Case: Joint Commissioner of Income-tax, Special Range 12 Vs Siemens Aktiengesellschaft. ITAT (Income Tax Appellate Tribunal)
| Judges | R.S. Syal, Accountant Member and N.V. Vasudevan, Judicial Member |
| Issue | Income Tax Act, 1961 - Sections 5, 195, 234B |
| Citation | [2009] 34 SOT 16 (Mum) |
| Judgement Date | June 30, 2009 |
| Court | ITAT (Income Tax Appellate Tribunal) |
Order:
R.S. Syal, Accountant Member, (In The ITAT Mumbai 'L' Bench)
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This appeal by the Revenue and cross objection by the assessee emanate from the order of the Commissioner of Income-tax (Appeals) on 18-12-2000 in relation to the assessment year 1997-98.
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The first ground of the departmental appeal is against the direction given by the learned CIT(A) to delete the addition of Rs. 8,45,70,467 included as business income of the assessee. Briefly stated the facts of the case are that the assessee is a German Company. According to the Assessing Officer it had executed various contracts through its PE in India for many decades. The assessee was asked to furnish the details of the contracts executed by it in India for turnkey project, supplies and services. Despite various reminders the assessee did not submit copies of the contracts executed in India. Copies of some contracts executed in India were collected by DCIT, Non-resident Circle, New Delhi which were transferred to the Assessing Officer of the assessee. According to that one contract was executed during the year with BPL Systems & Projects Limited ('BPL') for execution of the Cellular Mobile Project for the Bombay region on CIF basis for a total consideration of US$ 2,08,53,039. The Assessing Officer noted that it was performed by the Indian P.E. The assessee was asked to show cause as to why the profit of the above project should not be taxed since the project was performed by the Indian P.E. Despite various reminders, as per the Assessing Officer, the assessee did not furnish any information. Its value in Indian rupees was converted into Rs. 74,57,04,674. In the absence of any information about the consideration in respect of other contracts, the Assessing Officer estimated this amount at Rs. 10 crores. Thus the total turnover of the Indian projects, other than fees for technical services, was determined at Rs. 84,57,04,674. In response to the query as to why the profit be not computed under Rule 10, the assessee replied vide its letter dated 15-3-2000, some part of which has been extracted in the assessment order, that it did not have any employees stationed in India for carrying out any activity on its behalf. It was further stated that some of its employee were deputed to Siemens Ltd., who were on their rolls under their supervision and control for the purposes of fulfilling of the obligations of the M/s. Siemens Limited, the Indian company. It was further clarified that all the onshore operations were the responsibility of the Indian company, who was engaged in ensuring supplies and the availability of know-how whenever required. It was further clarified that for such services, there was no separate recovery by the assessee company and the charges were recovered by the Indian company directly from the customers. It was thus stated that the assessee did not have any P.E. in India and hence no income was taxable. The Assessing Officer, relying on Article 7 of Indo-Australia Treaty, came to the conclusion that the assessee was present in India for more than many decades and further it had executed many contracts in India exceeding the period of six months. Even the contract with BPL Mobile was also found to have been executed for a period of far more than six months. The Assessing Officer further noted that the assessee-company had taken full turnkey contract but assigned a part of it to its subsidiary M/s. Siemens Limited and another contract between Indian party was signed on 9-10-1995. He further took note of the fact that the assessee had sent its technicians for executing projects in India who were paid through their Indian subsidiary. In view of these facts it was held that the assessee had P.E. in India and its income from all contracts was taxable in India. In the absence of any detail of expenditure the profit earned was determined at 10 per cent of the total turnover and thus the total business income was determined at Rs. 8,45,70,467 on this score. In the first appeal the learned CIT(A) overturned the assessment order on this issue by observing that the Assessing Officer had wrongly relied on DTAA with Australia, whereas the assessee was a German company. He further took into consideration the contract dated 10-3-1995 entered into between the assessee and BPL which was for supply of equipment on principal-to-principal basis. He held that the assessee did not have any P.E. in India and hence the question of supply of equipment being attributable to the P.E. did not arise. He further referred to the new DTAA with Germany notified on 29-11-1996 which was to be applicable with effect from assessment year 1998-99 onwards. Considering the relevant Clauses of DTAA, the learned CIT(A) opined that the assessee did not have any P.E. in India and hence no part of such income was chargeable to tax in India.
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Before us the learned Departmental Representative contended that the assessee miserably failed to furnish relevant information/evidence at the assessment stage. While referring to the impugned order he submitted that the learned CIT(A) had not actually appreciated the facts in the light of the Treaty with Germany for determining precisely as to whether or not that the assessee had P.E. in India. It was further stated that neither the comments of the Assessing Officer were called for nor any remand report was sought and hence the learned CIT(A) fell in error in deciding the issue in assessee's favour in violation of Rule 46A. On the question of P.E. in India, the learned D.R. submitted that the Assessing Officer had specifically asked about the number of employees of the assessee who had come to India in the execution of the contract with BPL for the purposes of ascertaining if the assessee had P.E. in India or not. No information was provided by the assessee. He further stated that the Assessing Officer had a copy of contract between the assessee and BPL but the contract between BPL and Siemens India Limited was not provided. While referring to the copy of contract between BPL and the assessee, he stated that Article 1 of the contract provides that the assessee was to deliver the equipment on CIF basis. While referring to copy of invoice, he showed that BPL was billed on CIF Bombay basis. According to the learned D.R. this invoice amply demonstrate that the goods were not supplied to BPL outside India as the assessee was under obligation to supply the equipment at Bombay on CIF (Cost Insurance and Freight) basis. While referring to Annexure 2 to the contract between the assessee and BPL he stated that the services were to be rendered by the assessee in installation and bringing into operation/commissioning. He further invited our attention towards the equipment list which is part and parcel of the said contract dated 10-3-1995 to show that the training was to be given in India for 15 working days for 5 trainees. Then he referred to Annexure 7 dealing with warranty/repair programme for the Mobile Radio Network. While referring to Clause 2 of Annexure 7, he submitted that BPL was to identify any defect in the unit and replace it with a operable module from the spare parts tools and ship it to the TAC 2 (Technical Assistance Centre) organization in Bombay. It was, therefore, stated that the assessee had its presence in India through TAC 2 Centre in Bombay, which clearly meant that there was a permanent establishment of the assessee in India. Further since the equipment was supplied on cost insurance freight basis at Bombay, it was submitted that the property in the equipment stood vested in BPL only in India and hence the income accrued in India. Thus it was summed up that the income accrued to the assessee in India as per the regular provisions of the Act and further since it had TAC in Bombay, it meant of having PE in India also and even going as per DTAA, the taxable business profits were to be determined on the basis of such PE in India. It was further stated that as the assessee failed to furnish any information/evidence to the Assessing Officer, it will be in the fitness of things if the matter is sent back to the Assessing Officer for fresh computation of income.
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Per contra the learned Counsel for the assessee contended that the ld. CIT(A) had rightly held that the assessee did not have any P.E. in India. It was put forth that there was contract of the assessee with BPL for the supply of equipment only and the services in this regard were rendered by Siemens Ltd., the Indian company, which had received the income in its individual right and offered the same for tax in its own hands. It was reiterated that the assessee did not have any P.E. in India and hence the Assessing Officer fell in error to hold so. He further argued that the Assessing...
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