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TMI Blog2024 (5) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... section 90 and therefore, a non-resident assessee can opt to be governed by the applicable treaty if more beneficial to it, which is now a settled position of law. The impugned receipts of the assessee are not taxable in India under the provisions of section 44BB of the Act for the reason that the assessee does not have a PE in India in the relevant AYs under consideration and that being a resident of Canada, the assessee is governed by the more beneficial provisions under the India-Canada DTAA. It is the claim of the Revenue that the assessee s case is covered by the decision of the Apex Court in the case of ONGC [ 2015 (7) TMI 91 - SUPREME COURT ] We do not agree with this contention of the Revenue as in our considered view, the assessee s case is distinguishable on facts as the substantial question of law determined in ONGC s case was not concerning the eligibility of tax payers to the beneficial provisions of tax treaty but the taxability of income in the nature of FTS whether under the provisions of section 44D or 44BB of the Act. The Revenue has not been able to bring on record anything to establish the existence/ presence of a PE of the assessee in India either before us or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Int. Taxation-1(2)(1), under section 143(3) read with section 144C(13) of the Income-Tax Act, 1961 (the Act ) pursuant to the directions of the Ld. DRP, pertaining to AYs 2019-20, 2020-21 and 2021-22 respectively. Since all the four appeals involve common issues, these were heard together and are being disposed of by this common order. 2. The assessee has raised the following grounds of appeals: Assessment Year 2012-13 1. That the Ld. AO has grossly erred in treating the Appellant as an eligible assessee in terms of Section 144C of the Act and accordingly, passed draft assessment order under Section 144C of the Act, and thereafter passing the impugned final assessment order, beyond the period of limitation as prescribed under Section 153 of the Act, thereby making the assessment proceedings barred by limitation. 2. That, on the facts and in the circumstances of the case and in law, the order passed by the Ld. CIT(A) under Section 250 of the Act, taxing the receipts amounting to Rs. 3,64,35,459/-under Section 44BB of the Act, is wrong and bad in law as the same cannot be taxed at all, in the absence of any Permanent Establishment ('PE') of the Appellant in India in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case and in law, the order passed by the Ld. AO under s. 143(3) read with s. 144C(13) of the Act, taxing the receipts amounting to Rs. 7,94,63,248/- under s. 44BB of the Act, is wrong and bad in law as the same cannot be taxed at all in terms of the beneficial provisions under India-Canada DTAA. 2. That, on the facts and circumstances of the case and in law, the Ld. AO and Ld. DRP erred in not holding that: (A) Rs. 2.34,14,794 received on account of sale of software license cannot be taxed as Royalty under Article 12(3) of India-Canada DTAA, particularly in view of Engineering Centre of Excellence Private Limited v CIT (2021] 125 taxmann.com 42 (SC). (B) Rs. 5,50,38,725 and Rs. 10,08,728 received on account of software maintenance/support services and training services respectively, cannot be taxed as FIS under Article 12(4) of India Canada DTAA, as the said receipts do not satisfy the make available criteria. 3. That, the Ld. AO/ DRP has grossly erred in not considering the evidence provided by the Appellant and also without providing the result of investigation/enquiry conducting against the Appellant. 4. That, the Ld. AO has grossly er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on account of software maintenance/ support services and training services, cannot be taxed as Fee for Technical Service ('FTS') / Fee for Included Service ('FIS') under Article 12(4) of India-Canada DTAA. 5. That, on the facts and circumstances of the case and in law, the Ld. AO has erred in not granting complete interest due under Section 244A of the Act as the Appellant shall be eligible to interest under Section 244A of the Act from first day of AY i.e. 1 April 2020 till the date of receipt of actual refund in the bank account of the Appellant. 6. That, on the facts and the circumstances of the case and in law, the Ld. AO has erred in initiating penalty under section 270A of the Act. Assessment Year 2021-22 1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. AO under s. 143(3) read with s. 144C(13) of the Act is wrong and bad in law as the same is not accompanied by the notice of demand under Section 156 of the Act. 2. That on the fact and in circumstances of the case and in law, the final assessment order passed by the Ld. AO is void and liable to be quashed, in the absence of the Document Identification Number ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n company and is a tax resident of Canada. It is engaged in the business of supply of reservoir simulation software to oil companies such as ONGC, Oil India, Vedanta, etc. along with related software maintenance support services and training services for acquainting with the operation of such software. On examining the list of non-filers, the Ld. Assessing Officer ( AO ) found that the assessee has not filed its return for AY 2012-13 despite receipts from M/s. Cairn Energy India Pty. Ltd.; M/s. Prize Petroleum Company Ltd.; M/s. Shell India Market Pvt. Ltd. and M/s. Reliance Industries Ltd. on which TDS has been deducted. He therefore issued notice on 29.03.2019 under section 148 of the Act. It was served but compliance was not made. He, then issued notice(s) to the above concerns under section 133(6) of the Act seeking details about the amount paid/accrued to the assessee, nature of products/services rendered by the assessee to them as well as the contract/agreement under which such payments have been made. Based on the inputs so obtained, the Ld. AO concluded that the assessee is providing products and services which are being used to support exploratory activities in oil and gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of ONGC vs. CIT (2015) 376 ITR 306 (SC) has been relied upon to assess the income of the assessee under section 44BB of the Act. Similar addition is made in AY 2021-22 as well. 6. Aggrieved, the assessee is in appeal before the Tribunal and the main issue of taxing the entire receipts of the assessee by applying the provisions of section 44BB of the Act is common in all the AYs presently involved. 7. The Ld. AR made common submissions for all the four AYs under consideration. The Ld. AR submitted that section 44BB of the Act is a computation provision and provides that notwithstanding anything contained in section 28 to 41 and section 43 and 43A of the Act, 10% of the gross receipt of a non-resident engaged in the business of providing services or facilities in connection with supplying plant and machinery on hire which is used or to be used in prospecting for or extraction of, mineral oils shall be deemed to be the profits and gains of business. The section provides a presumptive taxation rate for computation of profits but also does not override provisions of sections 5, 9 or section 90 of the Act. He referred to the decision of Hon'ble Supreme Court in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclose any licensed technology in any form or manner to any third party. 7.4 The Ld. AR, without prejudice to the above contentions, further submitted that in para 18 of its order dated 19.11.2018 in assessee s own case for AYs 2006-07 to 2010-11 (copy placed in the Paper Book), the Tribunal held that nature of payment as received by the assessee through ONGC on account of software license fee cannot be characterized as royalty . It is stated by the Ld. AR that the order (supra) of the Tribunal has been accepted by the Revenue and no appeal there against has been filed. The Ld. AR submitted that facts continue to remain the same in AYs presently under consideration. He also submitted that this issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence (P.) Ltd. (2021) 125 taxmann.com 42 (SC). 7.5 The Ld. AR stated that software maintenance service and training do not qualify as make available within the meaning of the expression contained in Article 12(4)(b) of the India-Canada DTAA for the reasons that (i) the Indian customer is not able to apply any expertise technology contained therein or use knowledge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying plant and machinery on hire to be used in the prospecting for, or extraction or production of, mineral oils . It is in the company of three other sections (which we have referred to earlier as 44BB series) specially providing for computation of profits of the non- residents/foreign companies engaged in the specified types of business. True, profits arising from the business specified in section 4488 may also fall within the ambit of fees for technical services chargeable under section 9(1)(vii). But, the question is which is the appropriate computation provision that is applicable? As between the competing provisions, namely section 9(1)(vii) read with section 44DA and section 44BB, section 44BB being a more specific provision, that provision should prevail for the purposes of computation. Section 44DA, it may be recalled, provides for the method of computation of income by way of fees for technical services received by a non-resident or a foreign company carrying on business through a permanent establishment in India. If the non-resident is engaged in the business of providing services in connection with the prospecting, etc., of mineral oils, the computation provisions re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressly excluded. Accordingly, if the consideration received by the Assessee for services rendered is found to be fees for technical services, the AO would specifically have to determine (a) whether the assessee had a PE in India during the relevant period; and (b) if so, whether the contracts entered into by the appellant with BG and RIL were effectively connected with the Assessee's PE in India. It is conditions are satisfied, that the income of the assessee would be computed under Section only, if the AO finds that the said two 44BB(1) of the Act. However, if such condition of the asst satisfied then the income tax payable b the appellant would have to be computed in accordance with Section 115A(1)(b) of the Act. 30. Therefore, if it is accepted that the Tribunal was right in finding that the consideration received by the Assessee from BG and RIL was fees for technical services, in our view, the Tribunal's decision to remit the matter to the AO for determining whether the Assessee had a P in India and whether the consideration received by it was connected with that PE, would have to be sustained. 31. Accordingly the second question - Whether on the facts and circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under subsection (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under subsection (3) of section 143 and determine the sum payable by, or refundable to, the assessee. Following sub-section (4) shall be inserted after sub-section (3) of section 44BB by the Finance Act, 2023, w.e.f. 1-4-2024: (4) Notwithstanding anything contained in sub-section (2) of section 32 and sub-section (1) of section 72, where an assessee declares profits and gains of business for any previous year in accordance with the provisions of sub-section (1), no set off of unabsorbed depreciation and brought forward loss shall be allowed to the assessee fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PE has not been identified by the AO. Assessee s counsel has specifically mentioned that there is no finding in the assessment order as to which consortium member and which office of such consortium member constitutes PE of the assessee in India. Assessee has challenged the aforesaid finding before the DRP. DRP did not address the issue but held that the issue of PE is academic, therefore, need not be answered. This view is quite contradictory to the above decision. As referred in Hon ble Supreme Court decision in the case of ADIT vs. E-Funds (2018) 13 SCC 294, burden of proving the existence of PE lies on the Revenue which has not been discharged. In this view of the matter, assessee succeeds that there is no finding of PE in this case, hence section 44BB will not apply. Since the assessee succeeds on this plank, other limb of arguments is not being adjudicated as they are now of academic interest. 13. In the case of CIT vs. Enron Oil Gaspat Services Inc., Dehradun (2013) 29 taxmann.com 419 (Uttrakhand), the Hon ble High Court of Uttrakhand decided the question that whether payment received by the assessee, a US enterprise providing services and facilities as mentioned in section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s assumed by the appellant that the assessee made no profit at all. It appears to us that whether the assessee made any profit or it did not make any profit is of no consequence. 10 per cent of its remuneration, as mentioned in Section 44BB is deemed to be profit and to be taxed under the head 'profits and gains of business or profession'. If the assessee was of the view that it has not earned any profit by providing such service, the only way available to the assessee was to maintain books of accounts and to have the same audited and to furnish the audit report in respect thereof. It is submitted by the learned counsel for the respondent that a view contrary to our view, as expressed above, has been taken in Income Tax Appeal No. 89 of 2007 and connected Appeals by a Division Bench of this Court. In that case, the Division Bench was not concerned with a tripartite agreement, inter se, three individuals, one of which is an instrumentality of the Union of India, another an Indian public limited liability company and the third, a non-resident company, as is the case in the instant case. There the learned Judges dealt with Article 7 of DTAA, i.e. Article 7 of an international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal (supra), we are of the view that the impugned receipts of the assessee are not taxable in India under the provisions of section 44BB of the Act for the reason that the assessee does not have a PE in India in the relevant AYs under consideration and that being a resident of Canada, the assessee is governed by the more beneficial provisions under the India-Canada DTAA. It is the claim of the Revenue that the assessee s case is covered by the decision of the Apex Court in the case of ONGC vs. CIT (2015) 59 taxmann.com 1 (SC). We do not agree with this contention of the Revenue as in our considered view, the assessee s case is distinguishable on facts as the substantial question of law determined in ONGC s case was not concerning the eligibility of tax payers to the beneficial provisions of tax treaty but the taxability of income in the nature of FTS whether under the provisions of section 44D or 44BB of the Act. The Revenue has not been able to bring on record anything to establish the existence/ presence of a PE of the assessee in India either before us or before the lower authorities. It is not even the case of the Revenue that the assessee has PE in India in the relevant AYs un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax. 19.2 It can be seen from the above that proviso inserted in section 209(1)(d) of the Act by the Finance Act, 2012 w.e.f. 01.04.2012 would apply only in a scenario where person responsible for deducting tax has paid or credited such income without deduction of tax. In the case(s) at hand, the Ld. AR has submitted that the income (impugned receipts) has been received by the assessee after deduction of tax at source and therefore the said proviso to section 209(1)(d) of the Act is not applicable. As per section 209(1)(d) of the Act r.w. proviso thereto, where in case of a non-resident company, tax deductible at source has been paid, it would not be permissible for the Revenue to charge any interest under section 234B for alleged failure to pay advance tax by such assessee. 19.3 Before us, the assessee has relied upon the case of Mitsubishi Corporation 130 taxmann.com 276 (SC), wherein the Hon ble Supreme Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X
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