2010 (5) TMI 675 - AT - Income Tax

Summary

Issues Involved:
1. Determination of Permanent Establishment (PE) in India under Article 5(2)(f) of the DTAA between India and Australia.
2. Taxability of payments received by the assessee outside India under section 44BB(2) of the Income-tax Act.
3. Chargeability of interest under section 234B in the case of a non-resident assessee whose income is liable to deduction of tax at source under section 195 of the Act.

Issue-wise Detailed Analysis:

1. Determination of Permanent Establishment (PE) in India under Article 5(2)(f) of the DTAA between India and Australia:
The revenue contended that the assessee had a PE in India based on Article 5(2)(f) of the DTAA, which includes "a mine, an oil or gas well, a quarry or any other place of extraction of natural resources." The Assessing Officer argued that the assessee's activities related to the installation and upgrading of platforms in the Panna Oil field constituted a PE under this clause. However, the CIT(A) disagreed, stating that the assessee was only involved in installation and assembly projects and did not own or operate the oil wells. The CIT(A) concluded that the assessee's activities fell under Article 5(2)(k), which pertains to "a building site or construction, installation or assembly project" and requires the site to exist for more than six months to constitute a PE. Since the assessee's activities did not meet the six-month threshold, the CIT(A) held that there was no PE in India. The Tribunal upheld this view, agreeing that the assessee was not covered by Article 5(2)(f) and did not have a PE under Article 5(2)(k) due to the duration of the activities.

2. Taxability of payments received by the assessee outside India under section 44BB(2) of the Income-tax Act:
The revenue argued that the payments received by the assessee outside India were subject to tax under section 44BB(2) of the Income-tax Act, considering that the assessee had a PE in India. However, since the CIT(A) and the Tribunal concluded that the assessee did not have a PE in India, the payments received outside India were not taxable under section 44BB(2). The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 98,00,60,397 made by the Assessing Officer.

3. Chargeability of interest under section 234B in the case of a non-resident assessee whose income is liable to deduction of tax at source under section 195 of the Act:
The revenue contended that the CIT(A) erred in holding that interest under section 234B was not chargeable in the case of a non-resident assessee whose income is subject to deduction of tax at source under section 195. The CIT(A) relied on findings from the ITAT, which supported the view that interest under section 234B was not applicable in such cases. The Tribunal upheld the CIT(A)'s decision, agreeing that the interest under section 234B was not chargeable for the non-resident assessee.

Conclusion:
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s findings that the assessee did not have a PE in India under Article 5(2)(f) or 5(2)(k) of the DTAA, the payments received outside India were not taxable under section 44BB(2), and interest under section 234B was not chargeable.