Caterpillar Global Mining Eurpe GmbH-India Project Office, Hyderabad v. Asst.Director of Income Tax(International Taxation-I), Hyderabad

ITA 1842/HYD/2012 | 2009-2010
Pronouncement Date: 21-04-2014 | Result: Dismissed

Appeal Details

RSA Number 184222514 RSA 2012
Assessee PAN ITANO1842O
Bench Hyderabad
Appeal Number ITA 1842/HYD/2012
Duration Of Justice 1 year(s) 4 month(s) 1 day(s)
Appellant Caterpillar Global Mining Eurpe GmbH-India Project Office, Hyderabad
Respondent Asst.Director of Income Tax(International Taxation-I), Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 21-04-2014
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-04-2014
Date Of Final Hearing 07-02-2017
Next Hearing Date 07-02-2017
Assessment Year 2009-2010
Appeal Filed On 20-12-2012
Judgment Text
ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 1 OF 27 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH HYDERABAD BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN ACCOUNTANT MEMBER ITA NO.1842/HYD/2012 (ASSESSMENT YEAR: 2009-10) M/S. CATERPILLAR GLOBAL MINING EUROPE GMBH- INDIA PROJECT OFFICE GODAVARIKHANI KARIMNAGAR PAN:AADCB 4524 A VS ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-I I.T TOWERS AC GUARDS HYDERABAD 500004 FOR ASSESSEE : SMT. SUVIBHA NOLKHA FOR REVENUE : SHRI MOHAN KUMAR SINGHANIA DR O R D E R PER SMT. P. MADHAVI DEVI J.M. THIS IS ASSESSEES APPEAL FOR THE AY 2009-10 AGAINST THE ASSESSMENT ORDER DATED 15.10.2012 PASSED U/S 143(3) R.W.S 144C OF THE I.T. ACT IN ACCORDANCE WITH THE DIRECTIONS OF T HE DRP DATED 27.09.2012 U/S 144C(5) THE I.T. ACT. 2. THE ASSESSEE IS A FOREIGN COMPANY WITH THE NAME DBT EUROPE GMBH. THE ASSESSEE COMPANY CHANGED ITS NAME TO BUCYRUS EUROPE GMBH ON 23.09.2009 AND THE NAME WAS AGAIN CH ANGED TO CATERPILLAR GLOBAL MINING EUROPE GMBH FROM 17.04.20 12. THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US IN THE CHANGED NAME I.E. CATERPILLAR GLOBAL MINING EUROPE GMBH-INDIA PR OJECT OFFICE. 3. BRIEF FACTS OF THE CASE BEFORE US ARE AS UNDER: DATE OF HEARING : 22.02.2017 DATE OF PRONOUNCEMENT : 28.04.2017 ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 2 OF 27 4. THE ASSESSEE COMPANY IS A NON RESIDENT COMPANY INCORPORATED IN GERMANY. IS BUSINESS CONSISTS INTER ALIA OF MANUFACTURING OF MINING EQUIPMENTS AND OPERATING MI NES AND IT HAS IMPLEMENTED A NUMBER OF PROJECTS IN WHICH BOTH THE EQUIPMENT AND OPERATIONAL SUPPORT WAS PROVIDED. THE SINGARENI COL LERIES COMPANY LIMITED (HEREINAFTER REFERRED TO AS SCCL) AN INDI AN COMPANY DECIDED TO INTRODUCE CONTINUOUS MINER TECHNOLOGY ( CMT) FOR EXTRACTION OF DEVELOPED PILLAR GDK-11A INCLINE IN T HE RAMAGUNDAM AREA OF ANDHRA PRADESH FOR INCREASED PRODUCTION AND MINING SAFETY. ACCORDINGLY ON 14.11.2005 SCCL FLOATED A SINGLE T ENDER ALONG WITH TENDER NOTICES IN VOL. I & II FOR INTRODUCTION OF C MT WITH 5 YEARS MAINTENANCE CONTRACT IN SCCL MINES. THE ASSESSEE AP PLIED FOR THE BID AS A SINGLE BIDDER ON 29.03.2006 AND 3.04.2006 BY SUBMITTING A SINGLE BID DOCUMENT IN TWO PARTS I.E. COVER (A) FOR TECHNICAL BID AND COVER (B) FOR COMMERCIAL BID WHICH ALSO CONTAINS PR ICE BID AS COVER (C). SCCL IN ITS TENDER DOCUMENTS HAD SPECIFIED T HE SCOPE OF WORK TO INCLUDE DESIGN SUPPLY INSTALLATION COMMISSIO NING AND OPERATION & MAINTENANCE (O&M) FOR 5 YEARS ON CONTRACT INCLUDI NG INITIAL WARRANTY PERIOD AND HANDING OVER OF THE EQUIPMENT T O SCCL FOR SMOOTH AND SUCCESSFUL OPERATION. 5. THE ASSESSEE IN ITS BID DOCUMENTS HAD ASSURED SCCL TO HAVE OVERALL RESPONSIBILITY OF THE ENTIRE TURNKEY C ONTRACT IN ITS CAPACITY AS A SINGLE BIDDER. AFTER THE TECHNICAL AN D COMMERCIAL EVALUATION OF THE BIDS AND A FEW ROUND OF NEGOTIATI ONS SCCL AWARDED THE TURNKEY CONTRACT TO THE ASSESSEE. IN TH IS REGARD 3 SEPARATE PARTS OF THE MASTER CONTRACT WERE SIGNED O N THE SAME DAY I.E. ON 21.11.2006. CONTRACT (I) REFERRED TO AS RC -222 WAS FOR SCIENTIFIC SITE INVESTIGATION AND OBTAINING OF THE APPROVAL OF DGMS ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 3 OF 27 FOR THE MINING METHOD. CONTRACT (II) REFERRED TO A S RC-223 WAS TO SUPPLY THE EQUIPMENT AND SPARES. CONTRACT (III) RE FERRED TO AS RC- 224 WAS FOR PROVISION OF MAINTENANCE SERVICES FOR 5 YEARS BEFORE HANDING OVER THE MINES OPERATION ALONG WITH THE MAC HINERIES TO SCCL. AFTER SIGNING OF THE CONTRACT ON 21.11.2006 THE ASSESSEE PERFORMED ITS RESPONSIBILITY UNDER CONTRACT (I) AND OBTAINED THE DGMS APPROVAL ON 18.10.2007. THEREAFTER THE ASSESS EE MANUFACTURED THE EQUIPMENT AND DELIVERED THE SAME T O SCCL AND PROCEEDED TO PERFORM ITS RESPONSIBILITY UNDER CONTR ACT NO(III) BY SETTING UP ITS PROJECT OFFICE IN INDIA ON 21.04.200 8. THE ASSESSEE THEREFORE OFFERED THE INCOME FROM CONTRACT NO(III) ONLY FOR TAXES IN INDIA. 6. THE AO HOWEVER OBSERVED THAT THE BUSINESS OF T HE ASSESSEE WAS TO SET UP MINING PROJECTS ON EPC BASIS AND THAT IN THE PRESENT CASE THE PROJECT WAS FOR INTRODUCTION OF C MT FOR MINING IN RGK MINES OF SCCL IN INDIA AS A TOTAL SOLUTION PROV IDER AND NOT FOR SUPPLY OF EQUIPMENT WHICH IS ONLY INCIDENTAL TO ITS COMPOSITE BUSINESS OF INTRODUCTION OF THE TECHNOLOGY. THEREFO RE HE WAS OF THE OPINION THAT THE BUSINESS OF THE ASSESSEE WAS CARRI ED OUT IN INDIA. HE OBSERVED THAT UNDER BOTH THE INCOME TAX ACT AND ALSO THE DTAA BETWEEN INDIA AND GERMANY A FIXED PLACE FROM WHICH BUSINESS IS CARRIED OUT EVEN PARTLY WOULD QUALIFY TO BE TREATED AS PE AND ALSO BUSINESS CONNECTION IN INDIA. ACCORDING TO HIM THE ACTIVITIES OF THE ASSESSEE CONSTITUTE SUFFICIENT NEXUS TO ESTABLISH B USINESS CONNECTION AND ALSO PE OF THE ASSESSEE IN INDIA FOR THE ENTIRE PROJECT IN WHICH SUPPLY OF EQUIPMENT AND OTHER SERVICES GET EMBEDDED . HE CONSIDERED THE FOLLOWING DETAILS TO COME TO THIS CONCLUSION: ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 4 OF 27 (A) SCCL HAS ISSUED SINGLE TENDER FOR THE ENTIRE PR OJECT AND THE ASSESSEE SUBMITTED THE OFFER IN TWO VOLUMES I.E. ONE FOR TECHNICAL BID AND THE OTHER FOR COMMERCIAL BID AS A TOTAL SER VICE PROVIDER FOR ACCOMPLISHMENT OF CONTRACT IN ACCORDANCE WITH ALL T HE PROVISIONS OF BID DOCUMENTS WHICH WAS ACCEPTED BY SCCL. THE TECH NICAL PERSONNEL OF THE ASSESSEE HAVE VISITED INDIA NOT ON CE BUT SEVERAL TIMES TO NEGOTIATE THE TERMS AND CONDITIONS OF THE CONTRACT AND TO INTEGRATE THE SUBSEQUENT LEVEL OF ACTIVITIES FOR SU CCESSFUL COMPLETION OF THE PROJECT. THUS AO WAS OF THE OPINION THAT TH E WHOLE PROJECT WAS ONE SINGLE COMPOSITE CONTINUOUS AND INSEPARABL E PROJECT WHICH HAS BEEN FRAGMENTED INTO SEPARATE ACTIVITY MODULE. THE AO ALSO OBSERVED THAT THE ASSESSEE WHILE PROVIDING ALL THE TECHNICAL DETAILS IN ITS TECHNICAL BID DOCUMENT IN COVER A FOR THE IM PLEMENTATION OF FULL SCOPE OF SUPPLY WORKS OF SCCL HAS STIPULATE D THAT (I) THE CONTRACT NO.1 SHOULD COME INTO FORCE IMME DIATELY UPON SIGNING THE CONTRACT (II) THE CONTRACT NO.2 AND 3 SHOULD COME INTO FORC E UPON RECEIPT OF THE DGMS MINING METHOD APPROVAL. THUS THOUGH ALL THE THREE CONTRACTS ARE INTER-LINK ED AND ARE INDIVISIBLE THE ASSESSEE HAS STIPULATED THE CONDIT IONS OF ARTIFICIALLY SEPARATING THESE CONTINUOUS PROJECT ACTIVITIES INTO 3 SEPARATE CONTRACTS WITH A VIEW TO ALLOCATE ITS REVENUE RECEI PTS TO DIFFERENT SECTORS FOR TAX PURPOSE. (III) THE TECHNICAL EMPLOYEES OF THE ASSESSEE HAVE VISITED INDIA AND HAVE CARRIED OUT ACTIVITIES IN INDIA AND THEREFORE ACCORDING TO HIM THE PE HAS BEEN ESTABLISHED FROM THE DATE OF SIGNIN G OF THE CONTRACT. THEREFORE HE WAS OF THE OPINION THAT THE WHATEVER ACTIVITY WAS ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 5 OF 27 UNDERTAKEN AND DONE OUTSIDE INDIA WAS A PART OF THE PROJECT AND THE TITLE TO SUCH DESIGN OR SUPPLY REMAINED WITH THE AS SESSEE TILL THESE WERE UTILIZED BY THEM FOR THE PROJECT AND IT WAS ON LY AFTER THE COMPLETION OF THE PROJECT THAT THE TITLE TO THESE P ASSED TO THE CUSTOMER. (IV) THE KEY PERSONNEL OF THE ASSESSEE COMPANY VIS ITED THE MINE CAMPED THERE FOR 37 DAYS FOR SCIENTIFIC SITE INSPEC TION TO GIVE REPORTS TO DGMS FOR APPROVAL OF THEIR CONTRACT AND THEREFOR E THIS MINE OFFICE WOULD ACT AS PROJECT OFFICE AS PER ART 5(1)(2) OF D TAA AND THAT THIS OFFICE MONITORED ALL ACTIVITIES OF THE PROJECT RIGH T FROM THE PRE ENGINEERING SURVEY STAGE TO THE DESIGNING AND IMPOR T OF PLANT AND EQUIPMENT. THUS IMPORT OF PLANT AND MACHINERY IS I NEXTRICABLY LINKED WITH THE GENERATION OF DATA AND REPORT FROM THE SITE TAKING INTO ACCOUNT THE PRECISE REQUIREMENT OF THE PROJECT . 7. IN VIEW OF THE ABOVE OBSERVATIONS AO PROCEEDED TO COMPUTE THE TAXABLE INCOME FOR THE RELEVANT AY. HE H ELD THAT ALL RECEIPTS RECEIVED DURING THE RELEVANT PY WILL BE SUB JECT TO TAX IN INDIA. HE OBSERVED THE RECEIPTS FROM CONTRACT I WER E PARTLY IN FY 06- 07 AND PARTLY I FY 07-08 THEY CANNOT BE BROUGHT TO TAX IN THIS AY. AS REGARDS THE CONTRACT II THE SUPPLY CONTRACT TH E AO HELD THAT THE DESIGN OF THE EQUIPMENT THE CHOICE OF THE TECHNOLO GY AND THE OPERATIONAL FEASIBILITY OF THE UNDERGROUND MINING A CTIVITIES ARE DEPENDENT ON THE CRITICAL GEOLOGICAL AND MINING DAT A OF THE RAMAGUNDAM MINING AREA AND IS BASED ON THE DUE DILI GENCE CARRIED OUT BY THE ASSESSEE IN INDIA IN THE PRECEDING FINAN CIAL YEARS. THE AO ALSO OBSERVED THAT THE MANUFACTURING OF THE EQUIPME NTS HAS BEEN MADE BASED ON THE FINAL DESIGN IN GERMANY BY USING THE MANPOWER RESOURCES AND MATERIAL FROM GERMANY. THEREFORE TH E AO ATTRIBUTED ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 6 OF 27 60% OF THE CONTRACT II RECEIPTS TO FUNCTIONS CARRIED OUTSIDE INDIA BY THE ASSESSEE AND THE BALANCE 40% AS ATTRIBUTABLE TO THE INDIAN BUSINESS ACTIVITIES. WITH REGARD TO EXPENSES INCURR ED ALSO AO ATTRIBUTED 40% OF THE TOTAL EXPENSES TO INDIAN ACTIV ITIES. THE AO OBSERVED THAT FROM THE CONTRACT III THE ASSESSEE H AS SHOWN A LOSS OF RS.3 69 82 963/- AS PER THE P&L ACCOUNT AND AFTER V ERIFICATION ACCEPTED THE SAME OBSERVING THAT SOME OF THE SOME O F THE MANPOWER EXPENSES PERTAINS TO A PERIOD PRIOR TO COMMENCEMENT OF THE INSTALLATION AND OPERATION & MAINTENANCE ACTIVITIES AS PER CONTRACT III. HE ACCORDINGLY COMPUTED THE TAXABLE INCOME OF THE YEAR AND PROPOSED THE DRAFT ASSESSMENT ORDER. AGGRIEVED AS SESSEE PREFERRED ITS OBJECTIONS BEFORE THE DRP. DRP ALSO CONFIRMED THE VIEW OF THE AO BUT APPORTIONED 35% OF THE CONTRACT II RECEIPTS TOW ARDS INDIAN OPERATIONS AND ENHANCED THE ALLOWABLE EXPENSES TO 5 0%. THE AO ACCORDINGLY PASSED THE FINAL ASSESSMENT ORDER. AGAI NST THE FINAL ASSESSMENT ORDER THE ASSESSEE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED AO HAS ERRED IN ASSESSING THE TOTAL BUSINESS INCOME OF THE APPELLANT AT RS 20 403 492 A S AGAINST TOTAL BUSINESS LOSS OF RS 36 982 963 COMPUT ED BY THE APPELLANT; 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW IN ALLEGING THAT INTENT AND TH E OBJECT OF THE APPELLANT WAS TO ENTER INTO ALL THE T HREE AGREEMENT AT THE SAME TIME AND THEREFORE THE ACTIVIT IES ENVISAGED THEREIN ARE INTERDEPENDENT AND INTERCONNECTED TO THE OTHER AGREEMENTS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW IN ALLEGING ON MERE SURMISE AND CONJECTURE THAT THE APPELLANT HAS ENTERED INTO T HREE ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 7 OF 27 SEPARATE CONTRACTS WITH SCCL FOR THE PURPOSE OF TAX EVASION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW IN ALLEGING THAT THE RECEIPTS FROM OFFSHORE SUPPLY OF EQUIPMENT ARE TAXABLE IN IN DIA ON THE ALLEGED GROUND THAT THE TITLE TO THE GOODS HAS NOTIONALLY PASSED OUTSIDE INDIA. AS PER THE TERMS O F THE CONTRACT THE PROPERTY IN THE GOODS HAS PASSED IN I NDIA. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW IN ALLEGING THAT THE RECEIPTS FROM OFFSHORE SUPPLY OF EQUIPMENT ARE TAXABLE IN IN DIA ON THE ALLEGED GROUND THAT THE APPELLANT HAS BUSINESS CONNECTION IN INDIA IGNORING THE FACT THAT FOR THE OFFSHORE SUPPLY NO OPERATION WAS CARRIED OUT IN INDIA. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW IN ALLEGING THAT THE RECEIPTS FROM OFFSHORE SUPPLY OF EQUIPMENT ARE TAXABLE IN IN DIA ON THE ALLEGED GROUND THAT THE CONTRACT IS IN THE NAT URE OF A WORKS CONTRACT. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW IN ALLEGING THAT THE RECEIPTS FROM OFFSHORE SUPPLY OF EQUIPMENT ARE TAXABLE IN IN DIA IGNORING THE FACTUAL SUBMISSION AND DECISION OF THE HON'BLE SUPREME COURT AND OTHER DECISIONS RELIED UPON BY THE APPELLANT AND RELYING ON DECISIONS DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEE'S CA SE. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW BY HOLDING THAT APPELLANT CONSTITUTED A PE AND BUSINESS CONNECTION IN INDIA BEFORE ESTABLISHING PROJECT OFFICE IN INDIA. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS NOT APPRECIATED THE FACT THAT CASE OF THE APPELLANT WAS COVERED UNDER ARTICLE 5(4)(E) OF THE IN DO- GERMAN DTAA. ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 8 OF 27 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. AO HAS ERRED IN LAW BY HOLDING THAT OFFSHOR E SUPPLY OF EQUIPMENT IS EFFECTIVELY CONNECTED WITH TH E PE OF DBT BUCYRUS IN INDIA AND THEREFORE WILL BE ATTRIBUTABLE TO THE PE FOR TAXATION IN INDIA. WITHOUT PREJUDICE ON THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE AND IN LAW THE LD. AO HAS FAILED TO APPRECIATE THE FACT PROJECT OFFICE IN INDIA HAS NO ROLE WITH SUPPLY OF EQUIPMENT AND ACCORDINGLY INCOME FRO M OFFSHORE SUPPLY OF EQUIPMENT CANNOT BE TAXED IN INDI A. 11. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO HAS ERRED IN STATING THAT APPELLANT HAS NOT COOPERATED DURING THE ASSESSMENT PROCEEDINGS AND HAS COMPELLED THE LD. AO TO CALL FOR THE INFORMATION UNDE R SECTION 133(6) OF THE ACT. THE LD. AO HAS NOT APPRECIATED THE FACTS THAT DETAILS REQUESTED FROM THE PROJECT OFFICE IS NOT AVAILABLE AT THAT TIME AND THE REFORE PROJECT OFFICE TOOK TIME TO COLLATE THE RELEVANT INFORMATION FROM THE HEAD OFFICE. 12. WITHOUT PREJUDICE ASSUMING BUT NOT ACCEPTING T HAT INCOME FROM OFFSHORE SUPPLY IS EFFECTIVELY CONNECTE D WITH BUSINESS CONNECTION IN INDIA ERRED IN ALLEGING THAT THE TOTAL PROFITS FROM OFFSHORE SUPPLY WAS 50% OF G ROSS REVENUE OF OFFSHORE SUPPLY AND IN ATTRIBUTING 35% THEREOF TO INDIA EVEN THOUGH NO PART OF THE ACTIVI TY RELATING TO OFFSHORE SUPPLY WAS CARRIED OUT BY APPELLANT'S PROJECT OFFICE IN INDIA. 13. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO HAS ERRED IN NOT GRANTING FULL TAX DEDUCTED AT SOURCE (TDS) CREDIT OF RS. 7 004 430 AS CLAIMED BY TH E APPELLANT IN THE ORIGINAL RETURN OF INCOME. THE LD. AO HAS NOT GRANTED TDS CREDIT OF 4 382 085 IN THE FINAL ASSESSMENT ORDER. ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 9 OF 27 14. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO HAS ERRED IN LEVYING INTEREST UNDER SECTION 234B OF THE ACT. 15. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. AO HAS ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271 (1)( C) OF THE ACT. THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO ONE ANOTHER. THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND AMPLIFY OR MODIFY ANY OR ALL OF THE ABOVE GROUNDS O F APPEAL AT OR BEFORE THE TIME OF HEARING OF THE APPE AL. 8. THE LD. COUNSEL FOR THE ASSESSEE MS. SUVIBHA W HILE REITERATING THE SUBMISSIONS MADE BY THE ASSESSEE BE FORE THE AUTHORITIES BELOW SUBMITTED THAT THOUGH SCCL HAD FL OATED A SINGLE TENDER THE ASSESSEE HAD SUBMITTED ITS TENDER FOR THREE DIFFERENT CONTRACTS AND THE FINAL EXECUTION OF THREE DISTINCT CONTRACTS EXHIBITS THE INTENTION AND FINAL AGREEMENT OF THE PARTIES. SHE SUBMITTED THAT THE TENDER DOCUMENTS AS WELL AS THE BID DOCUMENTS L OSE THEIR RELEVANCE ONCE CONTRACT DOCUMENTS ARE EXECUTED. SH E THEREFORE PLACED RELIANCE ON THE FACT THAT AFTER NEGOTIATIONS SCCL ITSELF HAS AGREED TO AMEND THE TENDER AND DIVIDE THE CONTRACT INTO THREE DIFFERENT SEGMENTS AND FINALLY EXECUTED THE CONTRAC TS. THEREFORE ACCORDING TO HER ALL THE THREE CONTRACTS ARE INDEP ENDENT AND SEPARATE FROM EACH OTHER. 9. FURTHER SHE ALSO SUBMITTED THAT CONTRACT NO. (II ) I.E.R.C-223 WAS SOLELY FOR MANUFACTURE AND DELIVER Y OF THE EQUIPMENT OUTSIDE INDIA AND EVEN THE PAYMENT WAS MA DE OUTSIDE INDIA AND THEREFORE ACCORDING TO HER ALL THE RELE VANT ACTIVITIES HAVE BEEN CARRIED OUT OUTSIDE INDIA AND HENCE THE INCOME HAS NEITHER ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 10 OF 27 ARISEN NOR ACCRUED TO THE ASSESSEE IN INDIA AND HEN CE THE ASSESSEE IS NOT LIABLE TO TAX ON THE SAID INCOME IN INDIA EV EN TO THE EXTENT OF 40% AS HELD BY THE A.O. AND RESTRICTED TO 35% BY THE DISPUTE RESOLUTION PANEL (DRP). IN SUPPORT OF THESE CONTEN TIONS SHE DREW OUR ATTENTION TO VARIOUS DOCUMENTS ON RECORD. 10. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT EVE N IF THE INCOME UNDER CONTRACT NO. (II) IS TAXABLE IN INDIA IT IS TAXABLE AS BUSINESS INCOME OF THE ASSESSEE AND SINCE THERE WAS NO PERMA NENT ESTABLISHMENT (P.E) IN INDIA DURING THE RELEVANT PE RIOD THE INCOME CANNOT BE BROUGHT TO TAX EITHER UNDER THE INCOME TA X ACT OR THE INDIA GERMANY DTAA. FURTHER SHE ALSO DREW OUR ATTE NTION TO ARTICLE 5(D) OF THE DTAA TO SUBMIT THAT A P.E IS CO NSTITUTED ONLY IF THE EMPLOYEES OF THE ASSESSEE WERE IN INDIA FOR A M INIMUM OF SIX MONTHS BUT SINCE EVEN SCCL LETTER CLEARLY MENTIONS ONLY 37 DAYS THERE WAS NO P.E IN INDIA. SHE ALSO DREW OUR ATTEN TION TO THE FACT THAT UNDER ARTICLE 29 OF THE DTAA THE EQUIPMENT SU PPLIED BY THE HEAD OFFICE IS OUTSIDE THE SCOPE OF BUSINESS INCOME OF THE ASSESSEE. 11. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMI TTED THAT AS PER THE TERMS OF THE CONTRACT (II) THE TAX BURD EN IF ANY ARISES ON THIS CONTRACT IT IS TO BE BORNE BY SCCL. THEREFORE ACCORDING TO HER THERE WAS NO INCENTIVE FOR THE ASSESSEE TO AVOID TA X BY SPLITTING THE ALLEGED COMPOSITE CONTRACT INTO THREE DIFFERENT CON TRACTS. IN SUPPORT OF ALL THE ABOVE CONTENTIONS THE LEARNED COUNSEL F OR THE ASSESSEE PLACED RELIANCE UPON THE FOLLOWING CASE LAWS: (A) ISHIKAWAJIMA-HARIMA HEAVY INDUSTRIES LTD VS. DI T (2007)288 ITR 408 (S.C) ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 11 OF 27 (B) JT. STOCK COMPANY FOREIGN ECONOMIC ASSOCIATION TECHNOPROMEXPORT IN RE (2010) 322 ITR 409 (AAR) (C) ROLLS ROYCE PLC VS DDIT (2008) 19 SOT 42 (DEL I TAT) (D) CIT VS HYUNDAI HEAVY INDUSTRIES 291 ITR 482 (S. C) (E) DEEPAK CABLES (INDIA) LTD (2011) 242 CTR 469 (A AR) (F) L S CABLE LTD IN RE (2011) 337 ITR 35 (AAR) (G) L S CABLE AND SYSTEM LTD & ORS VS.CIT & ORS (20 16) 96 CCH 0011 DELHI HIGH COURT (H) CIT VS FRIED KRUPP INDUSTRIES (DELHI H.C) 128 IT R 27 (MAD) (I) A.P POWER GENERATION CORPN. LTD VS. ACIT (ITAT HYDERABAD) ITA NOS. 1057 TO 1060/HYD/2001. (J) CIT VS. R. D AGGARWAL & CO. & ANR (1965) 56 ITR 0020 (S.C) (K) DIRECTOR OF INCOME TAX VS. LG CABLE LTD (2011) 237 CTR (DEL.) 438 (DELHI H.C) (L) PRYSMIAN CAVIE SYSTEMI S.R.L. VS. ACIT (ITA NO.916/HYD/2006 & 244 & 246/HYD/2012). (M) PIRELLI CAVI E SISTEMI TELECOM S.P.A (INDIA PRO JECT OFFICE) VS. ACIT ITA NO.254 160/HYD/2006. (N) POSCO ENGINEERING & CONSTRUCTION COMPANY LTD VS ACIT (ITA NO.5787/DEL/2013). 12. WITHOUT PREJUDICE TO THE ABOVE CONTENTIONS THE LD. AR SUBMITTED THAT THE A.O OUGHT TO HAVE CONDUCTED AN FA R ANALYSIS BEFORE APPORTIONING THE PROFITS TO INDIA OPERATIONS AND ACCORDING TO HER ATTRIBUTING ONLY 10% OF THE OPERATIONS TO INDIA IS REASONABLE AS HELD BY THE COORDINATE BENCH OF INCOME TAX APPELLAT E TRIBUNAL IN THE CASE OF PIRELLI CAVI E SISTENI TELECOM SPA (IND IA PROJECT OFFICE) VS ACIT IN ITA NO. 254 160/HYD/06. ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 12 OF 27 13. THE LD. DR ON THE OTHER HAND SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW AND ALSO FILED WRITTEN SUBMIS SIONS THE GIST OF WHICH IS AS UNDER: (I) THAT THE ASSESSEE DID NOT PROVIDE ALL THE RELEVANT INFORMATION TO THE A.O. AND DID NOT CO-OPERATE WITH THE A.O. DUE TO WHICH A.O. HAD TO G ATHER THE RELEVANT INFORMATION FROM SCCL U/S 133(6) OF THE ACT. IT IS SUBMITTED T HAT FROM SUCH INFORMATION ONLY IT WAS DISCOVERED THAT THE ASSESSEE HAD ENTERED INTO T HREE CONTRACTS WITH SCCL IN CONNECTION WITH THE WORK OF INTRODUCTION OF CONTIN UOUS MINER TECHNOLOGY (TMT) WITH FIVE YEARS MAINTENANCE CONTACT FOR EXTRACTION OF DEVELOPED PILLARS IN GDK IIA INCLINE MINE RAMAGUNDAM AREA OF SCCL. ACCORDING TO HIM THOUGH IT IS THE OBLIGATION OF THE ASSESSEE TO FURNISH CORRECT AND COMPLETE INF ORMATION IN RELATION TO ALL OF ITS ACTIVITIES THE ASSESSEE HAS CONCEALED THE FACT OF THE OTHER TWO CONTRACTS AND HENCE SHOULD BE HELD GUILTY OF SUPPRESSION OF MATERIAL FA CTS AND ADVERSE INFERENCE SHOULD BE DRAWN AGAINST IT. (II) THAT THE CONTRACT WAS COMPOSITE AND NON-SEPARABLE A S THE RESPONSIBILITY OF THE BIDDER INCLUDED CONDUCTING OF SCIENTIFIC SITE INVESTIGATIO NS OBTAINING DGMS APPROVALS SUPPLYING CONTINUOUS MINES AND OTHER EQUIPMENT OPE RATION AND MAINTENANCE OF THE EQUIPMENT FOR A PERIOD OF FIVE YEARS WITH A GUARANT EE FOR AN AVERAGE PRODUCTION OF 1350 TONNES PER DAY AND 0.40 MILLION TONNES PER YEA R. THUS THOUGH THE CONTRACT APPARENTLY CONTAINED SEPARATE ACTIVITIES BUT IT WA S TO BE SINGLE CONTRACT WITH A SINGLE DELIVERANCE I.E. ANNUAL GUARANTEED PRODUCTION. AS THIS OVERARCHING SCHEME OF THE CONTRACT WAS NOT ABROGATED BY THE PARTIES IT CONTI NUED TO BE THE ESSENCE OF THE CONTRACT. THE COMMITMENT OF ANNUAL GUARANTEED PROD UCTION PRESUPPOSES COMBINED COMMITMENT OF SUPPLY OF EQUIPMENT INSTALLATION AND COMMISSIONING OPERATION AND MAINTENANCE BECAUSE NEITHER OF THEM BY ITSELF COU LD GUARANTEE ANNUAL PRODUCTION AND THEREFORE THE CONTRACT IS A COMPOSITE ONE. EVE N THOUGH THE CONTRACT IS SPLIT INTO THREE THE SUCCESS OR FAILURE OF EACH CONTRACT WAS TO BE JUDGED ON THE TOUCHSTONE OF THE SINGLE OUTCOME I.E. ANNUAL GUARANTEED PRODUCTI ON AS IT WAS CLEARLY MENTIONED THAT IF THE GUARANTEED PRODUCTION FELL BELOW THE ST IPULATED QUANTUM SCCL WOULD HAVE THE RIGHT TO REJECT THE EQUIPMENT AND THE SUPPLIER WOULD HAVE TO REIMBURSE THE COMPLETE COST OF EQUIPMENT TO SCCL. THUS IF FAILUR E OF ONE CONTRACT MEANS FAILURE OF ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 13 OF 27 OTHER CONTRACTS IT IS AN EXCELLENT INDICATOR OF TH E FACT THAT ALL THE CONTRACTS ARE INDIVISIBLE INTERDEPENDENT AND TOGETHER FORM A COM POSITE CONTRACT. III. THAT ACCORDING TO THE TENDER NOTICE EVEN IF T HE BIDS WERE GIVEN FOR DIFFERENT COMPONENTS OF WORK THE EVALUATION OF THE SAME WOUL D BE DONE BY TAKING THE CONTRACT AS A PACKAGE CONTRACT AND THAT COMMERCIA L EVALUATION WOULD BE BASED ON LEAST COST PER TONNE FOR THE CONTRACT PERIOD WHIC H SHOWS THAT THE CONTRACT WOULD BE AWARDED TO THE PERSON WHO WAS THE LOWEST BIDDER ON OVERALL BASIS. THUS IT WAS A COMPOSITE CONTRACT AND THE COMPONENTS WERE MERELY P ARTS/STAGES OF THE SAME AND EVEN IF SEPARATE CONTRACTS WERE TO BE MADE ALL OF THEM WOULD BE AWARDED TO THE SAME PERSON AND THEREFORE THE TALK OF INDEPENDENT/ SEPARATE CONTRACTS IS MEANINGLESS. IV. THE MENTION OF CONTRACT (I) IN CONTRACT (II) AN D FURTHER THAT CONTRACT (II) & (III) WOULD NOT COME INTO FORCE UNDER DGMS APPROVAL CAME THROUG H ALSO PROVE THEIR INTER CONNECTIVITY INTER LACING AND INTERDEPENDENCE OF T HE CONTRACTS ON ONE ANOTHER AND FURTHER THAT SCCL HAD CLEARLY STATED THAT ALL THE T HREE CONTRACTS WOULD BE AWARDED TO ONE SINGLE PARTY. ALL THESE PROVE THAT ALTHOUGH TH E CONTRACTS HAVE BEEN DIVIDED INTO 3 IT IS ONE SINGLE COMPOSITE CONTRACT. V. ON THE ARGUMENT OF THE ASSESSEE THAT THE TAX LIA BILITY UNDER CONTRACT (I) WAS TO BE BORNE BY SCCL AND THEREFORE THERE WAS NO INCENTIVE TO THE ASSESSEE TO AVOID TAX THE LEARNED DR ARGUED THAT IN THAT CASE THE ASSESSEE SH OULD NOT HAVE FILED THE APPEAL BUT SHOULD HAVE PASSED ON THE TAX BILL TO SCCL. ACCORDI NG TO HIM IT WAS IN THE MUTUAL INTEREST OF BOTH TO AVOID TAX BY STRUCTURING THE TR ANSACTION IN THE MANNER THAT IT WAS STRUCTURED. HE SUBMITTED THAT IT WAS A COLLUSIVE AR RANGEMENT AND COLOROUBLE DEVISE. VI. THE TERM SUPPLY INCLUDED ALL THE WORK UP TO T HE STAGE OF INSTALLATION AND COMMISSIONING OF THE PLANT AND DOES NOT END WITH HA NDING OVER OF THE EQUIPMENT OFFSHORE. THUS THERE WAS NO SCOPE OF SALE OF EQU IPMENT PER SE AND SUPPLY TOOK PLACE PARTLY IN INDIA. EVEN THE TERM SUPPLY TOOK PLACE PARTLY IN INDIA. EVEN THE TERM SUPPLY INCLUDED THE STAGE UP TO INSTALLATION AND COMMISSIONING OF THE PLANT. THEREFORE THE PAPER ARRANGEMENT SHOWING DELIVERY O FF-SHORE DID NOT AMOUNT TO REAL DELIVERY AND THERE WAS NEVER A REAL TRANSACTION FOR SALE OF THE GOODS. ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 14 OF 27 14. IN SUPPORT OF THE ABOVE CONTENTIONS THE LEARNE D DR RELIED UPON THE FOLLOWING DECISIONS: (A) ANSALDO ENERGIA SPA VC INCOME TAX APPELLATE TRIBUNAL(2009) 310 ITR 237 (B) LINDE AG LINDE ENGINEERING DIVISION (AAR NO.96 2 OF 2010) DATED 20.03.2012. (C) VODAFONE INTERNATIONAL HOLDINGS BV NETHERLANDS VS. VOI (345 ITR 1 (S.C) (D) DONGFANG ELECTRIC CORPORATION VS. DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) (2012) 147 TTJ 579 (KOLKATA). 15. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD THE FOLLOWING QUESTIONS EMERGE FOR ADJUD ICATION: (I) WHETHER ALL THE THREE CONTRACTS ARE INTERLINKED INTERDEPENDENT AND INDIVISIBLE AND THEREFORE WHETHE R THEY ARE TO BE CONSIDERED AS A SINGLE AND A COMPOSI TE CONTRACT? (II) WHETHER THERE WAS A PE OF THE ASSESSEE IN IND IA BEFORE ESTABLISHMENT OF PROJECT OFFICE IN INDIA AND IF SO SINCE WHEN? (III) WHAT IS THE INCOME ATTRIBUTABLE TO ACTIVITIES IN IN DIA? 16. TO ANSWER QUESTION NO.(I) ABOVE IT IS NECESSAR Y TO GO THROUGH THE NATURE OF ALL THE THREE CONTRACTS. THE ASSESSEE HAS FILED PAPER BOOKS IN 3 PARTS (A) (B) & (C). PART-A CONTA INS THE BASIC DOCUMENTS SUCH AS THE COPY OF THE AUDITED ACCOUNTS OF THE ASSESSEES PROJECT OFFICE THE TAX AUDIT REPORT AND THE COMPUTATION OF TOTAL INCOME FOR THE AY 2009-10 WHILE PART-B CONTAI NS THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LOWER A UTHORITIES AND ALSO THE COPIES OF THE CONTRACTS AND THE DGMS APPRO VALS. PART-B OF THE PAPER BOOK CONTAINS THE COPIES OF THE SCCL TEND ER DOCUMENT BID DOCUMENTS AND THE TDS CERTIFICATE AND COPIES OF THE DISPATCH ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 15 OF 27 DOCUMENTS SUCH AS BILLS AND INVOICES ETC. PART-C OF THE PAPER BOOK CONTAINS COPIES OF THE DRAFT ASSESSMENT ORDER THE ORDER OF THE DRP AND THE FINAL ASSESSMENT ORDER AND ALSO COPIES OF T HE INVOICES RAISED AGAINST THE SUPPLY OF EQUIPMENTS AND CORRESPONDING BILLS. THE ASSESSEE HAS ALSO FILED A PAPER BOOK CONTAINING COP IES OF VARIOUS CASE LAW ON WHICH THE ASSESSEE HAS PLACED RELIANCE UPON AND ALSO SUCH CASE LAW WHICH ARE TAKEN SUPPORT OF BY THE AO AND THE CIT(A) TO DISTINGUISH THEM FROM THE FACTS OF THE CASE BEFO RE US. 17. FROM THE COPY OF THE TENDER DOCUMENT FLOATED BY SCCL WHICH IS PLACED AT PAGE 243 OF THE PAPER BOOK IT I S SEEN THAT A SINGLE TENDER DOCUMENT HAS BEEN ISSUED FOR THE ENTIRE PROJ ECT AS A TURNKEY PROJECT THOUGH THE BIDS HAVE BEEN INVITED IN 3 PART S I.E. TECHNICAL BID COMMERCIAL BID AND PRICE BID. PAGE 267 OF THE PAPER BOOK IS THE LETTER OF THE SCCL DATED 14.11.2005 (WHICH IS THE P ART OF THE TENDER DOCUMENT) IN WHICH SEALED BIDS ARE INVITED FROM TEC HNICAL AND FINANCIAL SOUND AGENCIES WITH PROVEN TRACK RECORD F OR INTRODUCTION OF CONTINUOUS MINER TECHNOLOGY WITH 5 YEARS MAINTENA NCE CONTRACT FOR EXTRACTION OF DEVELOPED PILLAR AT GDK-11A INCLI NE RAMAGUNDAM AREA OF THE SCCL AND AS PER THE GENERAL CONDITIONS OF THE CONTRACT AND SPECIAL CONDITIONS OF CONTRACT INCLUDED IN THE BID DOCUMENT BIDS MUST BE SUBMITTED IN ACCORDANCE WITH THE INSTR UCTIONS TO BIDDERS. THE SCOPE OF THE WOK INCLUDES THE DESIGN SUPPLY INSTALLATION COMMISSIONING AND OPERATION AND MAINT ENANCE THEREAFTER FOR THE PERIOD OF 5 YEARS ON CONTRACT IN CLUDING INITIAL WARRANTY PERIOD AND HANDING OVER OF THE EQUIPMENT T O SCCL FOR SMOOTH AND SUCCESSFUL EXECUTION AND OPERATION OF TH E PROJECT. THE TECHNICAL DOCUMENT OF THE TENDER STARTS FROM PAGE 2 69 OF THE PAPER ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 16 OF 27 BOOK AND AT PAGE 279 IS CLAUSE NO.23 SPECIFYING THE BIDDER RESPONSIBILITY AS PER WHICH THE RELEVANT RESPONSIBI LITIES ARE AS UNDER: 1) SHALL CONDUCT SCIENTIFIC SITE INVESTIGATIONS PRE PARE STUDY REPORTS OBTAIN DGMS APPROVAL FOR THE MINING METHOD/ TECHNOLOGY AND SHALL QUOTE FOR THESE. 2) SHALL SUPPLY CONTINUOUS MINER SHUTTLE CARS MULT I ROOF BOLTER MOBILE FEEDER BREAKER J & COMPLETE ELECTRICAL EQUIPMENT AS ONE PACKAGE AND SHALL QUOTE FOR THESE IN DETAIL FOR EACH INDIVIDUAL ITEM. THE BIDDER SHALL QUOTE FOR 2 NOS. OF SHUTTLE CARS/CO AL HAULERS WITH 15 TONNE PAY/LOAD CAPACITY OR 3 NOS. O F SHUTTLE CARS WITH 10.0 TONNE PAY LOAD CAPACITY. (TO QUOTE FOR BOTH OPTIONS). 3) SHALL OPERATE AND MAINTAIN THE EQUIPMENT WITH REQUIRED SPARES AND CONSUMABLES FOR A PERIOD OF 5 (FIVE) YEARS AND TO QUOTE SEPARATELY FOR SPARES AND SERVICES ON PER TONNE BASIS YEAR-WISE. NOTE: THE CONTRACT FOR SUPPLY OPERATION & MAINTENANCE OF THE EQUIPMENT WILL COME INTO FORCE AFTER THE DGMS APPROVALS FOR THE SCIENTIFIC SITE INVESTIGATIONS MINING METHOD/TECHNOLOGY ARE OBTAINED. 4) A) SHALL GUARANTY FOR AN AVERAGE PRODUCTION OF 135 0 TONNES/DAY AND 0.40 MILLION TONNES PER YEAR. B) THE GUARANTEED PRODUCTION SHOULD COMMENCE WITHIN 4 MONTHS PERIOD FROM DATE OF COMMISSIONING THE EQUIPMENT AFTER GIVING REQUIRED TRAINING TO SCCL PERSONNEL AND PREPARATION OF PANEL FOR REQUIRED STANDARDS FOR COMMISSIONING THE ACTUAL DEPILLARING OPERATION OF COAL. C) IF THE ANNUAL GUARANTEED PRODUCTION IN ANY YEAR FALLS BELOW 4.00 LT / ANNUM ) THERE WILL BE PENAL ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 17 OF 27 CHARGES EQUIVALENT TO 1% OF EQUIPMENT COST FOR EVER Y FALL OF 1 % OF GUARANTEED PRODUCTION UP TO A MAXIMUM FALL OF 20%. IF THE GUARANTEED PRODUCTION FALLS BELOW 3.0 LT/ANNUM (I.E. 75% OF THE (GUARANTEED PRODUCTION) DURING THE FIRST YEAR OF OPERATION SCCL WILL HAVE TH E RIGHT TO REJECT THE EQUIPMENT. THE SUPPLIER HAS TO REIMBURSE THE COMPLETE COST OF THE EQUIPMENT TO SCCL. 18. AT PAGE 377 OF THE PAPER BOOK IS THE COMMERCIAL BID SUBMITTED BY THE ASSESSEE IN RESPONSE TO THE TENDER WHEREIN THE ASSESSEE AGREED TO TAKE THE RESPONSIBILITY AND OBLI GATIONS FOR ACCOMPLISHMENT OF THE CONTRACT IN ACCORDANCE WITH T HE PROVISIONS OF THE BIDDING DOCUMENT. AT PAGE 383 OF THE PAPER BOOK THE PREAMBLE OF THE COMMERCIAL BID READ AS UNDER: COVER B - COMMERCIAL BID FOR THE INTRODUCTION OF CONTINUOUS MINER TECHNOLOGY WITH FIVE YEAR MAINTENANCE CONTRACT AT GDK11A INCLINE MINE RGM AREA PEAMBLE THE PRICE OFFERED BY BIDDER FOR THE TOTAL 'SCOPE OF SUPPLY' FOR THE 'INTRODUCTION OF CONTINUOUS MINER TECHNOLOGY WITH FIVE YEAR MAINTENANCE CONTRACT AT GDK11A INCLINE MINE RGM AREA' AS PER SINGARENI COLLIERIES COMPANY LIMITED ENQUIRY NO. CRP.PD/01/80/ENQ.425/2005 IS DIVIDED INTO THREE (3) DISTINCT CONTRACTS AS FOLLOWS . 1. SCIENTIFIC SITE INVESTIGATION AND DGMS APPROVAL. 2. SUPPLY OF EQUIPMENT. 3. PROVISION OF SITE ASSISTANCE SERVICES INCLUDING: FIVE YEAR STRATA MONITORING PROGRAM ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 18 OF 27 SITE ASSISTANCE SERVICES - MOBILIZATION OVERSEAS TRAINING SITE ASSISTANCE AND PLANNING UNPACKING AND ASSEMBLY OF EQUIPMENT ON SURFACE 'NO LOAD' COMMISSIONING ON SURFACE TRANSPORT OF EQUIPMENT UNDERGROUND AND 'FULL LOAD' COMMISSIONING UNDERGROUND. MAINTENANCE SERVICES - OPERATION AND SUPERVISION ON A USD/TONE AND INR/TONE BASIS MAINTENANCE SERVICES - SPARE PARTS ON A USD/TONE BASIS MAINTENANCE SERVICES - CONSUMABLES ON A USD/TONE BASIS THE FULL 'SCOPE OF SUPPLY' FOR THE ABOVE PROPOSED CONTRACTS IS DETAILED IN 'COVER A TECHNICAL VOLUME' OF THIS BID. ALL CONTRACTS ARE SIGNED SIMULTANEOUSLY HOWEVER: CONTRACT NO.1 ABOVE COMES INTO FORCE IMMEDIATELY UPON SIGNING THE CONTRACT. CONTRACTS NO.2 AND NO.3 COME INTO FORCE UPON RECEIPT OF THE DGMS MINING METHOD APPROVAL. 19. AT PAGE 421 OF THE PAPER BOOK IS THE SPECIMEN C OPY OF THE PRICE BID SUBMITTED BY THE ASSESSEE IN COVER-C AND IN ACCORDANCE WITH THIS BID THE ASSESSEE HAS DIVIDED THE WHOLE C ONTRACT INTO THREE DIFFERENT CONTRACTS AND HAS ALSO APPORTIONED THE PA YMENT ACCORDINGLY. FURTHER FROM THE ERRATA ISSUED BY SCC L WHICH IS PLACED AT PAGE 362 TO 376 OF THE PAPER BOOK WE FIN D THAT AS PER THE ORIGINAL TENDER DOCUMENT THE CONTRACT FOR SUPPLY P ORTION AND MAINTENANCE OF THE EQUIPMENT WILL COME INTO FORCE A FTER DGMS APPROVAL FOR THE SCIENTIFIC SITE INVESTIGATION/MINI NG ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 19 OF 27 METHOD/TECHNOLOGY IS OBTAINED BUT AS PER THE AMENDE D DOCUMENT THERE CAN BE 3 SEPARATE CONTRACTS FOR (I) SCIENTIFI C SITE INVESTIGATION (II) SUPPLY OF EQUIPMENT AND (III) MAINTENANCE OF S PARES AND SERVICES AND IT HAS ALSO BEEN SPECIFIED THAT THESE 3 CONTRAC TS SHALL BE SIGNED ONLY WITH SINGLE AGENCY I.E. THAT THE SUCCESSFUL BI DDER WHO HAS SUBMITTED THE ORIGINAL OFFER. IN ACCORDANCE WITH TH IS PROPOSAL OF THE SCCL THE ASSESSEE HAS ENTERED INTO 3 DIFFERENT CON TRACTS WITH SCCL. CONTRACT NO.1 IS REFERRED TO AS RC-222 WHILE CONTR ACT NO.2 IS REFERRED TO AS RC-223 AND CONTRACT NO.3 IS REFERRE D TO AS RC-224. RC-222 IS PLACED AT PAGES 70 TO 102 OF THE PAPER BO OK WHILE RC-223 IS FROM PAGES 103 TO 182 AND RC-224 IS FROM PAGES 1 83 TO 237 OF PART-A OF THE PAPER BOOK. FROM THE CONTRACT RC-222 WE FIND THAT CLAUSE D OF THE DESCRIPTION PART MENTIONS THAT SCCL HAS AGREED TO ENTER INTO A CONTRACT FOR SCIENTIFIC SITE INVESTIGA TION AND OBTAINED DGMS APPROVAL WITH DBT I.E. THE ASSESSEE HEREIN ON THE TERMS AND CONDITIONS MENTIONED IN THE CONTRACT. DOCUMENT NO. 1 FORMING PART OF THE CONTRACT GIVES THE GENERAL CONDITIONS FOR TH E CONTRACT AND CLAUSE1.1 THEREOF GIVES THE DEFINITION AND MEANING OF THE TERMS USED IN THE CONTRACT. SUB-CLAUSE DEFINES SERVICES TO M EAN SCIENTIFIC SITE INVESTIGATION AND OBTAIN DGMS APPROVAL AS IN APPEND IX C TO APPENDIX G. THE APPENDIX C TO THE CONTRACT (AT P AGE TWO OF THE PAPER BOOK PART A) PROVIDES THAT PRIOR TO THE INTRO DUCTION OF CONTINUOUS MINER METHOD EQUIPMENT IT IS NECESSARY TO OBTAIN THE APPROVAL OF THE DGMS FOR BOTH THE EQUIPMENT AND MIN ING METHOD PROPOSED AND FOR THIS PURPOSE THE ASSESSEE SHALL C OMPLETE THE SCIENTIFIC SITE STUDY WITHIN SIX MONTHS FROM THE CO NTRACT COMING INTO FORCE SUBJECT TO THE PAYMENTS AS PER CLAUSE 6.1 AND DGMS APPROVAL SHALL BE RECEIVED WITHIN THREE MONTHS THEREAFTER AS SHOWN BY APPENDIX J AND IN CASE THE DGMS APPROVAL IS DELAY ED BOTH THE ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 20 OF 27 PARTIES SHALL REVIEW MUTUALLY FOR FURTHER NECESSARY ACTION. IT IS ALSO MENTIONED THAT THE ASSESSEE SHALL MONITOR THE MININ G METHOD DURING THE 5 YEAR PERIOD I.E. MAINTENANCE CONTRACT PERIOD . CLAUSE 6.1 OF THE GENERAL CONDITIONS (AT PAGE 82 OF THE PART A) SPECI FIES THE CONTRACT PRICE AT USD 127 655.91 AND ALSO THE MODE AND TIME OF PAYMENT. 20. THE CONTRACTS 2 & 3 ARE TO COMMENCE ONLY AFTER THE APPROVAL OF THE DGMS THOUGH THE SAME ARE ALSO SIGN ED ON 21.11.2006 ITSELF. IT IS ALSO SPECIFIED UNDER CLAUS E 7 OF THE CONTRACT-II I.E. RC-223 THAT THIS CONTRACT SHALL COME INTO FORC E AS PER CLAUSE 34 OF THE GENERAL CONDITIONS OF THE CONTRACT-II SPECIF IED IN SECTION 1 OF THIS CONTRACT. CLAUSE 34 OF THE CONTRACT READS AS U NDER: 34. COMING INTO FORCE OF THE CONTRACT 34.1 THE CONTRACT SHALL COME INTO FORCE UPON FULFIL LING ALL THE FOLLOWING: (A) SIGNING OF THE CONTRACT BY ALL THE PART IES; (B) RECEIPT OF ALL DGMS APPROVALS UNDER CLAUSE 3.1 3.2 3.3 OF GENERAL CONDITIONS. (C) SANCTION FROM GOVT. OF INDIA AND RBI (D) LETTER OF INDICATIVE SUPPORT FOR THE CONTRACT FROM A FIRST CLASS INDIAN BANK/FINANCIAL INSTITUTION AS PER ANNEXURE IV. 34.2 IN THE EVENT THE CONTRACT DOES NOT COME INTO FORCE WITHIN NINE (9) MONTHS FROM THE DATE OF SIGNI NG OF THE CONTRACT EITHER PARTY MAY WITHDRAW FROM THE CONTRACT WITHOUT ANY OBLIGATION THERE UNDER. 21. FURTHER CLAUSE 3 OF SECTION-I OF THE CONTRACT-I I RC-223 PROVIDES THAT FOR THE INTRODUCTION OF THE CONTINUOU S MINER MINING SYSTEM IN GDK-11A MINES OF SCCL DGMS APPROVAL FOR THE MINING ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 21 OF 27 METHOD WOULD BE OBTAINED BY THE SCCL AND SCIENTIFIC INVESTIGATION (SCIENTIFIC SITE INVESTIGATION AND OBTAINING DGMS A PPROVAL) TO BE CARRIED OUT FOR SECURING DGMS APPROVAL WOULD BE PAR T OF A SEPARATE CONTRACT TO BE AWARDED BY SCCL AND THAT THE RESULTS OF SCIENTIFIC INVESTIGATIONS WILL BE THE BASIS OF DESIGN OF MINING METHOD (EMPHASIS SUPPLIED BY US) AND ALSO SUBMISSION OF APPLICATION FOR DGMS APPROVAL FOR THE MINING METHOD AND ALSO THAT T HE SCCL WOULD PUT UP THE APPLICATION WITH DGMS AND THE DBT SHALL PROVIDE NECESSARY ASSISTANCE FOR MAKING APPLICATION AND OBT AINING DGMS APPROVAL. IT WAS ALSO PROVIDED IN CLAUSE 3.4 THAT ANY ADDITION/ALTERATION OF THE EQUIPMENT SUPPLIED SUGG ESTED BY DGMS WHILE APPROVING THE EQUIPMENT AND ANY ADDITIONAL ST UDIES SUGGESTED BY DGMS FOR OBTAINING MINING METHOD APPROVAL DURIN G THE COURSE OF IMPLEMENTATION SHALL BE AT DBTS COST. BUT IF A NY ADDITIONAL EQUIPMENT IS REQUIRED AS PER DGMS MINING METHOD APP ROVAL THE COST OF SUCH EQUIPMENT SHALL BE BORNE BY SCCL. 22. CLAUSE 6 THEREOF PROVIDES FOR INSPECTION OF THE EQUIPMENT BY SCCL AT MANUFACTURERS PREMISES AND ALSO THE RIGH T OF THE SCCL TO REJECT THE EQUIPMENT IF THE GOODS FAILS TO CONFO RM TO THE SPECIFICATIONS. SCCL MAY REJECT THEM IN WRITING MEN TIONING THE SPECIFIC REASON FOR REJECTION WITHIN 7 DAYS FROM TH E DATE OF INSPECTION AND THEREAFTER THE DBT SHALL EITHER REPLACE THE GOO DS REJECTED OR MAKE ALL THE ALTERATIONS NECESSARY TO MEET THE SPEC IFICATIONS FREE OF COST TO SCCL. 23. CLAUSE 7 THEREOF PROVIDES THAT DBT BEFORE DELI VERY SHALL INSPECT AND TEST THE EQUIPMENTS IN ITS SHOP TO ENSU RE THAT THE EQUIPMENTS HAVE BEEN FABRICATED/MANUFACTURED ACCORD ING TO THE STANDARDS AND SPECIFICATIONS UNDER THE CONTRACT AND SHALL YIELD THE ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 22 OF 27 STANDARD PERFORMANCE AND DBT SHALL ALSO PREPARE FA CTORY INSPECTION CERTIFICATES SUMMARIZING THE TESTING RESULTS AS A C OMPONENT OF THE EQUIPMENT REQUIRED UNDER CLAUSE 18 FOR PAYMENT. 24. AS PER CLAUSE 8 THE DBT SHALL PROVIDE SUCH PAC KAGING OF GOODS AS IS NECESSARY TO PREVENT THE GOODS FROM DAM AGE OR DETERIORATION DURING TRANSPORT TO THEIR FINAL DESTI NATION AND THE PACKING SHALL BE SUFFICIENT TO WITHSTAND ROUGH HAND LING AND WELL PROTECTED AGAINST WATER DAMP SHOCK AND RUST. 25. AS PER CLAUSE-9 OF THE AGREEMENT THE DBT SHALL NOTIFY PORT CONSIGNEE WITH COPY TO SCCL SEVEN (7) CALENDAR DAYS BEFORE SHIPMENT BY CABLE OR FAX THE CONTRACT NO DESCRIP TION OF THE GOODS QUANTITY NO. OF PACKAGES TOTAL GROSS WEIGHT TOTA L VOLUME IN CUBIC METERS AND EXPECTED DATE OF READINESS FOR LOADING A T PORT OF SHIPMENT TOGETHER WITH DETAILS ON TOTAL INVOICE VAL UE AND ANY SPECIAL REQUIREMENTS OR ATTENTION TO BE PAID DURING HANDLIN G AND STORAGE. IT SHALL ALSO BOOK SHIPPING SPACE IN A VESSEL ON BEHAL F OF THE SCCL AND SHALL ARRANGE THE SHIPMENT OF GOODS TO REACH TH EIR PORT OF DESTINATION ACCORDING TO THE TIME SCHEDULE MENTIONE D IN THE CONTRACT. ALL COSTS OF PACKAGING INTERNAL TRANSPOR TATION FEES OF FORWARDING AGENTS WAREHOUSING CHARGES PORT CHARGE S DOCK AND HARBOR DUES AND ALL OTHER EXPENSES AS MAY BE INCURR ED FOR THE PURPOSE AND UP TO THE POINT OF DELIVERY OF THE GOOD S ON BOARD THE NOMINATED SHIP SHALL BE PAID BY THE DBT AND THE DBT SHALL BE LIABLE FOR ALL EXPENSES INCLUDING DEAD AND EXTRA FREIGHT DEMURRAGE OF VESSELS ETC ARISING FROM DELAY IN SHIPMENT DUE TO LACK OF SHIPPING OPPORTUNITIES OR DELAY IN PROVIDING DOCUMENTS WHI CH ARE FOR ANY CAUSE ATTRIBUTABLE TO THE DBT AND IT IS ALSO AGREED THAT THE RISK OF ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 23 OF 27 THE GOODS SHALL REMAIN WITH DBT UNTIL DELIVERY HAS BEEN EFFECTED FREE ON BOARD (FOB). 26. CLAUSE 11 OF THE CONTRACT PROVIDES THAT SCCL SH ALL TAKE INSURANCE COVER FOR EQUIPMENT ON A FULL REPLACEMENT COST BASIS FROM FOB PORT OF SHIPMENT TILL THE TIME THE EQUIPMENT I S SUCCESSFULLY COMMISSIONED UNDERGROUND AT THE MINE SITE ON THE BA SIS OF SHIPPING ADVICE GIVEN BY DBT AS PER CLAUSE 10 OF THE AGREEME NT. IT IS FURTHER PROVIDED THAT SCCL SHALL TAKE INSURANCE COVER IN US D WITH DBT AS THE BENEFICIARY FOR SPARES ON A FULL REPLACEMENT CO ST BASIS FROM FOB PORT OF SHIPMENT TO THE MINE SITE AND THESE INSURAN CE COSTS SHALL BE TO THE ACCOUNT OF SCCL. 27. CLAUSE 14 PROVIDES FOR WARRANTY PERIOD WHILE C LAUSE 17 PROVIDES FOR PASSING OF THE RISK AND TITLE TO THE G OODS TO SCCL UPON DELIVERY EFFECTED FOB AT THE FOREIGN PORT OF SHIPME NT. 28. CLAUSE 18 PROVIDES FOR PRICE AND PAYMENT FOR TH E EQUIPMENT AND IT IS AGREED THERE UNDER THAT ALL PRI CES ARE FOB ACCORDING TO THE INCOTERMS 2000 PORT OF ORIGIN OUT SIDE INDIA AND THAT THE PAYMENT SHALL BE MADE BY SCCL TO DBT OUTSI DE INDIA IN USD AS PER THE INVOICE RAISED BY THE DBT. 29. UNDER CLAUSE 20 OF THE AGREEMENT THE SCCL UNDE RTAKES TO PROVIDE ALL OTHER EQUIPMENTS MATERIALS AND MAN POWER IN QUANTITIES AND QUALITY AS DEFINED IN CONTRACT RC 22 4 DATED 21.11.2006 FOR PROVISION OF SERVICES FOR INTRODUCTI ON OF CONTINUOUS MINER TECHNOLOGY AT GDK11A UNDERGROUND MINE REQUIRE D TO ACHIEVE THE ANNUAL GUARANTEED PRODUCTION. 30. CLAUSE 21 PROVIDES THAT IN CASE ANY TAX DUTY A ND/OR LEVY ETC. IS IMPOSED OR ASSESSED IN INDIA ON DBT OR ITS PROJECT OFFICE ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 24 OF 27 UNDER THIS CONTRACT OTHER THAN MENTIONED IN CLAUSE 21.2 AND THE SAME IS PAID TO THE GOVT. BY THE DBT SCCL SHALL MA KE REIMBURSEMENT OF THE TAXES/DUTIES ETC. SO PAID TO DBT ON MAKING AVAILABLE THE PROOF OF PAYMENT OF SUCH TAXES DUTIE S AND/OR LEVIES ETC. ALONG WITH THE RELEVANT COPIES OF THE GOVT. O RDER/DEMAND NOTICE/INTIMATION IN INDIAN RUPEES. 31. FURTHER AS PER THE SPECIAL CONDITIONS OF THE CO NTRACT SET OUT IN SECTION-II OF THE CONTRACT AND CLAUSE 2 THER EOF THE DBT SHALL DELIVER THE GOODS TO THE PORT OF SHIPMENT AS PER TH E SCOPE OF SUPPLY AND AS PER CLAUSE 6 OF THE CONTRACT DBT SHALL ARRA NGE SUPERVISE AND BE SOLELY RESPONSIBLE FOR THE TRANSPORTATION OF ALL THE GOODS FROM THE POINT OF MANUFACTURE TO THE PORT OF SHIPMENT AN D PORT OF DESTINATION OF THE GOODS SHALL BE AT CHENNAI INDIA . 32. FROM THE ABOVE TERMS OF THE CONTRACT IT IS NOW TO BE ASSESSED AND ANALYZED AS TO WHETHER ALL THE THREE C ONTRACTS ARE ONE COMPOSITE AND INDIVISIBLE CONTRACT? A TURNKEY PROJE CT ITSELF INDICATES THAT IT IS COMPOSITE CONTRACT WHICH INVOLVES ACTIVI TIES FROM THE INITIAL STAGE TO THE FINAL STAGE. ALL THE ACTIVITIES ARE EI THER INTERLINKED AND INTERDEPENDENT OR CONSEQUENT TO ONE ANOTHER. THE HO NBLE SUPREME COURT IN THE CASE OF ISHIKAWAJIMA HARIMA (CITED SUP RA) WAS DEALING WITH THE CASE OF A TURNKEY PROJECT BY A CONSORTIUM IN WHICH THE SCOPE OF WORK OF EACH OF THE CONSTITUENT OF CONSORT IUM WAS SPECIFIED. THE ROLE OF THE ASSESSEE THEREIN WAS TO DEVELOP DE SIGN ENGINEER AND PROCURE EQUIPMENT MATERIAL AND SUPPLIES TO ERECT AND CONSTRUCT STORAGE TANKS OF 5 MMTPA CAPACITY WITH POTENTIAL E XPANSION TO 10 MMTPA CAPACITY AT THE SPECIFIED TEMPERATURES. THUS THE ACTIVITIES OF THE ASSESSE INVOLVED BOTH OFF-SHORE SUPPLY OFFSHOR E SERVICES AND ON SHORE SUPPLY AND SERVICES. THE CONTENTION OF THE R EVENUE BEFORE THE ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 25 OF 27 HONBLE SUPREME COURT WAS THAT THE CONTRACT BEING A COMPOSITE AND INTEGRATED ONE THE ASSESSEE WAS LIABLE TO TAX ON T HE OFFSHORE SUPPLY AND SERVICES ALSO. THE HONBLE SUPREME COURT HAS H ELD THAT A CONTRACT MUST BE CONSTRUED KEEPING IN VIEW THE INTE NTION OF THE PARTIES. EVEN IN THE CASE BEFORE US THOUGH SCCL H AD ISSUED A SINGLE TENDER DOCUMENT FOR WHOLE OF THE PROJECT TH E INTENTION OF THE ASSESSEE TO SEGREGATE THE CONTRACT INTO THREE CONTR ACTS WAS CLEAR FROM THE BEGINNING. IT NEGOTIATED WITH SCCL WHO ULT IMATELY AGREED TO EXECUTE THREE SEPARATE CONTRACTS WITH SPECIFIC SCOP E OF WORK FOR EACH OF THE CONTRACTS AND DIFFERENT TIME FRAMES. THUS T HE INTENTION OF THE PARTIES TO HAVE THREE DIFFERENT CONTRACTS IS PROVED . IN SUCH CIRCUMSTANCES THE FINDINGS OF THE AUTHORITIES BELO W THAT ALL THE THREE CONTRACTS ARE PART OF A SINGLE AND COMPOSITE CONTRACT ARE NOT SUSTAINABLE. THE QUESTION NO.1 IS ACCORDINGLY ANSW ERED IN FAVOUR OF THE ASSESSE. THE CONSEQUENTIAL FINDING THAT IN A CO MPOSITE CONTRACT IF THERE IS A PE FOR ONE OF THE CONTRACTS THEN THE PE IS THERE FOR ALL THE CONTRACTS IS ALSO NOT SUSTAINABLE. ACCORDING TO THE REVENUE THE PROJECT OFFICE SET UP ON 21.04.2008 IS THE PE EVEN FOR THE CONTRACTS I AND II. THIS IS NOT ACCEPTABLE. THE OTHER GROUND O N WHICH THE REVENUE IS HOLDING THAT THE BUSINESS INCOME OF THE ASSESSEE UNDER CONTRACT II IS TAXABLE IN INDIA IS THAT THERE IS A PE IN INDIA BY VIRTUE OF CONTRACT NO.I. DURING WHICH THE TECHNICAL EMPLOY EES OF THE ASSESSE COMPANY VISITED INDIA FOR A TOTAL PERIOD OF 37 DAYS OVER A SPAN OF SIX MONTHS. ARTICLE 5(2) OF THE DTAA BETWEE N INDIA AND GERMANY DEFINES PERMANENT ESTABLISHMENT AND CLAUSE (I) THEREOF INCLUDES A BUILDING SITE OR CONSTRUCTION INSTALLAT ION OR ASSEMBLY PROJECT OR SUPERVISORY ACTIVITIES IN CONNECTION THE REWITH WHERE SUCH SITE PROJECT OR ACTIVITIES CONTINUE FOR A PERIOD E XCEEDING SIX MONTHS. IN THE CASE BEFORE US THE ACTIVITIES UNDER CONTRAC T NO.I DID EXCEED ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 26 OF 27 SIX MONTHS. THE CONTRACT WAS SIGNED ON 21.11.2006 WHILE DGMS APPROVAL WAS RECEIVED ON 18.10.2007 DURING WHICH PE RIOD THE EMPLOYEES CARRIED ON THE WORK OF SCIENTIFIC SITE IN VESTIGATION AND HAS ALSO DESIGNED THE MINING METHOD TO BE ADOPTED FOR O BTAINING THE OPTIMUM OUTPUT AS REQUIRED UNDER THE CONTRACT. THUS IT CAN BE SAID THAT THERE IS A PE FOR CONTRACT I. THE CONTRACTS II & III ARE TO COME INTO FORCE ONLY AFTER APPROVAL OF THE DGMS IS OBTAI NED. THE RESULTS OF THE CONTRACT I ARE THE BASIS FOR THE DESIGN MANUFA CTURE AND SUPPLY OF THE PLANT AND EQUIPMENT UNDER CONTRACT II. THE AO HAS NOT DOUBTED THE MANUFACTURE AND DELIVERY OF THE EQUIPME NT OUTSIDE INDIA. HIS BASIS FOR BRINGING TO TAX A PART OF THE INCOME UNDER CONTRACT II IS THAT THE FINDINGS OF CONTRACT I ARE THE BASIS FOR THE DESIGN OF THE EQUIPMENT AND THEREFORE PART OF THE I NCOME IS ATTRIBUTABLE TO ACTIVITIES IN INDIA. EVEN IF THERE IS A PE IN INDIA FOR THE CONTRACTS I AND II ONLY SUCH INCOME WHICH IS A TTRIBUTABLE TO ACTIVITIES OF THE ASSESSEE IN INDIA IS TAXABLE. TH ERE IS NO DISPUTE THAT THE ENTIRE ACTIVITY OF DESIGNING (ALBEIT WITH THE INFORMATION GATHERED DURING EVALUATION OF THE SITE AND FINALIZATION OF T HE PROJECT REPORT DURING CONTRACT I) MANUFACTURE AND DELIVERY OF THE EQUIPMENT INCLUDING THE PAYMENT WAS MADE OUTSIDE INDIA. THERE FORE EVEN IF THERE WAS A PE FOR CONTRACT II IT CANNOT BE SAID T HAT THE PE OF THE ASSESSE HAD ANY ROLE TO PLAY IN ANY OF THE ABOVE AC TIVITIES. THE AO AND DRP HAD RELIED UPON SOME CASE LAW TO HOLD THAT THE INCOME CONTRACT NO. II IS TAXABLE IN INDIA. IN THE CASE OF ANSALDO ENERGIA SPA (CITED SUPRA) THERE IS A SPECIFIC FINDING BY THE DE PARTMENT THAT THE PRICE OF CONTRACT NO.1 WAS LOADED TO TAKE IN A PORT ION OF THE CONTRACT PRICE FOR CONTRACT NO. II TO IV AND WHILE DISCOUNT WAS OFFERED FOR CONTRACT NOS. II TO IV WITH REGARD TO CONTRACT NO. I NO DISCOUNT WAS OFFERED. FURTHER THERE IS ALSO A FINDING THAT THE ASSESSEE THEREIN A ITA NO 1842 OF 2012 CATERPILLAR GLOBAL MINING EUROP E KARIMNAGAR PAGE 27 OF 27 FOREIGN COMPANY HAD SET UP A SUBSIDIARY COMPANY IN INDIA NAMELY ASPL WHICH WAS ALTER EGO OF THE ASSESSE AND THAT A SPL WAS ITS PE IN INDIA AS THE SITE OFFICE WAS JOINTLY OCCUPIED BY ASSESSE AND ASPL. THEREFORE THIS CASE IS DISTINGUISHABLE FROM THE FA CTS OF THE CASE BEFORE US. IN THE CASE OF SAMSUNG HEAVY INDUSTRIES CO. LTD THE ISSUE BEFORE THE TRIBUNAL WAS WHETHER THE PROJECT O FFICE SET UP BY THE ASSESSE THEREIN IS A FIXED PLACE OF BUSINESS OF THE ASSESSEE IN INDIA TO CARRY OUT WHOLLY OR PARTLY THE IMPUGNED CONTRACT IN INDIA WITHIN THE MEANING OF ART.5.1 OF THE DTAA AND IN THE CASE RAYT HEON COMPANY VS. DEPUTY CIT REPORTED IN (2011) 142 TTJ (DEL) 13 7 THE QUESTION WAS THE DATE FROM WHICH THE PE HAD COME INTO EXISTE NCE AND ALSO WHETHER THE FTS AND ROYALTY FOR SUPPLY OF EQUIPMENT AND SOFTWARE EMBEDDED THEREIN CAN BE BIFURCATED. THEREFORE THES E TWO DECISIONS ARE ALSO NOT APPLICABLE TO THE FACTS OF THE CASE BE FORE US. 33. IN VIEW OF THE ABOVE THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL 2017. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD DATED 28 TH APRIL 2017. VINODAN/SPS COPY TO: 1 M/S. CATERPILLAR GLOBAL MINING EUROPE GMBH- INDIA PROJECT OFFICE OFFICERS TRANSIT ACCOMMODATION BUILDING NE AR GDK-5 INCLINE VITTALNAGAR GODAVARIKHANI KARIMNAGAR 2 THE ASSTT. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-I I.T TOWERS AC GUARDS HYDERABAD 500004 3 DRP 2 ND FLOOR IT TOWERS 10-2-3 AC GUARDS HYDERABAD 50000 4 4 DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION I T TOWERS 10-2-3 AC GUARDS HYDERABAD 50004. 5 THE DR ITAT HYDERABAD 6 GUARD FILE BY ORDER