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TMI Blog2022 (11) TMI 1345X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 5(2)(i) of the Tax Treaty. Therefore, the decision of the Coordinate Bench (supra) will squarely apply to the facts of the present appeal. That being the case, respectfully following the decision of the Coordinate Bench, we direct the Assessing Officer to delete the addition. Ground nos. 1 and 2 are allowed. Taxability of revenue earned from contract with Jaiprakash Industries Ltd. by applying the provisions of section 44DA of the Act - As on going through the decision of the Tribunal in preceding assessment years, we find that the Tribunal did not accept assessee s claim that the revenue earned from the contract with the Jaipraksh Industries Ltd. is covered under section 44BBB of the Act, however, the Tribunal held that the assessee has no PE in India and in absence of PE, the revenue earned from Jaiprakash Industries Ltd., being in the nature of FTS will be taxable at the rate of 10%. Thus we direct the Assessing Officer to tax the revenue earned from the Jaiprakash Industries Ltd by applying the rate of 10% as provided under Article 12 of India Germany Tax Treaty. This ground is partly allowed. Applicability of Force of Attraction Rules to the revenue earned f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Date of Agreement Amount (Rs.) Rate of Tax Andhra Pradesh Transmission Corporation 15.05.1999 629,256 10% J K Power Development Corp. Baglihar Project 17.08.1999 112,144,163 20% Jai Prakash Ind. Ltd. 18.08.2003 22,023,692 4.18% Total 134,797,111 2.2 Insofar as the revenue earned from J K Power Development Corp. Baglihar Project is concerned, there is no dispute between the parties, as, the assessee itself has admitted that it had a PE in India and offered the revenue earned to tax at the rate of 20%. However, insofar as the amount received from AP Transco, the assessee claimed that it has no PE in India and the amount, being in the nature of Fee for Technical Services (FTS), is taxable under Article 12 of India Germany Tax Treaty. Thus, the assessee the assessee offered the income to tax on gross basis by applying the rate of 10%. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule in this treaty restricts the application of the rule to a case where, the PE is involved in the transaction and the transaction is restored to avoid taxation in the source state and both these contentions needs to be satisfied so as to attract the rule. The PE constituted in India by the assessee under the contract with JKSPDC-Phase-2 was not involved in any other project executed in India during the relevant previous year. For supporting this statement, the assessee submitted various contracts entered into by the assessee with different independent unrelated parties. Most of these contracting parties are government or semi government or private organisations. The assessee constitutes PE on account of undertaking supervisory activities as provided in article 5(2)(i) of the treaty in relation to construction of Hydro Power Projects at Baglihar in the state of Jammu Kashmir. In respect of the balance contracts, based on specific contract requirements, the assessee's personnel either performed service at the client's location or at its home office in Germany, wherein the assessee provided contract-wise, the location wherein the activities were undertaken. The above fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia by the assessee under Phase-II of the contract with JKSPDC did not play any role or contributed in any manner to the execution of the other contracts or earning of FTS under other contracts and cannot thus be said to be involved with any other projects in India. Accordingly, FTS received by the assessee from rendering of technical services and other contracts cannot be said to be involved directly or indirectly in any manner to the PE constituted in India under the contract with JKSPDC- Phase-II and are formed for the purpose of deliberate avoidance of tax. Therefore, we find merit in the argument of the Ld. AR that such income by way of FTS is to be subjected to tax @ 10% under article 12 of the treaty and cannot be subject to tax @ 20% as contemplated by the Assessing Officer. As per the Revenue's contention, it is undisputed fact that the income earned by the assessee was in the nature of FTS, there is business connection and income accrues and arises or deem to accrue and arise in India. The regional existence of place of PE and the article 5(1) in the form of JKSPDC-BCS as well as there is existence of supervisory PE under article 5(2)(i) in the form of JKSPDC-BCS was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground no. 3 relates to taxability of revenue earned from contract with Jaiprakash Industries Ltd. by applying the provisions of section 44DA of the Act. 3.1 Briefly the facts are, insofar as, the revenue earned from Jaiprakash Industries Ltd. contract, the assessee claimed that the amount received being in the nature of income derived from business of civil construction or the business of erection of plant and machinery or testing or commissioning thereof in connection with a turnkey power project approved by the Central Government, provisions of section 44BBB would be applicable and accordingly, the assessee offered 10% of the revenue earned to tax. Whereas, the Assessing Officer rejecting assessee s claim held that the assessee has a PE in India, hence, the income is taxable at 20%. While deciding assessee s objections on the issue, learned DRP upheld the decision of the Assessing Officer. 3.2 Before us, learned counsel appearing for the assessee submitted, though, assessee s claim that the revenue earned is covered under section 44BBB was not accepted by the Tribunal in preceding assessment year, however, the Tribunal did not accept Revenue s stand of taxing the income u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the relevant materials available on record. Interest u/s 234B and 234C is not chargeable where tax is deductible at source. The reliance placed on GE Packages Power Inc. (supra) is apt. Hence, Ground No. 3 of the assessee s appeal in ITA No. 4960/Del/2004 for A.Y. 2001-02 is allowed. 5.2 Respectfully following the decision of the Coordinate Bench, referred to above, we decide the ground in favour of the assessee. 6. In the result, the appeal is partly allowed. ITA No.5800/Del/2015 Assessment Year: 2007-08 7. In the previous year relevant to assessment year 2007-08, the assessee has earned revenue from executing following contracts and offered them to tax as under: Project Name Amount (Rs.) Tax Rate Jai Prakash Power Ventures Ltd. Vishnu Prayag Project 779,799 10% J K Power Development Corp. Baglihar Project 13,06,15,915 20.91% Jai Prakash Industries Ltd. 2,08,99,878 4.182% 15,22,95,590 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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