SNC- Lavalin Acres Inc., v. ADIT International Taxation Circle 2 (2),

ITA 220/DEL/2008 | 2003-2004
Pronouncement Date: 16-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 22020114 RSA 2008
Assessee PAN AAFCS2553J
Bench Delhi
Appeal Number ITA 220/DEL/2008
Duration Of Justice 3 year(s) 7 month(s) 23 day(s)
Appellant SNC- Lavalin Acres Inc.,
Respondent ADIT International Taxation Circle 2 (2),
Appeal Type Income Tax Appeal
Pronouncement Date 16-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 16-09-2011
Date Of Final Hearing 06-09-2011
Next Hearing Date 06-09-2011
Assessment Year 2003-2004
Appeal Filed On 24-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER & SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A. NOS.186 & 187/D/2008 ASSESSMENT YEARS: 2002-03 & 2003-04 ASSTT. DIRECTOR OF INCOME VS. M/S SNC-LAVILIN/ACRES INC . TAX CIRCLE 2(1) INTERNATIONAL RADISSON COMMERCIAL PLAZA TAXATION NEW DELHI 3 RD FLOOR WING-B NH-8 MAHIPALPUR NEW DELHI-37 & I.T.A. NOS. 692 & 220/D/2008 ASSESSMENT YEARS: 2002-03 & 2003-04 M/S SNC-LAVALIN/ACRES INC. VS. THE ASSTT. COMMISSIONER OF RADISSON COMMERCIAL PLAZA INCOME TAX PALAMPUR 3 RD FLOOR WING-B NH-8 HIMACHAL PRADESH MAHIPALPUR NEW DELHI-37 PAN NO.AAFCS 2553 J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARANDEEP SINGH CA RESPONDENT BY: SHRI ASHWANI MAHAJAN CIT-DR DATE OF HEARING: 06.09.2011 DATE OF PRONOUNCEMENT: 16.09.2011 ORDER PER K.G. BANSAL: AM: THESE CROSS APPEALS OF THE ASSESSEE AND THE REVENUE HAVE BE EN ARGUED IN A CONSOLIDATED MANNER BEFORE US. THE LEARN ED COUNSEL FOR THE ASSESSEE HAS ALSO FILED A CHART DEPICTING POSITION OF VARIOUS GROUNDS IN EARLIER YEARS. THEREFORE THE APPEALS ARE DECIDED IN A CONSOLIDATED MANNER WITH THE HELP OF THE CHART FILED BY THE LEARNED COUNSEL. 2 1.1 THE BACKGROUND FACTS ARE THAT THE ASSESSEE IS A NON-R ESIDENT COMPANY AND IT IS DERIVING INCOME IN INDIA FROM CONSU LTANCY SERVICES RENDERED TO NHPC LIMITED FOR DESIGNING SUPERVISING OF INSTALLATION AND COMMISSIONING OF ELECTRO MECHANICAL EQUIPMENTS ETC. IN THE HYDEL PROJECT UNDER AN AGREEMENT DATED 18.07.1999. THE SE RVICES ARE RENDERED IN RESPECT OF CHAMERA HYDROELECTRIC PROJECT STAGE-II CHAMBA HIMACHAL PRADESH FOR WHICH A COMBINED BID H AD EARLIER BEEN SUBMITTED ALONG WITH GENERAL ELECTRIC CANADA INTERNA TIONAL INC. AND JAI PRAKASH INDUSTRIES LIMITED. 1.2 WE MAY START WITH THE APPEAL OF THE ASSESSEE FOR ASSESSM ENT YEAR 2002-03 BEARING I.T.A. NO.692/D/08. 2. GROUND NOS. 1 TO 1.3 ARE IN RESPECT OF ATTRIBUTION OF PROFITS TO THE PERMANENT ESTABLISHMENT (PE FOR SHORT) IN INDIA. IT IS STATED THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT ENTIRE RECEIPT S OF THIS YEAR AND PROFIT EMBEDED THEREIN ARE LIABLE TO BE TAXED AS INC OME ATTRIBUTABLE TO THE PE. IN THIS CONNECTION CLAUSE (B) OF ARTICLE 7 OF THE DOUBLE TAXATION AGREEMENT BETWEEN INDIA AND CANADA (DTAA FOR SHORT) HAS BEEN MENTIONED. IT IS FURTHER STATED THAT HE ERRED I N HOLDING THAT THE NATURE OF WORK DONE BY THE HEAD OFFICE IN CANADA IS SAME OR SIMILAR AS THE WORK DONE BY THE PE. IT IS ALSO STATED THAT HE ER RED IN UPHOLDING 3 THE FINDING OF THE ASSESSING OFFICER THAT APPORTIONMENT OF PROFIT CANNOT BE MADE BETWEEN THE PE AND THE HEAD OFFICE. 2.2 IN THE AFORESAID CONNECTION IT IS MENTIONED IN T HE CHART THAT THE ISSUE STANDS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF FOR ASSESSMENT YEAR 2001-02 REPORTED IN (20 07) 15 SOT 1 (DEL.). IT HAS BEEN HELD THAT THE CLAIM OF AP PORTIONMENT OF INCOME HAS BEEN EXAMINED BY THE ASSESSING OFFICER AND TH E CIT(A) ON MERITS WHICH CANNOT BE REJECTED ON MERE TECHNICAL G ROUNDS. IT HAS BEEN FURTHER HELD THAT IN VIEW OF THE FORCE OF ATTR ACTION RULE EMBEDED IN ARTICLE 7 OF THE DTAA NO PART OF THE PROFIT CAN BE APPORTIONED TO THE HEAD OFFICE. RESPECTFULLY FOLLOWING THIS DECISION AF ORESAID GROUNDS ARE DISMISSED. FOR THE SAKE OF READY REFERENCE THE RELEVA NT PORTION OF THE DECISION IS REPRODUCED BELOW:- APPLYING THE ABOVE PRINCIPLE AS WELL AS ON INTERPR ETATION OF ARTICLE 7(1) OF DTAA NOT ONLY THE PROFIT ATTRIBUTABLE TO THE PERMANENT ESTAB LISHMENT BUT ALSO THAT ATTRIBUTABLE TO RENDERING OF SAME OR SIMILAR SERVICES AS RENDERED T HROUGH PE SHALL ALSO BE TAXABLE. IN THE PRESENT CASE THERE WAS COMPOSITE CONTRACT FOR REND ERING SERVICES IN CONNECTION WITH SETTING UP OF HYDRO ELECTRIC PROJECT. EVEN IF IT IS CONSIDERED THAT PART OF WORK IN RELATION OF SUCH SERVICES WERE CARRIED OUT OUTSIDE INDIA TH E SERVICES ARE THE SAME AS RENDERED BY THE PE IN INDIA. IT IS ALSO FACT THAT THE INVOICES WERE RAISED THROUGH THE PE IN INDIA WHICH ARE ACCOUNTED FOR IN THE BOOKS OF PROJECT OFFICE SE T UP IN INDIA. THE WORK EXECUTED HAS BEEN EFFECTED THROUGH THE PE IN INDIA. THUS EVEN I F ADMITTING THAT MERELY 30 PER CENT OF THE PART A WORK AS CONTAINED IN DOCUMENT NO.2 TO TH E AGREEMENT DATED 18-7-1999 IS ATTRIBUTABLE TO HO IN CANADA SINCE IT IS OF THE SA ME OR SIMILAR KIND AS EFFECTED THROUGH THE PE IN INDIA PROFIT ATTRIBUTABLE TO SUCH TRANSA CTION IS ALSO CHARGEABLE TO TAX IN INDIA. THE CONTENTION OF LEARNED COUNSEL FOR ASSESSEE WOUL D HAVE BEEN VALID HAD THE ARTICLE 7 OF 4 THE DTAA WOULD HAVE BEEN ON THE BASIS OF OECD MODEL CONVENTION. HOWEVER THE FACT REMAINS THAT THE SAME IS NOT SO AND IN VIEW OF CLAU SE (B) OF SUB-ARTICLE (1) OF ARTICLE 7 OF DTAA WHOLE OF THE PROFIT IN RESPECT OF CHAMERA PRO JECT IS TO BE TAXED IN INDIA. THUS THOUGH IN VIEW OF SECTION 5(2) READ WITH SECTION 9( 1)(I) OF THE ACT AND ALSO READ WITH ARTICLE 7(1) OF THE DTAA BROADLY THE PRINCIPLE OF ATTRIBUTIONS ARE ACCEPTABLE YET IN VIEW OF CLAUSE (B) OF SUB-ARTICLE (1) OF ARTICLE 7 OF DTA A BETWEEN INDIA AND CANADA NO PART OF THE PROFIT FROM THE EXECUTION OF CHAMERA PROJECT CA N BE EXCLUDED WHILE. COMPUTING THE PROFIT OF THE APPELLANT NON-RESIDENT IN INDIA. ACCOR DINGLY GROUND NO.2 RAISED IN THIS REGARD IS TO BE DISMISSED. 3. GROUND NO.2 IS IN RESPECT OF DISALLOWANCE OF EXPENSE S DEBITED UNDER FOUR HEADS NAMELY - A) COST OF PERSONNEL - `3 27 14 858/-; B) TRAVELING EXPENSES - `1 40 06 726/-; C) COMPUTER REPAIR AND MAINTENANCE - `10 40 024/- & D) LEGAL AND PROFESSIONAL EXPENSES - `86 89 088/-. 3.1 IN RESPECT OF THE AFORESAID IT HAS BEEN MENTIONED IN THE CHART THAT THE TRIBUNAL HAS HELD IN THE CASE OF THE ASSESSEE FO R ASSESSMENT YEAR 2001-02 (SUPRA) THAT THE TAX LIABILITY OF THE ASSESSEE HAS TO BE COMPUTED U/S 44D READ WITH SECTION 115A OF THE INCOME -TAX ACT 1961 (THE ACT FOR SHORT) THEREFORE THESE GROUNDS BECOME S IN-FRUCTUOUS FOR THE REASON THAT NO DEDUCTION OF EXPENDITURE IS ALLOWA BLE U/S 44D. RESPECTFULLY FOLLOWING THIS DECISION GROUND NO.2 IS AL SO DISMISSED. 5 3.2 FOR THE SAKE OF READY REFERENCE THE RELEVANT PO RTION OF THE DECISION IS REPRODUCED BELOW:- SINCE WHILE DECIDING GROUND NO.2 IT HAS BEEN HELD THAT THE OPTION TO BE GOVERNED BY EITHER THE PROVISIONS OF THE INCOME-TAX ACT OR BY THE PROVISIONS OF DTAA IS TO BE U SED BY THE ASSESSEE AND SINCE THE ASSESSEE HAS EXERCISED THE OPTION TO BE GOVERNED BY THE PROVISIONS OF INCOME-TAX ACT AND SINCE IT HAS BEEN HELD THAT THE TAX LIABILITY HAS TO BE COMPUTED AS PER SECTION 44D READ WITH SECTION 115A OF THE ACT THESE GROUNDS HAVE BECOME INFRUCTUOUS AS WHILE COMPUTING THE INCOME FROM FEES FOR TECHNICAL SERVICES UNDER SECTION 44D(B) NO DEDUCTION IN RESPECT OF ANY EXPENDITURE OR ALLOWANCE IS PERMISSIBLE. ACCORDINGLY ALL THESE ABOVE GROUNDS ARE DISMISSED. 4. GROUND NOS. 3 TO 3.3 ARE IN RESPECT OF THE ADDITIO N MADE TO THE TOTAL INCOME OF THE ASSESSEE REGARDING QUANTIFICATION O F CONSULTANCY SERVICE FEES. IT IS STATED THAT THE LEARNED CIT(A) ERR ED IN CONFINING THE RELIEF ON ACCOUNT OF ADDITION TO THE RECEIPTS TO `1 29 43 033/- AGAINST THE CLAIM OF `4 53 71 334/-. IT IS FURTHER MENTIONE D THAT HE ERRED IN ENHANCING THE INCOME BY AN AMOUNT OF `3 24 28 301/- . 4.1 IN THIS CONNECTION IT IS STATED IN THE CHART THAT THE ASSESSEE IS AGGRIEVED ONLY BY THE ENHANCEMENT OF INCOME MADE BY THE CIT(A). REFERRING TO THE BACKGROUND FACTS IT IS FURTHER STATE D THAT THE MATTER REGARDING RECONCILIATION OF THE RECEIPTS CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE PROCEEDINGS OF ASSESSMENT YEA R 2001-02. THE QUESTION WAS WHETHER INCOME OF ABOUT `3.24 CRO RES ON WHICH TAXES WERE PAID BY THE ASSESSEE IN ASSESSMENT YEAR 2002-03 W AS 6 TAXABLE AS INCOME IN ASSESSMENT YEAR 2001-02 MERELY BECA USE AS PER CERTIFICATE ISSUED BY NHPC LIMITED THE TAX WAS DEDUCT ED IN ASSESSMENT YEAR 2001-02? IT HAS BEEN HELD THAT THIS AMOU NT HAS BEEN ACCOUNTED FOR AS INCOME IN THE SUBSEQUENT YEAR. SIMIL AR ADDITION OF `4.53 CRORES WAS MADE BY THE ASSESSING OFFICER IN THIS YEA R. WHILE DOING SO HE HAD TAKEN INTO ACCOUNT THE AMOUNT OF `3 .24 CRORES ALREADY OFFERED TO TAX BY THE ASSESSEE IN THIS YEAR WHICH HAD A LREADY BEEN TAXED BY HIM IN ASSESSMENT YEAR 2001-02. THE LEARNED C IT(A) DELETED THE BALANCE ADDITION OF `1.29 CRORES. HOWEVER HE E NHANCED THE INCOME BY AN AMOUNT OF `3.24 CRORES ON THE ERRONEOUS ASSUMPTION THAT THE AFORESAID AMOUNT OF `3.24 CRORES WAS NOT OFFE RED FOR TAXATION IN THIS YEAR. IT IS SUBMITTED THAT THE ERROR IN THE A SSUMPTION IS FACTUAL AND IT EMERGES CLEARLY FROM THE DECISION OF THE TRIBU NAL FOR ASSESSMENT YEAR 2001-02. ACCORDINGLY IT IS ARGUED THAT THE AD DITION OF `3 24 28 301/- MADE BY THE CIT(A) MAY BE DELETED. PARAGRAPH NO.11.5 OF THE DECISION OF THE TRIBUNAL DEALING WITH THIS AM OUNT READS AS UNDER:- WE HAVE CONSIDERED RIVAL SUBMISSIONS AND RELEVANT FACTS. WE HAVE ALSO PERUSED THE CASE LAWS CITED. THE WHOLE OF THE ADDITION IS MADE ON TH E BASIS OF AMOUNT PROVIDED BY NHPC IN ITS ACCOUNTS FOR THE WORK DONE AND DEDUCTING TAX ON SUCH LIABILITY. IT IS ALSO PRESUMED THAT SINCE THE WORK OF ASSESSEE IS TO BE CARRIED OU T AFTER THE OTHER CONTRACTOR NAMELY J.P . INDUSTRIES LTD. COMPLETES HIS PART OF WORK AND SI NCE J.P. INDUSTRIES LTD. HAS COMPLETED HIS PART OF WORK THE WORK OF ASSESSEE WOULD ALSO H AVE BEEN COMPLETED. IN OUR OPINION THE WHOLE PREMISES NOT ON SOUND LEGAL SITUA-TION. SO FAR AS .RUNNING BILL NOS. 1 TO 5 ARE CONCERNED THERE IS NO DISPUTE ABOUT RECOGNIZING TH E INCOME IN RESPECT THEREOF. AS REGARDS AMOUNT CREDITED BY NHPC IT IS SEEN THAT TH E ASSESSEE HAS ACCOUNTED FOR THE 7 SAME BY INVOICE NOS. 6 7 8 AND 9 RAISED IN SUBSEQU ENT YEARS. HOWEVER INVOICE NO.6 PERTAINS TO THE PERIOD JANUARY 2001 TILL APRIL 20 01. INVOICE NOS. 7 8 AND 9 ADMITTEDLY PERTAINS TO THE WORK DONE AFTER THE END OF RELEVANT FINANCIAL YEAR. THIS IS EVIDENT FROM THE INVOICE RAISED BY THE ASSESSEE. AS PER THE TERM S OF CONTRACT THE INVOICE CAN BE RAISED PROVIDED THE WORK COMPLETED HAS REACHED BILLABLE ST AGE. ACCORDINGLY IN RESPECT OF WORK DONE UP TO 31ST MARCH 2001 INVOICE NO.6 WHICH CON TAINS A SUM OVER RS. 3.94 CRORES A SUM OF RS. 3.09 CRORES HAS BEEN ACCOUNTED FOR. THE CREDIT BY NHPC OR DEDUCTION OF TAX BY NHPC _CANNOT BE CONCLUDED AS ACCRUAL OF INCOME IN F AVOUR OF ASSESSEE. SINCE THE ASSESSEE RAISED THE BILL ON 11-06.2001 THOUGH PERTAI NING TO JANUARY TILL APRIL 2001 BUT SINCE THE PAYMENTS WERE RECEIVED PRIOR TO CLOSE OF THE ACCOUNTS AND AUDIT THEREOF INSTEAD OF SHOWING THE WORK-IN-PROGRESS THE ASSESSEE HAS ACC OUNTED FOR ENTIRE INCOME IN RELATION TO WORK DONE BETWEEN JANUARY AND MARCH 2001 THOUGH CLAIMED IN THE BILL RAISED ON 11- 6-200 1. IT IS ALSO TO BE NOTED THAT BILL DATED 11-6 -2001 ALSO CONTAINS THE PERIOD 1-4-2001 TILL 30TH APRIL 2001. THUS THE INCOME FOR THIS PE RIOD CANNOT BE SAID TO HAVE BEEN ACCRUED BEFORE THE CLOSE OF THE FINANCIAL YEAR ON 31-3-200 1 . IT IS SETTLED LAW THAT TAX IS PAYABLE ON ACCRUAL OF INCOME AND NOT ON THE BASIS OF ENTRIES M ADE BY THE PAYER OR DEDUCTION OF TAX ON SUCH CREDIT TO THE ACCOUNT RATHER THE PROVISION IS OTHERWISE. AS PER SECTION 199 CREDIT FOR TAX DEDUCTED AT SOURCE IS ALLOWABLE IN THE YEAR IN WHICH THE INCOME COMPRISED IN SUCH CERTIFICATE IS ASSESSABLE. THUS THE REVERSE IS NOT THE LAW. THE ASSESSING OFFICER HAS MERELY PRESUMED THAT SINCE THE AMOUNT HAS BEEN CREDITED BY NHPC AND SINCE THE WORK PERTAINING TO J.P. INDUSTRIES LTD. HAS BEEN COMPLET ED THE WORK OF ASSESSEE IS ALSO COMPLETED. IN OUR OPINION THIS PRESUMPTION IS NOT BASED ON FACTS ESTABLISHED IN THIS REGARD. THE ASSESSEE RAISED THE RUNNING BILL FROM M ONTH TO MONTH ON THE BASIS OF WORK TO BE EXECUTED BY IT AND NOT ON THE BASIS OF WORK COMP LETED BY J.P. INDUSTRIES. SINCE THE VALUE OF WORK DONE IS ALSO PART OF THE INVOICES RAI SED IN SUBSEQUENT YEAR AND WHICH IS ACCOUNTED AS INCOME IN THE SUBSEQUENT YEAR WE FIND THAT THE ASSESSEE IS FOLLOWING PROPER METHOD OF ACCOUNTING OR SUCH CONTRACT RECEIP TS BASED ON PERCENTAGE COMPLETION METHOD. WE ACCORDINGLY DO NOT FIND ANY JUSTIFICATIO N TO TREAT THE INCOME ACCRUING IN SUBSEQUENT YEAR AS INCOME OF THE YEAR UNDER APPEAL. WE ACCORDINGLY DELETE THE ADDITION OF RS. 3 24 28 301 AS ALLEGED UNDER STATEMENT OF CO NTRACT PROCEEDS. 4.2 IN REPLY THE LEARNED DR SUBMITTED THAT SINCE THE GROUND IS ONLY IN RESPECT OF RECONCILIATION OF THE RECEIPTS OF THE A SSESSEE VIS-A-VIS THE 8 TDS CERTIFICATES ISSUED BY NHPC LIMITED THEREFORE IT IS URGED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFI CER FOR VERIFICATION. IN THE REJOINDER THE LEARNED COUNSEL SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFI CER WITH CERTAIN REMARKS SO AS TO PLACE THE ISSUE IN CLEAR PROSPECTIVE. 4.3 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSI ONS MADE BEFORE US. THE QUESTION IS WHETHER THE AMOUNT OF AB OUT `3.24 CRORES EXCLUDED FROM THE INCOME OF THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2001-02 HAS BEEN INCLUDED BY THE ASSESSEE IN THE IN COME OF ASSESSMENT YEAR 2002-03? THE FINDING OF THE TRIBUNAL IN THE IMMEDIATELY PRECEDING YEAR IS THAT THE ASSESSEE IS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING AND UNDER THIS SYSTEM ON LY THAT INCOME WHICH HAS ACCRUED IN AN YEAR CAN BE BROUGHT T O TAX IN THAT YEAR. THIS MEANS THAT THE RECEIPTS IN RESPECT OF SERVIC ES RENDERED IN A YEAR CAN BE INCLUDED IN THE TOTAL INCOME OF THAT YE AR. THE CASE OF THE LEARNED COUNSEL IS THAT RECEIPTS OF ABOUT `3.24 CRORES WERE INCLUDED BY THE NHPC LIMITED IN THE TDS CERTIFICATES OF ASSESSMENT Y EAR 2001-02 HOWEVER THESE RECEIPTS PERTAINED TO THE MONTH OF APR IL 2002. THIS AMOUNT HAS BEEN INCLUDED IN THE RECEIPTS OF THIS YEAR. THE ASSESSING OFFICER MAY VERIFY THIS SUBMISSION OF THE LEARNED COUNSE L AND QUANTIFY THE RECEIPTS OF THIS YEAR ON MERCANTILE SYSTEM OF ACCOU NTING. IT FOLLOWS AXIOMATICALLY THAT CREDIT FOR TAX DEDUCTED AT SOURCE WILL HAVE TO BE 9 LIMITED TO THE RECEIPTS OFFERED FOR TAX IN THIS YEAR. THUS THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NO.4 IS THAT THE LEARNED CIT(A) FAILED TO ADJUDICATE GROUND NO.7 TAKEN IN APPEAL FILED BEFORE HIM. THIS GROUND IS THAT THE ASSESSING OFFICER ERRED IN DISREGARDING THE PROVISION CON TAINED IN RULE 115 OF THE I.T. RULES FOR THE PURPOSE OF COMPUTING AN D INCLUSION OF CONTRACTUAL RECEIPTS SUBJECT TO TAX IN INDIA. HE FUR THER ERRED IN NOT ALLOWING HEAD OFFICE EXPENSES OF `3 27 14 858/- BY TR EATING THEM AS COVERED U/S 44C OF THE INCOME-TAX ACT. HE ALSO ERRED IN APPLYING THE PROVISION CONTAINED IN SECTION 40(A)(I) IN RESPECT OF PROJECT EXPENSES OF `3 27 14 858/- INCURRED BY THE HEAD OFFICE. IN THI S CONNECTION IT WAS STATED BY THE LEARNED COUNSEL THAT THE MATTER STANDS DE CIDED AGAINST THE ASSESSEE AND THE WHOLE OF THE INCOME INCLUDING THE WHOLE OF THE INCOME ARISING ON ACCOUNT OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE IS LIABLE TO BE TAXED IN INDIA. THEREFORE THESE GROUN DS HAVE BECOME INFRUCTUOUS AND MAY BE DISMISSED. THE LEARNED DR HAD NO OBJECTION TO THE AFORESAID PROPOSAL. THIS GROUND IS ALSO DISMISSED. 6. GROUND NO.5 IS THAT THE LEARNED CIT(A) ERRED IN U PHOLDING THE LEVY OF INTEREST U/SS 234B & 234D. 6.1 IN THIS CONNECTION IT IS MENTIONED THAT THE ASSESSEE IS A NON- RESIDENT PERSON THEREFORE ALL ITS RECEIPTS ARE SUBJECT TO DEDUCTION OF TAX AT SOURCE. CONSEQUENTLY THE ASSESSEE IS NOT LIABLE TO PAY ANY 10 ADVANCE TAX. IN ABSENCE OF THE LIABILITY INTEREST C ANNOT BE CHARGED NOTWITHSTANDING THE FACT THAT THE PAYER HAS NOT DEDUC TED TAX AT SOURCE. FURTHER THE PROVISION CONTAINED IN SECTION 2 34D CAME INTO OPERATION W.E.F. 01.06.2003 THEREFORE IT IS APPLIC ABLE TO THE PROCEEDINGS OF ASSESSMENT YEAR 2004-05 AND SUBSEQUENT YEAR S. THIS PROVISION IS NOT APPLICABLE TO THE PROCEEDINGS OF ASSESSME NT YEAR 2002-03. THE CONTENTIONS OF THE ASSESSEE ARE FOUND TO B E IN CONSONANCE WITH THE DECISION OF HONBLE DELHI HIGH CO URT IN THE CASE OF DIRECTOR OF INCOME TAX VS. JACOBS CIVIL INCORPORATED/ MITSUBISHI CORPORATION (2010) 194 TAXMAN 495. RESPECTFULLY FO LLOWING THIS DECISION GROUND NO.5 IS ALLOWED. 7. GROUND NO.6 & 7 ARE IN RESPECT OF NON-ACCEPTANCE OF REVISED INCOME OF `42 77 560//- AND RESIDUAL RESPECTIVELY. THESE GROUNDS WERE NOT ARGUED AS THESE ARE IN CONSEQUENTIAL IN NATUR E. THEREFORE THESE GROUNDS ARE ALSO DISMISSED. 8. WE NOW COME TO THE APPEAL OF THE REVENUE FOR THI S YEAR BEARING I.T.A. NO.186/D/2008. THE ONLY SUBSTANTIVE GROUND TA KEN BY THE REVENUE IS THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT THE FEE FOR TECHNICAL SERVICES RECEIVED BY THE ASSESSEE IS GOVERNED BY THE PROVISIONS OF THE ACT AND IT DOES NOT CONSTITUTE BUSINESS INCOME AS HELD BY THE ASSESSING OFFICER BECAUSE THE PROJECT OFFIC E CONSTITUTES PE 11 UNDER THE DTAA. THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2001-0 2. RESPECTFULLY FOLLOWING THIS DECISION THIS GROUND IS DISMISSED. 9. HAVING DECIDED THE RIVAL APPEALS FOR ASSESSMENT YEAR 2002-03 WE NOW PROCEED WITH THE APPEALS FOR ASSESSMENT YEAR 2003 -04. WE TAKE UP THE APPEAL OF THE ASSESSEE AT THE FIRST INSTANCE BEARING NO.220/D/08. 10. GROUND NO.1 IS THAT THE ASSESSMENT ORDER IS BAD IN LA W AS STATUTORY NOTICE U/S 143(2) WAS NOT SERVED ON THE ASSESSEE. THIS GROUND HAS NOT BEEN PRESSED BY THE LEARNED COUNSEL. TH EREFORE THE SAME IS DISMISSED. 11. GROUND NOS. 2 TO 2.3 ARE TO THE EFFECT THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT ALL THE RECEIPTS OF THIS YEAR A ND PROFIT EMBEDED THEREIN ARE ATTRIBUTABLE TO THE PE IN INDIA. IN TH IS CONNECTION A REFERENCE HAS BEEN MADE TO ARTICLE 7 OF THE DTAA. T HE FINDING THAT THE WORK DONE BY THE HEAD OFFICE IS SAME OR SIMILAR IN NAT URE AS THE WORK DONE THROUGH THE PE HAS ALSO BEEN CHALLENGED. THIS GR OUND STANDS DECIDED AGAINST THE ASSESSEE IN OUR ORDER ON ITS APPEAL F OR ASSESSMENT YEAR 2002-03 (SUPRA). FOLLOWING THE ORDER THESE GRO UNDS ARE ALSO DISMISSED. 12 12. GROUND NO.3 IS AGAINST DISALLOWANCE OF TWO EXPENSES: - (A) COST OF PERSONNEL - `4 12 64 627/-; (B) TRAVELING EXPENSES- ` 84 11 512/-. SIMILAR GROUNDS HAVE BEEN DECIDED AGAINST THE ASSESSEE IN THE APPEAL FOR ASSESSMENT YEAR 2002-03. FOLLOWING THAT DEC ISION THIS GROUND IS ALSO DISMISSED. 13. GROUND NO.4 IS THAT THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE RELIEF TO THE ASSESSEE IN RESPECT OF CONTRACT RECEIPTS WH ICH HAVE BEEN ALREADY TAXED IN EARLIER YEARS. IT MAY BE MENTIONED HERE THAT SIMILAR GROUND HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFF ICER IN THE ORDER ON THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 200 2-03. THE LEARNED COUNSEL SUBMITTED THAT THE VERIFICATION TO BE MADE BY THE ASSESSING OFFICER WILL HAVE NO REPERCUSSION ON PROFITS OF THIS YEAR THEREFORE THE GROUND HAS BECOME INFRUCTUOUS. IN VI EW THEREOF THIS GROUND IS ALSO DISMISSED. 14. GROUND NO.5 REGARDING ADDITION OF `2 98 620/- ON ACCOUNT OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE HAS NOT BEEN PRESSED BY THE LD. COUNSEL STATING THAT SINCE ALL THE RECEIPTS HAV E BEEN HELD TO BE TAXABLE IN INDIA THE GROUND BECOMES INFRUCTUOUS. AC CORDINGLY THIS GROUND IS ALSO DISMISSED. 13 15. GROUND NO.6 IS AGAINST LEVY OF INTEREST U/SS 234B AN D 234D OF THE ACT. FOLLOWING OUR DECISION FOR ASSESSMENT YEAR 2003-04 THIS GROUND IS ALLOWED. 16. GROUND NOS. 7 & 8 REGARDING NON-ACCEPTANCE OF R ETURNED LOSS AND THE RESIDUARY GROUND HAVE NOT BEEN ARGUED BY TH E LEARNED COUNSEL. FOLLOWING OUR DECISION ON APPEAL FOR ASSESSMENT YEAR 2002- 03 THESE GROUNDS ARE DISMISSED. 17. WE NOW TURN TO THE APPEAL OF THE REVENUE FOR TH IS YEAR BEARING I.T.A. NO.187/D/08. THIS APPEAL CONTAINS A GROUND ID ENTICAL TO THE GROUND TAKEN IN THE APPEAL FOR ASSESSMENT YEAR 2002-03. FOLLOWING OUR DECISION OF THAT YEAR THIS GROUND IS DISMISSED. 17. IN RESULT; I) APPEAL OF THE ASSESSEE BEARING I.T.A. NO.692/D/08 IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSE AS DISCUSSED ABOV E; II) APPEAL OF THE REVENUE BEARING I.T.A. NO.186/D/0 8 IS DISMISSED; III) APPEAL OF THE ASSESSEE BEARING I.T.A. NO.220/D/08 IS PARTLY ALLOWED; AND IV) APPEAL OF THE REVENUE BEARING I.T.A. NO.187/D/0 8 IS DISMISSED. SD/- SD/- ( R.P. TOLANI ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER NS 14 COPY FORWARDED TO:- 1. M/S SNC-LAVILIN/ACRES INC. RADISSION COMMERIAL PLAZ A MAHIPALPUR NEW DELHI-37. 2. ASSTT. DIRECTOR OF INCOME TAX CIRCLE 2(1) INTERN ATIONAL TAXATION NEW DELHI. 3. THE CIT (A) NEW DELHI. 4. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY BY ORDER (ITAT NEW DELHI).