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TMI Blog2022 (3) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of the assessee is being carried out. It is well settled position that in order to constitute a Fixed Place PE it is a prerequisite that the alleged premise must be at the disposal of the enterprise. The Hon ble Supreme Court in the case of Formula One world Championship Vs. CIT[ 2017 (4) TMI 1109 - SUPREME COURT] has held that merely giving access to the premise to the enterprise for the purposes of the project would not suffice. The place would be treated as at the disposal of the enterprise when the enterprise has right to use the said place and has control thereupon. Thus considering judicial precedents wherein the constitution of Fixed Place PE has been considered and adjudicated upon, in our opinion the conditions laid down for creation of a Fixed Place PE is not satisfied in the assessee s case. Merely providing access to the premises by FRL for the purpose of providing agreed services by the assessee would not amount to the place being at the disposal of the assessee. No doubt the assesee has access to the factory premises of FRL but it is for the limited purposes of rendering agreed services to FRL without any control over the said premises. FRL is an independent l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tch of Engineers Agreement which have been duly offered to tax by the assessee as FTS as per the provisions of India-Japan DTAA. We therefore hold that the there is no Supervisory PE of the assessee for the AYs under consideration. Since we have held that the assessee does not have a PE, the issue of attribution of profits to such PE does not arise for consideration. Appeals of the assessee are allowed. - Shri N.K. Billaiya, Accountant Member And Ms. Astha Chandra, Judicial Member For the Assessee : Shri K. M. Gupta, Advocate, Shruti Khimta, Advocate For the Department : Ms. Anupam Anand, CIT DR ORDER PER ASTHA CHANDRA, JM These two appeals are filed by the assessee against the order of the Ld. Deputy/ Assistant Commissioner of Income-tax, International Taxation - 1(3)(1), New Delhi ( AO ) under section 143(3) read with Section 144C(13) of the Income-tax Act, 1961 ( Act ) dated 31.10.2018 and 16.10.2019 pertaining to assessment year ( AY ) AY 2014-15 and AY 2015-16 respectively. 2. Since the issues are common in both the appeals they were heard together and are being disposed off by this common order. 3. The main issue common in both the appeals relates to the existence of the al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of section 9(1)(i) of the Act and a Fixed Place PE as well as Supervisory PE in India under Article 5 of the India-Japan DTAA. The Ld. AO held that FRL s premises in addition to hosting the business activities of FRL, serve as a branch and an office of the assessee. Therefore, a Fixed Place PE is constituted. The Ld. AO after evaluating the key attributes of Fixed Place of business in the context of factual matrix in the present case concluded that the assessee deputed professionally qualified employees to the factory site of FRL in India and hence such factory site constituted a Fixed Place PE of the assessee in India. The Ld. AO also referred to certain clauses of the Licence Agreement viz-a-viz the facts of the present case and concluded that the employees visit in India were made to help FRL in setting up a new product line in India for which end-to-end supervision has been rendered by the assessee. Hence, the PE of the assessee in India under Article 5(4) of the India-Japan DTAA and a Fixed Place PE are clearly established. The Ld. AO arrived at his conclusion for the reason that certain employees of the assessee who visited India helped FRL in setting up a new product li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontracts also prove the active involvement of the employees of Indian company in the conclusion of contracts on behalf of the taxpayer. Huawei India was economically, technically and financially all dependent upon the taxpayer. Therefore, Huawei India also constitutes the agent other than an agent of independent status of Huawei China. This results into the creation of the dependent agent PE under the tax treaty and business connection under the Act Further, the process of joint bidding by the taxpayer and Huawei India constitutes Dependent Agent PE. Installation PE The taxpayer's employees also visited India to perform activities relating to installation projects lasting for more than 180 days, which constitutes Installation PE. Service PE The statements recorded during the survey also show that the employees render technical services continuing for more than 183 days, constituting Service PE. The facts recorded by the AO and upheld by the DRP in their order have not been controverted before the Tribunal, Accordingly, the Tribunal held that taxpayer had PE in India. The above decision is squarely applicable to the case of the assessee as, on examination of the TP Study Report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be inferred that the title and risk associated with supply of goods passed in India and therefore, there is extension of business of the assessee in India in respect of the supply of parts to FRL/ FCC Clutch. (iii) Fixed Place PE is created on account of presence of engineers at the work place in India. The Agreement for Dispatch of Engineers provides for engineers to be present at work place in India for technical guidance in manufacturing and assembly of products for which the Licensor is providing technical assistance to the Licensee. It also includes guidance of the Licensee s engineers and employees on operation procedures. Further, the Licence Agreement provides for after sales services and continues access to the improvement of manufacturing processes to Indian entity where its engineers visit frequently and work place is at its disposal for rendering such services. The License Agreement also provides for permission to access work place in India for the purpose of inspection of parts procured, products manufactured, manufacturing processes etc. and the degree of control exercised by the assessee on Indian entity. The aforesaid facts signify that the business of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product liability, claims in case of rejection of goods etc. to emphasize that the title and risk associated with goods passed in India and upon certain judicial pronouncements [i.e. Ericsson AB (Delhi High Court) and Voith Paper GmbH (Delhi ITAT)] is completely misplaced since these cases are distinguishable on facts of the present case in hand. In these cases the supplies were made from outside India and were erected on particular site or locations in India, whereas the assessee s case is of simpliciter supply of raw material and capital goods used by the Indian AE (FRL) in manufacturing process. In support of its agreements, the assesee relied upon the judgment of the Hon ble Supreme Court in the case of Mahabir Commercial Co. Ltd. Vs. CIT 1973 AIR 430 wherein the Hon ble Supreme Court held that right to examine and repudiate the goods does not indicate that property in the goods has not passed to the buyer. It was further submitted that even if it is assumed, though not accepted, that title of goods is transferred in India, no attribution of supplies could be made in absence of a PE in India. For attributing the income from supply of goods, the role of PE in such supplies woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying on of inspection does not establish that core business activity of the assessee was being carried out in India. (iv) Supervisory PE can be constituted only if supervision is in connection with a building site or construction, installation or assembly project. Also, the international tax commentaries suggest that installation and assembly project has to be mainly read in conjunction with building site or construction. The assessee further reiterates that its Indian AE is in the business of manufacture and assembly of clutches in India for which the assessee provides time to time technical assistance as required by its AE. The Ld. AO/DR confused the assembly of clutches with supervision of assembly project as envisaged in Article 5(4) of the India-Japan DTAA. In the facts of the instant case, the assessee is not doing supervision in connection with any building site or construction, installation or assembly project. Thus, question of establishment of supervisory PE does not arise. Services of the nature rendered by the assessee may give rise to Service PE (and not supervisory PE), however, in the absence of Service PE clause in the India- Japan DTAA, this issue becomes academ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the enterprise for the purposes of the project would not suffice. The place would be treated as at the disposal of the enterprise when the enterprise has right to use the said place and has control thereupon. 12.4 In light of the facts of the case and various judicial precedents wherein the constitution of Fixed Place PE has been considered and adjudicated upon, in our opinion the conditions laid down for creation of a Fixed Place PE is not satisfied in the assessee s case. Merely providing access to the premises by FRL for the purpose of providing agreed services by the assessee would not amount to the place being at the disposal of the assessee. No doubt the assesee has access to the factory premises of FRL but it is for the limited purposes of rendering agreed services to FRL without any control over the said premises. Moreover, FRL is an independent legal entity carrying on its business with its own clients for which the assessee provides time to time technical assistance as required by it. The business of the assesee is not being carried out from the alleged Fixed Place PE. The Ld. DR in support of his contention that FRL constitutes Fixed Place PE of the assessee has place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quality control; IT related services; support for launch of new segment line; etc. In our considered opinion, none of these activities performed by the employees are in the nature of supervisory functions, supervision being the act of overseeing or watching over someone or something which is not reflected in the work done by the engineers in India for FRL. 13.3 Moreover, no installation or assembly project was on going at FRL s premises. FRL is in the existing business since many years and no new line of business has been launched by FRL. The employees were not rendering any services in connection with building site or a construction project or an installation project or an assembly project. From the nature of the services rendered by the employees, it is amply clear that these activities were not in connection with a building site or construction installation or assembly project. Hence the issue of computation of period of six months also becomes academic. The employees are visiting India on year to year basis under the contract. In AY 2014-15 and AY 2015-16, the employees visited India to render certain technical services under the Licence Agreement read with Dispatch of Engineer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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