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TMI Blog2024 (12) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... TEC would not have any bearing on the presumed date of commencement and conclusion of the installation activities, since the payment dates may have no relevance or bearing on the date of commencement and completion of the project. Accordingly, since we have held that TEC does not have an installation PE in India in terms of Article 5(2)(k) of the India-USA Tax Treaty, the assessee did not have an obligation to withhold taxes at source of payments made to TEC. Accordingly, we hold that the assessee was not under an obligation deducted taxes at source with respect of contractual payments made to TEC, USA. Assessee appeal allowed. - Smt. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member For the Appellant : Shri S. N. Soparkar, Sr. Adv. Shri Parin Shah, A.R. For the Respondent : Shri Vipul Chavda, Sr. D.R. ORDER PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: Both appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-13, (in short Ld. CIT(A) ), Ahmedabad vide orders dated 28.02.2019 passed for A.Ys. 2013- 14 2014-15. Since common facts and issues for consideration are involved in both the years unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 was for equipment and services for the Heat Set Cabinet and Exit Section drives and controls. The issue for consideration before the TDS officer was the assessee s failure to withhold taxes on payments made to Teems Electric Co. Inc. under Section 195 of the Income-Tax Act, which requires withholding tax on payments to foreign entities if those payments are for services which are taxable in India. The TDS officer also held that the assessee was liable for withholding tax under Section 195 of the Income-tax Act and could be treated as an assessee in default for failing to deduct tax at source. Furthermore, the TDS officer levied interest under Section 201(1A) for the failure to withhold tax on the payments. 4. The assessee filed appeal against the aforesaid order before Ld. CIT(A). Ld. CIT(A) held that the payments received by Teems Electric (TEC) were business receipts and that, since TEC had a permanent establishment (PE) in India, the income from those receipts was taxable as business income in India and therefore, the taxability and consequent tax withholding requirement on such payments on the part of the assessee, would have to be determined in light of the fact whether TEC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in the maintenance of the non-woven lines. Fourthly, the assessee's reliance on Article 16 of the India-USA DTAA was also dismissed by Ld. CIT(A), as this Article pertains to the taxation of employees' income, not to determining whether TEC had a PE in India. Ld. CIT(A) noted that the critical issue in this case was whether TEC had a PE in India under the relevant provisions of the DTAA. Ld. CIT(A) observed that the assessee's own submissions demonstrated that TEC s employees had spent more than 120 days in India within a twelve-month period, which triggered the creation of a PE in India. According to the appellant s records, the number of man-days in India amounted to 161 days over the relevant periods. These 161 days included the time spent by TEC's personnel for installation and commissioning activities. Specifically, for Job Orders 155 and 156, which dealt with electrical and mechanical labour, TEC s employees were expected to be in India for 16 weeks (112 days), while Job Order 157 involved an additional 30 days for system start-up and commissioning activities. Payments for these activities were made starting in January 2013, with the first payment occurrin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly exception being that if the site or project continues for less than 30 days in any given year, then it would not constitute a PE in that year. Since TEC s presence in India exceeded 120 days, the PE was clearly established. As a result, the appeals for both assessment years (2013-14 and 2014-15) were dismissed, holding that TEC s income from the project was taxable in India, and Ld. CIT(A) held that the assessee was liable to withhold taxes under Section 195 of the Income Tax Act. 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) holding that the assessee has a PE in India. 6. Before us, the Counsel for the assessee submitted that the issue primarily involves the period of stay of the employees of TEEMS Electric Co., USA in India. The Counsel for the assessee submitted that TEC had given a certificate, giving specific details of employees visit in India and the number of days they had stayed India. As per the certificate issued by TEC, for A.Y. 2013-14, their period of stay was 52 days during A.Y. 2014-15, their period of stay was for 109 days. The only reason why a PE was held to exist in India was on account of double counting of period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, from the submissions furnished by assessee before Ld. CIT(A), it has been submitted that the employees of TEC visited India for a period of 26 days from 05.03.2013 to 31.03.2013. The employees from TEC were on a visit to India during the period from March 5, 2013 to March 31, 2013 for A.Y. 2013-14. Before going further into facts, it would be useful to reproduce a judicial precedent which has an important bearing on the particular set of facts and issue for consideration before us. In the case of Linklaters vs. DDIT (IT), Circle-3(2), Mumbai 106 taxmann.com 195 (Mumbai Trib.), the ITAT has clarified that for the purposes of Article 5(2)(k), for the purpose of computing the period of rendering of service, the stay of employees in India on a particular day has to be taken cumulatively and not independently. That being the case, multiple counting of employees in a single day is not permissible under Article 5(2)(k). Therefore, in the instant case, we observe that from the table of chart submitted by assessee regarding period of stay in India, it is observed that the employees stayed in India during the period from March 5, 2013 to March 31, 2013 (relevant to A.Y. 2013-14) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 5(2)(k) of the India-USA Tax Treaty. We note that as per submission dated 17.09.2018, reproduced at Page 109 of the Paper Book submitted before us, and another submission dated 21.03.2014 reproduced at Page 21-22 of the Paper Book the period of employee visit extends from 01.04.2013 to 07.06.2013 and therefore, even in light of these submissions, which evidently have not been disputed by the Tax Authorities, the period of stay does not exceed more than 65 man days for F.Y. 2013-14, relevant to A.Y. 2014-15. Accordingly, looking into the instant facts and in light of the ITAT ruling in Linklaters supra, in our considered view, TEC does not have a permanent establishment in India in terms of Article 5(2)(k) of the India-USA Tax Treaty. Further, in our considered view, the details of payment by the assessee to TEC would not have any bearing on the presumed date of commencement and conclusion of the installation activities, since the payment dates may have no relevance or bearing on the date of commencement and completion of the project. Accordingly, in light of the above facts, since we have held that TEC does not have an installation PE in India in terms of Article 5(2)(k) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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