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Income Tax Appellate Tribunal, DELHI BENCHES: ‘D’, NEW DELHI
Before: SHRI N.K.BILLAIYA & SMT. BEENA A PILLAI
ORDER PER BEENA A PILLAI, JUDICIAL MEMBER Present appeal has been filed by Revenue against order dated 24/11/15 passed by Ld.DCIT, Circle 3 (1) International Taxation, New Delhi on the following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law, the Hon'ble DRP has erred in directing the Assessing Officer to not levy interest u/s 234B of the Income Tax Act, 1961.
2. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal. Certified that the copy of the directions of DRP-2. New Delhi in the above mentioned case was communicated to me on 19.10.2015 and final assessment order was passed on 24.11.2015. Limitation to file appeal before the Hon'ble ITAT expires on 22.01.2016.”
ITA 89/Del/2016 A.Y.: 2012-13 DCIT vs. Terma A/S 2. Brief facts of the case are as under. Assessee is a Denmark-based foreign company engaged in the business of manufacturing and supplying of defence and aerospace equipment for civilian and military applications like radar system for coastal surveillance, naval surveillance, vessel traffic surveillance at ports, airports etc. During the year under consideration assessee received payments in respect of offshore supply of equipment and performance of services under certain contracts wherein assessee took a position that income from offshore supply of equipment is not taxable in India as it does not have a PE in India. Ld. AO passed draft assessment order by holding that assessee has a fixed place/installation/service PE in India and attributed 30% of sales revenue earned by the assessee from offshore supply to Indian operations and 10% of revenue to PE of assessee in India. Ld. AO also charged interest under section 234A, B, C and D of the Income Tax Act, 1961 (‘the Act’ for short).
Aggrieved by the order, assessee preferred Objections before DRP.
The DRP after considering the submissions upheld the existence of PE and directed Ld.DCIT, to apply global net profit rate of assessee to the revenue from India and then attribute 5% of such net profit to PE in India. DRP also directed to recompute interest, having regard to the decision of Hon’ble Delhi High Court in the case of GE Capital, wherein it has been held that since payments to non-resident subject to withholding of taxes under Section 195, interest under section 234B of the Act is not livable.