LINKLATERS,MUMBAI vs. ADDL. DIT (INTERNATIONAL TAXATION), MUMBAI

The cross appeals are directed against the order of the Ld. CIT(A)-57, Mumbai-51 dated 22.3.2016 pertaining to assessment year 2011-12 and these are heard together and disposed of through this common order.

Ground Nos.1 to 7 has not been pressed at the time of hearing and therefore need not to be adjudicated.

Ground Nos.14 & 15 are against the order of the ld.CIT(A) in not specifically holding that the appellant is not having permanent establishment in India during the financial year as the number day of days for which the services were rendered do not exceed 90 days . The Ground Nos.14 & 15 are extracted as under:-

The ld.CIT(A) erred in not specifically holding that the appellant did not have a fixed base in India.”

The facts in brief are that the assessee is engaged in the business of providing legal advice services word over to various clients and during the year filed return of income on 29.09.2011 declaring the total income of Rs.30,37,690/-. Thereafter, the case of the assessee was selected for scrutiny. The assessee in its return of income has stated that assessee has no branch or office in India during the financial year 2010-11 nor the assessee has established any office or place of business in India during the financial year 2010-11. It was also submitted that during the 12 months period pertaining to financial year 2010-11, the rendering of services including services on behalf of group concerns by assessee’s personnel has not exceeded 90 days and accordingly, assessee has no permanent establishment in India for the A.Y. 2011-12 in terms of the India-UK Tax Treaty Article-5(2)(k)(i) and no income is liable to tax in India as per Article-7(1) of the Tax Treaty.

Further, the Article-5(2)(k)(i) of the treaty provides that for the purpose of this treaty , the term ‘permanent establishment’ means a fixed place of business through which the business of an enterprise is wholly or partly carried on. Article 5(2)(k) further provides that the term permanent establishment shall include especially the providing of services including managerial services, other than those taxable under Article-13 (Royalties and fees for technical services), within a Contracting State by an enterprise through employees or other personnel, but only if activities of that nature continue within that State for a period or periods aggregating to more than 90 days within any twelve month period. Before the Bench, the learned A.R. of the assessee submitted that M/s.Linklaters the income of the assessee could only be brought to tax, if the assessee carries on activities of that nature for more than 90 days within any twelve month period, but in the case of the assessee, the period during which these activities were furnished by the assessee, does not exceed 90 days and therefore, whatever income, if the assessee has received, is not taxable under business income. The learned A.R. of the assessee referred to the statement of showing details of the number of days, the assessee furnished services/activities in India, a copy of which is filed at page 70 of paper book, which shows that the total number of mandays /cumulative were only 21 days, which are less than 90 days and therefore, the income of the assessee cannot be brought to tax in India. The learned A.R. of the assessee submitted that the said factor has been stated clearly in the statement of income by way of note. The learned A.R. of the assessee referred to the Order passed by ld.CIT(A) and specifically pointed out at page-7 of his order that in response to direction from the ADIT to furnish number of mandays spent by the employees in India, the assessee filed detailed summary containing number of days spent by employees in India for rendering services during financial year 2010-11, which has not been controverted by the ld.ADIT. The learned A.R. of the assessee further pointed out that the ld.CIT(A) further noted that ADIT has failed to appreciate that the income earned by the assessee during the ordinary course of business was in nature of business income and accordingly governed of Article-7 of Tax Treaty. The learned A.R. of the assessee vehemently submitted for the Bench that in view of the said fact there is no question of assessing the income of the assessee under Article-7 as ld.CIT(A) has also admitted the fact of having furnished the details of number of days spent by employees in India for rendering services, which were 21 days during the year, far below 90 days and therefore the assessee was not having any permanent establishment in India in terms of Article- Article 5(2)(k)(i) of the treaty . Learned A.R. of the assessee therefore prayed that the order of the ld.CIT(A) may kindly be reversed and direction may be given to this effect that the income of the assessee is not taxable at all in India.

On the other hand, learned D.R. relied on the order of the AO and the ld.CIT(A) and left the issue to the decision of the Bench.

After hearing both the parties and perusing the material available on record, we observe that undisputed facts are that that total number of days spent by the M/s.Linklaters employees in India by rendering services during the year were 21 days as is clear from the statement filed by the assessee at page-70 of the paper book, which is reproduced below for the sake of ready reference:-

In the result, the appeal of assessee is partly allowed.

Since we have decided in assessee’s appeal in India for Financial year 2010-11, therefore, the issue raised by the Revenue in its appeal become academic and needs no adjudication.

In the result, the appeal of Revenue is partly allowed.