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2022 (4) TMI 1014 - AT - Income TaxPE in India - Income deemed to accrue or arise in India - attribution of income arising from the contracts - Whether Project office of the assessee in India is its fixed place of business and Permanent Establishment as defined under Article 5(2)(c) of the Double Taxation Avoidance Agreement between India and the UAE? - HELD THAT - AO merely followed the grounds of assessment on the basis of previous years assessments which have been set aside by the Hon'ble Delhi High Court in assessee's own case for the A.Y. 2007-08 to 2009-10. Hon'ble High Court 2016 (2) TMI 47 - DELHI HIGH COURT has held that the question framed in the appeals preferred by the Revenue essentially pertains to the attribution of income arising from the contracts in question for the purpose of taxing the same under the Act. In the present case, we have concluded that the Assessee does not have a PE in India in terms of the DTAA, thus, the question of splitting the business profits of the Assessee arising from the contract into profits attributable to India and profits attributable to the Assessee overseas does not arise. Same has been relied by the Coordinate Benches in following years and so also by Ld. FAA. Accordingly, there is no substance in the grounds of appeal filed by revenue. The appeal of the revenue is dismissed.
Issues:
1. Determination of Permanent Establishment (PE) in India. 2. Taxability of interest income as income of PE. Analysis: Issue 1: Determination of Permanent Establishment (PE) in India The appeal before the Appellate Tribunal ITAT Delhi concerned the revenue's challenge against the order passed by the Ld. Commissioner of Income Tax (Appeals)-43, New Delhi regarding the assessment year 2015-16. The revenue contended that the assessee had a PE in India based on various grounds, including the project office being a fixed place of business, the activities not being preparatory and auxiliary, having an Installation Permanent Establishment, and a dependent agent Permanent Establishment. The facts revealed that the assessee, a UAE-based company engaged in fabrication and installation of petroleum platforms, had entered into contracts with Indian entities. The Assessing Officer (AO) had previously held the project office as a PE in earlier assessment years. However, the First Appellate Authority disagreed and ruled that the assessee had no PE in India for the assessment year in question. The Tribunal, after considering the arguments, observed that the AO merely relied on previous assessments without considering the High Court's judgment in the assessee's favor for earlier years. The Tribunal upheld the findings of the First Appellate Authority, stating that the assessee did not have a PE in India as per the Double Taxation Avoidance Agreement (DTAA) between India and the UAE. The Tribunal emphasized that the question of attributing income to India did not arise due to the absence of a PE. Consequently, the revenue's appeal was dismissed. Issue 2: Taxability of interest income as income of PE One of the grounds raised by the revenue was the taxability of interest income as income of the PE. However, this issue was not specifically addressed in the detailed analysis provided in the judgment. The focus of the judgment primarily revolved around the determination of PE in India and the subsequent tax implications. As a result, the Tribunal's decision did not delve into the specific tax treatment of interest income in relation to the PE status. The dismissal of the revenue's appeal was primarily based on the absence of a PE in India, as established through the interpretation of relevant provisions of the DTAA and previous judicial decisions. In conclusion, the Appellate Tribunal's judgment in this case centered on the determination of Permanent Establishment in India for the assessee company and the subsequent tax implications. The detailed analysis highlighted the significance of previous judicial decisions, the interpretation of the DTAA provisions, and the absence of a PE leading to the dismissal of the revenue's appeal.
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