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TMI Blog2018 (6) TMI 401X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 (1) TMI 1168 - DELHI HIGH COURT), is squarely applicable in the present case wherein held that no interest under section 234B of the Act can be levied on the assessee-payee on the ground of non-payment of advance tax because the obligation was upon the payer to deduct the tax at source before making remittances to them. Revenue appeal dismissed. - I.T.A .No. 5532/DEL/2012, I.T.A .No. 5373/DEL/2014 And I.T.A .No. 5372/DEL/2014 - - - Dated:- 29-5-2018 - SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant : Sh. Surender Pal, Sr. DR For The Respondent : Sh. Ajay Vohra, Sr. Adv, Sh. Anushul Sachar, Adv ORDER PER SUCHITRA KAMBLE, JM These appeals are filed by the Revenue against the order dated 29.08.2012 for A.Y. 2008-09 and orders dated 31.07.2014 for A.Ys. 2009-10 2010-11 passed by CIT(A)-XXIV, New Delhi. 2. The grounds of appeal are as under:- ITA No. 5532/Del/2012 1. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the consultancy services were rendered through the PE and effectively connected to it. 2. Whether on the facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orated 330 ITR 578, without appreciating that the levy of interest u/s 234B is mandatory as held in the case of CIT Vs. Alcatel Lucent. 3. Facts for A.Y. 2008-09 are taken herein as all other appeals for A.Y. 2009-10 and 2010-11 are identical in factual aspect. The assessee is a nonresident company incorporated under laws of Netherlands. It is engaged in business of providing consultancy services for transportation, water, building, spatial planning, environment and aviation projects. The assessee has a branch office in India and a subsidiary in name of DHV India Pvt. Ltd. The assessee filed its return of income on 03-11-2009 declaring therein income of ₹ 5,04,27,210. During Assessment Year under consideration, the assessee executed following contracts in India either directly through head office or through project office in India: (i) Kolkata Municipal Corporation (KMC) Project (ii) Orissa-II Project (iii) Yamuna Action Plan (YAP) Project Income from KMC project and Orissa-II project was offered as FTS and taxable as per section 44D r.w.s 115A on gross basis @ 20%. Income from YAP project was offered as FTS and taxable as per section 15A on gross basis @ 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect in deleting the additions made by the Assessing Officer. 7. As regards Ground No. 1 and 2 for A.Y. 2008-09 appeal and Ground No. 1 for A.Y. 2009-10 2010-11, the Ld. AR submitted that Consultancy services were not effectively connected to the PE. The Ld. AR submitted that the assessee is a tax resident of Netherlands. In order to examine whether the assessee constitute PE in India, the Ld. AR referred Article 5 of India- Netherlands DTAA which defines PE. Accordingly, the Ld. AR submitted that as per Article 5(1) of the India Netherlands DTAA, PE has been defined to mean a fixed place of business', through which business of the assessee is carried out in India. Thus, the Ld. AR submitted that fixed place PE presupposes the following: Existence of a place of business (i.e. a facility such as premises or machinery/ equipment); Place of business must be 'fixed' (i.e. it must be established at a distinct place with a certain degree of permanence); and Carrying on of business of the enterprise through this fixed place of business (i.e. conduct of business activity is conducted through such place of business). 8. The Ld. AR further submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Article 5/7 of the India- Netherlands tax treaty, then Article 12 (Fee for Technical Services) of the tax treaty cannot be applied. The said principle was upheld in the case of Horizontal Drilling 237 ITR 142 (AAR)] and Sumitomo Corpn. vs. DCIT [110 TTJ 302 (Del.)]. Further, the Ld. AR also relied upon the decision of Worley Parsons (AAR No. 747 of 2007) wherein the Authority for Advance Rulings held that where Project Management services are ' effectively connected with the PE, then receipts therefrom would be treated as business income and taxable only to the extent they are attributable of the operations of the PE in India. The Ld. AR also relied upon the decision of the Mumbai Tribunal in the case of IHI Corporation v. ADIT [2013] 32taxmann.com 132. Thus, the Ld. AR submitted that the revenues earned under the subject contracts are effectively connected to respondent s PE (branch office) in India and is liable to be taxed at 40% on net income basis. Therefore, the Ld. AR prayed that the appeal filed by the revenue has to be quashed. 10. The Ld. AR further submitted that the assessee sub-contracted its scope of work under the aforesaid contracts to its Indian sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 209(1)(d) of the Act, advance tax payable has to be computed after reducing from the estimated tax liability the amount of tax deductible/ collectible at source on income which is included in computing the estimated tax liability. Such balance tax liability is the advance tax payable under section 208 of the Act. The Ld. AR pointed out that the words used in section 209(1)(d) of the Act are 'tax deductible at source' and not 'tax deducted at source'. 12. The Ld. AR further submitted that under section 195 of the Act, tax is deductible at source from payments made to non-residents. The Assessee is a non-resident and thus, tax is deductible at source from the payments made to assessee under section 195 of the Act. Since tax was deductible at source on all the payments made to assessee, no advance tax was payable as per the provisions of section 208 read with section 209(1)(d) of the Act. In the absence of any liability for payment of advance tax, the provisions of section 234B of the Act cannot apply and the levy of interest under section 234B of the Act should be deleted. The Ld. AR relied upon the decision of the Delhi High Court in the case of DIT v. GE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tively connected with PE in India and hence not taxable u/s 44DA. The AO has reasoned that project wise detail of employees for contracts executed by branch office was not furnished. The action of the AO does not appear to be based on proper appreciation of facts. The AO has selectively chosen to hold that contracts executed by branch office in India and entered into after 01-04-2003 are not effectively connected with PE while other contracts executed by branch office in India and entered into before 01-04-2003 are effectively connected with PE. All the contracts which are subject matter of dispute in present appeal have been negotiated and signed in India by branch head. The branch office has outsourced consultancy service from subsidiary namely DHV BV India Pvt. Ltd. Various invoices have been raised by branch office and bank account has been maintained and operated by branch office. The AO has not pointed out which of the relevant operations have been carried out by the head office. A project/contract has to be effectively connected either with head office or with branch office. There is no whisper by the AO of any activity from head office which can lead to conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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