Income Tax Appellate Tribunal - Delhi
Voith Siemens Hydro ... vs Assessee on 18 March, 2008
I.T.A. No. 2353 /Del/2008
1/28
IN THE INCOME TAX APPELLATE TRIBUNAL,
NEW DELHI, BENCH 'H '
BEFORE SHRI K. G. BANSAL, ACCOUTANT MEMBER
AND SHRI GEORGE MATHAN, JUDICIAL MEMBER
ITA No. 2353 /Del/2008
(Assessment Year 2004-05)
Voith Siemens Hydro Kraftwerkstechnik Vs. ADIT,
GmbH & Co. KG, C/o Mohinder Puri & Co., CAs Cir.2(2)
1A-D, Vandhna, 11, Tolstoy Marg, New Delhi
New Delhi-110 001
(Appellants) (Respondents)
PAN / GIR No. AABCV9155B
Appellant by: Shri S D Kapila &
Shri R R Maurya, Adv.
Respondent by: Shri Ashwani Kumar Mahajan CIT DR
ORDER
PER GEORGE MATHAN, JM:
1. This appeal by the assessee has been preferred against the order of Ld. CIT(A) XXIX, New Delhi in appeal No.330/2006-07 dated 18.03.2008 for the Assessment Year 2004-05. Shri S D Kapila & Shri R R Mourya Advocates represented for the assessee and Shri Ashwani Kumar Mahajan CIT DR represented for the revenue.
I.T.A. No. 2353 /Del/2008 2/28
2. It was submitted by the Ld. A.R. that the assessee is a company incorporated under the laws of Germany and the assessee was engaged in the business of supply of plant & equipments and related services for Hydro Power Plants. It was the submission that the assessee had been awarded a contract by M/s. Orissa Hydro Power Corporation Ltd. (OHPC) for renovation, modernization and upgrading of units 3 & 4 OF Hirakund Power House at Burla, Orissa. It was the submission that one of the associated concerns of the assessee being M/s. Siemens Ltd. was also awarded part of the contract. As per the agreement the assessee was required to supply material and equipments and to run the supervision in respect of renovation, modernization and upgradation of units 3 & 4 of Hirakund Power House. It was the submission that the assessee in its appeal has challenged the issue of the action of Ld. CIT(A) in holding that the assessee had permanent establishment in India in ground No.5 of grounds of appeal. It was the submission that the said ground was not being pressed and consequently it was accepted that the issue of existence of permanent establishment of the assessee in India is not being disputed. It was also the submission that the issue of taxability as held by the Ld. I.T.A. No. 2353 /Del/2008 3/28 CIT(A) in respect of the income of the assessee for the training charges was also not in dispute. It was the submission that the dispute was only in relation to the supervision charges received by the assessee on account of erection, supervision, commissioning etc. It was the submission that the assessee had entered into contract with OHPC by which the assessee had supplied the bulk of the machinery, which was imported from Germany. The local equipment was supplied by Siemens Ltd. an Indian company and the civil construction was also done by Siemens India Ltd. but under the total control and supervision of the assessee. It was the submission that the A.O. and the Ld .CIT(A) had held that the supervision charges received by the assessee was fee for technical services under the treaty of DTAA with Germany and consequently they had applied the provisions of Article 7 of the DTAA with Germany read with section 44D and 115A of the I. T. Act, 1961. It was the submission that the assessee was only claiming that the income of the assessee was liable to be taxed u/s 44BBB of the Act. It was the submission that the assessee falls within the exclusion clause of Explanation (2) to Section 9(1)(vii) of the Act and consequently the income of the assessee was liable to be assessed only I.T.A. No. 2353 /Del/2008 4/28 under the provisions of Section 44BBB of the Act. It was the further submission that the A.O. and the CIT(A) had when interpreting the contract entered into by the assessee with OHPC, read only part of the contract being the scope of the services under the contract and they had not considered the contract as a whole. It was the submission that this was wrong in view of the decision of Hon'ble High Court of Kerala in the case of Asian Development Services reported in 239 ITR 713. The Ld. A.R. further drew our attention to the contract entered into by the assessee with M/s. OHPC, which was shown at pages 33-74 of the Paper Book. He drew our attention to the clause (d) of the preamble to the contract wherein it was mentioned that M/s. OHPC had appointed a consortium of consultants for the implementation of renovation, modernization and upgrading work of units 3 & 4 of Hirakund Power House. It was thus the submission that the assessee was not a consultant. Further, he drew our attention to page 43 of the Paper Book containing the definition clauses of the words used in the agreement. He specifically drew our attention to clause 1.13 for defining "erection" to mean that the installation of any equipment by and under the supervision of contractor and will include any I.T.A. No. 2353 /Del/2008 5/28 service which the contractor is required to perform at the site with his own and/or other staff and/or labour for the fulfillment of contract. He further drew our attention to clause 1.20 which defines the "Performance Guarantee Test/ Performance Test" to mean such tests as are prescribed in the specification to be done by the Contractor being the assessee herein, before the Plant is finally taken over under guarantee by the Purchaser being OHPC. He also drew our attention to clause 1.27 which defines "supervision" to mean successive control and directions given by the Contractor in relation to Contract work during execution of the Contractor's and/or his subcontractor's work. The further drew our attention to clause 1.37 which defines the term "works" shall mean and include all works specified or set forth and required in any of the specifications, drawings and schedules hereto annexed or referred to or to be implied therefrom or incidental thereto or to be hereafter specified or required in such explanatory instructions and drawings as shall from time to time during the progress of the work hereby contracted for, be supplied by the Purchaser and to be supplied, modified/repaired/renewed and executed by the Contractor under the Contract.
I.T.A. No. 2353 /Del/2008 6/28
3. It was the submission that the words as defined in the contract were to be given specific meaning as provided in the contract and not the general and common meaning of the terms. He further drew our attention to Schedule 2 of the agreement which was the scope of supply and services wherein clause 2.1 the scope of the work has been specified as :
"Scope of Work:
The scope of work under the contract shall include design, modification, engineering, manufacture, procurement and supply of new equipment, components and spares, and supervision of dismantling supervision of repairing, supervision of erection, testing and demonstration and establishment of Performance Guarantee parameters and successful commissioning of Material and Equipment under Renovation, Modernization & Uprating of the Units 3 & 4 and its associated facilities of Hirakund Power House No.1 and hand over to the Purchaser an operating Plant. The scope of work also includes supply of equipment/components required for the renovation of intake gates & hoists, Draft Tube gates & Hoissts. Details of the scope of supplies and their specifications are described in schedule 8 and the relevant Annexure. General Terms and conditions of Contract are as stated in Schedule 10."
4. He further drew our attention to clause 2.2.1 being the copy of the services which reads as under:
I.T.A. No. 2353 /Del/2008 7/28 "2.2.1 Technical Services to be provided by the Contractor shall generally include the following amongst others:
a) Material testing, if necessary.
b) Basic design/drawings and layout engineering
c) Detail design/drawings and engineering
d) Drawings/data for carrying out Plant Engineering and detail design including design modification drawings of civil, work and services, wherever necessary.
e) Technical services relating to planning, procurement, manufacturing, inspection, expediting, packing, shipping etc. All procurement will be as per KfW guidelines.
f) Project management services and complete feed back data and information to Purchaser/Consultant for the same for the Contractor's scope of supply and services.
g) Training of purchaser's personnel.
h) Consultancy services, if any, obtained by the Contractor from elsewhere.
i) Technical consultation/liaison/guidance relating to detail design and plant engineering by his Subcontractors.
j) Supplier's coordination relating to site work and other engineering work.
k) Supervision of dismantling, supervision of repair, supervision of civil engineering work & erection, including supervision of specialized erection services and other supervision services for complementation of the RM & U work.
l) Supervision of Startup trail runs and commissioning services.
m) Demonstration and establishment of performance guarantee parameters.
I.T.A. No. 2353 /Del/2008 8/28
n) Quality control and adherence to time schedule, control of site work and other Indian works."
5. It was the submission that in the said clause, the services mentioned in sub-clause (b) to (i) were outside India services and the work specified in sub-clause (a),
(j) to (n) were the work in India. It was the submission that as per the said clause 2.2.1(j), the assessee was to coordinate the site work and other engineering works and as per clause (k) supervise the dismantling, repair, civil engineering work and erection as also specialized erection services for the completion of the work. It was the submission that as per clause 2.1 extracted above, the scope of the work showed that the possession of site till the successful commissioning and the establishment of performance guarantee parameters and the handing over to OHPC of a complete operating plant rested with the assessee. It was the submission that the assessee was solely responsible for the completion of the project and handing over the commissioned plant to M/s. OHPC. It was the submission that even though M/s. Siemens India Ltd. had been contracted by OHPC for supplying the local equipment and parts of erection work the same was done with the consent of the assessee and the work had to be done under the I.T.A. No. 2353 /Del/2008 9/28 complete supervisory control of the assessee. He further drew our attention to para 4.2.11 of the contract to show that the erection of the unit was deemed to be completed only when all the equipments for the normal functioning of the unit was erected at the site and the certificate for mechanical completion is issued as per the terms of the Schedule 10. He further drew our attention to clause 4.2.12, which specifies that the demonstration of the performance guarantee completed when the assessee has demonstrated and has achieved the performance guarantee value as per the Schedule 9. He further drew our attention to clause 4.2.14, which specified that the assessee shall render timely and adequate technical services through its experts to ensure completion of civil work, erection commissioning and demonstrating the performance guarantee as per Schedule 10. He further drew our attention to clause 4.8, which specified the time schedule of the activities which reads as under:
"The 'bar chart' annexed to the schedule shows that commencement and completion of all activities like development of enabling works, basic engineering and approval, de4tial design including design modification and engineering, placement of orders for auxiliaries, issue of drawings, civil work, manufacturing, inspection, delivery and erection of Material & Equipment and testing, trial runs and I.T.A. No. 2353 /Del/2008 10/28 commissioning including Performance Guarantee Tests of all Material & Equipment under the scope of Contractor. These milestones shall be binding on the Contractor and form an integral part of the Contract."
6. It was the submission that as per the time schedule, the assessee was solely responsible for the erection of material and equipment and testing, trial run and even the civil work and commissioning including the performance guarantee test of all material and equipment. It was the submission that as per the contract the assessee was duty bound to complete the turnkey project lock stock and barrel within the time specified and the assessee had the responsibility to see to it that the sub-contractor and other contractors who were functioning in the completion of the contract, complete their allotted work within the time frame itself. Otherwise the assessee has to do such work to see to it that the project is completed on time. It was the submission that as per clause 4.9 the assessee was liable for liquidated damages in the event of any failure other than the reason of force majeure and those attributable to OHPC. It was thus the submission that as per the terms of contract entered into by the assessee with OHPC, it was the sole and exclusive responsibility I.T.A. No. 2353 /Del/2008 11/28 of the assessee to handover the turnkey plant fully functional to OHPC within the time frame specified. He also drew our attention to the provisions of Section 9(vii) of the I. T. Act, 1961, which for the better understanding, is extracted as follows:
"9. (1) The following incomes shall be deemed to accrue or arise in India:-
(vii) income by way of fees for technical services payable by -
(b) a person who is a resident, except where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India or for the purposes of making or earning any income form any source outside India;
or Explanation (2) - For the purposes of this clause, "fees for technical services "means any consideration including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "salaries".
7. It was the submission that as per Explanation (2) to Section 9(1)(vii), the fee for technical services meant consideration received for rendering any managerial, technical or consultancy services including the supervision of services of technical and other personnel I.T.A. No. 2353 /Del/2008 12/28 but did not include consideration for any construction, assembly, mining or like project undertaken by the recipient. It was the submission that as per the definition of the term "supervision" as provided in clause 1.27 of the agreement and a complete reading of contract, the assessee was not rendering any managerial technical and consultancy services. It was the submission that as per the contract itself, the assessee was not a consultant. The work of the assessee as per the contract was not managerial in India and neither could the work of the assessee as specified in the contract be termed as a plain and simple technical services. It was the submission that the scope of work as specified in the contract and as extracted above in clause 2.1 of the contract clearly showed that the work of the assessee included the design, modification, engineering as also the work of erection and also such work which were required for the successful commissioning of the material and equipment up to its handing over to OHPC an operating plant. It was the submission that this was more in the nature of construction and assembly of a turnkey power plant. It was thus a submission that in view of the exclusion as provided in Explanation (2) to Section 9(1)(vii) the I.T.A. No. 2353 /Del/2008 13/28 income derived by the assessee from the contract more specifically the portion relating to the "supervision charges" during erection, startup and commissioning etc did not fall within the mischief of the provisions of Section 9(1)(vii) of the Act.
8. He further drew our attention to Section 44BBB of the Act which is extracted as below:
"Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects. 44BBB - (1) Notwithstanding anything to the contrary contained in sections 28 to 44AA, in the case of an assessee, being a foreign company, engaged in the business of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project approved by the Central Government in this behalf, a sum equal to ten per cent of the amount paid or payable (whether in or out of India) to the said assessee or to any person on his behalf on account of such civil construction, erection, testing or commissioning shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession".
9. It was the submission that as per the provisions of Section 44BBB the conditions specified were - (i) the assessee should be a foreign company, which the assessee is, (ii) it should be engaged in the business of civil construction or the business of erection of plant & I.T.A. No. 2353 /Del/2008 14/28 machinery or testing and commission thereof. It was the submission that the assessee was not engaged in the business of civil construction but is in the business of erection of plant & machinery and is also in the business of testing and commissioning of such plant & machinery; (iii) the business mentioned in (ii) above should be in connection with the turnkey power project which in the present case is, and (iv) the said power project should be approved by the Central Government in this behalf which in the present case is also admitted. Thus, it was the submission that the assessee falls within the four parameters laid down in the provisions of Section 44BBB and consequently the income of the assessee was liable to be taxed only under the provisions of section 44BBB. It was the further submission that the submission of the assessee covers grounds Nos. 2, 3 & 4 in a consolidated manner. It was the further submission that in respect of ground No.6 the assessee did not wish to press the ground in respect of levy of interest u/s 234A and 234D of the act. It was the submission that only in respect of levy of interest u/s 234B, it was the submission that as the income of the assessee was liable for TDS under the provisions of Section 195, no interest u/s 234B was leviable in view I.T.A. No. 2353 /Del/2008 15/28 of the decision of Special Bench of this Tribunal in the case of Motorola reported in 95 ITD 269 (Del.) (S.B.).
10. In reply, the Ld. D.R. submitted that in view of the fact that the assessee had not pressed ground No.5 of the assessee's appeal the existence of PE of the assessee in India stood affirmed. It was the submission that it is admitted, that under the provisions of Section 44BBB, the requirement that the project is a turnkey power project, is admitted that the power project is approved by the Central Government, is admitted, that the assessee is a foreign company is also admitted. It is also admitted that the business of the assessee is not civil construction, however it was disputed that the business of the assessee is erection of plant & machinery. Nor is the assessee in the business of testing or the business of commissioning any such turnkey power project. It was also the submission that the business of erection of plant & machinery and testing and commissioning thereof was to be read together in connection with the turnkey power project approved by the Central Government and the testing and the commissioning was not to be read disjunct of the business of erection of plant & machinery. He further drew our attention to the contract entered into by I.T.A. No. 2353 /Del/2008 16/28 the assessee with OHPC in Article 1.1 and 1.2 which reads as follows:
Article 1:
1.1 "In consideration of the price of EURO 12 817 348 (twelve million eight hundred seventeen thousand three hundred forty eight EURO) to be paid by the PURCHASER to the CONTRCTOR, the CONTRACTOR hereby covenants with the PURCHASER to undertake design including design modification, engineering, manufacture, shop testing and inspection for and supply of imported equipment and materials including commissioning spares, mandatory spares, spars for two years normal operation and maintenance, drawings and documents on CIF basis (Incoterms 2000), training of Purchaser's personnel in Germany and supervision of erection, testing, commissioning and demonstration, and establishment of Performance Guarantee Parameters and handing over required for Renovation. Modernization & Uprating work as detailed in Schedule 2 "Scope of Supplies" and Schedule 8 "Contract Specification" to this CONTRACT subject to and on the terms and conditions contained hereinafter. 1.2 The CONTRACTOR shall be solely responsible and undertake full and exclusive responsibility towards the PURCHASER for timely manufacture and supply of imported equipment and materials complete in all respects and provide supervision services in accordance with the CONTRACT specification as per Schedule 8 and within the time schedule as per Schedule 4 of the CONTRACT."
I.T.A. No. 2353 /Del/2008 17/28
11. It was the submission that the Article 1.1 and 1.2 of the contract clearly specifies that the contract was for the supply of design, equipment and the supervision of the erection, testing, commissioning and demonstration and establishment of performance guarantee parameters. It was the submission that the contract was a purely supervision contract in respect of erection, testing & demonstration of establishment of performance guarantee parameters. He further drew our attention to page 5 of the order of Ld. CIT(A) wherein the Ld. CIT(A) had specifically recorded that the scope of work of Siemens Ltd. (Indian company) under the agreement included the supply of indigenous equipment, planning, dismantling, repairing and erection, testing and commissioning. It was the submission that the assessee had guaranteed to OHPC the duty performance and contractual obligation by Siemens Ltd. and this was the submission of the assessee before the Ld. CIT(A). It was the submission that the Siemens Ltd. was capable of erection and commissioning and had done it. It was the further submission that it was not the assessee who had done the completion of the contract in India but the assessee had been contracted the work to a sub- contractor who had done the work on behalf of the I.T.A. No. 2353 /Del/2008 18/28 assessee and the employees of the assessee had only visited India in connection with the supervision work and for the final testing and establishment of performance guarantee parameters. It was the submission that the assessee was only supervising the erection, testing and commissioning work done by Siemens Ltd. and it did not make the work of Siemens Ltd. the work of the assessee in so far as the assessee did not have any contractual agreement with Siemens Ltd. The contractual agreement was between the assessee and the OHPC and the agreement with Siemens Ltd. was with OHPC and there was no tripartite agreement. It was the further submission that the performance guarantee test was basically to test whether the erections as done by Siemens under the supervision of the assessee was properly done. It was the further submission that the supervision responsibility of the assessee extended to the last stage to see to it that the erection and commissioning had been done properly prior to the handing over of the project. It was the further submission that in the provisions of Section 44BBB the words used were business of erection of plant & machinery and the term supervision was absent. It was the submission that it I.T.A. No. 2353 /Del/2008 19/28 was not as if the legislature did not understand the meaning of the concept of supervision regarding providing the services as in the provisions of Section 44BB the words business of providing services or facilities is used. It was the further submission that Explanation (2) to Section 9(1)(vii) provided for the exclusion of receipts for construction, assembly, mining or like projects undertaken by the recipient. In the assessee's case, the assessee did not receive any consideration for any construction or assembly or mining or like projects but the assessee had received supervisory charges for the technical services provided by the assessee and consequently the assessee's case did not fall within the exclusion provided in Explanation (2) to Section 9(1(vii). It was the further submission that as per clause 2.1 of contract, which specifies the scope of work, assembling was not provided. Thus, it was the submission that the case of the assessee did not fall within the exclusion provided in Explanation (2) to Section 9(1)(vii)nor did it fall within the provisions of Section 44BBB but it was a purely supervisory work the consideration for which was in the nature of fee for technical services which f alls within the provisions of Section 9(1) (vii) and consequently was rightly taxed by I.T.A. No. 2353 /Del/2008 20/28 applying the provisions of Article 7 of DTAA with Germany read with Section 44D and Section 115A of the I. T. Act.
12. In reply the Ld. A.R. submitted that Section 44BB is in respect of exploration for minerals oils and it applies to a different set of activities, which did not have any assembly or commissioning but was purely service- oriented activities. It was the submission that the contract entered into by the assessee with OHPC was a contract for providing a turnkey power plant and in setting up a turnkey power plant the assessee had to do assembly, commissioning, erection and testing of the plant and machinery and the definition of supervisory activities as specified in the contract clearly showed that it was not a simple clause of supervision per se but an in depth involvement of the assessee in the erection, testing and commissioning of the plant and machinery which have been imported form Germany as also locally sourced. It was the further submisison that the assessee was in the possession and control of total plant till the successful commissioning, completion and performance guarantee test and handing over of the functional turnkey power plant to OHPC. This was the submission that the assessee was liable to be assessed I.T.A. No. 2353 /Del/2008 21/28 only by applying the provisions of Section 44BBB of the Act.
13. We have considered the rival submissions and perused the orders of the lower authorities and the paper book filed by the assessee. Here we would like to refer to the agreement entered into by the assessee with M/s Voith Siemens Hydro Private Limited (VSHPL) on 1st October 2003. This agreement was found at pages 12 and 13 of the paper book. This agreement it is found has been produced before both the lower authorities but neither has referred from the same. Even in the course of the arguments, other than referring to this agreement as the agreement in regard to the sub-contracting of the contract work entered into by the assessee with OHPC, no detailed reference has been made to it. But this agreement, it is noticed does give a clear picture of the nature of the work and the scope of work of the assessee in the main contract with OHPC. For better appreciation the said contract is extracted here:-
"AGREEMENT This agreement is made on 1st day of October, Two Thousand and Three.
BETWEEN I.T.A. No. 2353 /Del/2008 22/28 Voith Siemens Hydro Kraftworkstechnik GmbH & Co. KG having its registered office at Alexanderstr. 11, D- 89522 Heidenheim, Germany, hereinafter referred to as "VSHK" and shall include its successors and permitted assigns on one part.
AND Voith Siemens Hydro Private Limited, having its registered office at PO Industrial Estate, Nacharam, Hyderabad - 500076(A.P.), India, and hereinafter referred to as "VSID" and shall include its successors and permitted assigns on the other Part. Hereinafter individually referred o as "VSHK" or "VSID" as the case may be or "Party" or collectively referred to as "Parties".
WHEREAS VSHK entered into an agreement with ORISSA HYDRO POWER CORPORATION (OHPC) for execution of the contract for renovation, modernization and Uprating of Units 3 & 4 of Hirakund Power House NO.1 at Burla, Orissa.
WHEREAS the scope of work also includes supervision of dismantling, supervision of repairing and supervision of erection and WHEREAS VSID has expressed its interest in carrying out the Supervisory scope of work. It is now mutually agreed that the Supervisory scope of work be sub-contracted by VSHK to VSID.
NOW THEREFORE the Parties hereto hereby agree as under:
1. The Sub-Contractor shall perform the supervision services meeting the requireme4nts and terms of the main contract.
I.T.A. No. 2353 /Del/2008 23/28
2. The parties hereby agree to amend or modify any provision of this agreement which is declare invalid or contrary to law, consistent with the economic object of the Project thereof.
3. Any difference or dispute arising from this contract, shall be settled by an amicable effort of the parties concerned.
4. VSID will charge VSHK at the following fixed rats for carrying out the Supervisory services:
Main Supervisor :Euro 11,000 per calendar month Asstt. Supervisor : Euro 8,000 per calendar month In addition VSHK shall also reimburse associated travel costs incurred by VSID.
IN WITNESS WHEREOF the Parties hereto have signed this agreement at New Delhi by their duly authorized representatives on the date, month & year first mentioned hereinabove.
For & on behalf of For & on behalf of
VOITH SIEMENS HYDRO VOITH SIEMENS
KRAFTWERKSTECHNIK HYDRO P. LTD.
GMBH & Co.KG
Sd./- Sd./-
Place: New Delhi New Delhi
Date: 01.10.2003 01.10.2003
In presence of witnesses:
1.
I.T.A. No. 2353 /Del/2008
24/28
2.
13.1 A perusal of the above mentioned agreement clearly shows that the assessee has sub-contractor the "supervision services" that the assessee was to do under the main contract between he assessee and OHPC. Thus accepting the arguments of the assessee that the terms of the contract are to be given the meaning as specified in the agreement and not the ordinary or general meaning, if the sub contract agreement is seen, the sub contractor is to perform the supervision services meeting the requirements and terms of the main contract being the one between the assessee and OHPC. For this purpose the assessee has agreed to pay the sub-contractor Euro 11,000/- per calendar month per main supervisor and Euro 8,000/- per calendar month per assistant supervisor. What is noticed here is that as per the sub-contract the payment is not for any construction work or any assembly work or any dismantling or repair or erection work that is to be done by the sub-contractor. The sub-contract is for the supply of supervisors for the supervision of the project contract entered into by the assessee with OHPC. Here it is also noticed that the assessee has not produced before any of the lower authorities or before us any evidence to show how the assessee or the assessee thru its sub-contractor has I.T.A. No. 2353 /Del/2008 25/28 indulged in any activities, which can be termed construction, assembly or erection. The assessee if has indulged in any of the said activities would have incurred substantial expenses in the form of wages, tools, etc. No such expenses having been incurred have been shown. Just because the employees of the assessee or its sub-contractor have given directions to the personal working at the site but employed with another contractor it cannot be said that the assessee has done the business of erection or the work of assembly of the plant or machinery. In such circumstances it can only be said that the assessee has done the work of supervision simpliciter. Even though in the contract between the assessee and OHPC the term supervision has been given a specific meaning the conduct of the assessee is not supported by any evidence to hint at much less show that the assessee has done any thing other than "supervision" as understood in its general meaning. In these circumstances even though as per the terms of the contract with OHPC the assessee could be assumed to be liable to do the assembly, erection, testing and commissioning of the power project as also the supervision thereof, in the absence of there being any evidence of the assessee having done any such activities other than supervision simpliciter of the assembly, erection I.T.A. No. 2353 /Del/2008 26/28 and testing and commissioning the activities of the assessee cannot be said to fall within the meaning of the term, "business of erection of plant or machinery or testing or commissioning" as provided in the provisions of section 44BBB, or to fall with in the meaning of the terms, "construction or assembly" as provided in the exclusions provided in explanation 2 to section 9 (1) of the act. Once it is found that the assessee has not been able to prove that the assessee has involved itself in the physical activities of the business of assembly or erection of the plant or machinery or testing or commissioning of the power project but has only done the supervision simpliciter of the same the assessee would not be eligible to be taxed under the provisions of section 44BBB nor would the receipts fall within the exclusions provided in explanation 2 to section 9 (1) of the act. Further as the assessee has also not challenged the existence of the permanent establishment in India, the findings of the AO and the Ld. CIT(A) in holding that the business profits of the assessee is from the supervision charges are in the nature of "fees for technical services" from the rendering of supervision services in connection with the erection, testing and commissioning of the power project is liable to be upheld and we do so. In the circumstances the finding of the Ld. CIT(A) that the I.T.A. No. 2353 /Del/2008 27/28 provisions of Article 7 of the DTAA read with section 44D and section 115A of the act apply to the business profits of the assessee is upheld. Consequently grounds 2 to 5 of the assesses grounds of appeal are dismissed. 13.2 As the assessee has not pressed the ground no. 6 in regard to the levy of interest under section 234A and 234D, the same are dismissed as not pressed. In regard to the ground against the levy of interest under section 234 B it is noticed that the receipts of the assessee are liable for tax deduction under the provisions of section 195 of the act. It is also noticed that M/s OHPC has deducted tax at source on the payments made to the assessee. Whether the Tax Deducted a Source has been correctly deducted or not is not the issue before us, but the fact remains that the receipts of the assessee are liable to TDS and TDS has been done. In these circumstances we are of the view that interest under section 234B is not leviable on the assessee as the receipts of the assessee under the contract is liable for TDS. In the circumstances respectfully following the decision of the Special Bench of this tribunal in the case of M/s. Motorola referred to supra the interest levied under section 234B stand deleted. In the circumstances the ground No. 6 of the assessees appeal stand partly allowed.
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14. Grounds No. 1 and 7 of the assessees appeal are general in nature and doe not call for any adjudication.
15. In the result the appeal of the assessee is partly allowed.
16. This decision was pronounced in the open court on 05th March 2010.
Sd./- Sd./-
(K. G. BANSAL) (GEORGE MATHAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
th
Dated:05 Mar., 2009
Sp.
Copy forwarded to
1. Appellant
2. Respondent
3. CIT True copy: By order
4. CIT(A)
5. DR Dy. Registrar, ITAT, New Delhi