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TMI Blog2016 (9) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of contract awarded by GAIL to the consortium, the assessee has not done those extra activities and the consideration received by the assessee is as per the co operation agreement for the activities provided in the co operation agreement and having accepted by the A. O. the amount of consideration received by the assessee at 3% of gross receipts of the consortium, it has to be accepted that the same is for providing FTS as per the co operation agreement. No case has been made out by the A.O. to show that Section 115A and Section 9(1)(vii) are not applicable in the present case as per which the income of the assessee with regard to PDPL project is liable to tax @ 10% as has been claimed by the assessee. We, therefore, direct the A.O. to apply the provisions of Sub clause BB of clause (b) of sub-section (1) of Section 115A along with Section 9(1)(vii) of the Act. No reason to interfere in the CIT(A)’s order under challenge reversing Assessing Officer’s finding treating assessee’s income from the two pipeline projects as business income instead of that declared under the head fee for technical services. The Revenue’s sole substantive ground is declined. - ITA No.474/Ahd/2016 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned assessment year as well inter alia in holding that it is the sole entity responsible for overall project management as per various clauses incorporated in consortium agreement of the two pipeline project, its cooperative agreement revealed that not only it had proved each experience but also committed site reviews through experts and also that the assessee itself had to perform the relevant contracts solely. The Assessing Officer observed that the assessee overall supervised the above two pipeline projects thereby undertaking various responsibilities as per the corresponding letters of acceptance issued by the two oil Companies. He accordingly opined that all this amounted to business activities of construction of pipeline project of India and for this purpose only assessee had opened the branch office in India with prior approval. 4. The assessee filed reply to Assessing Officer s proposal. it reiterated its stand treating the above receipts from the two pipeline projects as fee for technical services and not business income in view of its projects in question thereby drawing strength from consortium and other agreements/documents forming part of the record. It furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all within the exclusion category of Explanation (2) to Section 9(1)(vii)of the Income Tax Act, 1961. 4 .4 The Hon ble Tribunal has observed that even if extra responsibility of the appellant is there as per the consortium agreement and as per the terms of contract awarded by GAIL to the consortium, the appellant has not done those extra activities and the consideration received by the appellant is as per the cooperation agreement for the activities provided in the co-operation agreement and having accepted by the A.O. the amount of consideration received by the appellant at 3% of gross receipts of the consortium, it has to be accepted that the same is for providing FTS as per the cooperation agreement. 4.5 It has been held that no case has been made out by the A.O. to show that Section 115A (1) (b) (BB) and section 9(1)(vii) are not applicable in the present case as per which the income of the appellant with regard to PDPL project is liable to tax @ 10% as has been claimed by the appellant. The tribunal has therefore, directed the A.O. to apply the provisions of sub clause BB of clause (b) of subsection (1) of Section 115A alongwith section 9(1)(vii) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is a non-resident, where the fees are payable in respect of services utilized in a business or profession carried on by such person in India or for the purposes of making or earning any income form any source in India: [ Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.] [Explanation 1. For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.] Explanation [2] For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of nay managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of ten per cent if such fees for technical services are received in pursuance of an agreement made on or after the 1st day of June, 2005; and] 9. From the above provisions we find that as per Explanation (2) to section 9(1)(vii) of the Income tax Act, 1961, FTS will not include consideration for any construction, assembly, mining or like project undertaken by the recipient for consideration of the income chargeable under the head salary . Hence, there are two exclusions where the consideration received by the assessee will not be considered as FTS. First exclusion is where receipt is chargeable to tax under the head salary . This is not applicable in the present case because this is not the case of the A.O. that the receipt in question is chargeable to tax under the head salary . The second exclusion is regarding those considerations, which are for any construction, assembly, mining or like project undertaken by the recipient i.e. the assessee in the present case. The case of the A.O. in the present case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Structural Design of Foundations it supports for Equipment to be installed in SV and Terminal stations. Scraper Traps Piping Valves All other equipments v) Review of Road and drainage design detailed engineering vi) Review of fencing and Gate design detailed engineering b. Electrical Review of Design Engineering of Electrical system for each SV and Terminal station covering including the following: Single Line Diagram Cable Layout Earthing Grid Layout Electrical Distribution Plan within the Building incoming Power Pane) Design Engineering Design Engineering of Distribution Panels Boards Switchgear and Safety Engineering Light Engineering for Control Room, Guard Cabin, Operating Area Review of Specification for all material Material Take-off for various items to be procured for installation c. Cathodic Protection of design engineering included in the Packages of following- Temporary Cathodic Protection based on Sacrificial Anodes Permanent Cathodic Protection based on Impressed Current d. Equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbly erection, testing and commissioning of power project as also the supervision thereof, in the absence of being any evidence that assessee having done any such activity other than supervision simplicitor, erection and testing and commissioning, the activities of the assessee cannot be said to fall within the meaning of term business of erection of plant machinery and testing and commissioning as provided in the provisions of Section 44BBB and to fall within the meaning of term construction and assembly as provided in the exclusion provided in Explanation (2) to Section 9(1)(vii) of the Act. Hence in that case, it was noticed by the tribunal that although as per the terms of contract with OHPC, it can be assumed that the assessee was liable to do the assembly, erection, testing and commissioning of power project as also the supervision thereof but the actual activities undertaken by the assessee company in that case was supervision simplicitor and assembly, erection, testing and commissioning and hence such activities of the assessee do not fall within the meaning of term construction and assembly as provided in the exclusion provided in Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case and as per this decision of the tribunal in the light of the facts of the present case, the activities undertaken by the assessee does not fall within the exclusion category of Explanation (2) to Section 9(1)(vii) of the Income tax Act, 1961. 13. The other Tribunal decision rendered in the case of Aditya Birla Nuvo Ltd. (supra), is also supporting the case of the assessee and as per this Tribunal decision also, the scope of work actually undertaken by the assessee company does not fall within the exclusion category of Explanation (2) to Section 9(1)(vii) of the act. 14. One aspect of cooperation agreement has also been accepted by the authorities below in so far as the amount of income of the assessee is concerned. The amount of income of the assessee was declared by the assessee to the extent of 3% of gross receipt of the consortium which is on the basis of cooperation agreement and the same has been accepted by the A.O. and he has not disputed the amount of income of the assessee as has been declared by the assessee. If the A.O. says that the construction work was undertaken by the assessee company then he should have assessed the income of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on business activities. In addition to MMTL project, the assessee is not carrying on any business activities and no effective connection with MMTL project has been established by the A.O. for this receipt in question relating to PDPL project. Both are independent projects. MMTL project was awarded by BPCL whereas PDPL was awarded by GAIL and hence, there is no relationship between the two and hence, we find that no case has been made out by the A.O. to show that Section 115A and Section 9(1)(vii) are not applicable in the present case as per which the income of the assessee with regard to PDPL project is liable to tax @ 10% as has been claimed by the assessee. We, therefore, direct the A.O. to apply the provisions of Sub clause BB of clause (b) of sub-section (1) of Section 115A along with Section 9(1)(vii) of the Act. 7. Learned Departmental Representative fails to point out any distinction on facts or law. We find no reason to interfere in the CIT(A) s order under challenge reversing Assessing Officer s finding treating assessee s income from the two pipeline projects as business income instead of that declared under the head fee for technical services. The Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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