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2023 (9) TMI 587 - AT - Income TaxIncome taxable in India - royalty/fee for technical services (FTS) - India-Germany DTAA - income from supervision services for inspection/optimization/erection/commissioning repair in India to other parties - assessee has submitted before the DRP that there was no permanent establishment (PE) of the company in India - DRP was of the view that the assessee and its subsidiary Gebr Pfeiffer India P. Ltd. were operating in the same segment of industry and stated that it was possible for both the assessee and its associate enterprise to work with same clients - HELD THAT - As perused the separate supervision contract executed by the assessee company with Emami Cement Ltd. on 09.06.2016 and also separate supervision contracts with Jaypee Cement Corporation on 03.05.2016 wherein the terms and conditions and scope of the work etc, were mentioned. The assessee has also furnished the detail of engineers visited India to carry out contractual objection with copies of the minutes of the meeting etc. We find that DRP/AO has not controverted the genuineness of the different contracts executed by the assessee company with the different clients to whom it had rendered services pertaining to core components for manufacturing of cement. It is also noticed that the DRP/AO has not brought on record any other material to demonstrate that assessee has not acted directly for providing services to the clients in India and it has also not been established that how the assessee used the premises and services of its associate enterprise (subsidiary company namely (GIPL) in India. Therefore, we consider that AO/DRP is not justified in holding that assessee has used the premises of its associate company in India for rendering services to its clients. Assessee appeal allowed.
Issues Involved:
1. Interpretation of Article 5 and Article 7 of the DTAA between India and Germany. 2. Determination of Permanent Establishment (PE) status of the assessee. 3. Attribution of profits to the alleged PE. 4. Tax credit claims under the DTAA. 5. Levy of interest and initiation of penalty proceedings. Summary: 1. Interpretation of Article 5 and Article 7 of the DTAA: The assessee contended that the Assessing Officer (AO) and Dispute Resolution Panel (DRP) erred in interpreting Articles 5 and 7 of the DTAA between India and Germany. The AO considered M/s Gebr Pfeiffer India Pvt. Ltd. (GPI) as the Permanent Establishment (PE) of the assessee, which the assessee disputed, arguing that GPI is merely a subsidiary and does not constitute a PE under Article 5. 2. Determination of Permanent Establishment (PE) Status: The AO held that GPI was a PE of the assessee, asserting that the assessee maintained a fixed place of business at GPI's premises, where significant core activities were carried out. The assessee argued that GPI is an independent entity with no contribution to the profits of the assessee in India. The Tribunal found that the contracts executed by the assessee and GPI with their clients were separate and for different scopes of work. The Tribunal concluded that the AO/DRP did not justify the PE status and allowed the assessee's appeal on this ground. 3. Attribution of Profits to the Alleged PE: The AO attributed 100% of the gross revenue of the assessee to the alleged PE, which the assessee contested. The Tribunal noted that the AO/DRP did not provide contrary evidence or issue a show cause before coming to this conclusion. The Tribunal ruled that the AO/DRP's attribution of profits was not justified and allowed the assessee's appeal. 4. Tax Credit Claims under the DTAA: The assessee claimed tax credit under Section 90 of the Income Tax Act, which the AO rejected. The Tribunal found that the AO/DRP did not appreciate the true facts and circumstances of the assessee's case and allowed the assessee's appeal on this ground. 5. Levy of Interest and Initiation of Penalty Proceedings: The AO levied interest under sections 234A, 234B, 234C, and 234D and initiated penalty proceedings under sections 270A and 271BA. The Tribunal did not specifically address these issues in detail but allowed the assessee's appeal, implying that these actions were also not justified. Conclusion: The Tribunal allowed the appeal of the assessee in ITA No. 1507/Mum/2021, ruling that the AO/DRP's conclusions regarding the PE status, attribution of profits, and tax credit claims were not justified. Consequently, the related appeal in ITA No. 54/Mum/2022 was dismissed as academic. The appeals were partly allowed, with the order pronounced on 20.04.2023.
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