M/S. SEAJULI PROPERTY &VINIYOG P. LTD (JUNIPER HOTELS P. LTD ),MUMBAI vs. THE ITO (I.T)2(1),

The Assessing Officer (TDS) took note of the above position, as also the fact that under paragraph 16 of the agreement in question APP-Australia had the responsibility to complete the job in 36 months, and sought information from JHPL-India about the rate at ITA Nos.: 931 to 933/M/2005 Assessment years: 2001-02, 2002-03 & 2003-04 Page 3 of 7 which income tax has been withheld from the payments made to APP-Australia. It was thus found that the assessee was deducting tax @15%. The stand of JHPL-India was that since the payments were in nature of payment for fees for technical services, the tax deductible under article 12 of the India Australia Double Taxation Avoidance Agreement (Indo Australia DTAA; in short) was 15%. It was further contended that since the provisions of the Indo Australia DTAA were beneficial to the assessee, these provisions will prevail. None of these submissions, however, impressed the Assessing Officer. The Assessing Officer noted that in view of the fact that activities carried out by APP-Australia at the project site exceed 6 months in the relevant financial period, the requirements under article 5(2)(k) of Indo- Australia DTAA, for triggering a permanent establishment on account of ‘building site or construction, installation of assembly project’ are satisfied, and, accordingly, APP-Australia, on the facts of this case, had a PE in India. As a corollary to these findings, the Assessing Officer was of the view that once APP has a PE in India, and the fees for technical services were connected with the same, the taxation could only be done under article 7 dealing with taxation of business income- which is as per the domestic law. He then referred to the provisions of Section 115A under which such income could be taxed at 20%. The Assessing Officer thus proceeded to compute the short tax withholding at source on that basis. Accordingly, impugned demands were raised. Aggrieved, assessee carried the matter in appeal but without any success. While confirming the stand of the Assessing Officer, learned CIT(A), in a well-reasoned order, observed as follows:

I have carefully considered the facts of the case and the contentions of both the Assessing Officer as well as the Appellant. From a perusal of the A.O.'s order and the appellant's submissions it emerges as an undisputed fact that APP's services were technical services squarely falling within the definition of "royalties" as per Article 12(3)(g) of the DTAA between India and Australia and as "fees for technical services" under section 9(l)(vii)(b) of the I.T. Act. However, the Appellant has thereafter objected to applicability of Article 12(4) of the DTAA on the ground that the activities carried out by APP in India, though in the nature of Technical services, are not capable of being brought within the sweep of those emanating from any Permanent Establishment. According to the Appellant APP did not have any building or construction site for assembling the project of its own in India, not did it carry out any supervisory activity in relation thereto. Indeed, what APP did was assisting the hotel project owner, namely the Appellant, by lending its technical expertise in the area of systems and procedures for monitoring the work of multiplicity of agencies involved in the project. One needs to examine this contention carefully and I now deal with this issue and other connected issues. 7.1 The Appellant is involved in developing 1,10,000 square meter plot of land at Santacurz (E) Mumbai for constructing a hotel, commercial and parking complex to be known as Grand Hyatt, Mumbai. For this purpose the Appellant retained the services of APR for undertaking the entire project management as an independent consultant for the project. Under the terms of the agreement signed between the two parties on 1st June, 2000, the project management consultant (APR) has to provide the services of the Project Director, Construction Manager and undertake overall project management services detailed in Schedule 2 of the said Agreement. The services to be rendered by APP include inter alia advice in regard to the estimated cost, time for construction, negotiation on behalf of the Indian company with project consultants, managing of designing, ensuring the .: 931 to 933/M/2005 Assessment years: 2001-02, 2002-03 & 2003-04 Page 4 of 7 Architect coordination to the other project consultant, cost of specifics prepared, work relating to tender documents, etc. 7.2 Clause (k) of Para 2 of Article 5 of India-Australia DTAA provides that the term "Permanent Establishment" shall include a building site or construction, installation or assembling project or supervisory activities in connection with such a site or project, where that site or project exists or those activities are carried out (whether separately or together with other sites, projects or activities) for more than 6 months. Thus carrying out supervisory activities in connection with a construction site also constitute PE as per the DTAA. The word Supervision has been defined in "Webster" to mean to oversee for direction to superintend, to inspect. Looking to the services as specified in Schedule-2 to the Agreement, one can easily reach a conclusion that the nature of services performed by the APP was of supervisory nature. For example as per Schedule-2 APP is required to check progress claims by each of the project consultants, the builders or other contractors and recommend the same for payment by the company and endeavor to procure in due course final accounts from each of the project consultants and the builders, checking and recommending payment of the same. Therefore, there cannot be any doubt that the services to be provided by APP in connection with the construction of the Hotel for the Appellant are supervisory in nature and admittedly the period for which they are rendered is more than the threshold limit of 6 months provided in Article 5(2)(k) of the DTAA. Therefore, APP can be said to have a PE in India and the services rendered by APP to the Appellant are connected with such PE. 7.3 Apart from Clause (k) of para 2 of Article 5, the case of APR is also covered by clause (c) of para 3 of Article 5 of the DTAA which provides as under: 3. An enterprise shall be deemed to have a permanent establishment in one of the Contracting States and to carry on business through that permanent establishment if: (a) ......................... (b) ......................... (c) it- furnishes services, including managerial services and those mentioned in sub paragraph (3)(h) to (k) of Article 12 but not those services in respect of which payments or credits that are royalties as defined in Article 12 are made, within one of the Contracting States through employees or other personnel, but only if those services are furnished within that State: (i) for a period or periods aggregating to more than 90 days within any 12-month period; or (ii) for another enterprise, if both enterprises are within either of the relationships described in sub-paragraphs (l)(a) and (b) of Article-9. There cannot be any doubt the services rendered by APP to Appellant are managerial services and on exceeding threshold period of 90 days within any 12 months period, a service PE is also triggered in this case. 7.4 Thus when APP is found to have a PE in India and the impugned services are connected with such PE, Article 12(4) of the DTAA gets attracted which provides as under: 12(4) The provisions of paragraphs (I) and (2) shall not apply if the person beneficially entitled to the royalties, being a resident of one of the Contracting States, carries on business in the other Contracting State, in which the royalties arise, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the property, right or services in respect of which the royalties are paid or .: 931 to 933/M/2005 Assessment years: 2001-02, 2002-03 & 2003-04 Page 5 of 7 credited are effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply. 7.5 Having found that Article 12(4) of the DTAA gets triggered in this case and income has to be determined under Article 7 of the DTAA, there remains no doubt that income will have to be determined in accordance with provisions of the domestic law i.e. Income-tax Act, 1961 in the present case. This is so as per the general principles of International Taxation and particularly as per provisions of para 3 of Article 7 of the Indo- Australia DTAA. 7.6 The Appellant has agreed that the impugned services by APP qualify to be termed as "fees for technical services" as per section 9(l)(vii) of the I.T. Act. Section 44D provides that in the case of a foreign company no deduction shall be allowed in computing income by way of "fees for technical services". This implies that the "fees for technical services" will be taxed on gross basis. The rate of tax has specifically been provided for income by way of "fees for technical services" in the case of a non-resident under section 115A of the I.T. Act, which is 20%. Therefore, the impugned services by APP to the Appellant become liable to tax at 20% in the instant case. 7.7 The Appellant has contended that in accordance with provisions of section 90(2) of the I.T. Act, the more beneficial rate of 15% prescribed for "royalties" under Article 12 of the DTAA should prevail and should have been applied. I have considered this contention of the learned A.R. but I find the same as misplaced. There is no doubt that section 90(2) allows an assesses to choose between the treatment under the Domestic Law and the DTAA, whichever is more beneficial to him. But in a peculiar situation like the instant case, the result in both the cases is the same. If we examine the case from purely domestic law point of view, the admitted position is that the impugned income is liable to be taxed at the rate of 20% under section 115A of the Income Tax Act, 1961. Coming to the DTAA, here again when the services in question are liable to be taxed in source country under Article 12 of the DTAA, para 4 of the Article 12 get triggered because of APR having a PE in India and the impugned services being connected with such PE. Therefore one has to shift to Article 7 for taxation, which again leads to domestic law provision. Thus under both the options, the taxability of the impugned income remains at the same rate i.e. 20% in the present case. In fact for this proposition one can find the support for advance rulings in the case of Ericsson Telephone Corporation 224 ITR 203 (AAR) and Bechtel France SA 228 ITR 487 (AAR). 7.8 Therefore, in view of the foregoing I do not find any fault in the order of the Assessing Officer in holding that the Appellant was liable to deduct tax at source in the present case at 20% instead of 15% and therefore the Appellant is assessee in default for the balance 5%. Consequent levy of interest under section 201(1A) is also in accordance with law. The action of the A.O. in this regard is upheld.

In the result, these appeals are dismissed. 5. The assessee is aggrieved and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. .: 931 to 933/M/2005 Assessment years: 2001-02, 2002-03 & 2003-04 Page 6 of 7 7. We find no reasons to disturb well-reasoned findings of the learned CIT(A). Once it is not in dispute that APP-Australia had a PE in India, the provision of Article 12(1) & 12(2) cease to come into play. That is clear mandate of article 12(4). The assessee thus gets no benefit from article 12(1) and 12(2) and the authorities below were quite justified in declining the same. The applicable treaty article, as a result of existence of PE under article 5, is Article 7 and that does not give any respite to the source taxation as applicable under domestic law. The grievance of the assessee is thus ill conceived. No specific arguments are advanced before us to meet the above points, and the learned counsel for the assessee simply leaves the matter to us. There is thus no good, and legally sustainable, reason to interfere with the order impugned in appeal before us. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the learned CIT(A) and hold that no interference is called for at the instance of the appellant before us. The impugned well- reasoned order hereby stands confirmed and approved. 8. We may also point out that these appeals have remained pending for adjudication for an inordinately long period but that is because a connected writ petition was pending before Hon’ble Bombay High Court and it was to await outcome of the said petition, and at the instance of the assessee, that hearing was blocked for a long time. Finally, vide letter dated 23rd June 2021, learned counsel has submitted final judgement of Hon’ble Bombay High Court in WP No. 175 of 2007 (in Australia Pacific Project Holding Pty Ltd. vs Union of India) which has dismissed the writ summarily on account of lack of prosecution by the assessee. Learned counsel fairly submitted that this judgement does not come to the rescue of the assessee and the assessee does not wish to rely upon the same. While the Tribunal often gets blamed for delay in disposal of the appeals, even a casual look at the undisputed facts of the case would show that the appeals have remained pending with the Tribunal not because of inertia of the Tribunal, or because of anything wanting on the part of the Tribunal, but because the Tribunal did accept the request of the assessee that the appeals should be blocked till related writ petition before Hon’ble Bombay High Court is disposed of, and the said writ petition was not even effectively pursued by the petitioner. The delay in disposal thus cannot be said to be on account of any action or inaction on the part of the Tribunal. 9. In the result, the appeals are dismissed in the terms indicated above. Pronounced in the open court today on the 23rd day of September, 2021.