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TMI Blog2023 (7) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... osed of in a consolidated order, for the sake of convenience. 2. We propose to take up the appeal relating to assessment year 2007-08 being ITA No. 3257/Del/2014 as lead appeal as the decision taken by us qua the grounds raised therein would apply to rest of the appeals. ITA No. 3257/Del/2014 Assessment Year: 2007-08 3. At the outset, learned counsel appearing for the assessee did not press ground nos. 1, 2, 4, 8 and 9. Accordingly, these grounds are dismissed as not pressed. 4. In ground No. 3, the assessee has challenged taxability of Rs. 1,46,52,283/- representing receipts from services rendered by head office in Germany 5. Briefly the facts are, the assessee is non-resident corporate entity and a tax resident of Germany. As stated, the assessee is a global airport operator offering comprehensive airport management services, including terminal and traffic management, aviation ground handling, baggage and cargo handling, aviation security and consulting etc. The assessee entered into a contract with Delhi International Airport Limited (DIAL) relating to development, modernization, expansion, upgradation, operation and management of Indira Gandhi International Airport, Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IAL as well as PE and fully supports PE. He submitted, additionally, head office does all tasks of human resources including payroll, invoicing, legal and administration etc. in relation to the PE in India. Thus, learned counsel submitted, the activity of the head office and PE are single and integrated activity of airport management and is complementary in nature as services cannot be exclusively rendered as both are supporting each other and dependent on each other. Accordingly, the receipts are taxable under Article 7 of the tax treaty, in view of exceptions provided under Article 12(5) of the treaty. He submitted, the PE is able to function because of Head Office. Hence, in relation to work performed by head office, both activity test and economic connection test are satisfied, since, the work has been done by Head Office through active participation of PE. He submitted, the entire activity of airport management services is a single integrated activity, hence, cannot be bifurcated between PE and the Head Office. He submitted, applying the dominant purpose test, which is to manage the airport, it has to be held that the services are rendered through PE, as, the pith and substanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of India - Germany DTAA, however, the treaty carves out an exception in paragraph 5 of Article 12 by providing that the receipts will not fall within the category of royalty or FTS, if the beneficial owner of royalty and FTS being resident of one contracting state carries on business in the other contracting state through a PE or fixed place of business in respect of which the royalty and FTS are paid. Article 12(5) further makes it clear, in such a situation, the provisions of Article 7 or Article 14 may apply. The receipts certainly cannot fall within the definition of independent personal services under Article 14 of the tax treaty. Therefore, the only provision under which the receipts can fall is business profits as provided under Article 7 of the tax treaty. Thus, since, the receipts are attributable to the PE, we have to examine whether such receipts are taxable in India. In this context, we have to refer to paragraph 1(b) under protocol appended to India - Germany tax treaty, which reads as under: "(b) Income derived by a resident of a Contracting State from planning, project, construction or research activities as well as income from technical services exercised in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount represents office and administrative overhead expenses charged by the head office on the basis of certification by the management and based on actual cost with no profit margin embedded therein. Alleging that the assessee neither furnished any evidence, nor justified the claim, the Assessing Officer disallowed the amount. The assessee contested the disallowance before the DRP. After examining assessee's claim in the context of facts and materials on record, learned DRP found that the amount, in reality, represents a markup of 19% on the expenses under various heads debited to the profit and loss account. However, learned DRP found that out of the deduction claimed, an amount of Rs. 45,96,723/- forms part of mobilization expenses, which has already been disallowed. Accordingly, learned DRP restricted the disallowance to Rs. 1,46,94,562/-. 13. As regards assessee's claim that the expenditure directly related to the PE is allowable under Article 7, learned DRP held that the amount charged by the head office is a fee of 19% on various expenditure claimed on notional basis, hence, cannot be allowed under Article 7 of the DTAA. Further, learned DRP has alleged that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 234A and 234B is concerned, such levy being consequential in nature, there is no need to adjudicate the issue. Insofar as the levy of interest under section 234D is concerned, the same is consequential in nature, does not require adjudication. Ground is dismissed. 19. Ground No. 7, being consequential in nature, does not require adjudication. 20. In the result, the appeal is partly allowed. ITA No. 3869/Del/2015 Assessment Year: 2008-09 21. Ground nos. 1, 6 and 7 are not pressed, hence, dismissed. 22. Ground nos. 2 and 3 are identical to ground No. 3 of ITA No. 3257/Del/2014. Accordingly, we direct the Assessing Officer to compute income, if any, following our direction therein. 23. The issue raised in ground No. 4 is identical to the issue raised in ground No. 5 of ITA No. 3257/Del/2014. Following our decision therein, we uphold the disallowance. This ground is dismissed. 24. Ground No. 5, being consequential in nature, does not require adjudication. 25. In the result, the appeal is partly allowed. ITA No. 3870/Del/2015 Assessment Year: 2009-10 26. Ground nos. 1, 5 and 6 are not pressed, hence, dismissed. 27. The issue raised in ground No. 2 and 3 are i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices Co. Middle East Ltd. Vs. ACIT [2015] 60 taxmann.com 246, the Hon'ble Uttarakhand High Court, while examining pari materia provision contained in Article 12(6) of India - UK Treaty has held that interest on income tax refund is taxable as business profits under Article 7 of the treaty. In our humble opinion, the decision of the Hon'ble Uttarakhand High Court will carry greater precedentiary value. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) on the issue. This ground is dismissed. 38. Ground No. 4 is not pressed, hence, dismissed. 39. In the result, the appeal is partly allowed. ITA No. 287/Del/2017 Assessment Year: 2012-13 40. Ground No. 1 is not pressed, hence, dismissed. 41. The issue raised in ground No. 2 is identical to the issue raised in ground No. 3 of ITA No. 1115/Del/2016. Following our decision therein, we uphold the decision of learned Commissioner (Appeals) 42. In the result, the appeal is dismissed. 43. To sum up, the appeals for assessment years 2007-08, 2008-09, 2009-10, 2010-11 and 2011-12 are partly allowed, whereas, appeal for assessment year 2012-13 is dismissed. Order pronounced in the open court on 3rd Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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