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TMI Blog2023 (4) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... ted ('JKHCL') as per the provisions of Article 5 of the Double Taxation Avoidance Agreement between India and Germany (India - Germany Tax Treaty') and taxing the revenues earned under the JKHCL contract under the provisions of Section 44DA of the Act. 2. Invoking the provisions of Section 44DA of the Act for taxing the revenues earned by the Appellant under its contract with Jaypee Ventures Limited (JVL') without any specific allegation that the Appellant constitutes a PE in respect of the said contract. 3. Without prejudice, attributing the revenues earned by the assessee from contracts entered with JVL and JKHCL to the PE constituted under the contract with Jammu and Kashmir State Power Development Corporation - Baglihar Construction Services by applying the rule of 'Force of Attraction' envisaged under the provisions of India-Germany Tax Treaty. 4. Levying interest under Section 234B and section 234C of the Act. 5. Initiating penalty proceedings under section 271(1)(c) of the Act for Assessment Year 2008-09, which is inappropriate. 6. Not granting credits for withholding taxes deducted by customers of the Appellant amounting to Rs. 27,841,806 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying the Force of Attraction Rule all receipts earned in India would be connected to the said PE. Hence, taxable under Section 44DA. Accordingly, he brought to tax the receipts by applying the provisions of section 44D/44DA of the Act. The assessee contested the aforesaid decision of the Assessing Officer by filing objections before learned DRP. However, learned DRP sustained the additions made by the Assessing Officer. 5. Before us, learned counsel appearing for the assessee submitted that insofar as contract with JKHCL is concerned, the assessee provided services in relation to review of design and duration of the contract was only for 3 months. He submitted, assessee's employees were in India only for 21 days. Thus, he submitted, there is no PE of the assessee under Article 5(2) read with Article 5(1) of India-Germany treaty. In this context, he submitted, the Assessing Officer has made a fundamental error by referring to the definition of PE in some other treaty, rather than India-Germany DTAA. He submitted, assessee's role in the contract is only advisory and nothing else. Insofar as the contract with JVL is concerned, learned counsel submitted, the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, it is very much clear that services rendered are of purely technical/consultancy nature, hence, the receipts from such work has to be treated as FTS. As discussed earlier, the departmental authorities have not brought on record any material to suggest that the work undertaken by the assessee was not completed within the period of 3 months. In such a scenario, it cannot be said that the so called office space provided by JKHCL to the assessee in its premises would constitute a PE under Article 5(2) of India - Germany DTAA. Further, we do not find any substance in the allegation of the Assessing Officer that assessee's PE in respect of JKSPDC- Baglihar project would constitute a PE in respect of JKHCL and JVL project. When the department is alleging involvement of the JKSPDC's PE to be actively involved in the other two projects, it is for the department to establish such fact on record through cogent evidence. However, on analysis of facts, we are convinced that the Assessing Officer has miserably failed to do so, as, no material has been brought on record to establish the involvement of JKSPDC's PE to be actively involved in the JKHCL and JVL project. In an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties were undertaken. The above fact as per the assessee clearly demonstrates that owing to geographical region, the PE on account of JKSPDC Phase- II projects (executed in the state of Jammu & Kashmir) could not play a part or be involved in any project in India. These contracts have been carried out by the assessee by using different teams at a given point of time. In this regard, the details of the project managers/ project engineers who visited India in connection with the execution of different contracts clearly shows that distinct PE of technician were involved in the execution of various projects in India. The teams of the project managers/ project engineers, in relation to various projects, visited India in connection with the execution of these projects at different points of time. The scope of work, liabilities and risk involved in each of the contracts are independent of those stated in the other contracts executed with the different parties. Owing to Reserve Bank of India' s stipulation, a separate project office is to be set up for each independent project. Further, the funds of the project office are to be used only to meet the expenses of the specific projects wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry PE under article 5 (2) (i) in the form of JKSPDC- BCS was not established by the Revenue from any documentary evidence on record. Similarly, the nature of business of the assessee remains unchanged and the assessee is engaged in the business of providing consultancy services to various projects in India. The assessee is an engineering consultancy services that offers wide range of planning, designing and consultancy services etc. in relation to complex infrastructure projects in. India. The assessee rendered engineering consultancy services mainly in relation to power projects. 7.1 From the perusal of the records and contradictory aspect pointed out by the Ld. DR, it can be seen that the PE in respect of JKSPDC- Baglihar Phase - I I Project has rightly been offered to tax at 20 % by the assessee as i t is the only project which has PE. The Force of Attraction rule will not be applicable in other projects as the same do not constitute either PE or does not come under the purview of the DTAA. The contradictions pointed out by the Revenue do not demonstrate that the other projects constitute PE. In fact, for applying force of attraction, there should be some common link to each o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed to be the PE in respect of JKHCL and JVL Projects. Insofar as, the applicability of Force of Attraction Rules, while deciding identical issue in assessee's own case in assessment years 2006-07 and 2007-08, the Tribunal has held that such rule will not apply, unless, even a remote link between the activities of other projects is established with the PE in relation to PKSPDC-Baglihar Project. That being the case, we hold that Force of Attraction Rule does not apply. This ground is allowed. 12. In ground No. 4, the assessee has raised the issue of levy of interest under section 234B and 234C of the Act. 13. Having considered rival submissions, we find, while deciding identical issue in assessee's own case in assessment years 2006- 07 and 2007-08 (supra), the Tribunal has held as under : "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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