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TMI Blog2023 (8) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... between India and Thailand and the conclusion was drawn by the AO that these incomes are not taxable. This consistent approach was departed by the Revenue for the assessment years 2016-17, 2018-19 and 2019-20 for one reason or the other, which, in our view, is not justified. The ratio of the decision of Radhasoami Satsang [ 1991 (11) TMI 2 - SUPREME COURT] wherein the apex court rejected the plea of the Revenue that res judicata does not apply to tax matters and held that where the facts are identical there is no change in law, the judicial authorities are bound by the decision of the previous year applies to the present case. Therefore, on this ground alone we direct the AO to delete the addition made towards off shore supplies and also for providing engineering services accepting the stand of the assessee that they are not taxable under DTAA between India and Thailand. Even on merits the case of the appellant is covered by the decision of the Tribunal in assessee s group company, namely, Bombardier Transportation Sweden AB Vs. DCIT [ 2020 (10) TMI 1205 - ITAT DELHI] held that appellant does not have any place of business in India and all business activities with respect to offsho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d prejudicial to the interest of Revenue. Assessee filed its objections for revision under section 263 of the Act as under:- "Assessee is a company registered and incorporated under the laws of Thailand, with its head office located at 3354/16-19, 6th floor, Manorom Building, Rama 4 Road, Klongton Klongtoey, Bangkok Thailand. It is a subsidiary of Bombardier Transportation Holdings (Thailand) Ltd. The company is a tax resident of Thailand as contemplated under Article 4 of the India-Thailand Tax Treaty. During the year under consideration, the company had only two sources of income: Source 1: Receipts from Delhi Metro Rail Corporation ('DMRC') Source 2: Receipts from Bombardier Transportation India Private Limited ('BTIN') - INR 1,80,89,192 towards engineering services. The case was selected for scrutiny assessment u/s 143(2) of the Act and detailed submissions were submitted before the Ld. Assessing officer ('Ld. AO'), explaining the nature and taxability of the above two incomes. The Ld. AO reviewed the submissions of the assessee and duly accepted the returned income. Thereafter, a notice under section 263 of the Act has been issued by your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofits Since the India Thailand Tax Treaty does not have article relating to FTS therefore the consideration for services provided by the assessee company to BTIN cannot be taxed under the Treaty provisions as Fee for Technical Services. Since such services are provided in course of its business it would be constituted as Business Income under Article 7 of the India Thailand tax treaty but undisputedly, the assessee company does not have any permanent establishment ("PE") in India, therefore the receipts from the said services could not be taxed in India. Prayer In light of the above arguments placed on record we would to summarize that: 1. Your Honour has inadvertently linked two mutually exclusive transactions. 2. Your Honour has erroneously compared the scope of activities to be performed by the Assessee under CS03 contract with engineering services to be rendered by Assessee to BTIN. 3. Thus it is prayed before your Honour that the said transactions are completely different from each other. Hence using the scope of activities mentioned in contract CS03 entered with DMRC and drawing conclusion about the taxability of receipts from BTIN for engineering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18-19 and 2019-20. The ld. Counsel submits that the Assessing Officer has departed from the consistent approach followed by the Department for the past wherein receipts from DMRC towards off shore supply of equipment and services thereof have been held to be not taxable in India. Since there has been no change in the facts of the case in terms of the business of the assessee, which has been consistently engaged in off shore supply of equipments and services un-settling a settled position on an identical issue is not only incorrect and flaunt, but against the settled principles of law. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang Vs. CIT [(1992) 193 ITR 321 (SC)]. 5. The ld. Counsel for the assessee further made the following submissions:- 6. The ld. Counsel for the assessee the assessment years 2018 brought to tax only the off shore supplies made by the assessee. 7. The ld. DR, strongly supported the orders of the AO/DRP. The ld. DR further submits that BTIN has no experience in rendering services and it is rendering assessee and Bombardier Transportation USA Inc. (BTUSA) one of the members of the consortium. Therefore, ld. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, a notice u/s 142(1) of the Act along with detailed questionnaire was issued to the assessee on 20.10.2015. In response to various notices, Sh Arvind Rajan and Ms. Chinu Bhasin CAs, authorized representatives of the assessee attended the assessment proceedings from time to time and filed necessary information and details. Written submissions and documents were considered. The case was discussed with the authorised representatives of the assessee. 2. The assessee company is registered and incorporated under the laws of Thailand and engaged in the business of manufacturing and supply of train signaling systems. Assessee's receipts from services provided by it in India and its taxability was examined in the light of provisions of the Act and India-Thailand DTAA. After considering replies and documents filed by the assessee its income as shown in the revised return of income is accepted. 3. Assessment is, accordingly made on Nil income. Credit for prepaid taxes is allowed after due verification. Detail of computation of tax and interest charged as provisions of law is given in the enclosed ITNS-150 which is part of this order. Issue necessary forms." Assessment Year : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case was discussed with the authorised representatives of the assessee. 2. The assessee company is registered and incorporated under the laws of Thailand and engaged in the business of manufacturing and supply of train signaling systems. The assessee had entered into an agreement namely CS03" with Delhi Metro Rail Corporation (DMRC) wherein BT-Thailand along with the other members of the consortium would design manufacture, supply, install, test and commission train control & signaling system. During the year under consideration, BT Thailand made offshore supplies to DMRC. The transfer of ownership/title to DMRC in respect of all supply transaction has taken place outside India. Accordingly, the income accruing by virtue of these offshore supply transactions is not taxable in India. After considering replies and documents filed by the assessee, its income as shown in the return of income is accepted." Assessment Year : 2017-18 : M/s Bombardier Transportation Signal (Thailand) Ltd (hereinafter referred to as "assessee") has e-filed its return of income for Assessment Year 2017-18 on 29.11.2017 declaring total income of Nil. The case was selected for scrutiny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee on off shore supplies made to DMRC and the engineering services provided to BTIN with reference to the DTAA between India and Thailand and the conclusion was drawn by the Assessing Officer that these incomes are not taxable. This consistent approach was departed by the Revenue for the assessment years 2016-17, 2018-19 and 2019-20 for one reason or the other, which, in our view, is not justified. The ratio of the decision of the Hon'ble Supreme Court in the case of Radhasoami Satsang Vs. CIT (supra) wherein the apex court rejected the plea of the Revenue that res judicata does not apply to tax matters and held that where the facts are identical there is no change in law, the judicial authorities are bound by the decision of the previous year applies to the present case. Therefore, on this ground alone we direct the Assessing Officer to delete the addition made towards off shore supplies and also for providing engineering services accepting the stand of the assessee that they are not taxable under DTAA between India and Thailand. 11. Even on merits the case of the appellant is covered by the decision of the Tribunal in assessee's group company, namely, Bombardier Transp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. DR pointed out that as per the contract, liability was fastened jointly and severally and the same profit has to be attributed for supply made to India by the appellant. 34. Referring to the findings of the DRP at Pages 18 & 19 of its order, the ld. DR pointed out that the seconded employee of Bombardier Transportation Sweden who has been seconded to Bombardier India and is overall responsible for entire delivery including mechanical and electrical equipment and commissioning of the train and ensuring BT standard in all testing activities prior delivery of train in connection 13 with the contract with DMRC. The ld. DR rested his submissions on the following findings of the DRP: "1. There is a Expat employee who is being paid a very high salary of Rs.7,35,26,751. This shows that his job is of paramount importance for the contract with DMRC and his job responsibilities as defined in the appointment letter include coordination with DMRC engineers for completion of contract. 2. He has overall technical responsibility for the entire scope of delivery including electrical and mechanical equipments. 3. He is also required to provide Technical support during train commissionin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ishikawajima Harima Heavy Industries Ltd 158 Taxman 259 has categorically held that only such part of the income as is attributable to the operations carried out in India can be taxed in India. Same view was taken by the Hon'ble High Court of Delhi in the case of Nortel Networks India International Inc & Ors 386 ITR 0353. 36. We have also considered the agreement between the appellant and BTIN. We find that as per this MOU, scope of work between eh appellant and BTIN are clearly bifurcated. The relevant part reads as under: "WHEREAS BT Sweden, BT India and their subsidiaries/affiliates as a fully integrated group are desirous and possess full capability to effectively execute the Project. WHEREAS in view of the prescribed 'eligibility criteria as detailed in Clause A 5.2 (b) of Instructions to Tenderers('ITT) of DMRC Tender BS02 document, BT Sweden has been selected as the Lead Member for the above Project of DMRC and BT India has been designated to act as the local Indiah member of the consortium - •Now MoU will cover the following: Purpose/ Area of the MoU 1.1 The purpose, of the MoU (hereinafter referred to as the 'Purpose') Is to provide a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peration defined in this MoU is on an exclusive basis and shall be subject to BT internal policies and guidelines. 3.3 In the event of contract, this MoU will be further elaborated for detailed clarity of scope split In meeting the overall project requirement 3.4 3.5 The detailed interfaces and scope of supply & services is defined after taking into consideration each entities' experience on capabilities while considering the requirement of the tender document of DMRC and in particular the need to involve suitable local partners. 14. The date of letter of acceptance is 17-09-2007 while the MoU is dated 11-10-2007. Thus, the MoU between B T Sweden and BUN has been signed after the contract has been accepted. 37. As mentioned elsewhere, the appellant does not have any place of business in India and all business activities with respect to offshore supplies are carried outside India. The equipment supply has been manufactured at overseas manufacturing facility of the appellant and sale of equipment has occurred outside India and payment has also been received by the appellant and outside India. 38. We find that during the DRP proceedings, the DRP was misdirected in consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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