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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 ..... . In ground nos. 1 & 2, the assessee has challenged the decision of the departmental authorities in holding that the assessee has a Permanent Establishment (PE) in India under Article 5 of India - Germany Double Taxation Avoidance Agreement (DTAA) and taxing the amount received from contract with Andhra Pradesh Transmission Corporation (AP Transco) by applying the rate of 20%. 2.1 Briefly the facts are, the assessee is a non-resident corporate entity incorporated in Germany and is a tax resident of that country. As stated by the Assessing Officer, the assessee is an engineering consulting company which offers planning, designing and consulting services in relation to complex infrastructure projects. The assessee had entered into contracts with Government/Semi-Government organization for executing various projects. During the year under consideration, the assessee has earned revenue from executing following contracts and offered them to tax as under: Project Name 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to assessment years 2001-02 to 2005-06, has not only held that there is no PE of the assessee in India, insofar as, the AP Transco project is concerned, but also held that Force of Attraction Rule will not apply. In this context, following observations of the Coordinate Bench would be relevant: "7. We have heard both the parties and perused the relevant material on record. The contention of the assessee was that the force of attraction rule is not applicable to the assessee in view of article 7(1) of the treaty between India and Germany DTAA. The contention of the assessee was that as per protocol of the treaty, the force of attraction rule 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 differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivities would be performed by the assessee in respect of the specific projects was dictated by the client's project site or as agreed with the clients and was undertaken outside India. Further, restriction on the activities which may be undertaken by project office is stipulated in the approval issued by the Government. Therefore, it cannot be said that the PE constituted in India by the assessee under Phase-II of the contracts with JKSPDC was involved in any way in the earning of income from technical services rendered by the assessee and other contracts in India. We find force in the contention of the assessee, that the PE constitute in India 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 delibe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our notice by learned counsel appearing for the assessee that duration of services rendered for AP Transco project in terms with the agreement is for a period of less than 6 months. The aforesaid factual position has not been controverted by the Revenue. That being the case, there is no PE in terms with Article 5(1) read with 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. 3. 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, provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been categorically held that Force of Attraction Rule is not applicable to the revenue earned from the AP Transco and Jaiprakash Industries Ltd. In view of the aforesaid, we decide the ground in favour of the assessee. 5. In ground no. 5, the assessee has challenged levy of interest under section 234B of the Act. 5.1 Having considered rival submissions, we find, the Coordinate Bench has decided identical issue in favour of the assessee in the preceding assessment years in the order referred to above. The relevant observations of the Tribunal in this regard are as under: "13. We have heard both the parties and perused 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 assessmen ..... 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