Income Tax Appellate Tribunal - Mumbai
Kreuz Subsea Pte Ltd, Mumbai vs Dcit (It) 3(1)(2), Mumbai on 4 September, 2017
आयकर अपीलीय अिधकरण, अिधकरण, मुब ं ई "एल " खंडपीठ Income-tax Appellate Tribunal "L"Bench Mumbai सव ी राजे , लेखा सद य एवं रिवश सूद, याियक सद य Before S/Sh. Rajendra,Accountant Member & Ravish Sood, Judicial Member आयकर अपील सं./ITA./1781 & 6621/Mum/2016, िनधा रण वष /Assessment Year: 2012-13&2013-14 M/s. Kreuz Subsea Pte.Ltd. DCIT,(Intl Taxn.) -3(1)(2) C/o.,SRBC & Associates-CA's 1st Floor, Room No.113 14th Floor, The Ruby Scindia House, NM Nagar, Ballard Pier Vs. Mumbai-400 038.
29 Senapati Bapat Marg, Dada(W)
Mumbai-400 028
PAN:AADCK 6822 G
(अपीलाथ /Appellant) ( यथ / Respondent)
Revenue by: Shri Samuel Darse-CIT-DR
Assessee by: Shri Nishant Thakkar/ Ms. Jasmin Amalsadvala-AR सुनवाई क तारीख / Date of Hearing: 04.09.2017 घोषणा क तारीख / Date of Pronouncement: 04.09.2017 आयकर अिधिनयम,1961 अिधिनयम क धारा 254(1)केके अ तग त आदे श Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद य राजे के अनुसार /PER RAJENDRA, AM-
Challenging the orders of the Assessing Officer(AO),passed in pursuance of the direction of Dispute Resolution Panel-I [DRP-I] Mumbai, the assessee has filed the appeal for the above mentioned two assessment years (AY.s).Assessee -a non resident company,is incorporated under the laws of Singapore.It had undertaken installation and construction activities during the years under appeal. The details of filing of return of income,dates of direction of DRP, dates of orders of the AO u/s.144C(13) r.w.s.143(3),assessed income can be summarized as under:-
AY. Return of income Dt.of direction of DRP AO order dt. Assessed income 2012-13 30/9/2013 23.12.2015 31.3.2015 Rs.13.41crores 2013-14 30/9/2013 25/07/2016 15.3.2016 Rs.8.93 crores ITA/1781/Mum/2016,AY 2012-13:
2.The first effective Ground of appeal(GOA 1-7)is about the status of the assessee i.e. installation PE or Service PE.During the assessment proceedings, the AO found that the assessee had undertaken installation and construction activities in relation to its four projects in India-
1.Contract with Swiber Offshore Construction Pte.Ltd.-Contract No.SOC/KSS/130910-002;
2.Contract with Swiber Offshore Construction Pte.Ltd.- SOC/KSS/030311-011;
3.Contract with Swiber Offshore Construction Pte.Ltd.- SOC/KSS/001;and 1781&6621/Mum/16-M/s. Kruez Subsea Pte.Ltd.
4.Consortium of Valentine Maritime Ltd. and Valentine Maritime Mauritius Ltd.-
C1004/PR/11/273/01 It was claimed that project duration of the above mentioned project was as follows:
Entity Project duration for
the year ending 2012
Swiber -SOC/KSS/1309/10-002 57 days
Swiber - SOC/KSS/030311-011 72 days
Swiber - SOC/KSS/001 51 days
Consortium of Valentine Maritime Ltd. and Valentine 88 days
Maritime Mauritius Ltd.-C1004/PR/11/273/01
The assessee submitted the project completion certificate before the AO during the course of assessment proceedings and submitted that duration of each of the project was less than 183 days,that it did not satisfy the duration test as envisaged under Article-5(3) of the India Singapore Double Taxation Avoidance Agreement (DTAA),that it did not form a PE in India, that revenue earned by it would not be taxable in India in terms of Article-5(3) read with Article-7 of the treaty.However, the AO did not accept the submission of the assessee.In pursuance of direction of the DRP,he held that income of the assessee was to be computed at the rate of 10% of gross revenue of Rs.1,34,17,46,562/- (Rs.13.41 crores).
3.During the course of hearing before us authorised representatives of both the sides agreed that identical issue was deliberated upon by the Tribunal, while deciding appeal for AY.2010- 11(58taxmann.com 371),that the Tribunal had decided the issue in favour of the assessee.We would like to reproduce the relevant portion of the order of the Tribunal and same reads as under :-
"7. We have heard the rival submissions, perused the relevant finding given in the impugned order and the material placed on record. The assessee is into the business of integrated Subsea installation services. It has undertaken 3 projects for installation and construction activity with Allseas Marine Contractors and Swiber Offshore Construction Pte. Ltd. for BH Hydra Project and BJ Gaslift Project. As per the terms of the contract the installation and construction activity in all the three contracts were as under:--
(a) Contract with Allseas
(i) Installation of Kreuz Sat-01, a saturation diving system, on the Dynamic Positioning Vessel i.e. REM Forza
(ii) Installation of Subsea Isolation Values i.e. SSIV
(iii) Installation of 24" spools between risers on offshore process platform and subsea pipelines connecting well heads in the deeper water towards facilitating gas flow from the deep well heads to process platform
(iv) Installation of subsea spool tie-in, concrete mattress and any subsea related activities
(v) Carrying out associated free span and pipeline crossing installations and riser remedial etc.
(b) Contract with Swiber-BG Hydra A-Scope of works for installation services from Swiber Supporter Execution of construction and installation of riser clamps, risers and spools from barge Swiber Supporter (work vessel), free issued by Swiber.2
1781&6621/Mum/16-M/s. Kruez Subsea Pte.Ltd.
Subsea installation Scope of work shall include:
(i) Installation of Risers, two nos. at PPA (existing) and one each at PK & SWP (new) platforms.
(ii) Installation of Riser and I-tube clamps for two risers and one I-tube at PPA Platform
(iii) Installation of I-tube at PPA Platform encashing a 2-inch rigid chemical injection line
(iv) Installation of spool spice connectors at PPA and SWP Platforms between riser and pipelines and piggy back line and chemical injection line inside of I-tube
(v) Installation of stalk on 10" riser at PK Platform
(vi) Installation of spool piece connector between piggy back pipe and chemical injection line inside of I-tube.
B-Scope of works for installation services from HD-2500 Execution of construction and installation for subsea installation of SWP and PK Jackets (structures) shall be undertaken by Kreuz from barge HD-2500 (work vessel), chartered by Swiber.
Subsea Installation Scope of Work shall include.
(i) Sea bed Surveys and installation of transponders on sea bed
(ii) Jacket mud mat survey with respect to sea bed post installation
(iii) Monitoring of flood and vent vales subsea during installation and upending of structure
(iv) Demolitions of grout lines and reach rod post structure installation
(v) Removal and demolition of working platform on completion of installation
(vi) Removal of subsea installation slings and rigging (C) Contract with Swiber-BG Gaslift Swiber entered into contract with Kreuz vide subcontract number 2009 018/OCS/KSS/BG-
PGL for the performance for offshore transportation and installation of pipelines and risers for the Panna Gas Lift Project.
Execution of construction and installation of riser clamps, risers and spools shall be undertaken by Subcontractor from barge Swiber Supporter (work vessel), free issued by Contractor.
Subsea Installation Scope of work shall include:
(i) Installation of Risers (ii) Installation of Grout Bag or Mattress Crossings (iii) Installation of Riser Clamps (iv) Installation of spool spice connectors
From perusal of the aforesaid activities, it is apparent that essence of all the above contracts was to undertake subsea installation and construction activity and not into the provision of equipment, manpower supply or furnishing of any kind of services. The entire contract is for pure installation. The project duration of all the three contracts had already been listed in the foregoing paragraph except for the number of days in the case of Swiber BG Hydra Project, which according to the AO is more than 183 days, because the starting day of the project should be reckoned from the date of the signing of the contract.
8. The first and foremost controversy which needs to be adjudicated here is, whether in the case of the assessee, the Service PE can be said to be established/constituted within the scope of Article 5(3) or Article 5(6). The AO in the draft assessment order had held that Article 5(3) is applicable and since the number of days of the employees working in India has exceeded 183 days, therefore, it constitutes Service PE in India. However, now in pursuance of DRP direction, the department's case is that assessee is Service PE within the scope Article 5(6). For the sake of ready reference, relevant paras of Article 5 of India Singapore DTAA is reproduced hereunder:--
"3. A building site or construction, installation or assembly project constitutes a permanent establishment only if it continues for a period of more than 183 days in any fiscal year.3
1781&6621/Mum/16-M/s. Kruez Subsea Pte.Ltd.
4. An enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it carries on supervisory activities in that Contracting State for a period of more than 183 days in any fiscal year in connection with a building site or construction, installation or assembly project which is being undertaken in that Contracting State.
5. Notwithstanding the provisions of paragraphs 3 and 4, and enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in that Contracting State for a period of more than 183 days in any fiscal year in connection with the exploration, exploitation or extraction of mineral oils in that Contracting State.
6. An enterprise shall be deemed to have a permanent establishment in a Contracting State if it furnishes services, other than services referred to in paragraphs 4 and 5 of this Article and technical services as defined in Article 12, within a Contracting State through employees or other personnel, but only if:
(a) activities of that nature continue within that Contracting State for a period or periods aggregating more than 90 days in any fiscal year; or
(b) activities are performed for a related enterprise (within the meaning of Article 9 of this Agreement) for a period or periods aggregating more than 30 days in any fiscal year."
Article 5(3) is a specific provision dealing with 'Service PE', on account of construction, installation or assembly project. if it continues for a period of more than 183 days in any fiscal year. The installation activity includes erection/setting up machine, equipments and testing and commissioning of such machines and equipments. Installation also relates to a construction of a project. Article 5(6) whereas envisages that, if an enterprise is "furnishing services" in the contracting state through its employees for a period of 90 days or more, then it is deemed to have Service PE, except for the services referred to in para 4 and 5. The threshold period under this para is 90 days and more; or if such activities are performed for a related enterprise, then period of more than 30 days. The Article 5(6) explicitly provides that it applies to "services" other than those covered by Article 5(4) and 5(5), however, the said article is silent as regards its relationship with Article 5(3). Thus, Article 5(6) cover various services which are not covered by para 4 and 5 of Article 5 and technical services as defined in Article 12. What kind of services have been contemplated in para 6 of Article 5 have not been elaborated in the treaty or elsewhere. In contradistinction, para 3 of Article 5 is very specific and therefore, such specific activities cannot be read into para 6 of Article 5. There cannot be a overlapping of activities carried out within the ambit of Article 5(3) and furnishing of services as stated in Article 5(6). Both should be read independent of each other, or else there was no requirement of enshrining separate provisions. If the activities relating to construction or installation are specifically covered under Article 5(3), then one need not to go in Article 5(6). Thus, the activity of the assessee which is purely installation services has to be scrutinized under Article 5(3) only and not within Article 5(6).
9. Now we have to see, whether the threshold the period of more than 183 days in the fiscal year has crossed or not in this case. So far as project relating to contract with Allseas, the finding of the DRP is that employees of the assessee who have stayed in India were for duration of minimum 3 days to 101 days and on second trip the duration ranges from 14 days to 48 days which aggregates to less than 183 days. The DRP has not given any finding that the period of stay of employees has crossed 183 days. The only case of the DRP is that, the assessee constitute a service PE within Article 5(6) which prescribed for 90 days and 30 days. Thus, so far as contract with Allseas, the same do not constitute a service PE as period of stay in India is less than 4 1781&6621/Mum/16-M/s. Kruez Subsea Pte.Ltd.
183 days. So far as contract with Swiber GB Gaslift Project also, the number of days as per the finding of DRP itself is much less than 183 days and therefore, this project also do not constitute Service PE in India."
We find that the activities carried out by the assessee during the year under appeal are similar to the activities of AY.2010-11,so,respectfully following the above order of the Tribunal,we decide first effective Ground of appeal in favour of the assessee.
4.Second effective Ground of appeal (GOA -8) is about not granting credit for TDS claimed by the assessee in its return of income.The AO is directed to verify the claim made by the assessee and take necessary action as per law. Ground of appeal No. 8 is allowed in favour of the assessee,in part.
5.Ground No. 9-11 dealing with interest u/s. 234B of the Act are consequential in nature, hence same are not being adjudicated.
6.Last Ground of appeal about initiating penalty proceedings u/s. 271(1)(c ) of the Act is premature,hence,we dismiss the same.
ITA/6621/Mum/2016-AY: 2013-14:
7.Facts for the year under consideration are similar to the facts for the AY.2012-13.Th only difference is amount involved.The AO assessed the income of the assessee at Rs.8.93 crores,being 10% of gross revenue of Rs.89.30 crores.In this year the assessee has executed only one installation project and the period of the project was less that 183 days.Following the order of the Tribunal,for earlier year,we decide first effective Ground of appeal in favour of the assessee.
8.Ground No.8 is about not granting credit for TDS claimed by the assessee .The AO is directed to verify the claim and pass necessary orders. Ground No.8 is allowed partly.
9.Ground No.9 and 10 are about levy of interest u/s. 234 being consequential in nature they are not being adjudicated.Following our order for the last year we dismiss last ground of appeal raised by the assessee as it deals with initiation of penalty u/s. 271(1)(c) of the Act.
As a result appeals field by assessee for both the AY.s stands partly allowed. फलतः िनधा रती ारा दोन िन.व.के िलए दािखल क गई अपील अंशतः !प से मंजूर क जाती है.
Pronounced in open court on 4th September, 2017.
आदेश क घोषणा खुले (यायालय म )दनांक 4 िसतबंर, 2017 को क गई ।
Sd/- Sd/-
(रिवश सूद /Ravish Sood) (राजे(* / RAJENDRA)
(याियक सद,य / JUDICIAL MEMBER लेखा सद
य / ACCOUNTANT MEMBER
मुंबई Mumbai; दनांक/Dated :04.09.2017.
Jv.Sr.PS.
5
1781&6621/Mum/16-M/s. Kruez Subsea Pte.Ltd.
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1.Appellant /अपीलाथ 2. Respondent / यथ
3.The concerned CIT(A)/संब अपीलीय आयकर आयु , 4.The concerned CIT /संब आयकर आयु
5.DR "L" Bench, ITAT, Mumbai /िवभागीय ितिनिध, खंडपीठ,आ.अिध.मुंबई
6.Guard File/गाड फाईल स यािपत ित //True Copy// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार Dy./Asst. Registrar आयकर अपीलीय अिधकरण, मुंबई /ITAT, Mumbai.6