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TMI Blog2018 (9) TMI 1741X X X X Extracts X X X X X X X X Extracts X X X X ..... dia-U.K. DTAA has to be construed to mean the previous year or financial year as per section 3 of the Act, since, the income is sought to be taxed in India. Therefore, it has to be seen whether the employees or personnel of the assessee have rendered services in India for a period aggregating to 90 days or more in financial year 2011-12 to constitute a PE. As per the chart submitted by the assessee it is claimed that the employees and personnel of the assessee were situated in India for rendering services for a period aggregating to 77 days. Since, the aforesaid factual aspect has not been verified by the Departmental Authorities as the assessee did not raise this issue before them, we are inclined to restore the issue to the Assessing Officer for adjudication keeping in view of our observations hereinabove and only after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes. The income received by the assessee will not be taxable under Article-15 of India-UK DTAA. This ground is allowed. Reimbursement of expenses as part of the gross receipts - Held that:- It is noted from the perusal of orders passed by the lower authorities tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has provided services to M/s. Linklaters Allen and Gledhil Pte. Ltd. which in turn provided services to their client which has Indian connection. In course of the assessment proceedings, though, the assessee contended that it does not have a fixed place Permanent Establishment (PE) in India, however, the Assessing Officer rejected such contention of the assessee on the reasoning that assessee's employees / personnel were located and rendered services in India for more than 90 days in aggregate during any 12 month period beginning from 1st April, 2011 to January, 2012. Thus, he held that the assessee had a Permanent Establishment in India in assessment year 2012-13 as per Article-5(2)(k)(ii) of the India-UK Double Taxation Avoidance Agreement (DTAA). Having held so, the Assessing Officer observed that since the assessee as per the tax law of UK is a fiscally transparent entity, hence, not liable to tax, the assessee cannot be treated as a resident of UK. Therefore, it is not entitled to the benefits of India-UK DTAA. Thus, he proceeded to tax the income received from services in India as well as outside India by treating as income deemed to accrue or arise in India under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed rival submissions and perused materials on record. Undisputedly, the Assessing Officer relying upon his observations in the preceding assessment year held that the assessee is not entitled to the benefit of India-UK DTAA as it is not required to pay tax in UK. Further, the Assessing Officer also held that the income received by the assessee is otherwise taxable as FTS both under section 9(1)(vii) of the Act as well as under the DTAA. However, the Tribunal, while deciding the issue of applicability of India-UK DTAA to the assessee in assessee's own case for assessment year 2011-12, has held in the following manner:- 10. Similarly, in other years, the Tribunal has followed its earlier order and held that M/s. Linklaters is eligible for the benefits of India-UK DTAA so long as entire profits of the partnership firm are taxed in UK, whether in the taxable income is determined in relation to personal characteristics of the partners or in the hands of the firm directly. In the year before us, there is no dispute on facts that ultimately tax has been paid either by the said firm or by its partners in UK. No distinction has been pointed out by the Ld. CIT-DR on facts or law. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. 12. The learned Sr. Counsel for the assessee, at the outset, fairly submitted that this issue was not raised either before the Assessing Officer or the DRP and is being raised for the first time before the Tribunal. Hence, he submitted, the ground may be treated as an additional ground. Proceeding further, the learned Sr. Counsel submitted, the term any 12 month period as mentioned in Article- 5(2)(k)(i) of the India-UK DTAA has not been defined therein. He submitted, the 12 month period has different connotation in different countries, hence, it has to be construed keeping in view the provisions of domestic law of the country where it is sought to be taxed. He submitted, in India the 12 month period would mean the previous year as defined under section 3 of the Act which in other words means the financial year or the chargeable accounting period. The learned Sr. Counsel drawing our attention to a list containing the number of days employees or personnel of the assessee rendered services in India, a copy of which is at Page-37 of the paper book, submitted that in the financial year 2011-12, the total number of days the employees or personnel of the assessee stayed in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression previous year has been defined under section 3 of the Act to mean the financial year immediately preceding the assessment year. Thus, as per the provisions of domestic law, the 12 month period would mean the previous year or the financial year which is the unit for which the income of a person is taxable. If the provisions of Article 5(2)(k)(i) of the India-UK DTAA is read harmoniously with the provisions of the Act referred to above, it will be fair and reasonable to conclude that the expression any 12 month period mentioned in Article 5(2)(k)(i) of the India-U.K. DTAA has to be construed to mean the previous year or financial year as per section 3 of the Act, since, the income is sought to be taxed in India. Therefore, it has to be seen whether the employees or personnel of the assessee have rendered services in India for a period aggregating to 90 days or more in financial year 2011-12 to constitute a PE. As per the chart submitted by the assessee at Page-37 of the paper book, it is claimed that the employees and personnel of the assessee were situated in India for rendering services for a period aggregating to 77 days. Since, the aforesaid factual aspect has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.5 are not required to be adjudicated upon. 20. In ground No. 9, the assessee has challenged the decision of the Departmental Authorities in holding that the income earned by the assessee is taxable under Article-15 of the India-UK DTAA. 21. The learned Sr. Counsel, at the outset, submitted that the issue is covered by the decision of the Tribunal in assessee's own case for assessment year 2011-12 (supra). 22. The learned Departmental Representative fairly agreed with the aforesaid submissions of the learned Sr. Counsel. 23. Having considered rival submissions, we find that while deciding identical issue in assessee's own case for assessment year 2011-12, the Tribunal has held as under:- 35. We have gone through the orders passed by the lower authorities and also Article 15 of India-UK DTAA. It is noted by us that Article 15 of DTAA deals with taxability of independent personal services. This Article starts with the words Income derived by an individual in respect of professional services or other independent activities of similar character....... It is noted by us that Article 15 shall be applicable for determining taxable income in the hands of individu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 50 per cent of such reimbursements of expenditure as income on the ground that the assessee has not been able to produce all such bills/invoices and considering the facts these bills do not, in any case, have any supporting evidences and thus brought to tax an amount of ₹ 2,12,23,219, the CIT(A) upheld the action of the Assessing Officer to the extent of 15 per cent of the total amount of reimbursement. The CIT(A) also held that the reimbursements of expenses received by the assessee constitute income of the assessee. It is also important to bear in mind the fact that the CIT(A) confirmed the disallowance of 15 per cent of reimbursement of expenses on the ground that (a) the appellant was not able to produce all supporting evidences in respect of expenditure incurred; and (b) it may be difficult to bifurcate the expenses between disbursements related to services rendered in India and services rendered outside India. While the Assessing Officer is not in appeal against the disallowance so restricted by the CIT(A), the assessee is not satisfied by the part relief given by the CIT(A) and is in second appeal before us. 132. Learned counsel has taken us through meticu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of the Revenue. Under these circumstances, it cannot just be presumed that income element was involved in the reimbursement of expenses. Therefore, respectfully following the orders of the Tribunal of earlier years, these grounds are allowed and decided in favour of the assessee. The AO is directed to delete the disallowance made in this regard. As a result, these grounds are allowed. 28. Facts being identical, respectfully following the aforesaid decision of the Co-ordinate Bench, we delete the disallowance made by the Assessing Officer. Ground raised is allowed. 29. Ground No. 11 is on the issue of applicability of proper rate of tax if the income is taxed under the Act as fees for technical services. 30. Considering the fact that while deciding ground Nos. 5, 6 and 7, we have held that the income earned by the assessee is not to be treated as FTS under Article-13 of the India-UK DTAA, this ground has become redundant, hence, not required to be adjudicated. 31. In ground Nos. 12 and 13, assessee has challenged levy of interest under sections 234B and 234C of the Act. 32. At the outset, the learned Sr. Counsel for the assessee submitted that identical issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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