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TMI Blog2010 (2) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... ember:- 1. This appeal preferred by the revenue is directed against the order dated 19-9-2006 passed by the ld. CIT.(A)-XXXI, Mumbai for the assessment year 2003-04 for treating the fees received by the assessee for deputing two persons to India as a business profit inasmuch as the assessee should be considered as a person having permanent establishment in India. 2. The facts of the case are as follows:- "Tekmark Global Solutions LLC ("Tekmark") is a tax resident of USA. During the Financial Year 2002-03, Tekmark had an arrangement with Lucent Technologies Hindustan Private Limited ("Lucent India") in terms of which Tekmark personnel were deputed to Lucent India purely on a hire out basis. The personnel work under the supervision and control of Lucent India. However, during the Financial Year 2002-03, no remittances have been made by Lucent India to Tekmark in respect of personnel deputed to Lucent India. Tekmark, has opted to follow the cash system of accounting. Accordingly, there is no income liable for tax in India during the Financial Year 2002-03." During the previous year, the assessee has raised invoices on M/s. Lucent Technologies Hindustan Pvt. Ltd. (Luce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en LH has a right to send the personnel back to TGS. The assessee made another submission dated 30-12-2005, wherein it mentioned that the application was filed by it with the IRS of U.S., requesting them to issue a Tax Residency Certificate. 3. The Assessing Officer has held that in case of partnership the term resident of USA would apply only to the extent that the income derived from such partnership is subject to tax in USA as the income of resident either in its hands or in the hands of its partners and, hence, the provision of the treaty cannot be filed by the assessee. As the assessee could not file copy of the tax residency certificate, the Assessing Officer held that the income directly accrued to the assessee in India through its employees who were provided to the services of Lucent as per the terms and conditions and, hence, the entire amount of Rs. 8,98,96,880 is taxable under section 5(2)(1) of DTAA and had, accordingly, raised the demand. On appeal before the Ld. CIT(A) the assessee filed the tax residency certificate and the same had been accepted by the Assessing Officer. The assessee raised the following grounds of appeal before the Ld. CIT(A):- "I. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement also provides that the deputed personnel will work under the supervision of Lucent India. The appellant will not be held responsible for the work done or action taken by such deputed personnel. Lucent India will arrange for the lodging, boarding and other related expenses of such deputed personnel The deputed personnel will remain on the payroll of TCS i.e., appellant. If the deputed personnel is found not be suitable/efficient or is not of sound moral character then Lucent India will have right to send the personnel back to the appellant. Perusal of the agreement reveals that there is no mention of any services being provided by appellant to Lucent India. The appellant is providing only personnel and not furnishing any services through the personnel. I am accordingly, of the view that the case of appellant is not covered by clause (1) of Article 5(2) as the appellant is not furnishing any services through the employees or other personnel. The appellant is only providing personnel on hire basis. Further, the appellant is also not supervising the activities of his personnel nor directing them to act in a certain manner. These personnel are also not under the control of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by the applicant on the employees. The issue was whether the fees received were liable to tax in India. The Hon'ble AAR has held that the services provided by XYZ were managerial and not technical or consultancy. Perusal of the order and facts in this case clearly reveal that the prominent purpose of the agreement was the provision of managerial services and under that agreement executive personnel were deputed. On the other hand in the case of appellant there is no other agreement to provide services in connection with which personnel have been deputed. On the contrary the agreement is simply to provide personnel to work under the direction, supervision, control of Lucent India. In view of this, I hold that the ratio of ruling of Hon'ble AAR in the case of P. No. 28 of 1999 (cited supra) is, therefore, not applicable in the case of the appellant. It is held that the appellant does not have a PE within the meaning of Article 5(2)(1) of the DTAA. The Assessing Officer has, therefore, wrongly held that the appellant has a PE in India." 6. Considering the above, the CIT(A) allowed the appeal of the assessee by observing as under:- "The Assessing Officer has himsel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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