2023 (5) TMI 740 - AT - Income Tax

Income deemed to accrue or arise in India - Addition u/s 44DA or u/s 115A r.w.s. 9(1)(vii) - amount received by the assessee from Delhi Airport Metro Express Pvt. Ltd. is taxable u/s 44DA as per departmental or u/s 115A r.w.s. 9(1)(vii) as per assessee - assessee is a non-resident corporate entity, a tax resident of Hong Kong - contention of the assessee is that since professional services rendered by the assessee are not through any fixed place of profession, the receipts are not taxable under section 44DA - HELD THAT - As contention of the assessee is farfetched, hence, not acceptable. The expression fixed place of profession is used in the context of a non-resident, which is not a foreign company. Though, the expression fixed place of profession has not been defined specifically under the provisions of the Act, however, the term Permanent Establishment used in section 44DA, in turn, refers to the definition of Permanent Establishment u/s 92F(iiia) of the Act. As per definition of PE under section 92F(iiia), it includes fixed place of business, through which, the business of the enterprise is wholly or partly carried on. Thus, the fixed place of profession is akin to fixed place of business. Therefore, assessee s contention in this regard are rejected. Whether the assessee had a PE in India ? - On a perusal of the agreement between the parties, it is observed that the contractee is to provide office space with some other facilities to the employees of the assessee in India to carry out their activities. Such premises and facilities have been given free of charge. However, the question, which arises, is, whether access given to the assessee of the office premises of the contractee would constitute service PE or for that matter any other PE. The facts on record do not reveal that the space and facilities provided to the assessee by DAMEPL can be construed to be a fixed place of business from where the assessee carries on its business wholly or partly. In the facts of the present appeal, the Revenue has failed to establish through corroborative evidence that the assessee is having control over the premise. Admittedly, it is the DAMEPL, which is having control over the premises and the assessee has been given access to the premise and provided certain space and facilities. No corroborative evidence has been brought on record to demonstrate that the assessee carries on business in India wholly or partly through a fixed place of business. That being the factual position emerging on record, applying the ratio laid down in the judicial precedents cited before us by the learned counsel for the assessee, we hold that the assessee does not have any PE in India. That being the fact, the provisions of section 44DA would not be applicable. Thus income offered by the assessee un/s 115A read with section 9(1)(vii) of the Act has to be accepted. More so, considering assessee s contention that in the preceding assessment years, similarly declared income has been accepted has not been controverted by the Revenue. Accordingly, we delete the addition made by the Assessing Officer under section 44DA of the Act.

Issues Involved:
1. Taxability of the amount received by the assessee from DAMEPL under section 44DA or section 115A read with section 9(1)(vii) of the Income-tax Act, 1961.
2. Existence of Permanent Establishment (PE) in India.
3. Applicability of section 44DA due to the existence of a fixed place of profession.
4. Allowability of expenses if section 44DA is applicable.
5. Legal grounds regarding the issuance of directions by learned DRP and the period of limitation.

Summary:

Issue 1: Taxability of Amount Received
The core issue was whether the amount received by the assessee from DAMEPL is taxable under section 44DA or section 115A read with section 9(1)(vii) of the Income-tax Act. The assessee, a non-resident corporate entity from Hong Kong, treated the receipts as Fee for Technical Services (FTS) and offered it to tax under section 115A. However, the Assessing Officer assessed the income under section 44DA, attributing the entire receipt to the PE in India and taxed it at 40%.

Issue 2: Existence of Permanent Establishment (PE)
The Assessing Officer concluded the existence of a PE based on the fact that the assessee's employees visited India and were provided space and facilities by DAMEPL. The assessee argued that there was no business connection in India, and the burden of proof lies on the Revenue to establish the existence of a PE.

Issue 3: Applicability of Section 44DA
The assessee contended that the expression "fixed place of profession" is not defined in the statute and argued that since there was no fixed place of profession in India, section 44DA is not applicable. The Tribunal held that the expression "fixed place of profession" is akin to a fixed place of business and rejected the assessee's contention.

Issue 4: Allowability of Expenses
The assessee argued that if section 44DA is applicable, the entire expenditure incurred should be allowed. The Departmental Representative submitted that the issue could be examined by the Assessing Officer with reference to the audited accounts and other evidences furnished by the assessee.

Issue 5: Legal Grounds
The Tribunal dismissed the legal grounds raised by the assessee regarding the issuance of directions by learned DRP and the period of limitation, as the factual position brought on record by the Departmental Representative could not be controverted by the assessee.

Conclusion:
The Tribunal concluded that the Revenue failed to establish that the assessee had control over the premises provided by DAMEPL, and thus, the assessee did not have a PE in India. Consequently, the provisions of section 44DA were not applicable, and the income offered by the assessee under section 115A read with section 9(1)(vii) was accepted. The addition made by the Assessing Officer under section 44DA was deleted, and the appeal was partly allowed.

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