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Tax Publishers Idiada Automotive Technology v. DCIT [ITA No. 1056/Del/2014, dt. 29-5-2020] : 2020 TaxPub(DT) 2336 (Del.-Trib.) Alleged existence of PE and attribution of income on a set of composite contracts - with part of it possibly creating PE subsequently cancelled and rest of the income exclusively coming under scope of Fee for Technical Services (FTS). *Facts* Assessee non-resident of Spain had entered into 3 contracts -- 1. Detailed project implementation report 2. Engineering services 3. Construction supervision Of the above, engineering services were rendered from Spain. The project implementation activity required technical staff to visit India occasionally which they did visit occasionally for short durations and the construction supervision had it been done in India for more than 6 months would have created a PE in India under article 5 of Indo-Spain DTAA. Subsequently the Construction supervision was cancelled and the rest of the services were provided from Spain with only sparing visits of staffs which did not trigger a PE in India as claimed by the assessee. Further assessee claimed that the engineering services was subject to tax as FTS - Fee for technical services under section 115A read with Indo-Spain DTAA article 13(4). The payment for the FTS were all done before set up of a project office in India as facts manifest. An application for TDS deduction under lower/NIL rate was also applied under section 195 read with 197 which confirmed the nature of streams of payment as FTS under the Indo-Spain DTAA. It was the department's allegation that there existed a PE that too a place/project PE under the DTAA for the assessee. Thus substantial FTS was attributed as business profits and 75% of the same was held as attributable business profits of the PE which was also upheld by the DRP. Aggrieved assessee went in higher appeal to ITAT -- Held in favour of the assessee that on evidential basis that there was no PE in existence for the assessee thus there can be no attribution of income made.

Tax Publishers

Idiada Automotive Technology v. DCIT [ITA No. 1056/Del/2014, dt. 29-5-2020] : 2020 TaxPub(DT) 2336 (Del.-Trib.)

Alleged existence of PE and attribution of income on a set of composite contracts - with part of it possibly creating PE subsequently cancelled and rest of the income exclusively coming under scope of Fee for Technical Services (FTS).

Facts

Assessee non-resident of Spain had entered into 3 contracts --

1. Detailed project implementation report

2. Engineering services

3. Construction supervision

Of the above, engineering services were rendered from Spain.

The project implementation activity required technical staff to visit India occasionally which they did visit occasionally for short durations and the construction supervision had it been done in India for more than 6 months would have created a PE in India under article 5 of Indo-Spain DTAA.

Subsequently the Construction supervision was cancelled and the rest of the services were provided from Spain with only sparing visits of staffs which did not trigger a PE in India as claimed by the assessee. Further assessee claimed that the engineering services was subject to tax as FTS - Fee for technical services under section 115A read with Indo-Spain DTAA article 13(4). The payment for the FTS were all done before set up of a project office in India as facts manifest. An application for TDS deduction under lower/NIL rate was also applied under section 195 read with 197 which confirmed the nature of streams of payment as FTS under the Indo-Spain DTAA.

It was the department's allegation that there existed a PE that too a place/project PE under the DTAA for the assessee. Thus substantial FTS was attributed as business profits and 75% of the same was held as attributable business profits of the PE which was also upheld by the DRP.

Aggrieved assessee went in higher appeal to ITAT --

Held in favour of the assessee that on evidential basis that there was no PE in existence for the assessee thus there can be no attribution of income made.