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2017 (5) TMI 1320 - AT - Income TaxAddition u/s 44BB - eligibility for the benefit of DTAA between India and UAE - Permanent Establishment in India - Held that - We note that the assessee has conceded that for the services rendered to Arcadia Shipping Limited, the same needs to be taxed u/s 44BB of the Income-tax Act. Hence, as regards the issue of taxability u/s 44BB of the services rendered to Arcadia Shipping Limited, we set aside the order of learned CIT(A) and restore that of the Assessing Officer. As regards the services rendered with respect of other works, we note that the duration for each of them was less than nine months. The learned CIT(A) has given a clear finding and we find ourselves in agreement with the same. The Assessing Officer has not based his order on any cogent reasoning. He has presumed that assessee s representative might have come earlier also before the actual arrival of the barge in the Indian waters. Such hypothesis cannot be sustained. The actual period of the two projects cannot be combined as they are unconnected works. In such situation, the Assessing Officer s view that the period of the two works should be combined cannot be sustained. Departmental Representative s submission that the issue should be considered by applying a different Article than the one applied by the A.O. the same is also not sustainable. The A.O. has invoked Article 5(2)(h) of the DTAA between India and UAE and has based his decision on the analysis thereof. After consideration of the same learned CIT(A) has found that the assessee cannot be held to be liable for tax as the period of the stay was less than nine months required to form a permanent establishment so as to come under the ambit of taxation under this Article. Now learned DR is agreeing that the view of the A.O. is not sustainable, however, he states that the issue should be considered under Article 5(1) of the said DTAA. We find that the above is neither the case of the A.O. nor any ground in this regard has been raised. Hence, we do not find this plea of the learned Counsel of the assessee sustainable. - Decided partly in favour of assessee.
Issues Involved:
1. Deletion of addition made under Section 44BB. 2. Eligibility for benefits under the DTAA between India and UAE. 3. Potential amendments or additions to grounds of appeal. Detailed Analysis: Issue 1: Deletion of Addition Made Under Section 44BB The Revenue challenged the deletion of an addition of ?1,82,76,675/- made under Section 44BB by the CIT(A). The assessee, a foreign company incorporated in Abu Dhabi, UAE, engaged in oil and gas construction, undertook three projects in India during the assessment year 2009-10. The projects were with Arcadia Shipping Ltd., Reliance Ports & Terminals Ltd., and Leighton Contractors (India) Pvt. Ltd. The assessee claimed that since the contracts were for less than nine months, the income was not taxable under Article 7 of the DTAA between India and UAE, asserting no Permanent Establishment (PE) in India. The Assessing Officer (AO) disagreed, stating that the contract with Leighton started on 16/07/2008 and continued till 11/06/2009, exceeding nine months, thereby establishing a PE in India. The AO also argued that the combined duration of all projects indicated a continuous presence in India, thus taxable under Section 44BB. The CIT(A) found that the Leighton project commenced on 09/11/2008 when the barge entered India, lasting less than nine months. The CIT(A) concluded that the assessee did not have a PE in India for any project, thus not taxable under Section 44BB. The Tribunal upheld the CIT(A)'s decision for Reliance Ports and Terminals Ltd. and Leighton Contractors, agreeing that the duration of each project was less than nine months and the AO's hypothesis of combined duration was unsustainable. However, the Tribunal accepted the assessee's concession that the Arcadia Shipping Ltd. project should be taxed under Section 44BB, restoring the AO's order for this project. Issue 2: Eligibility for Benefits Under the DTAA Between India and UAE The AO argued that the assessee's projects indicated a continuous presence in India, thus establishing a PE under Article 5(2)(h) of the DTAA. The CIT(A) disagreed, stating that the projects did not exceed nine months individually or in any 12-month period, thus no PE was established under Article 5(2)(h) or 5(2)(i) of the DTAA. The Tribunal agreed with the CIT(A) that the combined duration of unrelated projects could not be used to establish a PE. The Tribunal also rejected the Revenue's request to apply Article 5(1) of the DTAA, as the AO had based his decision on Article 5(2)(h), and no new grounds were raised. Issue 3: Potential Amendments or Additions to Grounds of Appeal The Revenue sought to amend or add new grounds if necessary. However, the Tribunal's analysis focused on the existing grounds, particularly the applicability of Section 44BB and the DTAA provisions. Conclusion: The Tribunal partly allowed the Revenue's appeal, restoring the AO's order for the Arcadia Shipping Ltd. project under Section 44BB. For the other two projects, the Tribunal upheld the CIT(A)'s decision, confirming no PE was established, thus not taxable under Section 44BB or the DTAA. The Tribunal rejected the Revenue's plea to apply a different DTAA article, maintaining the CIT(A)'s findings based on Article 5(2)(h). The appeal was partly allowed, with the order pronounced on May 24, 2017.
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