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TMI Blog2016 (2) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... ons that may be furnished by the assessee. The assessee is also directed to furnish evidences supporting various expenses claimed by it and also make its submissions with regard to the income attributable to the Indian operations.- Decided partly in favour of assessee for statistical purposes. - I.T.A. No.8863/Mum/2011 - - - Dated:- 6-1-2016 - SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM For The Appellant : Shri Sharad A Shah For The Respondent : Shri Tasbir S Chauhan ORDER Per B R Baskaran, AM: The assessee has filed this appeal challenging the order dated 25.10.2011 passed by the assessing officer u/s 143(3) r.w.s. 144C(13) of the Act in pursuance of directions given by the DRP for assessment year 2007-08. 2. The assessee is aggrieved by the decision of the assessing officer in holding that the contract executed by the assessee is composite contract and hence entire contract receipts is liable for taxation in India. 3. The facts relating to the above said issue are stated in brief. The assessee is a Israel company. An Indian company named Hindustan Petroleum Corporation Limited (HPCL) floated tenders to supply, install /implement and support re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate to the amount of US$ 46,38,522 and further attributed 75% of the same to the Indian operations and accordingly made an addition of ₹ 2,46,68,265/-. In addition above, the AO also disallowed following expenses explained above:- (a) Interest on delayed payment of service tax as the same is in the nature of penalty - 1,10,006 (b) Professional tax as no evidence produced - 5,000 (c) Rates Taxes as there is no proof - 2,444 (d) Sundry expenses as no evidence filed - 13,09,647 The assessee is aggrieved by the decision taken by the AO/DRP in respect of all the issues. 6. The Assessing officer had placed reliance on the decision rendered by the Hon ble High Court of Madras in the case of Ansaldo Energia SPA Vs. ITO (2009)(310 ITR 237), wherein the High Court held that the sub division of a composite contract according to the convenience of contractor had to be ignored when the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bidding, the assessee has bid the tender singly and won the same. Thereafter, it has entered into a sub-contracting work with HAIL to implement the automation systems. As per the said contract, the assessee has supplied the equipments to HAIL. However, it is pertinent to note that the assessee has raised the bill towards supply of equipments upon HPCL and not on HAIL. The payment for the supply of equipments was also received from the HPCL. 10. The assessee has contended that the invoices relating to equipments were raised in US $ and the same strengthens its case of supply of the machineries off shore. We are not able to agree with the same. The invoices are generally raised as per the terms and conditions that were agreed between the parties. A perusal of the tender enquiry document placed at page 455 of the paper book (clause 1.0) shows that the HPCL has given an option to the foreign bidders to quote the bid price either in Indian Rupees or in US $. Hence it appears that the assessee herein, being a foreign bidder, has quoted the value of equipments in US $. In our view, the manner of rasing invoices may not be relevant to determine the taxability of any receipt. 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed upon the assessee. 12. We have also perused sub-contracting agreement entered by the assessee with HAIL. The liability of HAIL seems to be limited and the relevant clause reads as under:- In no event will Honeywell (here HAIL) be liable for any incidental damages, consequential damages, special damages, indirect damages, loss of profits, loss of revenues or loss or use, even if informed of the possibility of such damages. Honeywell s liability for damages arising out of or related to this agreement shall in no case exceed the lesser of the amount paid by Orpak to Honeywell or the contract price for the specific product or service that gives riseto the breach to the extent permitted by applicable law, these limitations and exclusions will apply regardless of whether liability arises from breach of contract, warranty tort (including but not limited to negligence), by operation of law or otherwise. Thus, we notice that the liability of sub-contractor is limited. We have noticed earlier that the assessee has contended that the bid for tender was initially planned to be jointly given by the assessee and HAIL, but it was not so given due to prohibition of joint bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Ansaldo Energia SPA (supra). Accordingly, we uphold the view taken by the assessing officer that the impugned contract is a composite contract. 16. The Ld A.R further contended that the assessee does not have a Permanent Establishment in India and hence no part of its profit is attributable to the Indian operations. The Ld A.R submitted that M/s HAIL is an agent of independent status and hence, in terms of Article 5 and 6 of India-Israel treaty, the HAIL cannot be considered to be the Permanent Establishment of the assessee. 17. We are not able to agree with the said contentions of the Ld A.R. We have earlier noticed that the sub-contracting of works is one of the methods of executing the contract and hence, we are of the view that the concept of agency cannot be applied in the facts and circumstances of the case. The assessee has opened a project office in India to oversee the implementation of the project and, in our view, the assessing officer was justified in treating the same as Permanent Establishment and hence the profit attributable to Indian operations needs to be determined and assessed in India. 18. In this regard, the Ld A.R put up an alternative ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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