2021 (9) TMI 1374 - AT - Income Tax

PE in India - Income deemed to accrue or arise in India - attribution of income arising from the contracts - activities of Project Office of the assessee - Whether CIT(A) erred in holding that the Project Office of the assessee in India is not its fixed place of business and Permanent Establishment as defined under Article 5 (2) (c) of the Double Taxation Avoidance Agreement between India and UAE? - appeal of the revenue mainly relates to the provisions of Article 5(2)(c) with regard to treating of project office as fixed place PE, the preparatory and auxiliary functions as per Article 5(3)(e) and treating the assessee as installation PE under Article 5(2)(h) of DTAA between India and UAE - HELD THAT - As the counsels brought to the notice of the bench that the issue stands squarely covered by the order of the Hon ble High Court of Delhi 2016 (2) TMI 47 - DELHI HIGH COURT The judgment dealt with Fixed Place PE, Installation PE and Dependent PE in the assessee s own case for the A.Ys. 2007-08 2012 (10) TMI 257 - ITAT DELHI and 2008-09 2013 (10) TMI 753 - ITAT DELHI and the Hon ble High Court held that the assessee did not have a PE in India and no income from the project in question can be contributed to the assessee s PE. In the absence of any material change in the facts of the case and legal proposition, following the judgment of Hon ble High Court mentioned above, we hereby dismiss the appeal of the revenue.

Summary

Issues Involved:
1. Interpretation of Double Taxation Avoidance Agreement between India and UAE regarding Permanent Establishment.
2. Classification of Project Office as a fixed place of business.
3. Determination of activities as preparatory and auxiliary under the Agreement.
4. Assessment of Installation Permanent Establishment.
5. Recognition of Dependent Agent Permanent Establishment.
6. Attribution of income to the Permanent Establishment in India.
7. Taxability of profits attributable to the Permanent Establishment.
8. Tax treatment of interest income under the Double Taxation Avoidance Agreement.

Analysis:
1. The appeal raised several grounds challenging the order of the ld. CIT (A) regarding the classification of the Project Office as a fixed place of business under Article 5(2)(c) of the Double Taxation Avoidance Agreement between India and UAE. The issue of whether the Project Office constituted a Permanent Establishment was contested.

2. Another issue raised was the characterization of the activities of the Project Office as 'preparatory and auxiliary' in nature as per Article 5(3)(e) of the Agreement. The question of whether these activities fell within the scope of the Agreement's provisions was a key point of contention.

3. The appeal also questioned the determination of whether the assessee had an Installation Permanent Establishment under Article 5(2)(h) of the Agreement. The assessment of whether the conditions for such an establishment were met formed a significant part of the dispute.

4. Furthermore, the issue of whether M/s Arcadia Shipping Ltd was a Dependent Agent Permanent Establishment of the assessee under Article 5(4) of the Agreement was raised. The dependency relationship and its implications on the tax treatment were central to this aspect of the appeal.

5. The judgment referred to a previous decision by the Hon’ble High Court of Delhi for the A.Ys. 2007-08, 2008-09, and 2009-10, which concluded that the assessee did not have a Permanent Establishment in India. Citing this precedent, the present appeal by the revenue was dismissed due to the absence of material changes in facts or legal principles.

6. In conclusion, the appeal of the revenue was dismissed based on the precedent set by the earlier judgment of the Hon’ble High Court, which determined that the assessee did not have a Permanent Establishment in India. The decision was made considering the lack of alterations in circumstances or legal interpretations warranting a different outcome.

7. The judgment highlighted the importance of adhering to established legal precedents and the significance of consistency in interpreting tax laws and Double Taxation Avoidance Agreements. The dismissal of the appeal underscored the relevance of past decisions in shaping current tax assessments and disputes.

End of Analysis