×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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20-07-2018, HITT Holland Institute, Section 44BBB, 9(1)(i), Tribunal Kolkata
1. These appeals are directed against the order of the Learned DCIT, International Taxation, Circle 1(1), Kolkata [ hereinafter referred to as the ld AO] under section 143(3) of the Income Tax Act, 1961, [ hereinafter referred to as the ‘Act’] dated 30.12.2015 and 21.12.2016, pursuant to the directions of the Learned Dispute Resolution Panel [hereinafter referred to as ld DRP] issued u/s 144C(5) of the Act dated 16.11.2015 and 26.10.2016 for the Asst Years 2012-13 and 2013-14 respectively. As identical issues are involved in both these appeals, they are taken up together and disposed off by this common order for the sake of convenience.
2. The brief facts of these appeals are that the assessee is a subsidiary of HITT N.V.. It is a company incorporated as per the laws of Netherlands operating in the international market for safety, security and efficiency of nautical and air traffic. It operates in the specialized market for traffic control, navigation and port management systems. The assessee has entered into contracts with Oil and Natural Gas Corporation of India (ONGC) . Director General of Lighthouse and Lightships (DGLL) and Airports Authority of India (AAI) for supply of equipment and services. During the year under consideration, the assessee received payments in respect of performance of services and supply of equipment under the following contracts in India :-
a) Supply, Installation, testing and commissioning of Advances Surfaces Movement Guidance Control System (ASMGCS) at Chennai, Mumbai and Kolkata Airports by AAI [ AAI (Mumbai, Chennai and Kolkata) Project ].
b) Establishment of Vessel Traffic Service (VTS) system in the Gulf of Kuchchh (GOK Project)
c) Contract to provide Annual Maintenance of the Vessel and Air Traffic Management System (VATMS) system for ONGC (ONGC VATMS – AMC Project). The transactions of the assessee are covered under the Double Taxation Avoidance Agreement (DTAA) between India and Netherlands.
3. Gulf of Kuchch (GOK) Project
The assessee had entered into a consortium agreement with Telecommunications Consultants India Limited (in short TCIL) and Dalmia & Company Limited , with TCIL acting as the consortium leader. This consortium was awarded a contract for establishment of Vessel Traffic Service (VTS) system in the Gulf of Kuchch (GOK) by the Director General of Lighthouse and Lightships (DGLL) in 2005 (agreement between DGLL and consortium enclosed in pages 224 to 227 of paper book and consortium agreement enclosed at pages 228 to 252 of paper book) for Asst Year 2012-13. Similar papers were also enclosed in the paper book filed separately for Asst Year 2013-14 also except with variance in page numbers. The responsibilities of each of the members of the consortium are set out in the annexure to the consortium agreement. Supply, installation, testing and commissioning of integrated automatic identification system base stations equipments with associated software is the primary responsibility of the assessee. As per the consortium agreement , the assesse had set up a Project Office (PO) in India for the execution of this project in the year 2005. However, the PO never became operational and was not involved in any activity pertaining to this project. During the year under consideration, the assessee received payments for the following offshore supply of equipment / services / training and onshore supply of equipment / services:-
3.1. The Grounds of Asst Year 2012-13 with regard to this GOK project are taken up for adjudication and the decision rendered thereon would apply with equal force for the relevant grounds of Asst Year 2013-14 also.
3.2. The Ground 2.1. raised by the assessee is with regard to the action of the ld AO in holding that an Installation PE of the assessee exists in India. Without prejudice to earlier ground, the assessee had raised Ground 2.2. with regard to the action of the ld AO in attributing 10% gross consideration amount of supply of equipment and provision of services for both offshore and onshore to the alleged PE. Without prejudice to earlier grounds, the assessee had raised Ground 2.3. that no part of the income from offshore activities can be attributed to the alleged PE.
3.3. We find that these grounds had been adjudicated by this tribunal in assessee’s own case for the Asst Year 2011-12 in ITA No. 390/Kol/2015 dated 4.4.2018 wherein it was held that the assessee herein constituted Installation PE in India. Further it was held that no attribution can be done on receipts from Offshore supply of equipment and Offshore provision of services. Only the profits attributed to the activities carried out in India shall be taxable and accordingly, only the onshore supply of equipment and onshore services rendered by the assessee, would have to be considered for taxing the onshore receipts at 10%. The rel vant operative portion of the said order is reproduced hereunder:-
3.2. We have heard the rival submissions. The ld AR before us fairly stated that the assessee be treated as an ‘Installation PE’ but pleaded for treating only the onshore provision of services and onshore supply of equipments at 10% on gross basis as profits attributable to the Installation PE in India as against the action of the ld AO in taking the total receipts (i.e both offshore and onshore activities). This is because of the lack of details with regard to the number of days of stay in India for executing the installation work by the assessee. The same is reckoned as a statement from the Bar by the ld AR. Therefore, we shall address the Ground No. 3.4. raised by the assessee before us and dismiss the Grounds 3.1. to 3.3. raised by the assessee as not pressed. Before going into this question, we feel that it would be relevant to address the contents of Article 5(3) of the IndiaNetherlands DTAA which is reproduced as under:-