OF THE ASSESSEE THAT THE INCOME IN RESPECT OF SERVICES RENDERED IN INDI A ONLY WAS TAXABLE IN INDIA BEING ATTRIBUTABLE TO THE PE IN INDIA RELYING INTER ALIA ON ARTICLE 7(3) OF THE INDIA-UK DTAA. HE SUBMITTED THAT THE TRIBUNAL, HOWEVER, HAS ACCEPTED THE STAND OF THE REVENUE ON THIS ISSUE THAT THE ENTIRE INCOME EARNED BY THE ASSESSEE FROM INDIAN PROJECTS IS TAXABLE IN INDIA IN VIEW OF THE FORCE O F ATTRACTION PRINCIPLE EMBEDDED IN ARTICLE 7 OF THE INDIA-UK DTAA AND ALLOWED GROUND N O. 2 OF THE APPEAL OF THE REVENUE. HE INVITED OUR ATTENTION TO THE RELEVANT P ORTION OF THE TRIBUNALS ORDER AS CONTAINED IN PARAGRAPH NO. 139 TO 149 ON THIS ISSUE AND CONTENDED THAT THE TRIBUNAL HAS REFERRED TO THE PROVISIONS OF ARTICLE 7(1) AND 7(2) OF THE INDIA-UK DTAA WHILE DECIDING THIS ISSUE IGNORING ENTIRELY TH E PROVISIONS OF ARTICLE 7(3) OF THE SAID TREATY. HE SUBMITTED THAT THE TRIBUNAL HAS RELIED ON ARTICLE 7(1)(B) AND 7(1)(C) OF THE UN MODEL CONVENTION TO DECIDE THE I SSUE OF ATTRIBUTION OF PROFIT HOLDING THAT THE SAID PROVISIONS ARE AKIN TO THE PR OVISIONS OF ARTICLE 7(1) AND 7(2) OF THE INDIA-UK DTAA. IN THIS REGARD, HE INVITED OU R ATTENTION TO THE COMPARATIVE CHART PREPARED AND FURNISHED BY HIM OF THE RELEVANT PROVISIONS OF ARTICLE 7 OF INDIA-UK DTAA AND THAT OF UN MODEL CONVENTION AND S UBMITTED THAT THERE IS NO 3 M.A.NO.223/MUM/2011 PROVISION IN ARTICLE 7 OF UN MODEL CONVENTION WHICH IS AKIN TO THE PROVISION OF ARTICLE 7(3) OF INDIA-UK DTAA. HE CONTENDED THAT TH E TRIBUNAL HAS APPLIED THE FORCE OF ATTRACTION PRINCIPLE EMBEDDED IN ARTICLE 7 (1) OF INDIA-UK DTAA WHICH PROVIDES THAT THE PROFITS OF THE ENTERPRISE MAY BE TAXED IN THE OTHER STATE BUT ONLY SO MUCH OF THEM AS IS DIRECTLY OR INDIRECTLY ATTRIB UTABLE TO THE PE IN THAT STATE. HE CONTENDED THAT WHAT IS MEANT BY PROFITS INDIRECTLY ATTRIBUTABLE TO PE HAS BEEN DECIDED BY THE TRIBUNAL RELYING ON ARTICLE 7 OF UN MODEL CONVENTION IGNORING THAT THE SAME HAS BEEN EXPLAINED IN ARTICLE 7(3) OF INDIA-UK DTAA AS UNDER : WHERE A PERMANENT ESTABLISHMENT TAKES AN ACTIVE P ART IN NEGOTIATION, CONCLUDING OR FULFILLING CONTRACTS ENTERED INTO BY THE ENTERPRISE, THEN, NOTWITHSTANDING THAT OTHER PARTS OF THE ENTERPRISE HAVE ALSO PARTICIPATED IN THOSE TRANSACTIONS, THAT PROPORTION OF PROFITS OF T HE ENTERPRISE ARISING OUT OF THESE CONTRACTS WHICH THE CONTRIBUTION OF THE PERMA NENT ESTABLISHMENT TO THOSE TRANSACTIONS BEARS TO THAT OF THE ENTERPRISE AS A WHOLE SHALL BE TREATED FOR THE PURPOSE OF PARAGRAPH 1 OF THIS ARTICLE AS B EING THE PROFITS INDIRECTLY ATTRIBUTABLE TO THAT PERMANENT ESTABLISHMENT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THERE IS NO PROVISION IN ARTICLE 7 OF UN MODEL CONVENTION WHICH IS ANALOGOUS TO THE PROVISION OF ARTICLE 7(3) OF INDIA-UK DTAA AND THE NON CONSIDERATION OF THE SAID ARTICLE 7(3) OF THE INDIA-UK TAX TREATY WHICH IS RELEVANT FOR THE PURPO SE OF APPLYING THE FORCE OF ATTRACTION PRINCIPLE IN THE CASE OF THE ASSESSEE, H AS GIVEN RISE TO A MISTAKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL. IN SUPPOR T OF HIS CONTENTION THAT THE FAILURE TO CONSIDER THE RELEVANT STATUTORY PROVISIO N GIVES RISE TO A MISTAKE APPARENT FROM RECORD, THE LEARNED COUNSEL FOR THE ASSESSEE H AS RELIED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : 1. A.H. WHEELER AND CO. P. LTD. V. ITO [1973] 88 ITR 2 31 (ALL). THE ITO OMITTED TO APPLY THE RELEVANT PROVISIONS OF THE FINANCE ACTS OF 1958 AND 1959 DUE TO WHICH, HAVING REGARD TO THE DIVIDEND DISTRIBUTED BY THE ASSESSEE IN THE RESPECTIVE PREVI OUS YEARS, THE SUPER- 4 M.A.NO.223/MUM/2011 TAX REBATE SHOULD HAVE BEEN REDUCED. THIS OMISSION RESULTED IN SUPER- TAX BEING UNDERCHARGED. THE HIGH COURT AFFIRMED THE SINGLE JUDGE AT PAGE 233 AND HELD THAT THE OMISSION TO TAKE INTO AC COUNT THE RELEVANT STATUTORY PROVISIONS OF THE FINANCE ACTS CONSTITUTE D A MISTAKE APPARENT FROM THE RECORD. 2. INDIAN CARBON LTD. V. CIT [1989] 175 ITR 27 (GAU) THE ASSESSE CLAIMED DEDUCTION OF MANAGERIAL REMUNER ATION OF RS.2,07,783, OUT OF WHICH RS.54,000 WAS ALLOWED BY THE AO AND THE BALANCE WAS DISALLOWED BY APPLYING THE PROVISIONS O F SECTION 40(C). THE TRIBUNAL HELD THAT THE ENTIRE REMUNERATION WAS ALLOWABLE AS IT WAS REASONABLE. ON A MISCELLANEOUS APPLICATION, THE TRI BUNAL NOTED THAT IT HAD OVERLOOKED THE AMENDMENT TO SECTION 40(C), WHIC H LIMITED THE MAXIMUM ALLOWANCE OF REMUNERATION TO RS.72,000. ACC ORDINGLY, THE TRIBUNAL PASSED A RECTIFICATION ORDER RESTRICTING T HE ALLOWANCE TO RS.72,000. THE HIGH COURT HELD THAT SECTION 40(C) W AS CAPABLE OF INTERPRETATION ONLY AS DONE BY THE TRIBUNAL AND ACC ORDINGLY UPHELD THE TRIBUNALS RECTIFICATION ORDER. 3. CIT V. KESARIA TEA CO. LTD. [1998] 233 ITR 700 (KER ) THE ASSESSEE, AN EXPORTER OF GOODS, WAS GRANTED WEI GHTED DEDUCTION UNDER SECTION 35B OF THE ACT. AS PER 35B(1A), WEIGH TED DEDUCTION WAS NOT TO BE ALLOWED UNLESS THE ASSESSEE WAS ENGAG ED IN MANUFACTURE OF THE GOODS WHICH WERE EXPORTED. THE ASSESSEE HAD PURCHASED GOODS AND EXPORTED THEM. THE HIGH COURT NOTED AT PAGE 707 THAT THE PROVISIONS OF SUB-SECTION (1A) [REPRODUCED AT PAGE 706] HAD BEEN OMITTED TO BE CONSIDERED. THE HIGH COURT AFTER DISC USSING THE MATTER AT PAGES 707-711 HELD THAT SUCH OVERLOOKING OF A MA NDATORY PROVISION WAS A MISTAKE APPARENT FROM THE RECORD. 4. CIT V. JANATHA STEEL MILLS PVT. LTD. [2007] 294 ITR 668 (KER) THE ASSESSEE WAS A PARTNER IN THREE FIRMS. HE WAS A LLOWED DEDUCTION OF INVESTMENT DEPOSIT UNDER SECTION 32AB AT 20% OF THE TOTAL INCOME 5 M.A.NO.223/MUM/2011 FROM BUSINESS, INCLUDING THE SHARE OF PROFIT RECEIV ED FROM THE THREE FIRMS. PROVISO TO SECTION 32AB (REPRODUCED AT PAGE 3) DENIED DEDUCTION UNDER SECTION 32AB TO A PARTNER OF THE FI RM. THE HIGH COURT HELD THAT SINCE THE DEDUCTION AT 20% OF THE PROFITS FROM THE FIRM WAS GRANTED TO THE ASSESSEE IN IGNORANCE OF THE AFORESA ID PROVISO, IT CONSTITUTED A MISTAKE APPARENT FROM THE RECORD. 5. CIT V. STEEL STRIPS LTD. [2011] 200 TAXMAN 368 (P&H ) THE PROVISIONS OF SECTION 80VVA PLACING RESTRICTION ON THE DEDUCTION OF CERTAIN TYPES OF EXPENSES WERE OVERLOOKED AND TH AT RESULTED IN ALLOWANCE OF DEDUCTION IN EXCESS OF PERMISSIBLE LIM IT. IT WAS HELD THAT SUCH OVERLOOKING OF A STATUTORY PROVISION WAS A MIS TAKE APPARENT FROM THE RECORD. 6. CIT V. KUSHAL BAGH MINERALS (P LTD. [2009] 310 ITR 125 (RAJ) THE AO DID NOT GIVE BENEFIT OF CLAUSE (V) OF EXPLAN ATION TO SECTION 115JA (DEDUCTION OF PROFITS DERIVED BY AN UNDERTAKI NG SITUATED IN AN INDUSTRIALLY BACKWARD STATE OR DISTRICT IN ARRIVING AT BOOK PROFITS). IT WAS HELD BY THE TRIBUNAL AND AFFIRMED BY THE HIGH C OURT THAT THE ORDER SUFFERED FROM A MISTAKE APPARENT FROM THE REC ORD. 7. CIT V. CARBON & CHEMICALS INDIA LTD. [2012] 344 ITR 252 (KER). THE OFFICER ALLOWED EXCESS DEDUCTION FOR UNABSORBED DEPRECIATION CONTRARY TO CLAUSE (B) OF EXPLANATION (III) TO SECT ION 115JA IN DETERMINING THE ASSESSEES BOOK PROFITS. HE PASSED A SUBSEQUENT ORDER UNDER SECTION 154 RECTIFYING THE MISTAKE. IT WAS HE LD THAT OVERLOOKING THE PROVISIONS OF CLAUSE (B) OF EXPLANATION (III) T O SECTION 115JA RESULTED IN A MISTAKE APPARENT FROM THE RECORD. IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 154 ARE IDENTICAL TO SECTION 254(2). 6 M.A.NO.223/MUM/2011 8. THE ITO V. CHEKKA SRIRAMACHANDRA MURTHY [1984] 10 I TD (HYD) 902 THE ITO RECOGNIZED A PARTIAL PARTITION OF HUF DISRE GARDING THE PROHIBITION IN SECTION 171(9) OF THE ACT IN THIS BE HALF. IT WAS HELD THAT OVERLOOKING THE PROVISIONS OF SECTION 171(9) RESULT ED IN A MISTAKE APPARENT FROM THE RECORD. THE TRIBUNAL HELD IN PARA 5 THAT THE ISSUE WAS NOT DEBATABLE AS THERE WAS A CLEAR CONTRAVENTIO N OF THE ACT. IT OBSERVED THAT NEITHER THE DURATION OF THE ARGUMENT BEFORE IT NOR THE OTHER FACTS URGED WOULD AUTOMATICALLY LEAD TO A CON CLUSION THAT THE ISSUE WAS A DEBATABLE ONE. THE TRIBUNAL HELD THAT S INCE THE LANGUAGE OF THE STATUTORY PROVISION WAS CLEAR, AN ACTION IN CONTRAVENTION THEREOF CONSTITUTED A MISTAKE APPARENT FROM THE RECORD. 9. ASSTT. CIT V. ELECTRICAL TRANSFORMER CO. [1999] 70 ITD 48 (INDORE) THE RETURN OF LOSS WAS NOT FILED WITHIN THE DUE DAT E PRESCRIBED UNDER SECTION 139(1) BUT THE LOSS WAS ALLOWED CONTRARY TO THE PROVISIONS OF SECTION 80. THE TRIBUNAL HELD THAT IGNORANCE OF SEC TION 80 RESULTED IN A MISTAKE APPARENT FROM THE RECORD. 4. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUB MITTED THAT THE FORCE OF ATTRACTION PRINCIPLE CONTAINED IN THE UN MODEL CONV ENTION IS COMPLETELY DIFFERENT FROM THE DIRECT AND INDIRECT ATTRIBUTION PRINCIPL E CONTAINED IN INDIA-UK DTAA AND THE CONCLUSION REACHED BY THE TRIBUNAL RELYING ON THE FORCE OF ATTRACTION PRINCIPLE CONTAINED IN UN MODEL CONVENTION OVERLOOK ING ARTICLE 7(3) OF INDIA-UK DTAA EXPLAINING WHAT IS INDIRECTLY ATTRIBUTABLE TO A PE HAS GIVEN RISE TO A MISTAKE APPARENT FROM RECORD INASMUCH AS THE ENTIRE INCOME FROM THE INDIAN PROJECTS IS 7 M.A.NO.223/MUM/2011 HELD TO BE TAXABLE IN INDIA BY THE TRIBUNAL IRRESPE CTIVE OF WHETHER THE ACTIVITY IS DONE IN INDIA OR NOT WHICH IS ERRONEOUS BEING CONTR ARY TO THE SCOPE OF INDIRECT INCOME ATTRIBUTABLE TO PE AS EXPRESSLY DEFINED IN A RTICLE 7(3) OF THE INDIA-UK TAX TREATY. HE ALSO EXPLAINED HOW OVERLOOKING A STATUTO RY PROVISION GIVES RISE TO A MISTAKE APPARENT FROM RECORD WITH THE HELP OF ONE E XAMPLE BY REFERENCE TO THE PROVISIONS OF SECTION 2(41) AND SECTION 54(2)(VII). HE SUBMITTED THAT THE GENERAL DEFINITION OF RELATIVE GIVEN IN SECTION 2(41) IS NARROWER AS COMPARED TO THE DEFINITION APPLICABLE FOR THE PURPOSE OF SECTION 56 (2)(VII) OF THE ACT AND IF THE APPLICABILITY OF SECTION 56(2)(VII) IS DECIDED ON T HE BASIS OF THE GENERAL DEFINITION OF RELATIVE GIVEN IN SECTION 2(41) OVERLOOKING THE DEFINITION GIVEN IN SECTION 56(2)(VII) ITSELF, THE CONCLUSION WOULD BE ERRONEOU S. HE CONTENDED THAT SIMILARLY THE CONCLUSION DRAWN BY THE TRIBUNAL IGNORING THE P ROVISIONS OF ARTICLE 7(3) OF INDIA-UK DTAA WHICH EXPRESSLY DEFINES THE SCOPE OF INCOME INDIRECTLY ATTRIBUTABLE TO THE PE IS ERRONEOUS AND OVERLOOKING THE SAID PROVISION HAS GIVEN RISE TO A MISTAKE APPARENT FROM RECORD. 5. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUB MITTED THAT THE TRIBUNAL HAS INTERPRETED THE EXPRESSION DIRECTLY OR INDIRECTLY ATTRIBUTABLE IN SUCH A WAY THAT THE ENTIRE INCOME FROM THE INDIAN PROJECTS IS TO BE REGARDED AS INCOME ATTRIBUTABLE TO THE PE IRRESPECTIVE OF WHETHER THE PE WAS INVOLV ED IN EXECUTION OF THE SAID PROJECTS OR NOT. HE CONTENDED THAT THIS CONCLUSION DRAWN BY THE TRIBUNAL IS CONTRARY TO THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF ISHIKAWAJIMA- HARIMA HEAVY INDUSTRIES LTD. VS.. DIRECTOR OF INCOM E-TAX, MUMBAI 288 ITR 408 WHEREIN IT WAS HELD IN PARA NO. 73 THAT FOR THE PRO FITS TO BE ATTRIBUTABLE DIRECTLY OR INDIRECTLY, THE PE MUST BE INVOLVED IN THE ACTIVITY GIVING RISE TO SUCH PROFITS. HE CONTENDED THAT THE CONCLUSION DRAWN BY THE TRIBUNAL THUS IS CONTRARY TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF I SHIKAWAJIMA-HARIMA HEAVY 8 M.A.NO.223/MUM/2011 INDUSTRIES LTD. (SUPRA) WHICH BY ITSELF CONSTITUTES A MISTAKE APPARENT FROM RECORD AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. SAURASHTRA KUTCH STOCK EXCHANGE LTD. 305 ITR 227. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT EVEN AS PER ARTICLE 7(1)(C) OF UN MODEL CONVENTION, THE SCOPE IS LIMITE D TO ACTIVITIES CARRIED ON IN INDIA AND NOT TO THE ACTIVITIES CARRIED ON BY THE A SSESSEE IN LONDON. HE SUBMITTED THAT THE TRIBUNAL HAS HELD THE PROVISIONS OF ARTICL E 7(1) OF INDIA-UK DTAA AND THE PROVISIONS OF ARTICLE 7(1)(C) OF UN MODEL CONVE NTION TO BE PARA MATERIA OVERLOOKING THE VITAL AND RELEVANT PROVISIONS OF AR TICLE 7(3) OF INDIA-UK DTAA WHICH HAS GIVEN RISE TO A MISTAKE APPARENT FROM REC ORD AS THE RELEVANT STATUTORY PROVISIONS APPLICABLE IN THE CASE HAVE BEEN IGNORED . HE SUBMITTED THAT ARTICLE 7(1) OF INDIA-UK DTAA HAS TO BE READ WITH ARTICLE 7(2) A ND 7(3) AND THE DECISION RENDERED BY THE TRIBUNAL READING ARTICLE 7(1) IN IS OLATION HAS RESULTED IN A MISTAKE APPARENT FROM RECORD AS THE RELEVANT PROVISION OF A RTICLE 7(3) HAS BEEN OVERLOOKED. 7. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T ARTICLE 7(3) OF INDIA-UK DTAA WAS REPRODUCED BY THE LEARNED CIT(APPEALS) IN PARAGRAPH NO. 6.5 OF HIS ORDER IMPUGNED BEFORE THE TRIBUNAL AND THE DECISION WAS ALSO RENDERED BY THE LEARNED CIT(APPEALS) RELYING ON THE SAID ARTICLE. H E SUBMITTED THAT THE DECISION RENDERED BY THE LEARNED CIT(APPEALS) ON THIS VERY I SSUE WAS CHALLENGED BY THE REVENUE IN ITS APPEAL FILED BEFORE THE TRIBUNAL AND THE TRIBUNAL HAVING DECIDED THE SAME SPECIFICALLY AFTER CONSIDERING THE MATERIAL AV AILABLE ON RECORD INCLUDING THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS), IT CANN OT BE SAID THAT ARTICLE 7(3) HAS BEEN OVERLOOKED BY THE TRIBUNAL WHILE RENDERING ITS DECISION. HE POINTED OUT FROM PARAGRAPH NO. 141 OF THE TRIBUNALS ORDER THAT A FI NDING WAS GIVEN BY THE TRIBUNAL WHILE DECIDING THIS ISSUE OF HAVING HEARD THE RIVAL CONTENTIONS AND CAREFULLY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS WELL A S THE APPLICABLE LEGAL POSITION. 9 M.A.NO.223/MUM/2011 HE CONTENDED THAT IN VIEW OF THIS SPECIFIC FINDING RECORDED BY THE TRIBUNAL, IT CANNOT BE SAID THAT ARTICLE 7(3) IS IGNORED OR OVE RLOOKED BY THE TRIBUNAL. HE CONTENDED THAT MERELY BECAUSE THERE IS NO SPECIFIC REFERENCE TO ARTICLE 7(3) MADE BY THE TRIBUNAL IN ITS ORDER, IT CANNOT BE SAID THA T THE TRIBUNAL HAS IGNORED OR OVERLOOKED THE SAID ARTICLES WHILE RENDERING ITS DE CISION. HE CONTENDED THAT A WELL CONSIDERED VIEW HAS BEEN TAKEN BY THE TRIBUNAL WHIL E DECIDING THIS ISSUE WHICH MAY NOT BE CORRECT AS PER THE ASSESSEE BUT THERE IS NO MISTAKE APPARENT FROM RECORD AS ALLEGED BY THE ASSESSEE. IN SUPPORT OF THIS CONT ENTION, HE RELIED ON THE THIRD MEMBER DECISION OF ITAT, MADRAS IN THE CASE OF DHAR AMCHAND SURANA VS INCOME-TAX OFFICER 61 ITD 115. 8. THE LEARNED DR THEN SUBMITTED THAT THE ASSESSEE HAS ALREADY FILED AN APPEAL AGAINST THE DECISION OF THE TRIBUNAL ON THIS ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT. HE INVITED OUR ATTENTION TO THE COPY OF THE SAID APPEAL ALONG WITH RELEVANT ANNEXURES PLACED IN THE PAPER BOOK AND SUBMITTED TH AT THE SUBMISSIONS MADE THEREIN CLEARLY SHOW THAT A VIEW HAS BEEN TAKEN BY THE TRIBUNAL ON THIS ISSUE AFTER INTERPRETING THE RELEVANT PROVISIONS OF THE TREATY. HE CONTENDED THAT WHEN THE DECISION OF THE TRIBUNAL ON THIS ISSUE HAS GIVEN RI SE TO SUBSTANTIAL QUESTION OF LAW AS CLAIMED BY THE ASSESSEE HIMSELF, THE PRESENT APP LICATION FILED BY THE ASSESSEE SEEKING RECTIFICATION OF THE ORDER OF THE TRIBUNAL ON THE VERY SAME ISSUE U/S 254(2) IS NOT JUSTIFIED. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF INCOME-TAX OFFICER VS INCOME-TAX APPELLATE TRIBUNAL (PAT) 229 ITR 651. HE ALSO RELIED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME- TAX VS RAMESH ELECTRIC AND TRADING CO. 203 ITR 497 WHEREIN IT WAS HELD THAT ER ROR OF JUDGMENT CANNOT BE RECTIFIED U/S 254(2). HE ALSO RELIED ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME-TAX VS SAURASHTRA KUTCH STOCK 10 M.A.NO.223/MUM/2011 EXCHANGE LTD.-305 ITR 227 TO CONTEND THAT ANY ERROR WHICH IS REQUIRED TO BE EXPLAINED BY LONG DRAWN OUT PROCESS OF REASONING ON POINTS WHERE THERE MAY CONCEIVABLY BE TWO VIEWS IS NOT A MISTAKE APPARENT FROM RECORD RECTIFIABLE U/S 254(2). HE SUBMITTED THAT THE ATTEMPT THAT IS NOW B EING MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE TO ANALYZE COMPARATIVELY THE ARTICLES OF INDIA-UK DTAA AND UN MODEL CONVENTION AT THIS STAGE DURING THE PR OCEEDINGS FOR RECTIFICATION U/S 254(2) IS NOT PERMISSIBLE. HE CONTENDED THAT THERE IS THUS NO MISTAKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL AS ALLEGED BY T HE ASSESSEE IN THE PRESENT APPLICATION CALLING FOR ANY RECTIFICATION U/S 254(2 ). 9. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE AS SESSEE SUBMITTED THAT THERE IS NOTHING IN THE ORDER OF THE TRIBUNAL TO SHOW THAT A RTICLE 7(3) OF INDIA-UK DTAA HAS BEEN CONSIDERED BY IT WHILE RENDERING THE DECIS ION. HE SUBMITTED THAT THERE IS ALSO NO REFERENCE TO ANY ARGUMENT RAISED EITHER ON BEHALF OF THE ASSESSEE OR EVEN ON BEHALF OF THE DEPARTMENT ON THIS ASPECT OF THE MATT ER. HE SUBMITTED THAT THE REVIEW OF THE DECISION OF THE TRIBUNAL NO DOUBT IS NOT PER MISSIBLE U/S 254(2) BUT THE QUESTION OF REVIEW WILL COME ONLY WHEN THERE IS A V IEW TAKEN BY THE TRIBUNAL. HE SUBMITTED THAT EVEN IN THE APPEAL FILED BY THE ASSE SSEE BEFORE THE HONBLE BOMBAY HIGH COURT AGAINST THE ORDER OF THE TRIBUNAL, GROUN D NO. 5 RAISED ON THIS ISSUE SPECIFICALLY TALKS ABOUT THE OVERLOOKING OF RELEVAN T ARTICLES OF THE TREATY BY THE TRIBUNAL. HE CONTENDED THAT SUCH OVERLOOKING OF REL EVANT ARTICLE OF THE TREATY BY THE TRIBUNAL HAS GIVEN RISE TO SUBSTANTIAL QUESTION OF LAW AND AT THE SAME TIME, THIS CONSTITUTES A MISTAKE ALSO WHICH IS APPARENT FROM R ECORD THAT CAN BE RECTIFIED U/S 254(2). HE CONTENDED THAT THE SAID APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL, HOWEVER, HAS NOT BEEN ADMITTED BY THE HONBLE BOMBAY HIGH COURT SO FAR. AS REGARDS THE VARIOUS JUDICIAL PRONOUNCEME NTS RELIED UPON BY THE LEARNED DR IN SUPPORT OF HIS ARGUMENTS, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT 11 M.A.NO.223/MUM/2011 NONE OF THEM IS DIRECTLY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND THERE IS NOTHING TO DISLODGE THE CONTENTION OF THE ASSESSEE THAT THE NON CONSIDERATION OF RELEVANT STATUTORY PROVISION CONSTITUTES A MISTAKE APPARENT FROM RECORD WHICH IS SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS ALREAD Y CITED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE ASSESSEE IN THE PRESENT MISCELLANEOUS APPLICATION AND FURTHER REITERATED BY THE LEARNED C OUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US, THE MAIN MISTAKE THAT HAS ALL EGEDLY CREPT IN THE ORDER OF THE TRIBUNAL IS THAT THE DECISION ON THE ISSUE OF PROFI T ATTRIBUTABLE TO THE PE OF THE ASSESSEE IN INDIA HAS BEEN DECIDED BY THE TRIBUNAL IGNORING OR OVERLOOKING ARTICLE 7(3) OF INDIA UK DTAA WHICH IS RELEVANT TO DECIDE T HE SAID ISSUE. IN OUR OPINION, THERE CAN NOT BE ANY QUARREL WITH THE PROPOSITION, WHICH IS ALSO SUPPORTED BY VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY THE LEARNE D COUNSEL FOR THE ASSESSEE, THAT NON-CONSIDERATION OF RELEVANT STATUTORY PROVISION C ONSTITUTES A MISTAKE APPARENT FROM RECORD. THE QUESTION, HOWEVER, IS WHETHER THE TRIBUNAL IN THE PRESENT CASE CAN BE SAID TO HAVE RENDERED ITS DECISION ON THE IS SUE OF COMPUTATION OF PROFIT ATTRIBUTABLE TO THE PE OF THE ASSESSEE IN INDIA WIT HOUT CONSIDERING ARTICLE 7(3) OF THE INDIA UK DTAA AS ALLEGED BY THE ASSESSEE. IN TH IS REGARD, IT IS OBSERVED THAT THE ENTIRE INCOME EARNED BY THE ASSESSEE FROM PROJ ECTS IN INDIA WAS BROUGHT TO TAX BY THE AO IN THE HANDS OF THE ASSESSEE BEING ATTRIB UTABLE TO THE PE IN INDIA. THIS ACTION OF THE AO WAS DISPUTED BY THE ASSESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT(APPEALS) WHEREIN THE GRIEVANCE PROJECTED BY THE ASSESSEE IN GROUND NO.5 WAS THAT THE AO ERRED IN INCLUDING IN THE TOTAL INCOME THE AMOUNTS INVOICED BY THE ASSESSEE THAT WERE RELATABLE TO THE SERVICES RENDER ED OUTSIDE INDIA. AS CLAIMED BY THE ASSESSEE IN THE SAID GROUND, THE AO OUGHT TO HA VE ASSESSED THE ASSESSEE ONLY IN RESPECT OF FEES WHICH WERE RELATABLE TO WORK PERFOR MED IN INDIA. IN SUPPORT OF THIS 12 M.A.NO.223/MUM/2011 GROUND, RELIANCE, INTER ALIA, WAS PLACED ON BEHALF OF THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) ON ARTICLE 7(3) WHICH WAS REPRODUCED B Y HIM IN HIS APPELLATE ORDER IN PARAGRAPH NO. 6.5. THE LEARNED CIT(APPEALS) THEN HAD DISCUSSED AND DEALT WITH THE RELEVANCE OF ARTICLE 7(3) IN PARAGRAPH NO. 6.12 OF HIS IMPUGNED ORDER WHICH READ AS UNDER : REFERENCE MAY ALSO BE MADE TO ARTICLE 7(3). THIS PARAGRAPH STATES THAT ONLY THAT PROPORTION OF PROFITS WHICH THE CONTRIBUT ION OF THE PERMANENT ESTABLISHMENT BEARS TO THAT OF THE ENTERPRISE AS A WHOLE SHALL BE TREATED AS INDIRECTLY ATTRIBUTABLE TO THE PERMANENT ESTABLISHM ENT. FRO THIS IT FOLLOWS THAT THE ENTIRE INCOME CANNOT BE TREATED AS INDIRECTLY A TTRIBUTABLE TO THE PERMANENT ESTABLISHMENT. ONLY A PROPORTIONATE PART OF THE INCOME CAN BE TREATED AS INDIRECTLY ATTRIBUTABLE. THE APPELLANT C HARGES ITS CLIENTS AT HOURLY RATES BASED ON THE HOURS SPENT ON THE PARTICULAR JO B FROM TIME TO TIME. CONSEQUENTLY, INCOME PROPORTIONATE TO THE TIME SPEN T IN INDIA CAN BE INCLUDED UNDER THIS PARAGRAPH. THEREFORE, INCOME WH ICH CAN BE DIRECTLY OR INDIRECTLY ATTRIBUTED TO THE PERMANENT ESTABLISHMEN T OF THE APPELLANT IN INDIA IS ONLY THE INCOME RELATED TO THE SERVICES PERFORME D IN INDIA. THE LEARNED CIT(APPEALS) THUS HAD ACCEPTED THE CONT ENTION OF THE ASSESSEE THAT ONLY THE INCOME RELATED TO THE SERVICES PERFORMED I N INDIA WAS ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT IN INDIA AND ONLY THAT PORT ION OF INCOME OUGHT TO BE CHARGED TO TAX IN INDIA. AGGRIEVED BY THIS RELIEF A LLOWED BY THE LEARNED CIT(APPEALS) TO THE ASSESSEE, THE REVENUE RAISED IT S GRIEVANCE IN THE APPEAL FILED BEFORE THE TRIBUNAL WHICH WAS TAKEN NOTE OF BY THE TRIBUNAL IN PARAGRAPH NO. 139 OF ITS ORDER AS UNDER : THE ONLY OTHER GRIEVANCE RAISED IN ASSESSING OFFI CERS APPEAL IS THAT THE CIT(A) ERRED IN HOLDING THE ASSESSEE WAS TAXABL E IN RESPECT OF ONLY THAT PORTION OF INCOME THAT WAS RELATED TO SERVICES PERF ORMED IN INDIA, AND DID NOT APPRECIATE THE SCOPE OF FORCE OF ATTRACTION P RINCIPLE EMBEDDED IN ARTICLE 7(1) OF THE INDIA-UK TAX TREATY 13 M.A.NO.223/MUM/2011 THE TRIBUNAL ALSO TOOK NOTE OF THE REASONS OR BASIS GIVEN BY THE LEARNED CIT(APPEALS) TO GIVE RELIEF TO THE ASSESSEE ON THIS ISSUE IN PARAGRAPH NO. 140 WHICH IS REPRODUCED HEREUNDER: AS WE HAVE SEEN EARLIER IN THIS ORDER, THE IMPUGN ED RELIEF GIVEN BY THE CIT(A) WAS FOR THREE REASONS REASONS FIRST, THE TWIN FACTORS THAT THE INCOME EARNED BY THE APPELLANT WERE NOT IN THE NAT URE OF FEES FOR TECHNICAL SERVICES AS DEFINED IN SECTION 9(1)(VII) AND THEREF ORE THE AAR RULING IN THE CASE OF STEFFEN, ROBERSTSON & KIRSTEN CONSULTING EN GINEERS (SUPRA) WILL NOT APPLY TO THE FACTS OF THE APPELLANT AND THAT AS P ER EXPLANATION (A) TO SECTION 9(1)(I), EVEN IF THERE IS A BUSINESS CONNEC TION IN INDIA, ONLY INCOME RELATED TO OPERATIONS CARRIED OUT IN INDIA IS TAXAB LE IN INDIA; - SECOND, THAT IN THE CASE OF CLIFFORD CHANCE (82 ITD 106) THE HO NBLE MUMBAI BENCH OF ITAT HAS HELD THAT THE INCOME RELATING TO SERVICES RENDERED OUTSIDE INDIA IS NOT TAXABLE IN INDIA; AND THIRD, THAT AS PER AR TICLE 7, ONLY THAT PORTION OF INCOME, WHICH IS ATTRIBUTABLE TO THE PERMANENT ESTA BLISHMENT IN INDIA, CAN BE TAXED IN INDIA. THE TRIBUNAL THEN PROCEEDED TO DEAL WITH THE CORREC TNESS OF THE REASONS/BASIS GIVEN BY THE LEARNED CIT(APPEALS) IN PARAGRAPH NO. 141 TO 148 OF ITS ORDER. IN PARAGRAPH NO. 141, THE TRIBUNAL OBSERVED CATEGORICA LLY THAT AFTER HAVING HEARD THE RIVAL SUBMISSIONS AND HAVING CAREFULLY CONSIDERED T HE FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION, NONE OF THE THR EE REASONS GIVEN BY THE LEARNED CIT(APPEALS) TO GIVE RELIEF TO THE ASSESSEE ON THIS ISSUE WAS FOUND TO BE SUSTAINABLE IN LAW. THE TRIBUNAL THEN PROCEEDED FUR THER TO GIVE ITS REASONS FOR THE SAID DECISION AND AFTER DEALING WITH THE FIRST TWO REASONS GIVEN BY THE LEARNED CIT(APPEALS) IN PARAGRAPH NO. 142 AND 143, DEALT WI TH THE THIRD REASON/BASIS GIVEN BY THE LEARNED CIT(APPEALS) RELYING ON ARTICL E 7 OF INDIA-UK TREATY IN PARAGRAPH NO. 144 TO 148 WHICH READ AS UNDER : 14 M.A.NO.223/MUM/2011 144. AS FAR AS LEARNED CIT(A)S RELIANCE ON ARTICL E 7(1) OF THE INDIA UK TAX TREATY IS CONCERNED, IN SUPPORT OF THE PROPOSIT ION THAT ONLY SUCH PROFITS AS ATTRIBUTABLE TO THE OPERATIONS CARRIED OUT IN THE P E ARE TAXABLE IN INDIA, THIS IS SIMPLY CONTRARY TO THE PLAIN PROVISIONS OF THE INDI A UK TAX TREATY. ARTICLE 7, AS WE HAVE SEEN EARLIER IN THIS ORDER, PROVIDES THA T IF THE ENTERPRISE CARRIES ON BUSINESS THROUGH A PE, THE PROFITS OF THE ENTERPRIS E MAY BE TAXED IN THE OTHER STATE BUT ONLY SO MUCH OF THEM AS IS DIRECTLY OR I NDIRECTLY ATTRIBUTABLE TO THAT PERMANENT ESTABLISHMENT. 145. LEARNED CIT(A) HAS APPARENTLY TAKEN NOTE OF TH E PROFITS IN OF THE WORK PERFORMED IN THE PE ITSELF BUT HE HAS NOT TAKEN NOT E OF THE POSITION THAT IT IS ONLY IN RESPECT OF THE PROFITS DIRECTLY ATTRIBUTABL E TO WORK DONE IN THE PE BUT IT IS IN RESPECT OF PROFITS DIRECTLY OR EVEN IND IRECTLY ATTRIBUTABLE TO THE PERMANENT ESTABLISHMENT. THE IMPORT OF DIRECTLY OR INDIRECTLY ATTRIBUTABLE TO PE HAS BEEN CLEARLY IGNORED. THE INCLUSION OF PRO FITS INDIRECTLY ATTRIBUTABLE TO THE PE CLEARLY INCORPORATES A FORCE OF ATTRACTI ON PRINCIPLE IN THE INDIA UK TAX TREATY, BUT THE CIT(A) HAS SIMPLY NOT TAKEN NOT E OF THAT ASPECT OF THE MATTER. IN THE IMPUGNED ORDER, THE CIT(A) HAS, INTER ALIA , OBSERVED THAT, I ALSO AGREE WITH THE LEARNED A.RS ARGUMENTS THAT AS PER ARTICLE 7, ONLY THAT PORTION OF INCOME, WHICH IS ATTRIBUTABLE TO THE PER MANENT ESTABLISHMENT IN INDIA, CAN BE TAXED IN INDIA, AND THAT, .ONLY THAT PORTION OF INCOME RELATING TO RENDERING OF SUCH SERVICES IN INDIA CAN BE ATTRIBUTED TO THE SERVICES PE OF THE APPELLANT IN INDIA. THIS APPROA CH OF THE CIT(A) IS CLEARLY THE FORCE OF ATTRACTION RULE EMBEDDED IN ARTICLE 7( 2) OF INDIA UK TAX TREATY. IN THIS VIEW OF THE MATTER, WE CANNOT, AND DO NOT, APPROVE THE ACTION OF THE CIT(A) IN THIS RESPECT. 146. THE EXTENSION OF TAXABILITY OF PROFITS OF PE B Y INCLUDING PROFITS DIRECTLY OR INDIRECTLY ATTRIBUTABLE, IS AKIN TO THE PROVISIO NS OF ARTICLE 7(1)(B) AND 7(1)(C) OF THE UN MODEL CONVENTION WHICH PROVIDES T HAT IN ADDITION TO THE PROFITS ATTRIBUTABLE TO THE PERMANENT ESTABLISHMEN T THE TAXABILITY OF PE PROFITS WILL ALSO EXTEND TO (B) SALES IN THAT OTHE R STATE OF GOODS OR MERCHANDISE OF THE SAME OR SIMILAR KIND AS THOSE SO LD THROUGH THAT PERMANENT ESTABLISHMENT; OR (C) OTHER BUSINESS CAR RIED ON IN THAT OTHER STATE OF THE SAME OR SIMILAR KIND AS THOSE EFFECTED THROU GH THAT PERMANENT ESTABLISHMENT. IN OUR CONSIDERED VIEW, THE CONNOTA TIONS OF PROFITS INDIRECTLY ATTRIBUTABLE TO PERMANENT ESTABLISHMENT WILL EXTEND TO THESE TWO CATEGORIES. THESE CATEGORIES CLEARLY INCORPORATES A FORCE OF ATTRACTION RULE. THE BASIC PHILOSOPHY UNDERLYING THE FORCE OF ATTRAC TION RULE IS THAT WHEN AN ENTERPRISE SETS UP A PERMANENT ESTABLISHMENT IN ANO THER COUNTRY, IT BRINGS 15 M.A.NO.223/MUM/2011 ITSELF WITHIN THE JURISDICTION OF THAT ANOTHER COU NTRY TO SUCH A DEGREE THAT SUCH ANOTHER COUNTRY CAN PROPERLY TAX ALL PROFITS T HAT THE ENTERPRISE DERIVES FROM THAT COUNTRY WHETHER THE TRANSACTIONS ARE ROUTED AND PERFORMED THROUGH THE PE OR NOT. 147. THE PROVISIONS OF ARTICLE 7(1) IN INDIA UK TA X TREATY INCLUDE THE SAME RESULTS AS SOUGHT TO BE ACHIEVED BY ARTICLE 7(1)(C) OF THE UN MODEL CONVENTION. AS TO THE SCOPE OF THIS PROVISION, WE F IND GUIDANCE FROM THE UN MODEL CONVENTION COMMENTARY IN THIS REGARD. ON THIS ISSUE, THE UN MODEL CONVENTION COMMENTARY STATES, INTER ALIA, AS FOLLOW S SOME MEMBERS FROM DEVELOPED COUNTRIES POINTED OUT THAT THE FORCE OF ATTRACTION RULE HAD BEEN FOUND UNSATISFACTORY AND ABANDONED IN RECENT TAX TREATIES CONCLUDED BY T HEM BECAUSE OF THE UNDESIRABILITY OF TAXING INCOME FROM AN ACTIVIT Y THAT WAS TOTALLY UNRELATED TO THE ESTABLISHMENT AND THAT WAS IN ITSE LF NOT EXTENSIVE ENOUGH TO CONSTITUTE A PERMANENT ESTABLISHMENT. THE Y ALSO STRESSED THE UNCERTAINTY THAT SUCH AN APPROACH WOULD CREATE FOR TAXPAYERS. MEMBERS FROM DEVELOPING COUNTRIES POINTED OUT THAT THE PROPOSED FORCE OF ATTRACTION APPROACH DID REMOVE ADMINIST RATIVE PROBLEMS IN THAT IT MADE IT UNNECESSARY TO DETERMINE WHETHER PARTICULAR ACTIVITIES WERE OR WERE NOT RELATED TO THE PERMANEN T ESTABLISHMENT OR THE INCOME INVOLVED ATTRIBUTABLE TO IT. THAT WAS TH E CASE ESPECIALLY WITH RESPECT TO TRANSACTIONS CONDUCTED DIRECTLY BY THE HOME OFFICE WITHIN THE COUNTRY, BUT SIMILAR IN NATURE TO THOSE CONDUCTED BY PERMANENT ESTABLISHMENT. HOWEVER, AFTER DISCUSSION, IT WAS PROPOSED THAT THE FORCE OF ATTRACTION RULE, SHOUL D BE LIMITED SO THAT IT WOULD APPLY TO SALES OF GOODS OR MERCHANDISE AND OTHER BUSINESS ACTIVITIES IN THE FOLLOWING MANNER: IF AN ENTERPRIS E HAS A PERMANENT ESTABLISHMENT IN THE OTHER CONTRACTING STATE FOR TH E PURPOSE OF SELLING GOODS OR MERCHANDISE, SALES OF THE SAME OR A SIMILAR KIND MAY BE TAXED IN THAT STATE EVEN IF THEY ARE NOT CON DUCTED THROUGH THE PERMANENT ESTABLISHMENT; A SIMILAR RULE WILL AP PLY IF THE PERMANENT ESTABLISHMENT IS USED FOR OTHER BUSINESS ACTIVITIES AND THE SAME OR SIMILAR ACTIVITIES ARE PERFORMED WITHOUT AN Y CONNECTION WITH THE PERMANENT ESTABLISHMENT. (EMPHASIS SUPPLIED BY US) 148. IN OUR CONSIDERED VIEW, THEREFORE, THE CONNOTA TIONS OF PROFITS INDIRECTLY ATTRIBUTABLE TO PERMANENT ESTABLISHMENT DO INDEED EXTEND TO INCORPORATION 16 M.A.NO.223/MUM/2011 OF THE FORCE OF ATTRACTION RULE BEING EMBEDDED IN A RTICLE 7(1). THE WAY IT NEEDS TO BE IMPLEMENTED, ON THE FACTS OF THE PRESEN T CASE, IS LIKE THIS. IN ADDITION TO TAXABILITY OF INCOME IN RESPECT OF SERV ICES RENDERED BY THE PE IN INDIA, ANY INCOME IN RESPECT OF THE SERVICES RENDER ED TO AN INDIAN PROJECT, WHICH IS SIMILAR TO THE SERVICES RENDERED BY THE PE RMANENT ESTABLISHMENT, IS ALSO TO BE TAXED IN INDIA IN THE HANDS OF THE ASSES SEE IRRESPECTIVE OF THE FACT WHETHER SUCH SERVICES ARE RENDERED THROUGH THE PERM ANENT ESTABLISHMENT, OR DIRECTLY BY THE GENERAL ENTERPRISE. THERE CANNOT BE ANY PROFESSIONAL SERVICES RENDERED IN INDIA WHICH ARE NOT, AT LEAST INDIRECTL Y, ATTRIBUTABLE TO CARRYING OUT PROFESSIONAL WORK IN INDIA. THIS INDIRECT ATTRI BUTION, IN VIEW OF THE SPECIFIC PROVISIONS OF INDIA UK TAX TREATY, IS ENOU GH TO BRING THE INCOME FROM SUCH SERVICES WITHIN AMBIT OF TAXABILITY IN IN DIA. THE TWIN CONDITIONS TO BE THUS SATISFIED FOR TAXABILITY OF RELATED PROFITS ARE (I) THE SERVICES SHOULD BE SIMILAR OR RELATABLE TO THE SERVICES RENDERED BY TH E PE IN INDIA; AND (II) THE SERVICES SHOULD BE DIRECTLY OR INDIRECTLY ATTRIBUT ABLE TO THE INDIAN PE I.E. RENDERED TO A PROJECT OR CLIENT IN INDIA. IN EFFECT THUS, ENTIRE PROFITS RELATING TO SERVICES RENDERED BY THE ASSESSEE, WHETHER RENDE RED IN INDIA OR OUTSIDE INDIA, IN RESPECT OF INDIAN PROJECTS IS TAXABLE IN INDIA. THAT IS PRECISELY WHAT THE ASSESSING OFFICER HAD DONE. THE GRIEVANCE OF T HE ASSESSING OFFICER IS INDEED JUSTIFIED AND WE UPHOLD THE SAME. WE, THEREF ORE, VACATE THE RELIEF GRANTED BY THE COMMISSIONER (APPEALS) AND RESTORE T HE ORDER OF THE ASSESSING OFFICER IN THIS REGARD. 11. KEEPING IN VIEW THE RELEVANT PORTION OF THE ORD ER OF THE TRIBUNAL ON THIS ISSUE WHICH IS REPRODUCED ABOVE AND HAVING REGARD T O THE MATERIAL AVAILABLE ON RECORD BEFORE THE TRIBUNAL INCLUDING THE ORDER OF T HE LEARNED CIT(APPEALS) WHICH WAS IMPUGNED BEFORE THE TRIBUNAL, WE FIND THAT THE CONTROVERSY INVOLVED IN RELATION TO THE ISSUE WAS CORRECTLY UNDERSTOOD BY T HE TRIBUNAL AND EVEN THE REASONS GIVEN BY THE LEARNED CIT(APPEALS) TO GIVE RELIEF TO THE ASSESSEE ON THE SAID ISSUE WERE IDENTIFIED BY THE TRIBUNAL. ONE OF THE REASONS SO GIVEN BY THE LEARNED CIT(APPEALS) AS IDENTIFIED BY THE TRIBUNAL WAS BASE D ON ARTICLE 7 OF THE INDIA-UK TREATY AND THE SAID ARTICLE INCLUDING PARA 3 THEREO F WAS NOT ONLY REPRODUCED BY THE LEARNED CIT(APPEALS) IN PARAGRAPH NO. 6.5 OF HIS IM PUGNED ORDER BUT THE SAME 17 M.A.NO.223/MUM/2011 WAS ALSO DISCUSSED AND DEALT WITH BY HIM IN PARAGRA PH NO. 6.12 OF THE SAID ORDER BEFORE GIVING RELIEF TO THE ASSESSEE RELYING ON THE SAME. AS CLEARLY MENTIONED BY THE TRIBUNAL IN PARAGRAPH NO. 141 OF ITS ORDER, THE LEGAL POSITION APPLICABLE TO THE ISSUE WAS CAREFULLY CONSIDERED BY IT WHICH OBVIOUSL Y INCLUDED ARTICLE 7(3) OF THE INDIA-UK TREATY RELIED UPON BY THE LEARNED CIT(APPE ALS) AND AFTER TAKING THE SAME INTO CONSIDERATION, IT WAS HELD BY THE TRIBUNAL THA T THE PROVISIONS OF ARTICLE 7(1) IN INDIA-UK TREATY INCLUDED THE SAME RESULTS AS SOUGHT TO BE ACHIEVED BY ARTICLE 7(1)(C) OF THE UN MODEL CONVENTION. ACCORDINGLY, RE LYING ON THE UN MODEL CONVENTION COMMENTARY ON THIS ISSUE, A CONSIDERED V IEW WAS TAKEN BY THE TRIBUNAL THAT THE CONNOTATION OF PROFITS INDIRECT LY ATTRIBUTABLE TO PERMANENT ESTABLISHMENTS DID EXTEND TO INCORPORATION OF THE FORCE OF ATTRACTION RULE BEING EMBEDDED IN ARTICLE 7(1). KEEPING IN VIEW THIS TEXT AND CONTEXT OF THE ORDER OF THE TRIBUNAL, WE ARE OF THE VIEW THAT IT CANNOT BE SAID THAT THE TRIBUNAL HAS IGNORED OR OVERLOOKED ARTICLE 7(3) OF INDIA-UK TREATY WHILE RE NDERING ITS DECISION ON THIS ISSUE AND THAT THERE IS ANY MISTAKE APPARENT FROM R ECORD IN THE ORDER OF THE TRIBUNAL ON ACCOUNT OF NON CONSIDERATION OF THE SAI D ARTICLE AS ALLEGED BY THE ASSESSEE. 12. AS REGARDS THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. V. DIRECT OR OF INCOME-TAX, MUMBAI (SUPRA), IT IS OBSERVED THAT THE DECISION RENDERED THEREIN REGARDING DETERMINATION OF INCOME THAT CAN BE TAXED IN INDIA ONLY TO THE EX TENT AS ATTRIBUTABLE TO PART PLAYED BY THE PERMANENT ESTABLISHMENT IN THE RELEVANT TRAN SACTION WAS BASED ON THE FACTS AND CIRCUMSTANCES OF THAT CASE AS WELL AS ARTICLE 7 OF DTAA BETWEEN INDIA AND JAPAN AS WELL AS PARA 6 OF PROTOCOL TO THE SAID TRE ATY WHEREAS THE DECISION IN THE PRESENT CASE HAS BEEN RENDERED BY THE TRIBUNAL AS P ER ARTICLE 7 OF INDO-UK TREATY WHICH AS FOUND BY THE TRIBUNAL IS AKIN TO ARTICLE 7 (1)(B) AND 7(1)(C) OF THE UN 18 M.A.NO.223/MUM/2011 MODEL CONVENTION. THE DECISION IN THE PRESENT CASE, THUS HAS BEEN RENDERED BY THE TRIBUNAL ON ITS OWN FACTS AND BY APPLYING THE PROVI SIONS OF DIFFERENT TREATY. IN OUR OPINION, IT THEREFORE, CANNOT BE STRAIGHTWAY INFERR ED THAT THE SAME IS CONTRARY TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD. (SUPRA) GIVING RISE TO A MISTAKE AP PARENT FROM RECORD. AS REGARDS THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE THA T THE SCOPE OF ARTICLE 7(1)(C) OF U.N. MODEL CONVENTION IS LIMITED TO ACTIVITIES CARR IED ON IN INDIA ONLY, IT IS OBSERVED THAT THE TRIBUNAL HAS TAKEN A CONSIDERED V IEW ON INTERPRETATION OF THE SAID ARTICLE THAT THE ENTIRE PROFIT RELATING TO SERVICES RENDERED BY THE ASSESSEE WHETHER RENDERED IN INDIA OR OUTSIDE INDIA, IN RESPECT OF I NDIAN PROJECT IS TAXABLE IN INDIA AND IT IS NOT PERMISSIBLE TO REVIEW THE DECISION OF THE TRIBUNAL IN THE GUISE OF RECTIFICATION U/S 254(2) OF THE ACT. WE ARE, THERE FORE, OF THE VIEW THAT THE ORDER OF THE TRIBUNAL DOES NOT SUFFER FROM ANY MISTAKE APPAR ENT FROM RECORD AS ALLEGED BY THE ASSESSEE IN THE PRESENT MISCELLANEOUS APPLICATI ON. 13. IN THE RESULT, THE MISCELLANEOUS APPLICATION O F THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 19 TH DAY OF DECEMBER, 2012. SD/- SD/- (I.P. BANSAL) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 19 TH DEC., 2012. WAKODE 19 M.A.NO.223/MUM/2011 COPY TO : 1. APPLICANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. D.R., L-BENCH. (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.