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TMI Blog2023 (10) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... neous. Accepting the plea of the assessee has set aside the issue of computation of profit attribution, and elimination of duplication of income in respect of service contract revenue, to the file of the AO/TPO. Assessee has failed to provide necessary information to justify his arguments that, there is an error in computation of profit attribution to PE in India and also failed to substantiate his arguments that there is a duplication of income in respect of service contract revenue. The appellant failed to provide basic information, considering the plea of the assessee and also consistent with view taken by the co-ordinate bench in assessee s own case for assessment years 2013-14 2014-15, we set aside the issue of computation of profit attribution and duplication of income in respect of service contract revenue to the file of the AO for the limited purpose of computation of income. The assessee is directed to provide the requisite details to ascertain correct amount of profit attributable to Indian PE. Appeal of allowed for statistical purposes. - SHRI V. DURGA RAO, HON BLE JUDICIAL MEMBER AND SHRI MANJUNATHA. G, HON BLE ACCOUNTANT MEMBER For the Appellant : Shri. Vikram Vijaya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ignoring the fact that Durr Germany and its PE in India are in fact one and the same entity and therefore incapable of doing business with itself. Therefore, as such, there is no international transaction as defined in section 92B of the Act. (iii) TPO has erred in assuming that the transaction under consideration is one which gave rise to a value chain i.e. where a contract was initially entered into by Durr Germany and was thereafter sub-contracted, on a commercial basis, to its Indian PE. Since, no value chain comes into existence in the above transaction, the attribution of the revenue to the Indian PE has to be based on the Comparable Uncontrolled Price (CUP) method and neither the Cost Plus Method (CPM) nor Transaction Net Margin Method (TNMM) shall be appropriate in the given case. (iv) Without prejudice to the above, it is submitted that the comparable used by the TPO are not applicable to the activities of the appellant's PE in India namely supervision of the installation and commissioning of the highly specialized facility i.e. a Paint shop. In fact the TPO failed to appreciate that there are no entities in India which provide identical services. 5. Duplication of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioning of the project. Income arising out of the contract-2 has been offered to tax by Durr Germany in India. The income from installation and commissioning was offered to tax by M/s. Durr India (P) Ltd. The Assessing Officer, based on these facts came to the conclusion that all the activities right from engineering stage to commissioning stage were inextricably and originally linked and therefore, the turnkey contract was a single composite contract between the assessee and the clients in India. The ld. Assessing Officer, considering mark-up of all the three activities, has proposed addition towards income attributable to Indian PE from said contracts and taxed in the hands of the assessee for all three years. The assessee carried the matter in appeal before the first appellate authority and raised various contentions. The ld. CIT(A), for the reasons stated in their appellate order dated 22.02.2016, dismissed objections raised by the assessee and held that such contracts constitutes PE in India and also computation of profit attributable to Indian PE. Aggrieved by the ld. CIT(A) order, the assessee is in appeal before us. 4. The Ld. Counsel for the assessee, Shri. Vikram Vijaya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is squarely covered in favour of the revenue by the decision of ITAT, Chennai Benches in assessee s own case for assessment years 2013-14 2014-15 in IT(TP)A No. 92/Chny/2018 and IT(TP)A No. 15/Chny/2021, where the Tribunal held that the contract between appellant and its clients in India is a composite contract/turnkey contract and thus, supply contract constitute PE in India, because of business and project office. He further submitted that, the Assessing Officer has rightly computed profit attribution on the basis of evidence filed by the assessee and the same has been appraised and confirmed by the Tribunal. Therefore, there is no reason to set aside the issue of computation of profit attribution once again to the file of the Assessing Officer/TPO. 6. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The sole issue involved in these three appeals filed by the assessee for assessment years 2009-10 to 2011-12 is treating project office of the appellant as PE in India, in respect of supply contract and computation of profit attribution to Indian PE. We find that this issue is squarely covered in favour of the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce only on 02/05/2013 to be completed on 17.01.2014. Till such time, the imported goods have been stored in the storage area on site. Hence, the imported material was always in the custody of assessee and the passing of Risk on Equipment to customer is to happen only on 17.01.2014 post which the warranty for the equipment supplied starts from 31.03.2014, post installation of all the equipments at site. There are two stages of passing of risk associated with this project viz., passing of risk over equipment and passing of risk over completed project to the customer, which would happen only post commissioning or when the pilot production start and pre-acceptance of the customers. Therefore, the assessee had a PE in India in respect of offshore supplies by virtue of presence of Site Office/Storage Area at the Ford Site in India for a period more than the threshold. It is therefore clear that the income to the assessee accrued in India and the source of income is in India and therefore taxable in India. From the statement recorded from General Manager Sales Service Durr India Private Limited, the process mentioned in Ford Contract is common for all the contracts executed by Durr German ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jurisdictional High Court is extracted as under : 36. The Tribunal s factual findings also are in favour of the revenue as regards the contract being a composite one, ASPL being a mere facade, existence of close relationship between the foreign person and the Indian operations. 37 it had secured the due performance of the whole contract by insisting that the assessee should guarantee its performance even if the contract was split up into four contracts, NLC did not stand to lose since the value of the contract was fixed even from the beginning. It must be remembered that it was open only for a single bidder. It was only for the convenience of and at the instance of the assessee that it was divided into four. Therefore, the question as to whether NLC would have agreed to such a course of action is really not relevant. NLC did not suffer in any way by splitting up and NLC was bound to pay the entire payment regardless of whether it was equally distributed among all the four contracts or whether the price was loaded on to Contract or 11. 40. For the reasons given above, we confirm the findings that, (a) the foreign company and the activities rendered by it under contract No. I and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not furnished the details in respect of the above submissions, in the interests of justice, we deem it fit to remit this issue back to the AO/TPO for a fresh examination. The assessee shall place all materials in its support before the AO/TPO and comply to the requirements of the AO/TPO in accordance with law. The AO/TPO is free to conduct appropriate enquiry as deemed fit. However, he shall after affording effective opportunity to the assessee, would pass appropriate order in accordance with law. The assessee s above grounds are treated as allowed to the above extent. It could be thus seen that the assessee could not furnish any details with respect to computations but nevertheless, the matter was restored by the bench back to lower authorities for limited purpose of computation of income. Set-aside proceedings 4.1 Pursuant to the aforesaid directions, order giving effect has been passed by Ld. AO on 06.02.2020. During proceedings, details were called from assessee seeking information on the income which is taxed twice and the year in which the same was already brought to tax. However, the assessee submitted that it was not maintaining separate books for the permanent establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Consequently, the computations made in order dated 08.11.2017 were retained by Ld. AO. The Ld. DRP confirmed the stand of Ld. AO vide directions dated 05.02.2021 and accordingly, final assessment order was passed on 17.02.2021. Aggrieved, the assessee is in further appeal before us with a grievance that the directions as given by Tribunal has not been followed by lower authorities and the additions have been repeated in the set aside proceedings. Our findings and Adjudication 5. Upon careful perusal of Tribunal s adjudication as extracted in preceding para 2 3, we find that the issue, on merits, has been decided by the Bench against the assessee. It has clearly been held by the bench that all the activities of the assessee from engineering stage to supply erection, installation, commissioning and completion are inextricably linked and hence, the turnkey contract is a single composite contract between Ford India and Durr Systems GmbH (assessee). However, considering the submissions of the assessee that the profit rate was determined by applying adhoc mark-up rate and the down payment invoices were considered as supplies which lead to double taxation and the plea that the income s ..... 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