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TMI Blog2015 (12) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany registered under the laws of Italy. The assessee is a non-resident as per the Income-tax Act. It is engaged in the business of designing, building and supplying full range of plant solutions on different types of packages such as turnkey, engineering and individual components, worldwide and is a global power generation player and covers the entire power generation spectrum. 2.1 The assessee and its subsidiary company Ansaldo Services Pvt. Limited (ASPL) entered into separate contracts with NLC and executed them during the assessment years under consideration. 2.2 The CIT(A) passed an order on 29/09/2011 u/s. 251 of the I.T. Act upholding the additions made by the AO to the income of the assessee from NLC contracts. The CIT(A) also h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, the CIT(Appeals) confirmed the orders of the AO. Aggrieved by this, the assessee is in appeal before us. 4. The ld. AR submitted that the impugned interest is covered by Article 12 of the DTAA between India and Italy and the same issue was considered by the Tribunal, Special Bench in the case of M/s. Clough Engineering Ltd. in ITA Nos.4771 & 4986/Del/2007, wherein it was held as under: "11.4 Thus, we are again left with the fundamental question as to whether the debt-claim in this case can be said to be effectively connected with the PE. We have already held that the claim is connected with the PE in the sense that it has arisen on account of tax deduction at source from the receipts of the PE. However, it is also a fact that paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the same cannot be said in respect of interest on income-tax refund. Such interest is not effectively connected with PE either on the basis of asset-test or activity-test. Accordingly, it is held that this part of interest is taxable under paragraph no. 2 of Article XI. Thus, the ground referred to the Special Bench is partly allowed. The Division Bench shall dispose off the appeal in conformity with this order." 4.1 He also relied on the decision of the Tribunal, Mumbai Bench in the case of M/s. DHL Operations B.V. in ITA No.183/Mum/2010 dated 21.9.2011 for the A.Y. 2003-04. Further, he submitted that the above decision was confirmed by the Bombay High Court in the case of DHL Operations BV in ITA No.431/2012 dated 17.7.2014, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term "attributable" avoids that problem and that is the reason the expression "Attributable" is used in US Model Conventions. Therefore the term appearing in US Model Conventions have the same meaning as the expression "Effectively Connected". The expression "Attributable" as used in Article 11(5) of the India-USA DTAA has therefore to be construed as equivalent to "Effectively connected". The technical explanation referred to by the learned counsel for the Assessee whereby it has been observed that the term "Attributable" is to be given a narrower meaning than the expression "Effectively Connected", we find that the said technical explanation is in the context of attribution of profits of the PE and is relevant to taxation of an India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce there was no dispute to the fact that the assessee though being a resident of the UK was carrying on business in India through a PE situated in India and the interest was effectively connected with such PE in India, therefore, in terms of para 6 of article 12, such interest could be taxed as business profit under article 7. In view of overriding provision of para 6 of article 12, the assessee could not take benefit of para 2 of article 12 so as to pay tax on such interest at the rate of 15 per cent. Rather in terms of para 6 of article 12, the same was chargeable under article 7 as business profit. Accordingly, the assessee was not entitled to be taxed under para 2 of article 12 but was rightly taxed under 6. We have heard the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the interest shall be taxable in that other Contracting State according to its own law. 6. Interest shall be deemed to arise in a Contracting State when the payer is that State itself, a political or administrative subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent es ..... X X X X Extracts X X X X X X X X Extracts X X X X
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