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TMI Blog2025 (3) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied from outside India and the payment for the same has been received outside India. We find force in assessee's argument that supply of Drawings and Designs are an integral part of Imports and are highly integrated to the supply of the Plant, Machinery and equipment. Without the Drawings, the other supplies are of no worth.
We are of considered view therefore that being a component of supply of Plant and Machinery and being an accrual overseas, the receipts on account of Drawing and designs formed part of business income within the purview of Article 7 of the USA-India DTAA and the same can not be taxed separately under Article 12 of the USA-India DTAA. Since it has been decided that the assessee doesn't have a DAPE in India nor an installation PE in India, the receipts on account of Drawing and Design can not be taxed as Income in India nor the same be attributed to the assessee as FTS u/ 9(1)(vii) - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant company is an entity incorporated in the United States of America and is engaged in manufacturing and selling of products and equipment primarily for the American Steel Industry. Products are generally used by steel companies to improve their iron desulfurization. During the year under consideration, the assessee earned Revenue from RashtriyaIspat Nigam Limited [RINL] and from Steel Authority of India Limited [SAIL]. The assessee company has undertaken the following two projects during the year: (i) Project with SAIL for design and engineering supply of drawings and equipment's, supply of plant and equipment's including commissioning of spares, foreign supervision, training of personnel in India, ocean freight, etc. (ii) Project with RINL for technology design, engineering of hot metal desulphurization plant SMS-2 complete in all respects for imported portion on discrete turnkey basis. 7. The assessee had not filed any return of income for the year under consideration. The AO observed that the assessee had three source of income and had earned Fees for Technical Services as follows: i) Supplies of equipment & commissioning of spares - $15,02,160 ii) Drawing & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es several companies and as an agent has no right to conclude the contract and that the agent RIC is not wholly and exclusively working for the assessee. 15. Per contra, the ld DR stated that as per the contract between the assessee and the RIC, the non-compete and the non-solicitation clause shows that the assessee has control over its agent RIC. The ld DR submitted that wholly and exclusively working for the assessee is relevant in the later year but not in the instant year. 16. We have heard the rival submissions and have carefully perused the materials on record. The whole controversy revolves around whether RIC is DAPE of the assessee so as to tax the assessee business income in india. This controversy was resolved by the coordinate bench of ITAT, Delhi benches in AY 2011-12 in ITA no 2343 & 1644/Del/2015 vide order dated 21.02.2022. We find that the ITAT has given a clear finding that the RIC is not a DAPE. It held as follows: "10. A perusal of the assessment order shows that, after extracting the responsibilities from the agreement between the assessee and RIC, the Assessing Officer, referring to Article 5 of the India-USA DTAA, came to the conclusion that RIC is an agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inland Refractories Co. 38600 Chester Road, Avon, Ohio 44011- 23/03/2009 2 TATA Steel UK Consulting Limited 30 Millbank, London, SW1P 4WY, UK 21/04/2011 3 Schenck Process India Limited Plot Nos. 67-82, Tupudana Industrial Area (New), Hatia 03/02/2012 4 Barnes Group Inc. 10367 Brecksville Road, Brecksville, OH 19/07/2013 5 McKeown International Inc. 1106, South Mays, Suite 100, Round Rock, TX 78664, USA 15/01/2014 6 Technosulphur Sistema De Tratamento De MetaisLiquidos S. A Rua 1° de Junho, 2,000, Bairro Vale Das 01/02/2014 15. It can be seen that RIC is also engaged with other persons. Therefore, it can be safely concluded that RIC was not completely dependent on the assessee for its finances. On the contrary, it was just was just engaged in its individual capacity vide Sales and Representative Agreement to assist the company in supply of the services/products to customers, in performing the final performance tests and in final settlement of the companies contractual obligations under contract, if required by the company. It would be apt to refer to the part of the contract which reads as under: "Representative shall at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 b) Indigenous (At site) (Refer fable - - 32,00,000 Supply of Plant & Equipment a) Imported (FOB) (Refer '['able - 3) 1,988,580 - b) Indigenous (At site) (Refer fable - - 16,80,00,000 3 Supply of Refractories (At a) Imported (FOB) (Refer 'fable - 5) - b) Indigenous (At site) (Refer fable - Inch in 2b 4 Supply of Commissioning Spares a) Imported (FOB) (Refer 'fable - 7) 14,300 " b) Indigenous (At site) (Refer Table - - 5 Civil Engineering Inch in 2b * Work including 6,04,67,000 6 Supply of Fabricated Building Steel Structures at site including Sheeting, - 3.00,00.000 7 Erection of Building Steel Structures including Sheeting, 30,00,000 8 a) Erection of Refractories Incl. in 9 b) Works Contract Tax on Erection of Refractories (Refer Inch in 9 9 Storage, Handling, Erection, Commissioning, and P. G. tests of Plant 1,50,00,000 10 Eoreign Supervision Charges in India during Erection, Start-up, 72,000 11 Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... &Commisioning and till PRAC is 2,000,000 13 Custom Clearing and Forwarding Operation at Chennai/ Vishakhapatnam Port, Inland Transportation for all the imported items including NA 500,000 14 Total Contracts Priee(l to 13) 1,785,261 270640000 15 CENVAT credit (refer clause 23.13 of GCC) 15.1 Excise Duty including education 33,700,000 15.2 Counter veiling Duty (CVD) including Education cess Structures at site including Nil Nil 15.3 Input Tax Credit(ITC) on APVAT Nil Nil 16 Contract Price (Net of ITC) 1,785,261 236,940,000 Applying an exchange rate of 44.30/USD whereas the value of supply by / ESM is Rs. 7.78 Crore (USD 17,56,261 X 44.30), the value of supply, services and erection done by the consortium partner Beekay Engineering Corporation is Rs. 27.06 Crore accounting for 78% of the Contract value." 20. A perusal of the above two contracts shows that in the case of RINL, consortium partner M/s Beekay Engineering Corporation is 78% of the contract value and in the case of the contract with SAIL [Bhilai Steel Plant], the value of supply services and erect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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