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The Tax Publishers Wrong Attribution of income for non-resident - scoping Section 44BBB - applying rule 10 without rejecting books *Facts:* Assessee an Italian non-resident had offered composite project related services to HPCL India. It was the case of the AO that the offering of the composite services of the assessee triggered a Project PE under Indo-Italian DTAA Article 5(2), hence applied rule 10 and attributed 10% of the income to tax in India after giving a reading that assessee's income fell in the scope of Section 44BBB. The AO also held that the expenses as claimed in the books of accounts with related parties was excessive under Section 40A(2) without establishing as to how and why it was excessive. Assessee's contention were - Section 44BBB was narrow in scope and the gamut of their services would not get entirely telescoped under this Section Nonetheless even if Section 44BBB with separate books maintained for the Indian source of income by the assessee, a bald attribution of Rule 10 @ 10% cannot be made as even under the alleged Section 44BBB if applied, the sub-section 44BBB(2) empowers an assessee to declare lower profits if books are maintained and audited as in the case of the assessee. The tax on the Project PE if at all be levied be made on the audited books of accounts on the actual income derived/arising out of the Project. It was unwarranted to invoke Section 40A(2) without facts. DRP voiced views of the AO. On higher appeal - Held in favour of the assessee that the income did not fall in the scope of Section 44BBB. The taxability of the PE be made as per the books and accounts of the assessee. The expenditure paid to related parties (Technip India) could not be said to be excessive without AO establishing as to how it was excessive in the first place. *Ed. Note:* The discussion on Section 40A(2) is worth noting. *Case:*Technip Energies Italy Section P.A. v. DCIT 2023 TaxPub(DT) 1558 (Del-Trib)

The Tax Publishers

Wrong Attribution of income for non-resident - scoping Section 44BBB - applying rule 10 without rejecting books

Facts:

Assessee an Italian non-resident had offered composite project related services to HPCL India. It was the case of the AO that the offering of the composite services of the assessee triggered a Project PE under Indo-Italian DTAA Article 5(2), hence applied rule 10 and attributed 10% of the income to tax in India after giving a reading that assessee's income fell in the scope of Section 44BBB. The AO also held that the expenses as claimed in the books of accounts with related parties was excessive under Section 40A(2) without establishing as to how and why it was excessive.

Assessee's contention were -

Section 44BBB was narrow in scope and the gamut of their services would not get entirely telescoped under this Section

Nonetheless even if Section 44BBB with separate books maintained for the Indian source of income by the assessee, a bald attribution of Rule 10 @ 10% cannot be made as even under the alleged Section 44BBB if applied, the sub-section 44BBB(2) empowers an assessee to declare lower profits if books are maintained and audited as in the case of the assessee.

The tax on the Project PE if at all be levied be made on the audited books of accounts on the actual income derived/arising out of the Project.

It was unwarranted to invoke Section 40A(2) without facts.

DRP voiced views of the AO. On higher appeal -

Held in favour of the assessee that the income did not fall in the scope of Section 44BBB. The taxability of the PE be made as per the books and accounts of the assessee. The expenditure paid to related parties (Technip India) could not be said to be excessive without AO establishing as to how it was excessive in the first place.

Ed. Note: The discussion on Section 40A(2) is worth noting.

Case:Technip Energies Italy Section P.A. v. DCIT 2023 TaxPub(DT) 1558 (Del-Trib)