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2016 (6) TMI 728 - AT - Income TaxTDS u/s 195 - non tds deduction - PE in India - maintainability of appeal - appealable order u/s 246A - whether CIT(A) has erred in adjudicating the appeal filed by M/s Abu Dhabi Ship Building PJSC who is not Applicant of the application u/s 195(2)? - Held that - The order appealed against is an order passed under section 195(2) against ONGC requiring it to deduct tax at source on payments made to the assessee. Further, there is no final determination of liability under the Act as far as the assessee is concerned which can only be determined when assessment is framed against the assessee. That besides, there being a specific provision under section 248 of the Act for filing appeal against order passed under section 195(2) of the Act, that too by payer / deductor of tax at source the said order cannot be challenged under section 246A of the Act by the respondent. In the aforesaid view of the matter, we are of the considered opinion that the appeal filed by the respondent assessee before the learned Commissioner (Appeals) against the order passed under section 195(2) in the case of ONGC is not maintainable. The learned Commissioner (Appeals), in our view, was not competent under the provisions of section 246A of the Act to entertain such an appeal. We, therefore, set aside the impugned order passed by the learned Commissioner (Appeals) and restore the order of the Assessing Officer under section 195(2). - Decided in favour of revenue
Issues Involved:
1. Maintainability of the appeal filed by Abu Dhabi Ship Building PJSC under section 246A. 2. Determination of tax liability under section 195(2) regarding payments made by ONGC to Abu Dhabi Ship Building PJSC. 3. Business connection and Permanent Establishment (P.E.) in India. 4. Applicability of Double Taxation Avoidance Agreement (DTAA) between India and UAE. 5. Attribution of income to Indian operations. Issue-wise Detailed Analysis: 1. Maintainability of the Appeal: The primary issue was whether Abu Dhabi Ship Building PJSC could file an appeal under section 246A against the order passed under section 195(2). The Tribunal concluded that the order under section 195(2) was not appealable under section 246A, as it was not mentioned as an appealable order in that section. The Tribunal emphasized that the appeal should have been filed by ONGC under section 248, which provides for an appeal by the payer/deductor of tax. Since the order was against ONGC and not the assessee, and there was no determination of the assessee's liability under the Act, the appeal filed by Abu Dhabi Ship Building PJSC was found to be not maintainable. 2. Determination of Tax Liability under Section 195(2): The Assessing Officer had directed ONGC to deduct tax at source on payments made to Abu Dhabi Ship Building PJSC, considering that there was a business connection in India. The Assessing Officer relied on several factors, including the turnkey nature of the contract, signing of the contract in India, delivery of the ship in India, and the role of the Indian agent. The Tribunal upheld this determination, noting that the Assessing Officer's decision was based on relevant facts and circumstances. 3. Business Connection and Permanent Establishment (P.E.) in India: The Assessing Officer argued that the consortium had a business connection in India and that the Indian agent constituted a P.E. The assessee contended that all operations related to the construction of the vessels were carried out outside India, and the Indian agent's role was limited to providing information and assistance. The Commissioner (Appeals) had found that the Indian agent's activities did not constitute a P.E. under the DTAA. However, the Tribunal did not delve into the merits of this issue due to the decision on the maintainability of the appeal. 4. Applicability of DTAA between India and UAE: The Assessing Officer had rejected the application of the DTAA benefits, arguing that the consortium was not a resident of either contracting state. The Commissioner (Appeals) had allowed the DTAA benefits, considering Abu Dhabi Ship Building PJSC as the leading partner of the consortium. The Tribunal did not address this issue in detail due to the decision on the maintainability of the appeal. 5. Attribution of Income to Indian Operations: The Assessing Officer had attributed 20% of the contract value to Indian operations, estimating the profit attributable to Indian activities. The Commissioner (Appeals) had disagreed, stating that the entire construction work was done outside India, and the income could not be attributed to Indian operations. The Tribunal did not address this issue in detail due to the decision on the maintainability of the appeal. Conclusion: The Tribunal set aside the order of the Commissioner (Appeals) and restored the order of the Assessing Officer under section 195(2), concluding that the appeal filed by Abu Dhabi Ship Building PJSC was not maintainable under section 246A. The decision emphasized the specific provisions for filing appeals against orders under section 195(2) and the necessity for such appeals to be filed by the payer/deductor of tax, in this case, ONGC.
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