GE HYDRO FRANCE,NEW DELHI vs. DCIT, CIRCLE-1(3)(1), INTERNATIONAL TAXATION, NEW DELHI

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “D”: NEW DELHI BEFORE SHRI C. N. PRASAD, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA No.2085 & 2086/Del/2022 (Assessment Years: 2018-19 & 2019-20) GE Hydro France, Vs. DCIT, A-18, 1st Floor, Okhla Circle-1(3)(1), Industrial Phase-II, International Taxation, Tekhand, South East New Delhi Delhi, Okhla Industrial Estate SO, New Delhi (Appellant) (Respondent) PAN: AAFCA1688N

Assessee by : Shri Ajay Vohra, Sr. Adv Revenue by: Shri Aditya Vohra, Adv Shri Arpit Goel, CA Date of Hearing 15/12/2023 Date of pronouncement 13/03/2024

O R D E R PER M. BALAGANESH, A. M.: 1. The appeals in ITA No.2085 and 2086/Del/2022 for AYs 2018-19 and 2019-20 arise out of the order of the Assessing Officer/ ACIT, Circle- International Taxation 1(3)(1), New Delhi [hereinafter referred to as „ld. AO, in short] dated 29.07.2022. Identical issues are involved in both the appeals and hence they are taken up together and disposed of by this common order for the sake of convenience. 2. The assessee has raised the following grounds of appeal in ITA No. 2085/Del/2022 for AY 2018-19:- “1. That on the facts and circumstances of the case and in law, the assessment order dated 29.07.2022 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 ("the Act") for assessment year 2018-19 assessing the total income of the Appellant at Rs.46,93,12,952 is bad in law, void-ab-initio and therefore, liable to be quashed and/ or set aside.

ITA No.2085 & 2086/Del/2022 GE Hydro France

ITA No.2085 & 2086/Del/2022 GE Hydro France

Re: Income of Rs.96,45,476 from Fees for Technical Services ("FTS") 14. That the DRP/ assessing officer erred on facts and in law in applying the provisions of section 44BBB of the Act to bring to tax income of Rs.96,45,476 received on account of FTS, not appreciating that the same constituted Income from Other Sources and was already offered to tax in the return of income. 15. That the DRP/ assessing officer erred on facts and in law in making the aforesaid addition of Rs.96,45,456 to the returned income, not appreciating that the same resulted in double taxation. Re: Other grounds relating to computation of tax demand & penalty proceedings 16. Without prejudice, that the assessing officer erred in erroneously computing total receipts as 'Profits from Business or Profession' and taxing the same at 40% instead of first applying presumptive rate of 10% provided under section 44BBB of the Act to compute the income embedded in the receipts and thereafter, applying 40% tax rate to the same. 17. Without prejudice, that the assessing officer erred on facts and in law in not allowing set off of brought forward losses in the assessment order on the ground that no loss is allowed when income is taxed on presumptive basis under section 44BBB of the Act. 18. That the assessing officer erred on facts and in law in levying interest under 234B of the Act. 19. That the assessing officer erred on facts and in law in levying interest under section 234C of the Act. 20. That the assessing officer erred on facts and in law in levying interest under section 234D of the Act. 21. That the assessing officer erred on facts and in law in initiating penalty proceedings under section 270A of the Act.”

AY 2018-19 - ITA No.2085/Del/2022: Ground Nos. 2, 10, 11, 13, 14, 15, 16, 17 & 21

AY 2019-20 - ITA No.2086/Del/2022: Ground Nos. 2, 10, 11, 12 & 16

ITA No.2085 & 2086/Del/2022 GE Hydro France

4.1. The ld. AR before us made a statement from the Bar to the aforesaid effect and hence the aforesaid grounds are dismissed as not pressed.

ITA No.2085 & 2086/Del/2022 GE Hydro France which were dismissed. Pursuant to the directions issued by the ld. DRP under section 144C(5) of the Act, the ld. AO passed final assessment order dated 29.07.2022 under section 143(3) r.w.s. 144C(13) of the Act, assessing the total income of the assessee at Rs.46,93,12,952/-.

ITA No.2085 & 2086/Del/2022 GE Hydro France machinery and hydro-mechanical plant & machinery (Offshore Component) of 4 x 250 MW Tehri Pumped Storage Plant. Under the said Contract No.3, the assessee received consideration from THDC for offshore supply of plant and equipment. Along with HCC, the assessee was also awarded Contract No.1. However, no amount has been received by the assessee under the said Contract No.1 in the subject assessment years and the same is not subject matter of dispute before us.

9.1. The details of five contracts entered into by THDC with the consortium formed by the assessee, HCC and GE Power India Ltd, as mentioned in Annexure-3 of THDC Overall Agreement are tabulated hereunder:-

Contra ct. Particulars Contractor No. 1. Planning, Design and Engineering of 4 x 250 MW Tehri Hindustan Construction Pumped Storage Plant Company Ltd and Alstom Hydro France Civil Works of 4 x 250 MW Tehri Pumped Storage Plant Hindustan Construction 2. Company Ltd 3. Supply of Electro-Mechanical plant & machinery and Alstom Hydro France (i.e., Hydro-Mechanical plant & machinery (offshore the Appellant) Component) of 4 x 250 MW Tehri Pumped Storage Plant 4. Supply of Electro-Mechanical plant & machinery and Alstom Projects India Hydro-Mechanical plant & machinery (On-shore Limited Component) of 4 x 250 MW Tehri Pumped Storage Plant 5. Transportation, Insurance, Custom clearance, Storage, Alstom Projects India Erection, Testing and Commissioning of the Electro- Limited Mechanical plant & machinery and Hydro- Mechanical plant & machinery (Onshore Services) of 4 x 250 MW Tehri Pumped Storage Plant

9.2. As is evident from the above, under the THDC Agreement, the assessee is executing Contract No.3, i.e., supply of electro-mechanical plant & machinery and hydro-mechanical plant & machinery (Offshore Component). The said Contract No.3 is hereinafter referred to as "THDC Contract No.3 for Offshore Supply". As per the said THDC Contract No.3 for Offshore Supply read with Particular Conditions of Contract, the transfer of ownership, for the plants and

ITA No.2085 & 2086/Del/2022 GE Hydro France equipment (including spares) supplied from foreign country, was done on "FOB" basis. The relevant clause is reproduced hereunder:- "Sub-Clause 7.7 Ownership of Plant and Material "The Ownership of imported material will be transfer on "FOB" basis. The ownership of indigenous material will transfer on "Ex. Work" basis" 9.3. As per the THDC Overall Agreement, the consortium members are jointly and severally responsible and liable to THDC. Separate roles and responsibilities of consortium members emanate under the aforesaid THDC Overall Agreement, which are separate and independent of each other, and separate consideration was agreed between the parties for each independent scope of work defined in the 5 different contracts entered into between THDC and the consortium formed by the assessee. For the work relating to offshore supply of plant and equipment, the assessee was to receive consideration in foreign currency, as is evident from perusal of Clause 1 of THDC Contract No.3 for Offshore Supply. 9.4. The ld. AO observed that THDC contracts executed by the Consortium formed by the assessee were single composite contracts awarded on turnkey basis which were deliberately split into 5 contracts by the parties for tax purposes. Firstly, in terms of the THDC Overall Agreement, the consortium of the assessee and THDC agreed that the Tehri Project shall be executed through separate five contracts, as tabulated supra. The assessee placed the copy of Overall Agreement i.e. Agmt No.THDC/RKSH/CD-262/AG/OA dated 23.7.2011 between THDC India Ltd and ALSTOM-HCC Consortium comprising of partners (i) Alstom Hydro France; (ii) Alstom Projects India Ltd and (iii) Hindustan Construction Company Ltd. For the sake of convenience, the relevant clauses in agreement which is enclosed in Pages 31 to 48 of the Paper Book are reproduced below:- “WHEREAS (A) The Consortium had submitted its coordinated bid: Techno- commercial bid on 31.10.2008 and Fresh Financial bid 07.04.2011 to the Employer for. EPC Execution and completion of Tehri Pumped Storage Plant (4X250 MW) under Tender No. THDC/RKSH/CD-202 on turnkey sy

ITA No.2085 & 2086/Del/2022 GE Hydro France basis and as briefly described in hereto (hereinafter referred to as the "Project). Annexure-1 (B) Having accepted the said bid, the Employer has decided to award the execution of the Project to the Consortium. (C) The Consortium and the Employer having agreed that the Project shall be executed on a coordinated basis through separate CONTRACTS, (detalled in Annexure-III) each to be signed by the partner of the Consortium directly responsible for the respective portion of Supplies, services or works. (D) The Consortium and the Employer have agreed, that CONTRACTS pertaining to the On-shore Supplies and Services of Electro-Mechanical and Hydro-Mechanical Works shall be signed and performed by the M/S Alstom Project India Ltd., the Group Company of of M/s Alstom Hydro France, having its registered office at Mumbal and Its office for correspondence at The International, V Floor, 16, Marine Lines Cross Road No. 1, Off Maharahi Karve Road, Churchgate, Mumbal. (E) It being agreed and understood that the execution of the Project under several CONTRACTS (as at "C" above) shall not in any manner dilute the respective responsibilities, obligations and liabilities of the each partner of the Consortium as defined in the sald CONTRACTS (detailed in Annexure -III) and In this Agreement to ensure completion and performance of the Project within the TIME FOR COMPLETION with the understanding that the Consortium shall be jointly and severally responsible and liable for the performance of the Project with in the Time for Completion as defined in Para 1.1.3 of this Agreement. (F) It is deemed necessary and expedient to enter into this Agreement to, inter-alla, define the scope of the WORKS and provide for the responsibilities of Alstom Hydro France as the leader of the Consortium ("the Leader") and the joint and several responsibility and liability of the Consortium in respect of the execution thereof under the several CONTRACTS. (G) Alstom Hydro France, Alstom Projects India Limited and Hindustan Construction Company Limited shall be individually referred to as Contracting Party oг collectively as Contracting Parties. (H) Brief description of the scope of the works, particulars of the Consortium partners and Contract Price of the respective Contracts is given in Annexure-III. NOW THEREFORE IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS:

ITA No.2085 & 2086/Del/2022 GE Hydro France 1.0 INTERPRETATION 1.1 In this Agreement, except where the context otherwise requires thin following expressions shall have the meaning hereafter respectively assigned to them. 1.1.1 "WORKS" under the CONTRACTS shall mean turkney execution of the project by the Consortium and shall cover the Planning, Design, Engineering, Execution of Main Civil works and infrastructural works, design manufacture and supply of Hydro Mechanical Works and electro mechanical works, and assembly, storage, erection, testing and commissioning of Hydro Mechanical works and electro mechanical works as spelt out in the contracts and shall include the deficiencies or gaps that may arise in or between the works to the executed by consortium., all permanent and temporary works to be executed, all items and things to be supplies/ done and services and activities to be performed or which may be reasonably implied there from and reasonably necessary for execution and completion of the WORKS by the Consortium pursuant to and in accordance with this agreement and the CONTRACTS. 2.0 EXECUTION OF WORKS: The WORKS shall be executed by the Consortium in accordance with this Agreement and several contracts briefly referred to in Annexure- III. 3.0 JOINT AND SEVERAL RESPONSIBILITY. 3.1 In consideration of the Employer and the Consortium agreeing to enter into several CONTRACTS for the performance of the WORKS, the Consortium hereby jointly and severally agree and covenant with the Employer that the Consortium shall jointly and severally be and remain responsible and liable to the Employer for due and faithful performance of the WORKS and, the signing of separate CONTRACTS shall not relieve all or any of them in any manner whatsoever of their joint and several responsibility and liability for the proper execution of the WORKS in a timely manner under the CONTRACT and this Agreement. For the purposes hereof any breach by any of the Consortium partner of their respective obligations under any of the CONTRACT and this Agreement shall be deemed to be a breach by the Consortium under all the CONTRACTS and this Agreement. 3.2 Not withstanding the entering into the several CONTRACTS and the provisions contained therein, the Consortium, under the leadership of ALSTOM Hydro France shall be bound by the provisions of this Agreement and each member/partner of the Consortium shall be severally and Jointly obliged: a) To execute and perform or cause to be executed and performed the CONTRACT:

ITA No.2085 & 2086/Del/2022 GE Hydro France b) To satisfy the obligations and liabilities of any and all members/ partners of the Consortium as set out in the CONTRACT and/or this Agreement; and c) To execute and perform the WORKS in accordance with the Master Program annexed as Annex-11 hereto and as may be modified by mutual Agreement between the Consortium and the Employer from time to time. 3.3 Nothing contained in this Agreement is intended by the Consortium nor shall be construed as creating a joint venture / Consortium, partnership, agency or association of persons amongst the various members / partners of the Consortium for the purpose of execution of the Project. Without prejudice to the joint and several responsibility and liability provided for in this Agreement each Consortium Partner / member and permitted Assignee of the Consortium shall be individually responsible for the performance of the work under its respective CONTRACT 85 well as for their respective loss or profit occurring there under.

ANNEXURE -3 OVERALL AGREEMENT NO. THDC/RKSH/CD-262/AG/OA

DESCRIPTION OF SEVERAL CONTRACTS Contract No. Planning, Design and Engineering of 4 X 250 MW Tehri THDC/RKSH/CD. Pumped Storage Plant 262/AG/01 Contractor M/s Hindustan Construction Company Ltd. And M/s Alstom Hydro France Contract Price EURO 5,117,289.00 and INR 30,000,000.00 plus applicable Service Tax EURO 8,482.00 and INR 35,740,936:00 Brief Scope of Work The Scope of Works under this Contract "Plaining, Design & Engineering" shall mean, but not limited to, the overall and detailed planning of the Project, all necessary additional investigations and tests, preparation of design criteria & detailed Specifications, basic and detailed design and quality control plan for the Civil, Design criteria and specifications for Electro-Mechanical Works and Hydro- Mechanical Works, Reviewing and submitting the detailed specifications, detailed designs and quality assurance plans of the manufacturers for all Electro-Mechanical Works and Hydro- Mechanical Works, Co-ordination of the design of Electro- Mechanical and Hydro- Mechanical Works with design of the Civil Works, preparation and submission of Commissioning and O&M Manuals for Civil Works, Electro-Mechanical and Hydro-Mechanical Works, preparation of progress reports and overall Project Completion Report and the studies required for these purposes.

ITA No.2085 & 2086/Del/2022 GE Hydro France The scope also includes the liaison with the Employer and the training of the Employers' Personnel as defined in the detailed scope of work and Employer's Requirement. The detailed Scope of Work under Planning, Design and Engineering shall be as per Section I of Employer's Requirement and as detailed in Appendix D-1 to Section I of Employer's Requirement and Bidding Documents.

Contract No. Civil Works of 4 x 250 MW Tehri Pumped Storage Plant THDC/RKSH/CD- 262/AG/02 Contractor M/s Hindustan Construction Company Ltd. Contract Price INR 6,61,46,91,866.00 Brief scope of Work Execution of civil works of 4X250 MW of Tehri Pumped Storage Plant which includes head race tunnels (HRT-3 and HRT-4), upstream, surge shafts, downstream surge shafts, pressure shaft, penstocks, tail race tunnels, an underground powerhouse, all more fully described in the Employer's Requirement. The detailed Scope of Works under Civil Works shall be as per section -I of Employer's Requirement and as detailed in Appendix CW-1 to Section I of Employer's Requirement and Bidding Documents.

Contract No. Supply of Electro-Mechanical plant & machinery and Hydro- THDC/RKSH/CD- Mechanical plant & machinery (Off-shore Component) of 4 x 262/AG/03 250 MW Tehri Pumped Storage Contractor M/s Alstom Hydro France Contract Price Euro 82,841,152.00 (EM Supply EURO 62,923,012.00 and HM supply EURO 19,918,140.00) Brief Scope of Work Design and Engineering of the Electro-Mechanical works and of Hydro-Mechanical Works of 4 X 250 MW Tehri Pumped Storage Plant, preparation of design criteria and technical specifications, manufacture and supply of off-shore equipments and material forming part of permanent works for Electro-Mechanical and Hydro-Mechanical Works of 4 X 250 MW Tehri Pumped Storage Plant The detailed 'scope of Work under Supply of Electro- Mechanical plant & machinery and Hydro-Mechanical plant & machinery (Off- shore Component) shall be as per Section I of Employer's Requirement and as detailed in Appendix EM-1 & HM-1. to Section -I of Employer's Requirement and Bidding Documents.

ITA No.2085 & 2086/Del/2022 GE Hydro France Contract No. Supply of Electro-Mechanical plant & machinery and Hydro- THDC/RKSH/CD- Mechanical plant & machinery (On-shore component) of 4 x 262/AG/04 250 MW Tehri Pumped Storage Plant Contractor M/s Alstom Projects India Limited Contract Price INR 5,134,863,955.00 plus applicable sales tax INR 112,367,579.00 Brief Scope of Work Design & Engineering of the on-shore equipments of Electro- Mechanical works of 4 X 250 MW Tehri Pumped Storage Plant, and Hydro-Mechanical Works of Tehri PSP and preparation of design criteria and technical specifications, manufacture and supply of on-shore equipments and material forming part of permanent works for Electro-Mechanical Plant and of Hydro- Mechanical Works of 4 X 250 MW Tehri Pumped Storage Plant. The detailed scope of Work under Supply of Electro- Mechanical plant & machinery and Hydro-Mechanical plant & machinery (On- shore Component) shall be as per Section I of Employer's Requirement and as detailed in Appendix EM-1 (EM Supply) and HM-1 (HM Supply) to Section I of Employer's Requirement and Bidding Documents.

Contract No. Transportation, Insurance, Custom clearance, Storage, THDC/RKSH/CD- Erecion, testing and commissioning of the Electro Mechanical 262/AG/05 plant & machinery and Hydro-Mechanical plant & machinery (Onshore Services) of 4 x 250 MW Tehri Pumped Storage Plant Contractor M/s Alstom Projects India Limited Contract Price Euro 798,000.00 and INR 719,408,038.00 plus applicable Service Tax Euro 82,200.00 ahd INR 74,099,034.00 Brief Scope of Work Shop assembly and testing, painting, packing and shipping to site 2 of Hydro-Mechanical equipment. Transportation, Installation, Insurance, Erection and Commissioning of all Electro-Mechanical & Hydro-Mechanical equipments of 4X 250 MW Tehri Pumped Storage Plant. Logistic services in respect off-shore Electro-Mechanical equipment (Port handling & Customs clearance, Inland transportation and handling & insurance in respect of off- shore supplies of Electro-Mechanical equipment). The detailed scope of Work under Transportation, Insurance, Custom clearance, Storage, Erection, Testing and Commissioning of the Hydro-Mechanical plant & machinery and Electro-Mechanical plant & machinery (Onshore Services) shall be as per section -1 of Employer's Requirement and as detailed in Appendix EM/HM-1 to Section -I of Employer's Requirement and Bidding Documents.

ITA No.2085 & 2086/Del/2022 GE Hydro France 9.5. Based on the Overall Agreement with THDC, it was submitted that Joint and Several responsibility of the Consortium is provided and according the ld. AO alleging that assessee bears all the responsibilities and liabilities for execution of the contracts under THDC Overall Agreement has no basis. Rather assessee is jointly and severally liable along with the other consortium members under all the Agreements. It was submitted that assessee acted as a leader of the consortium for the purposes of ensuring coordination of the inter-related tasks between the members of the consortium undertaking the project but did not assume responsibility and liability (other than to THDC) for work to be performed by the independent contractors being consortium members, responsible for undertaking onshore work under separate and independent contracts with THDC. We find that the Hon‟ble Jurisdictional High Court in the case of Linde AG, Linde Engineering Division vs DDIT reported in 365 ITR 1 (Del) had held that that the fact that contractual obligations of one of the consortium members were not limited merely supplying equipment, but were for performance of the entire contract, would not necessarily imply that entire income relatable to the contract could be deemed to accrue or arise in India; only that portion of income which is reasonably attributable to operations carried on in India would fall within the tax net in India. The Hon'ble Delhi High Court further held that since the consortium arrangement was for limited purpose of presenting a common face and complying with conditions laid down by the employee therein, with no intention to form an Association of Persons (AOP), work to be performed by both members was separate, definite and divisible, no member had any role to play with respect to scope of work allocated to other member, payments to be made for separate items of work were specified in the respective contract and consideration was to be paid directly to the concerned members in accordance with separate invoices raised by them, the members neither shared costs nor risks and also managed their own deliverables, it could not be said that the members formed an AOP for being assessed to tax as such. Thereafter, CBDT issued Circular No.7/2016 with a view to avoiding tax disputes and providing consistency in approach while handling cases where consortium is formed to implement large infrastructure projects, particularly EPC contracts and Turnkey

ITA No.2085 & 2086/Del/2022 GE Hydro France contracts, wherein certain attributes were enumerated for deciding whether a consortium arrangement would be treated as AOP or not. In view of the said Circular, Special Leave Petition (SLP) filed by the Department against the aforesaid decision in the case of Linde AG, was dismissed by the Hon‟ble Supreme Court which is reported in 242 Taxman 371 (SC). 9.6. Further we find that the Hon‟ble Supreme Court in the case of Ishikawajma- Harima Heavy Industries Ltd vs DIT reported in 288 ITR 408 (SC), it was observed that even in the case of a composite turnkey contract, the taxability of the different components has to be individually seen. The pertinent observations of the Hon‟ble Supreme Court in this regard are as under: “17.............. The fact that it has been fashioned as a turnkey contract by itself may not be of much significance. The project is a turnkey project. The contract may also be a turnkey contract, but the same by itself would not mean that even for the purpose of taxability the entire contract must be considered to be an integrated one so as to make the appellant to pay tax in India. The taxable events in execution of a contract may arise at several stages in several years. The liability of the parties may also arise at several stages. Obligations under the contract are distinct ones. Supply obligation is distinct and separate from service obligation. Price for each of the component of the contract is separate. Similarly offshore supply and offshore services have separately been dealt with. Prices in each of the segment are also different. 18. The very fact that in the contract, the supply segment and service segment have been specified in different parts of the contract is a pointer to show that the liability of the appellant thereunder would also be different. …………………. 70. We would in the aforementioned context consider the question of division of taxable income of offshore services. Parties were ad idem that there existed a distinction between onshore supply and offshore supply. The intention of the parties, thus, must be judged from different types of services, different types of prices, as also different currencies in which the prices are to be paid. ………………… 76. In construing a contract, the terms and conditions thereof are to be read as a whole. A contract must be construed keeping in view the intention of the parties. No doubt, the applicability of the tax laws would depend upon the nature of the contract, but the same should not be construed keeping in view the taxing provisions. (emphasis supplied)

ITA No.2085 & 2086/Del/2022 GE Hydro France 9.7. The ld. AO had observed that Base Erosion and Profit Shifting (BEPS) Action Plan 7 addresses and prohibits splitting up of contracts by parties for artificial avoidance of PE status, which has now been included in Article 13 - Artificial Avoidance of Permanent Establishment Status through the Specific Activity Exemptions of the Multilateral Instrument ("MLI"), and therefore, the arrangement of the assessee to split the otherwise single contract into various contracts with a view to avoid PE status is not permissible. In this regard, we find that the application of BEPS Action Plan 7 read with Article 13 Multilateral Instrument is an issue which was in the air and was in nascent stage as the OECD members had not come into consensus for the same so as to make it applicable for the years under consideration. Accordingly, the same cannot be applied for the AY under consideration.

9.8. We find that the ld. AO had made the addition towards offshore supplies by observing that there is a business connection of the assessee in India u/s 9(1)(i) of the Act. We are unable to comprehend ourselves to accept to this proposition in as much as title transfer in respect of equipment supplied by the assessee to THDC on an offshore basis happened outside India. Payments are made in foreign currency and that too are received by the assessee outside India. The law is very well settled by the decision of Hon‟ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Ltd vs DIT reported in 288 ITR 408 (SC) and Hon‟ble Jurisdictional High Court and other Hon‟ble High Courts that if the sale is concluded outside India and the property in goods is passed outside India; the payment of consideration is received outside India; no activity in relation to such offshore supply is conducted in India, then income from such offshore supplies cannot be made liable to tax in India as assessee does not constitute „Business Connection‟ in India. It is also pertinent to note that under the Contract No.3 which is in dispute before us, Offshore Supply under THDC Contract, supply of plant and equipment was to take place on "FOB" basis. At the cost of reiteration, we hold that title to and property in the goods shipped by the assessee stood transferred at the port of shipment and the event of sale

ITA No.2085 & 2086/Del/2022 GE Hydro France clearly took place outside the territory of India. In these facts, the income arising out of such sale cannot be said to have accrued or arisen in India. The accrual of income derived from offshore supplies cannot be attributed to any operation in India and therefore, no income can be deemed to accrue or arise in India.

9.9. The ld. AO had further alleged that there is a Fixed Place PE of the assessee in India. The assessee had stated that it does not have PE in India apart from the project office which is set up for rendering services in connection with the contract with NHPC project and the income earned by such Project Office is already offered to tax by the assessee in the return filed in India. We find that the ld. AO had concluded that there exists a Fixed Place PE of the assessee in India without bringing on record any evidence to demonstrate that the assessee has a fixed place available at its disposal in India which was used for purposes of undertaking core business activities of the assessee in India. It was submitted that even prima facie, the „disposal test‟ is not satisfied in the instant case i.e. the fixed place must be available to the assessee for its use without any hindrance and further that such fixed place must be used for carrying on the core business of the assessee in India. Infact we find that the ld. AO had merely reproduced the observations made in the assessment order of some other assessee with respect to PGCIL contract without appreciating the fact that the receipts were earned by the assessee herein from THDC and NHPC project during the year under consideration. There was no contract undertaken by the assessee with PGCIL and no amounts were received from PGCIL by the assessee. This clearly proves the complete non-application of mind on the part of the ld. AO. Either way, it is trite law that onus is on the revenue to establish that there exists a PE of the foreign entity in India, which has not been discharged by the revenue in the instant case. Reliance in this regard is placed on the decision of Hon‟ble Supreme Court in the case of CIT vs eFunds IT Solution reported in 399 ITR 34 (SC) ; DIT vs Samsung Heavy Industries Co Ltd reported in 117 taxmann.com 870 (SC) ; decision of Hon‟ble Jurisdictional High Court in the case of DIT vs Mitsui & Co. Ltd reported in 399 ITR 505 (Del);

ITA No.2085 & 2086/Del/2022 GE Hydro France decision of Hon‟ble Jurisdictional High Court in the case of National Petroleum Construction Co vs DCIT reported in 421 ITR 24 (Del). Hence we have no hesitation to hold that the assessee does not have a Fixed Place PE in India and accordingly no income earned by the assessee from operations and activities undertaken outside India could be brought to tax in India in terms of Article 7 of India-France DTAA.

9.10. The ld. AO had further alleged that there is a Construction PE of the assessee in India under the provisions of Article 5(2) of India –France DTAA. It was submitted that this conclusion has been reached by the ld. AO without discharging the primary onus of bringing on record any document, evidence or information based on which such conclusion has been reached by him. As stated earlier, in the instant case before us, in respect of offshore supplies made by the assessee, the title to the goods as per the contract had been transferred outside India, sales concluded outside India and no part of the profit with respect to the same could be attributed to the alleged PE in India. It was specifically submitted by the ld.AR before us that the ld. AO had stated in his order that this is a legacy issue and it is already covered in favour of the revenue by the decision of the Delhi Tribunal in GE Group company cases for Asst Year 2001-02. But it is pertinent to note that assessee herein became part of GE group only in the year 2015 which is also admitted by the ld. AO in his order. Hence all the findings of Delhi Tribunal in GE Group company cases relied upon by the ld. AO cannot be made applicable to the facts of the assessee herein. It is also relevant to understand that Contract No. 03 between THDC and assessee is in dispute before us with regard to offshore supply. Admittedly THDC is a Government of India Undertaking, which had split the contracts. Splitting of contracts is not done at the behest of the assessee. The case laws relied upon hereinabove for non-existence of Fixed Place PE in India would apply for non- existence of Construction PE also. Hence we have no hesitation to hold that the assessee does not have a Construction PE in India and accordingly no income

ITA No.2085 & 2086/Del/2022 GE Hydro France earned by the assessee from operations and activities undertaken outside India could be brought to tax in India in terms of Article 5(2) of India-France DTAA.

9.11. We hold that there cannot be attribution of Business Connection u/s 9(1)(i) of the Act, alleged PE (both Fixed Place and Construction PE) and applicability of provisions of section 44BBB of the Act in respect of receipts for offshore supplies in the instant case. We find that the ld. AO had computed the taxability of the assessee in India by applying the provisions of section 44BBB of the Act which provide that 10% of the amount paid or payable in or outside India to a foreign company or any person on its behalf, on account of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with a turnkey power project approved by the Central Government, shall be deemed to be the income chargeable to tax under the head „Profits and gains from business or profession‟. We find that since the amount under consideration pertain to offshore supply of plant and equipment, for which sale was completed outside India and title to the goods was transferred outside India without any role of the alleged PE in India, the provisions of section 44BBB of the Act per se cannot be made applicable in the instant case. We find that reliance in this regard was placed on the co-ordinate bench of Delhi Tribunal in the case of DDIT vs Mitsui & Co Ltd reported in 118 taxmann.com 379. Even otherwise, we have already held that that there is no PE of the assessee in India and hence as per Article 7 read with Protocol thereon of India UK DTAA, income earned out of offshore supplies cannot be brought to tax in India in the hands of the assessee. Here the treaty provisions are also beneficial to the assessee herein and hence on this count also, there cannot be taxability of income in respect of offshore receipts in the hands of the assessee.

9.12. Since we have already held that there is no PE of the assessee in India, the other argument advanced by the ld. AR that there would be no attribution of

ITA No.2085 & 2086/Del/2022 GE Hydro France profits in view of operational or net loss at global level, need not be gone into as adjudication of the same would become merely academic in nature.

9.13. We also find that the entire issue in dispute is already covered by the co- ordinate bench decision of this Tribunal in the case of UK Grid Solutions Ltd vs DCIT in ITA No. 2087/Del/2022 dated 12.4.23 for AY 2018-19 . The relevant operative portion of the said order is reproduced below:- “9. Ground no 3 to 8.Ld. Sr. Counsel for the assessee/ appellant contended that Ld. Tax Authorities below have erred in understanding the nature of three agreements entered between the assessee, its associate ALSTOM-I and employer PGCIL. It was submitted that Ld. Tax Authorities have fallen in error in concluding that there was an artificial splitting of the contract between the assessee and ALSTOM-I. Referring to the contracts executed between the assessee and PGCIL, made available on page no. 6 to 249 of the paper book, it was submitted that engaging an Associate was an integral part of the bid proposal and the execution of two separate contracts between PGCIL and ALSTOM-I was part of bidding documents. It was submitted that Ld. Tax Authorities below have selectively construed the recitals of the bid and contract documents. 9.1 It was submitted that tax authorities below have also fallen in error in construing the business connection in India without appreciating that the sales were concluded outside India and the property in goods under the offshore agreement had passed outside India. No payment or consideration was received within India. Specially referring to judgment in Ishika Wasma- Harima Heavy Industries Ltd. vs. DIT : [2007] 288 ITR 408 (SC) Ld. Sr. Counsel submitted that Hon‟ble Supreme Court has held in many words that when the transfer of property in goods and the payment are carried out outside India the transactions cannot be taxed in India. In this context, judgment in CIT vs. Hindustan Shipyard Ltd. 109 ITR 158 (AP) was also relied. 9.2 It was submitted that when the scope of work under the bid documents covered off-shores supply and off-shores services as distinguished from on-shore supply and construction work, Ld. Tax Authorities had fallen in error in considering the three contracts to be part of one consolidated contract. It was submitted that in case of contracts by consortium, the law is settled that when a project is executed by consortium then income of foreign entity has to be assessed on the business of income occurring to it in India. Specially referring to Board Circular dated 07.03.2016 he submitted that even the Board recognizes the fact that in case of projects executed under consortium arrangement and if each member is independently responsible for executing its part of work, then accordingly the income is taxable. In this context, he specially referred to judgment of Hon‟ble Delhi High Court in Linde AG, Linde Engineering Division vs. DDIT : [2014] 365 ITR 1 (Del) of Income Tax. 9.3 He submitted thatoverstress is laid by Ld. Tax Authorities on the fact that the primary liability of execution of contracts and damage for beach of the contracts being upon the assessee ALSTOM only, so the ALSTOM-I was merely

ITA No.2085 & 2086/Del/2022 GE Hydro France an extended arm. And thus the Ld. Tax Authorities have fallen in error in considering the associate M/s. ALSTOM-I to be Agency PE. It was submitted that there was no legal and financial dependency between the assessee and its associates. 9.4 Ld. Sr. Counsel submitted that the assessee had earned revenues from offshores supplies and no activity was performed in India for earning its revenue. He specifically stressed on fact that no employee of the assessee visited India and as such there is no branch or place of business in India. 9.4.1 As with regard to Dependent PE it was submitted the Tax Authorities have not discussed any evidence and an incorrect observation is made by Ld. AO that GE India was actively involved in soliciting business for the assessee as the assessee had procured the contract by way of open bidding. 9.5 It was submitted that the Associate was engaged in independent contracts under the bid and was independent entity. Referring to the financial statements of GE T &D India Limited, available on page no. 429 to 437 for F.Y. 2017-18 and 438-445 for F.Y. 2018-19 it was submitted that related party transactions have been disclosed and it was submitted that the Indian associates has several independent source of revenue. The income earned from the two contracts was independently offered to Tax under the Act.

9.6 As with regard to the Associate constituting a Construction PE,he submitted that the associate was independent and responsible for concluding the contracts and the role of assessee was limited to off-shore supplies. In this context he specifically contended in regard to the findings of construction PE that there was no factual evidence to support the findings. Assessee was not involved into any activity of construction project and as “supply” is not included in the activities taxable in the provisions, so Article 5(2) of the treaty was not applicable. 9.7 He also referred to Section 44BBB of the Act and submitted that as assessee was merely a supplier to PGCIL so provisions which are otherwise applicable in case of business of civil construction or the business of erection of plant or machinery or testing or commissioning thereof, in connection with the turnkey power project is not applicable and the income received against offshore supply of equipments cannot be taxed by virtue of section 44BBB. 9.8 As with regard to the submission that the agreements were not deliberately split for tax avoidance, Ld. Sr. Counsel relied Linde AG, Linde Engineering Division vs DDIT: [2014] 365 ITR 1 (Del) where the Department‟s SLP dismissed in 242 Taxman 371 (SC). He also relied DIT vs Ericsson AB: 343 ITR 470 (Del). 9.8.1 In support of the submission that there is no business connection of assessee in India, Ld. Sr. Counsel relied, CIT vs. R D Aggarwal and Co. [1965] 56 ITR 20 (SC), CIT vs Hindustan Shipyard Ltd: 109 ITR 158 (AP) and CIT vs Atlas Steel Company Ltd: 164 ITR 401 (Cal). 9.8.2 As with regard to the submission that Offshore supply are not taxable under the Act, he relied Ishikawajma-Harima Heavy Industries Ltd vs DIT: [2007] 288 ITR 408 (SC), DIT vs LG Cable Ltd: [2011] 237 CTR 438 (Del), DIT

ITA No.2085 & 2086/Del/2022 GE Hydro France vs Nokia Networks OY: 358 ITR 259 (Del) and Siemens Mobile Communications SPA vs DCIT: [2020] 182 ITD 479 (Del Trib.) 9.8.3 The non applicability of Section 44BBB qua offshore supply was supported by Ld. Sr. Counsel by relying DDIT vs Mitsui & Co Ltd: 118 taxmann.com 379 (Del Trib.), DOT vs Whessoe Oil & Gas Ltd: 87 taxmann.com 342 (Mum Trib.) and Atomstroy Export vs DCIT: ITA No.6945/Mum/2017 (Mum Trib.) 9.8.4 He supported his contentions with regard to law on Dependent Agent Permanent Establishment (“PE”) under the India-UK DTAA he referred to the Copy of India-UK DTAA and section 182 of Indian Contract Act, 1872. He also cited judgments in National Petroleum Construction Company vs DIT: 383 ITR 648 (Del), Western Union Financial Services Incvs ADIT: 101 TTJ 56 (Del Trib.),Mitsui & Co Ltd vs ACIT: ITA No.4764/Del/2016 (Del Trib.), ITO vs International Reinsurance and Insurance Consultancy & Broking Services (P) Ltd: 142 taxmann.com 509 (Mum Trib.), DCIT vs Adobe Systems Software Ireland Ltd: ITA Nos.l978/Del/2019 &Ors. dated 27.07.2022 (Del Trib.), Net App BV vs DDIT: [2017] 78 taxmann.com 97 (Del Trib.), TVM Ltd vs CIT: 237 ITR 230 (AAR) and KronesAktiengesellschaftvs CIT: ITA No.907/Del/2017 dated 30.12.2022 (Del Trib.) 9.8.5 The Ld. Sr. Counsel stressed that the onus is on Department to prove existence of PE and for that he relied CIT vs eFunds IT Solution: 399 ITR 34 (SC), DIT vs Samsung Heavy Industries Co Ltd: 426 ITR 1 (SC), DIT vs Mitsui & Co Ltd: 399 ITR 505 (Del) and AB SciexPte Ltd vs ACIT: 195 ITD 384 (Del Trib.) 9.8.6 As with regard to principles of attribution to business connection/ PE he relied DIT vs Morgan Stanley & Co Inc: 292 ITR 416 (SC), DIT vs Morgan Stanley & Co Inc: 292 ITR 416 (SC), The Anglo French Textile Co Ltd vs CIT: 25 ITR 27 (SC), Annamalais Timber Trust and Co vs CIT: 41 ITR 781 (Mad), CIT vsBertrams Scotts Ltd: 31 Taxman 444 (Cal), CIT vs Hyundai Heavy Industries Co Ltd: 291 ITR 482 (SC), Samsung Heavy Industries Co Ltd vs DIT: 265 CTR 109 (Uttarakhand), Affirmed by the Supreme Court in 426 ITR 1(SC), DCIT vs Roxon OY: 106 ITD 489 (Mum Trib.) 10. Ld. DR however, supported the findings of Ld. Tax Authorities below and submitted that it was not a case of consortium but one consolidated bid was fragmented. It was submitted that the PGCIL had invited bid and assessee was the contractor and the Associate, Indian entity was given authority to execute the local work while the responsibility continued to stay with the assessee. He referred to various clauses of agreement trying to show that when over all responsibility was of assessee, then PE has to be presumed. 11. Now, giving thoughtful consideration to the matter on record and the submissions, at the outset, the Bench feels relevant to observe that in the assessment order the Ld. AO has discussed more about the various provisions and principles of law governing the taxability in case of income which is deemed to accrue or arises in India for the purpose of Section 9 of the Act and how there has to be attribution to profit to the PE, without discussing the evidence in the case in hand, to give conclusive findings as to how the Indian associate of the assessee happens to be an agent or construction PE. His primary and ultimate reliance was on the fact that there was single composite contract which was divided into three contracts and that in two contracts, which were to be Page | 21

ITA No.2085 & 2086/Del/2022 GE Hydro France performed by the Indian entity, the ultimate liability for non-performance or compensation being on assesse, therefore, the Indian entity was a PE and the provisions of profit attribution were applicable. 12 At the same time the Ld. DRP bettered it little while discussing quite more of the recitals of the agreements and contracts but reached same finding that as there was no separate bid for each contract and that in case of any default in second or third contract, it was to be construed to be default of the assessee and result into right of termination and recovery of damages from the assessee by PGCIL, accordingly it too concluded that Associate as PE was involved throughout the contract period. DRP observed that the off-shore supply of equipments by the assessee would have been rendered meaningless in the absence of service of supervision, erection, commissioning etc. all of which was an integral and indivisible part of the contract. 13. So the key question is if this was independent contract as claimed by assessee or there was artificial spilt of one contract to the benefit of assessee, into three contracts leading to evasion of tax. The first and a very important concept that has to kept in mind is that the controversy regarding taxability event, in case of complex arrangement of contacts, may arise at several stages and with different tax incidences. The adjudication of an issue should be on basis of wholesome reading of the contract and context of terms. In regard to this principle of law the Hon‟ble Supreme Court in Ishikawajma-Harima Heavy Industries Ltd. (supra) has observed in para no. 60 as follows :- “In construing a contract, the terms and conditions there of are to be read as a whole. A contract must be construed keeping in view the intention of the parties. No doubt, the applicability of the tax laws would depend upon the nature of the contract, but the same should not be construed keeping in view the taxing provisions." 14. Thus, it will be relevant to reproduce some major clauses of agreements and contracts entered between the PGCIL and the assesse, unlike selectively done by the Revenue Authorities below. The Off-shore contract agreement along with 11 Appendices dated 17.08.2012 is available at page no. 6 to 43 of the paper book and is the basic document and the relevant clauses of same starting from page 9, are reproduced as below :- “WHEREAS the Employer is desirous of setting up ±800kV, 3000 MW HVDC Terminal ' Package associated with Western / Northern Region Interconnector for IPP Projects in Chhattisgarh under ”National Grid improvement Project" and had invited bids for complete project- management, design, engineering, manufacture, testing, supply, port handling and customs clearance for the Plant and Equipment including mandatory Spares to be supplied from abroad, further handling, inland transportation and delivery at destination Site, unloading, storage, - handling at site, erection/installation including associated civil works, employer staff training, testing and commissioning including performance testing of Plant and Equipment including mandatory Spares and any other services as required for complete execution of the package. WHEREAS M/s. ALSTOM Grid 'UK Limited participated in the above referred bidding vide its First Stage bid proposal reference rro.T0193 dated 26.11.2011, updated Technical Bid, Compliance to Amendment Page | 22

ITA No.2085 & 2086/Del/2022 GE Hydro France No.-I and Clarification to the provisions of the Bidding Documents pursuant to First Stage Bid Evaluation. submitted vide communication reference CC- CS/156-WR1/HVDC-1489/7/G10 dated 12.03.2012 and Second Stage Bid vide ref. No. T0193 dated 21st March 2012 read alongwith discount letter ref no. T- 0193/01 dated 22.03.2012. WHEREAS, as per the provisions of the Bidding Documents (Part I) and confirmations as per the documents referred in Notification of Award mentioned under Article 1.1 below, the construction of contracts shall be as follows: First Contract‟ for CIF Indian Port of Entry supply of Plant and Equipment including mandatory Spares from outside India, Type Test and Training to be conducted outside India (also referred to as Off-Shore Contract), „Second Contract‟ for Ex-works supply of Plant and Equipment including mandatory Spares from within India and Type Test to be conducted within India (also referred to as On¬Shore Supply Contract), and Third Contract‟ for all services to be performed in India covering, inter alia, port handling, port clearance, inland transportation, insurance, delivery at site, handling, storage, erection including associated civil works, testing and commissioning of all equipment and materials, including the equipment supplied under the First Contract end the Second Contract, Training in India etc. (also referred to as On-Shore Services Contract). WHEREAS M/s. ALSTOM Grid UK Limited in their Bid, had proposed M/s. ALSOM T&D India Limited having its Registered Office at A-18, First Floor, Okhla Noida-201301, U.P. Area, Phase-ll, New Delhi-110020 and business address as A-7, Sector-65, : ca-201301, (hereinafter referred to as “ALSTOM-l” as their Associate for the purpose of executing the On- Shore Supply Contract and On-Shore Services Contract) and furnished “ALSTOM-l” written unequivocal consent vide their letter dated 26.11.2011 (enclosed in their First Stage bid) to work as Employer‟s independent Contractor, on the terms and conditions as laid down in the Bidding Documents. WHEREAS the associate proposed by ALSTOM has been accepted by the Employer, as above, subject to the condition that ALSTOM shall be overall responsible and liable for the execution of all the three Contracts irrespective of the fact that the Employer will enter into the „First Contract‟ with them and the „Second Contract‟ and the Third Contract‟ with ALSTOM- I. Further, in the Contract Documents, for „First Contract‟ the word „Contractor‟ shall mean ALSTOM, who had submitted the bid and shall, for the purpose of 'Second Contract‟ and „Third Contract‟, include' ALSTOM-I - the Permitted Associate of ALSTOM. Accordingly, without prejudice to the overall responsibility and the liability of ALSTOM for the execution of all the three Contracts, the word „Contractor‟ wherever appearing in the „Second Contract'and the Third Contract‟shall also mean ALSTOM-I. WHEREAS the Employer desires to engage the Contractor for the CIF Indian Port of Entry supply of all Plant and Equipment including Page | 23

ITA No.2085 & 2086/Del/2022 GE Hydro France mandatory Spares inter-alia including Design, engineering, manufacture, testing at manufacturer‟s works and CIF supply of all off-shore equipment and materials from country(ies) outside India including Type Testing and training to be conducted outside India for the complete execution of the ±800kV, 3000 MW HVDC Terminal Package associated with Western / Northern Region. Interconnector for IPP Projects in Chhattisgarh under “National Grid Improvement Project” as detailed in the Contract Documents (“the Facilities”), and the Contractor has agreed to such engagement upon and subject to the terms and conditions hereinafter appearing. Article 6. ALSTOM having proposed ALSTOM-I as its Associate for the purpose of executing the On-Shore Supply Contract and On¬Shore Services Contract and furnished ALSTOM-I‟s written unequivocal consent to work as the Employer‟s independent Contractor, on the terms and conditions as laid down in the Bidding Documents and, in accordance with the confirmations as per the documents referred in Notification of Award mentioned under Article ”1.1 above, Contract Agreement Nos. CC- CS/156-WR1/HVDC-1489/7/G10/CA-II/4336 and CC- CS/156-WR1 /HVDC-1489/7/G10/CA-l11/4337 between the Employer and the Contractor‟s Associate - ALSTOM-I has also been made on 17.08.2012, respectively for the On-Shore Supply Contract (also referred to as the „Second Contract‟) and On-Shore Services Contract (also referred to as the Third Contract‟). The scope of ‘Second Contract’ includes Design, engineering, manufacture, testing at manufacturer‟s works and Ex-works supply of all the equipment and materials including mandatory spares from within India and Type Testing, as detailed in the Contract Documents of said contract, required for the complete execution of ±800kV, 3000 MW HVDC Terminal Package associated with Western / Northern Region Interconnector for IPP Projects in Chhattisgarh under “National Grid Improvement Project”. The scope of „Third Contract‟ includes all services to be performed covering, inter alia, port handling, port clearance, inland transportation, insurance, delivery at site, handling, storage, erection including associated civil works, testing and commissioning of all the Plant and Equipment including mandatory Spares supplied under the Off- Shore Contract and On-Shore Supply Contract, Training in India etc. and any other services specified in the Contract Documents of said contract, for complete execution of ±800kV, 3000 MW HVDC Terminal Package associated with Western / Northern Region Interconnector for IPP Projects in Chhattisgarh under “National Grid Improvement Project”. Notwithstanding the award of work under three separate Contracts in the aforesaid manner, ALSTOM shall be overall responsible to ensure the execution of all the three Contracts to achieve successful completion and operational acceptance / taking over of the facilities by the Employer as per the requirements stipulated in the respective Contract Documents. It is expressly understood and agreed by ALSTOM that any default or breach by its Associate, ALSTOM-l under the „Second Contract‟ and/or Third Contract‟ shall automatically be deemed as a default or breach of

ITA No.2085 & 2086/Del/2022 GE Hydro France this „First Contract‟ also and vice-versa, and any such default or breach or occurrence giving the Employer a right to terminate the „Second Contract‟ and/or Third Contract‟, either in full or in part, and/or recover damages under those contract(s), shall give the Employer an absolute right to terminate this Contract, at ALSTOM risk, cost and responsibility, either in full or in part and/or recover damages under this „First Contract‟ as well. However, such default or breach or occurrence in the „Second Contract‟ and/or „Third Contract‟, shall not automatically relieve ALSTOM of any of its obligations under this „First Contract‟. It is also expressly understood and agreed by ALSTOM that the Plant and Equipment including mandatory Spares supplied by ALSTOM under this „First Contract‟ and by its associate, ALSTOM-I under the „Second Contract‟, when erected and commissioned by its associate, ALSTOM-I under the „Third Contract‟ shall give satisfactory performance in accordance with the provisions of the Contract”. 14.1 Further, from the notification of award of off-shore contract dated 21.06.2012 and the relevant minutes dated 28.10.2011, page 125-127 of PB, relevant clauses are reproduced as below :- “1.3 Your First Stage Bid submitted for the subject package under Proposal reference no. T0193 dated 26.11.2011; which was opened on 28th November, 2011. In your bid, you have confirmed that M/s. ALSTON T&D India (ALSTOM INDIA) (earlier known as M/s. AREVA T&D India Limited) shall be your Associate for the purpose of executing the On- Shore Supply Contract and On-Shore Services Contract (refer para 2.2 below) and furnished ALSTOM INDIA‟S written unequivocal consent vide their letter dated 26.11.2011. ……………………… 12.1 We confirm having accepted your Bid referred to at para 1.3, 1.7 & 1.8 above) read in conjunction with all the specifications, terms & conditions of the Bidding Documents (referred to at para 1.2, 1.2.1, 1.2.2, 1.2.3 & 1.6 above) and your confirmations as per the documents referred above, and award on you the „Off-Shore Contract‟ (also referred to as the „First Contract‟) covering inter-alia supply on CIF Indian Port of Entry of all equipment and materials, mandatory spares including Type Testing to be conducted outside India, Training to be imparted abroad for the complete execution of the ±800kV, 3000 MW HVDC Terminal Package associated with Western / Northern Region Interconnector for IPP Projects in Chhattisgarh under “National Grid Improvement Project”, as detailed in the Bidding Documents referred hereinabove. The scope of work inter-alia includes the following: Design, engineering, manufacture, testing at manufacturer‟s works and CIF supply of all off-shore equipment and materials from country(ies) outside India including Type Testing and training to be conducted outside India. The scope of work under this Notification of Award (NOA) shall also include all such items which are not specifically mentioned in the Bidding Documents and/or your bid but are necessary for the successful completion of your scope under the Contract for the construction of ±800kV, 3000 MW HVDC Terminal Package associated with Western /

ITA No.2085 & 2086/Del/2022 GE Hydro France Northern Region Interconnector for IPP Projects in Chhattisgarh under “National Grid Improvement Project”, unless otherwise specifically excluded in the Bidding Documents or in this NOA. 2.2 As per the Record Notes of Clarification Meetings (referred to in para 1.5 above) and the acceptance of proposed Associate confirmed vide our communication dated 01.03.2012 (referred to in para 1.6 above), we have notified your Associate M/s. ALSTOM T&D India Limited vide our Notification of Award Ref. No. CC-CS/156- WR1/HVDC- 1489/7/G10/NOA-II/4336 dated 21.06.2012 for award of 'On¬Shore Supply Contract‟ (also referred to as the „Second Contract‟) for the subject package which includes the Ex¬works supply of all equipment/materials including Type Testing to be conducted within India, required, for the complete execution of ±800kV, 3000 MW HVDC Terminal Package associated with Western / Northern Region Interconnector for IPP Projects in Chhattisgarh under ”National Grid Improvement Project”, 'as set forth in the Bidding Documents., viz. Design, engineering, manufacture,, testing at manufacturer‟s works and Ex-works supply of all the equipment and materials including mandatory spares and Type Testing from within India. We have also notified your Associate M/s. ALSTOM T&D India Limited vide. our Notification of Award Ref. No. CC-CS/156-WR1/HVDC- 1489/7/G10/NOA-lIl/4337 dated 21.06.2012 for award of „On¬Shore Services Contract‟ (also referred to as the Third Contract‟) for performance of all other activities, as set forth in the Bidding Documents, viz. port handling, port clearance, inland transportation, insurance, delivery at site, handling, storage, erection including associated civil works, testing and commissioning of all equipment and materials, including the equipment supplied under the First Contract and the Second Contract, Training in India etc. required for the complete execution of +800kV, 3000 MW HVDC Terminal Package associated with Western / Northern Region Interconnector for IPP Projects in Chhattisgarh under “National Grid Improvement Project” Notwithstanding the award of work under three separate Contracts in the aforesaid manner, you shall be overall responsible to ensure the execution of all the three Contracts to achieve successful completion and taking over of the works under the package by the Employer as per the requirements stipulated in the Bidding Documents. It is expressly understood and agreed by you that any default or breach by your Associate , M/s. ALSTOM T&D India Limited under the „Second Contract‟ and/or the Third Contract‟ shall automatically be deemed as a default or breach of this „First Contract‟ also and vice-versa, and any such default or breach or occurrence „ giving us a right to terminate the 'Second Contract‟ and/or 'Third Contract‟, either in full or in part, and/or recover damages under those contract(s), shall give us an absolute right to terminate this Contract, at your risk, cost and responsibility, either in full or in part and/or recover damages under this „First Contract‟ as well. However, such default or breach or occurrence in the „Second Contract‟ and/or Third Contract‟, shall not automatically relieve you of any of your obligations under this ‟First Contract. It is also expressly understood and agreed by you that the equipment/materials supplied by you under this 'First Contract‟ and by your Associate M/s. ALSTOM T&D India Limited under the „Second Contract‟, when erected, installed & commissioned by Page | 26

ITA No.2085 & 2086/Del/2022 GE Hydro France your Associate M/s, ALSTOM T&D India Limited under the Third Contract‟ shall give satisfactory performance in accordance with the provisions of the Contract. ” 15. When these minutes dated 28.10.2011 are considered, the clause 1.3 makes it apparent that in the bid itself ALSTOM-I was proposed and confirmed as an Associate for the purpose of executing the on-shore supply and service contracts. So having an Indian Associate was an integral part of the Bid and not introduced at the discretion of the assessee. Reference in this context can be made to the bid document of September, 2011 containing special conditions of contract available at page no. 231 of the paper book which required that success full bidder shall be under an obligation for entering into the three contracts. The first for off-shore contract and second & third for on-shore supply contract. 16. Next in the notification of the award, the „scope of contract‟ of the off shore contract, given to the assessee was limited to, “Design, engineering, manufacture, testing at manufacturer‟s works and CIF supply of all off-shore equipment and materials from country(ies) outside India including Type Testing and training to be conducted outside India. As distinguished with Scope of contract, meant for Second and Third Contracts. Thus there was not one scope of contract under which the assesse and Indian Associate were working together. 17. In aforesaid context only, this notification of award letter dated 26.06.2012 in clause 2.2 mentions that as ALSTOM-I was „awarded‟ contract 2 and 3 for which „separate notification‟ of award on-shore supply contract and on- shore service contract was made on 21.06.2012. Thereupon the off¬shore contract was executed on 17.08.2012 where it was specifically mentioned that ALSTOM-I was made part of the contract as the part of proposal at the bid stage itself. This of-shore contract specifically mentions that ALSTOM-I shall be „independent contractor‟ of PGCIL on the terms and conditions as laid down in the bidding document. Article 6 of this document dated 17.08.2012 specifically makes reference to ALSTOM-I‟s „written unequivocal consent to work as the independent contractor of PGCIL‟ and that separate contracts have been entered between PGCIL and Indian Associate of the assesse, ALSTOM- I, on the same date 17.08.2012 for the second and third contract. 18. The aforesaid discussion of the relevant clauses leave no doubt in the mind of this Bench that at the stage of bid itself ALSTOM-I had joined the assessee in terms of the requirement of the bid. These clauses and stipulations go on to establish that there was a collaborative effort of the assessee and the Indian associate and as such there was not actually a consortium to which one contract was awarded with bifurcation at level of the members of Consortium. The award of separate off shore contract by the PGCIL to assessee and on shore contracts to the permitted associate ALSTOM-I, which was classified as independent contractor of employer, coupled with the execution of separate contracts with defined scope of work of each contract, required each party to perform its obligation under the respective contracts awarded to them separately and to receive the consideration under the contracts independent to each other. The terms negotiated and document executed firmly establish that there was no mix up in the role and identity.

ITA No.2085 & 2086/Del/2022 GE Hydro France 19. The Ld. Tax Authorities below have actually fallen in error in construing the aforesaid discussed clauses because what appears to be a narrow and not a pragmatic approach. As observed above, they were selective in considering the bid and contract documents clauses and failed to take note of it as a whole and to understand the business prudence of such Bidding involving International entities, while dealing with Indian entities, for such infrastructural contracts. The Ld. AO has merely focused on the fact of three contracts, alleging that a single composite contract awarded on turnkey basis was split artificially into three sub- contracts by the assessee. The matter of fact happens to be it was a condition in bid and there was nothing on the part of assessee to do the splitting of a composite contract. 20. Then the Ld. DRP has fallen in error in making certain factual errors in observations. As for instance in para no. 5 of its order Ld. DRP mentions that there are only two signatories to all the three contracts namely PGCIL (the Employer) and the assessee company (the Contractor). The above discussion has established there were three different award of contract and three different contracts were signed and executed. Only the „first contract‟ was executed and signed between the assessee and PGCIL. 20.1 Further in para 5, the Ld. DRP has taken into account „Part D‟ of a document relating to “commercial issues”, and mentioned that it provided that “if ALSTOM-I fails to enter into the second contract and the third contract, the said contracts shall be entered into between ALSTOM and Power Grid in lines with the provisions of the bid document”. Now as a matter of fact this clause is part of Appendices 10, to the off-shore agreement which contains „specific agreements‟ made during meetings held from 03.07.2012 to 05.07.2012 between the PGCIL and M/s. ALSTOM, along with its associate ALSTOM-I. This agreement was on the part of ALSTOM to execute second and third contract, merely as an assurance that at advance stage after the bid is accepted and before the contract is actually executed the bid is not frustrated. In any case when the three contract stand executed on 17.08.2012, the issues discussed in the meeting between 03.07.2012 and 05.07.2012 became superfluous but Ld. DRP has unnecessarily stressed upon the same to draw a conclusion that primary commitment in all the three contracts was of the assessee. 20.2 Further in para 5.2, the Ld. DRP has reproduced para 3.2 of the notification of award dated 21.06.2012 without understanding the context in which the same was made. As for the convenience para 5.2 of the order of DRP is reproduced as below :- “5.2 It has also been clarified at para 3.2 therein that- “3.2 Notwithstanding the break-up of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract. ” As a matter of fact that this para 3.2 is part of clause 3.0 in notification of award, which makes reference to contract price and it will be beneficial to reproduce the whole of it, from the notification of award dated 21.06.2012, available at page no. 127 of paper book as under :- “3.0 Contract Price Page | 28

ITA No.2085 & 2086/Del/2022 GE Hydro France 3.1 The total Contract Price for the entire scope of work under this Contract shall be GBP 107,590,567 + EURO 68,835,118+USD 13,559,144 (Great Britain Pound One Hundred Seven Million Five Hundred Ninety Thousand Five Hundred Sixty Seven Plus Euro Sixty Eight Million Eight Hundred Thirty Five Thousand One Hundred Eighteen Plus USD Thirteen mijlion Five Hundred Fifty Nine Thousand One Hundred ' Forty Four Only) as per the following break-up : Sl. Price Component Amount No. CIF Price 1. GBP 107,590,567 Component EURO 68,835,118 USD 13,559,144 2. Type Test Charges Included 3. Training Charges Included Total for Off-Shore GBP 107,590,567 Contract EURO 68,835,118 USD 13,559,144

3.2 Notwithstanding the break-up of the Contract Price, the Contract shall, at all times, be construed as a single source responsibility Contract and any breach in any part of the Contract shall be treated as a breach of the entire Contract. 20.3 Ld. DRP has fallen in error in considering that the reference here to “single source of responsibility” is with regard to three contracts but the matter of fact is that it was only in context to the contract price for the off-shore contract. The off shore contract had three components; first being „CIF price component‟ for which the contract price was disclosed and further the assessee was supposed to provide „type test‟ and „training‟but the charges for same were included in the contract price for „CIF price component‟ and in reference to that it was agreed that any breach in any part of the contract shall be treated as a breach of the entire contract. Here the entire contract has reference to the offshore contract and not all the three contracts. 20.4 Further, Ld. DRP has fallen in error in considering the „scope of work‟ mentioned in the bid to be the contract which has been awarded by PGCIL to assessee while as discussed above, the notification of award of the off-shore contract dated 21.06.2012 gave the limited scope of work in off-shore contract and there is a separate delineation of scope of the word for second and third contract awarded to ASTOM-I. Thus Ld. DRP has fallen in error to conclude there is no separate delineation of work. 21. Lastly, the major focus of tax authorities below and Ld. DR has also been on the fact that under the bid and the three contracts the ultimate responsibility of execution and liability in case of breach remained with the assessee. In this context, the Bench is of considered opinion that the business prudence involving such major infrastructure projects cannot be examined and questioned by the revenue authorities attributing bare motives and to assume that the different contracts under one bid are with only intention to escape taxation. Such arrangements are more out of business prudence and usually for the safeguard of the rights of Indian entity, like PGCIL, which negotiates and gets executed such infrastructural facility contracts. The intention being successful

ITA No.2085 & 2086/Del/2022 GE Hydro France commissioning of the project and that it is not abandoned or frustrated due to involvement of many parties, each performing some part, by shouldering any delay or latches, on other unrelated party. 21.1 In this context, reliance can be placed on the judgment of Hon‟ble Delhi High Court in Linde AG, Linde Engineering Division (supra) wherein dealing with the reasons for having such clauses to make parties to a consortium being joint and safely liable under a contract, Hon‟ble High Court observed in para 53 and 55 as follows : “53. We are also unable to accept the contention that the fact that Samsung and Linde had agreed to be jointly and severally liable for performance of the contract, would be sufficient to hold that they constituted an Association of Persons for the purposes of the Act. Linde and Samsung agreeing to be jointly and severally liable to OPAL for due performance of the Contract only indicates that Linde and Samsung had accepted a contractual obligation towards a third party, the same does not by itself lead to a conclusion that the said members had formed an Association of Persons. Any entity/individual may agree, for its own business purposes, to accept a liability for due performance of an obligation of another. This by itself would not lead to a conclusion that the said persons had formed a common enterprise or an association which was moved by joint action for a common purpose. As a matter of illustration, let us take a case where a director of a company provides a personal guarantee for a loan taken by the company. Having stood as a surety for the company, the director and the company would be jointly and severally liable to the lender. However, they continue to be independent of each other and the fact that are jointly and severally liable cannot possibly lead to the conclusion that the company and its director constitute an Association of Persons for the purposes of the Act. In order for independent entities/individuals to be considered as an Association of Persons, they must exhibit some trappings of a partnership in relation to their common enterprise. ” “55. In every project which is executed by multiple independent agencies, a certain level of cooperation and coordination is required to ensure that the agency involved performs its work in a timely manner as per a predetermined schedule in order to enable the other agency to commence and complete its portion of work. The level of cooperation as agreed between Linde and Samsung was also akin to the level of cooperation as expected from independent agencies executing a project. This can be understood by taking an illustration of a simple project for construction of a building. It is only after an Architect or a Designer provides the detailed drawings that a civil contractor can commence construction. Similarly, it is only after the civil construction is commenced and progressed to a certain level that space for electrical contractors is available for them to perform their work. The work of Interior finishing can take place only after the civil works are complete. The fact that each of the aforesaid agencies, namely, the architect, the civil and electrical contractors are required to complete their work in a pre¬determined sequence and are required to cooperate with each other in providing the necessary information and adhering to a specified schedule would not necessarily imply that the architect, civil contractors and electrical Page | 30

ITA No.2085 & 2086/Del/2022 GE Hydro France contractors had formed an Association of Persons. In this illustration each one of the participants works towards a common project with a certain level of cooperation. However, since the said participants do not act as a single cohesive entity, but perform their independent allocated works, they cannot be considered as an Association of Persons. In order to consider independent agencies as an Association of Persons, it is necessary that they form a joint enterprise with a greater level of common management. An element of mutual agency and joint action for mutual purpose is also necessary. Mere obligation to exchange information, between independent agencies, for co-ordinating their independent tasks would not result in an inference that the agencies had constituted an Association of Persons. ” 22. Hon‟ble Delhi High Court in the Linde AG Case (supra) has also referred to case of Hyundai Rotem Co., in re [2010] 323 ITR 277/190 taxman 314 (AAR) which was also referred by the assesse before Ld. Tax Authorities below and where the facts were that Hyosung Corporation submitted a bid for execution of the works relating to 800 KV/400KV Tehri Pooling Station which was floated by Power Grid Corporation of India Limited (Power Grid). The applicant was successful and its bid was accepted. As per the terms and conditions of the bid, the applicant could assign the whole or part of the work to an independent contractor subject to the approval of Power grid. In terms of this provision, the applicant requested that part of the contract relating to onshore supply and services be assigned to M/s L & T. Accordingly, Power Grid entered into a separate contract for onshore supplies and services with M/s L & T. Although, Hyosung continued to be responsible for the overall execution of the project, the scope of work of Hyosung was limited to the offshore portion of the contract. The facts of this case are quite identical; with PGCL being a common party and Ld. AAR in this matter vide application AAR no. 773 of 2008 order dated 17/6/2009, after taking into consideration the overall responsibility stipulations for the successful completion of the three contracts rested with the applicant Hyosung in line with the proposal in the bidding document, observed in para 7.4 that; “By incorporating various safeguards in the contract, Power Grid took the necessary precautions to see that notwithstanding the split up of contract into three, the applicant and L&T would act in harmony and maintain requisite coordination for the timely and successful completion of project. Such a role assigned to the applicant by Power Grid was in the overall interest of the project. It is an arrangement conceived of and agreed to by the parties keeping in view the overall objective of successful commissioning of the project. ” 23. Thus, the bench is of considered opinion that the Ld. Tax Authorities below have fallen in error in concluding that there was an artificial split of a contract and that there was one inseparable, indivisible and composite contract. 24. On the basis of aforesaid discussion the question of assessee having a permanent establishment (PE) can be examined. Ld. AO has not given any substantial reason on the basis of evidence while what weighted heavily in the mind of Ld. DRP was that the supply of equipment on the basis of off-shore contract would have been rendered meaningless in the absence of services of

ITA No.2085 & 2086/Del/2022 GE Hydro France supervision, erection commissioning etc. all of which was an indivisible part of the contract. 25. The Bench is of considered opinion that when the allegation of the Revenue about an artificial split of contract is not sustained and it is established that the assessee has entered into the „First Contract‟, in its independent capacity, there is no force in the finding of Ld. AO that GE India ( Alostom-I) was actively involved in soliciting business for the assessee. In fact, there is substance in the contention of Ld. Sr. Counsel that in the bidding structure of present nature there is no question of someone „soliciting‟ the business, as it was a case of open bid to which Indian and Foreign entities, both, were eligible to make the offer of bid. 25.1 There is no question of any agent and principle relationship between the assessee and the Indian associate for a very substantial reason that PGCIL has treated in its contract documents, ALSTOM-I to be its „Independent Contractor‟. There is substance in the argument of Ld. Sr. Counsel on the basis of judgment of Hon‟ble Supreme Court in CIT vs. E-funds IT solutions (supra) that the onus was on the department to prove the existence of PE. The Bench is of considered opinion that such an onus can be considered discharged by specific reference to the evidence. No evidence is brought on record to show that the Indian Associate was employed by any „act‟ of the assessee to represent the assessee independently while dealing with PGCIL. On the contrary what is established is that it was the assessee at whose proposal, ALSTOM-I was accepted to be an Associate of the assessee and the employer PGCIL treated ALSTOM-I as its „independent contractor‟ on the terms and conditions, as laid down in the bidding document. If there was any involvement of the employees of Indian Associate, at any stage in the meetings between assessee and the PGCIL that was bound to be there and outcome of the fact that assessee and its Indian associate were required to work in tandem and that does not give rise to existence of a dependent agent P E of the assessee. 26. As with regard to the question of Indian Associate being a Construction PE again there is force the contention of Ld. Sr. Counsel that the findings of Ld. Tax Authorities below are not on the basis of any facts and evidence. The case of assessee as submitted and established is that under „First contract‟ it was merely liable to make offshore supplies. Thus, assessee was not engaged in any construction project in India. Its revenues were outcome of the offshores supplies and services rendered off shore. Thus, there was no question of constitution of the Construction PE as per Article 5(2) of the DTAA. 27. As for the applicability of Section 44BBB of the Act, is concerned, it can be observed that the foundation of it was existence of a PE. The assessee under the „First contract‟ was merely under obligation to make off shore supplies and wherein property in the goods transferred outside Indian, therefore as Section 44BBB does not speak of engagement of a foreign company for „supply‟ in connection with the turnkey Power Project, the provisions of Section 44BBB are not applicable. Thus Ld. DRP has fallen in error in sustaining application of Section 44BBB of the Act, on premises that the assessee is involved in the end to end execution of the project in India. The revenue derived by the assessee were on the basis of offshore supplies and not out of any construction, erection, testing or commissioning activities of a turnkey power project in India. Thus, the

ITA No.2085 & 2086/Del/2022 GE Hydro France application of section 44BBB to such revenue, which is not per se taxable India, is not sustainable. 28. It also appears that the Revenue is not disputing the fact that under the „First Contract‟ assessee was only supposed to make off shore supplies. Otherwise too it is appearing from the recitals of „First Contract‟ that the procurement by PGCIL, was on the basis of, “CIF Indian Port of Entry supply”. The title in property had passed out side India. The payments were also made outside India in terms of this contract. The settled proposition of law in this regard, rightly relied by Ld. Sr Counsel for assessee, is sustainable and the relevant conclusion in para 79, from the judgment of Hon‟ble Supreme court in the case of Ishikawajma-Harima Heavy Industries Ltd. (supra)is reproduced below; “Re : Offshore Supply : (1) That only such part of the income, as is attributable to the operations carried out in India can be taxed in India. (2) Since all parts of the transaction in question, i.e. the transfer of property in goods as well as the payment, were carried on outside the Indian soil, the transaction could not have been taxed in India. (3) The principle of apportionment, wherein the territorial jurisdiction of a particular state determines its capacity to tax an event, has to be followed. ” 29. Thus, the Bench is inclined to conclude that there was not an artificial split of bid into three separate contracts to avoid taxes in India.In the present case, the Indian Associate‟s non- involvement in off-shore transaction excludes it from being a part of the cause of the income itself, and thus there is no business connection. The Ld. Tax authorities below failed to appreciate the distinction between the existence of a business connection and the income accruing or arising out of such business connection, which is clear and explicit. It is established that assessee had no business connection or dependent agent PE or construction PE in India. The attribution of profit from off-shores supplies made to PGCIL to the alleged business connection or PE and application of Section 44BBB is not sustainable. The ld. Tax Authorities below have fallen in error to hold that off-shores supplies to PGCIL are taxable in India. The assessee was merely under liability for making off-shores supplies to PGCIL under the „First contract‟ for which the revenue earned is not taxable in India. Consequently, ground no. 3 to 8 are decided in favour of the assessee.”

ITA No.2085 & 2086/Del/2022 GE Hydro France that the addition made by the ld. AO by bringing to tax receipts from offshore supply is hereby directed to be deleted. Accordingly, the Ground Nos. 3 to 9 raised by the assessee are allowed. 11. The ground No. 12 raised by the assessee is challenging the disallowance of deduction of claim on account of write off of duty draw back. 11.1 We have heard the rival submissions and perused the material available on record. During AY 2018-19, the assessee had an ongoing contract with NHPC for which it had opened a Project Office in India. In the assessee‟s opinion, the said project was eligible for Deemed Export benefits under the Foreign Trade Policy 2004-09 and Foreign Trade Policy 2009-14 (hereinafter together referred to as "FTP"). In view of the benefits available under the FTP, the assessee opted to claim drawback of the excise duty levied on the supplies made by the assessee to NHPC under the Chamera Project. Accordingly, the assessee filed an application with the Joint Director General of Foreign Trade ("JDGFT") for claiming refund of the said excise duty. The assessee was of the view that the excise duty deposited by it from its own pocket was eligible for refund, hence, the same was not recognized in the books of accounts as an expense. Instead, the same was recorded as Advance Recoverable (i.e., current asset) in the books of account of the respective years in which excise duty was deposited by it. The assessee had deposited cumulative amount of Rs.3,20,01,335/- as excise duty. The said amount is forming part of the current assets in the financial statements of the prior year, i.e., financial year ending on March 31, 2017. The same was shown as "Advances Recoverable in Cash or in Kind or Value to be Received" under the head "Short Term Loans and Advances"). 11.2. The application filed by the assessee to claim refund of the duty drawback deposited was rejected by JDGFT on the ground that the Chamera Project does not qualify as a Mega Power project prescribed under para 8.2 of the FTP. The assessee was of the view that the excise duty recoverable amount of Rs.3,20,01,335/- recorded in the books of accounts of the assessee became irrecoverable. Hence, the assessee wrote-off the said amount by booking an expense as "Duty Draw Back Claim Written off" in the books of account for the Page | 34

ITA No.2085 & 2086/Del/2022 GE Hydro France previous year 2017-18 relevant to subject AY 2018-19. It is submitted that the ld. AO erred in making addition to the returned income in respect of deduction amounting to Rs.3,20,01,335 claimed on account of duty drawback written off, without assigning any reason for such disallowance and without passing speaking order in this regard, blatantly disregarding the directions of the ld. DRP. In fact the ld DRP had in principle upheld the finding of the ld. AO in disallowing the claim of deduction of duty drawback written off. However, the ld DRP directed the ld AO to consider the assessee‟s submission regarding adjustment of project office operations computed in accordance with section 44BBB(1) of the Act that the disallowance towards duty draw back written off for claim and pass a speaking order in that regard. 11.3. At the outset, we find that the assessee had duly written off the amount of duty drawback receivable after knowing the fact that JDGFT had rejected the claim of the assessee that Chamera project does not qualify as a mega power project under the foreign trade policy. In our considered opinion, the said claim is made by the assessee in its normal course of business and accordingly be eligible for deduction as a trading loss u/s 28 of the Act itself. In the instant case, the assessee had duly proved that the said duty drawback is irrecoverable from the Govt. Similar issue arose before the coordinate bench of this Tribunal in the case of NEC Technologies India Pvt Ltd Vs. Additional CIT in ITA No. 6982/Del/2019 for AY 2014-15 dated 16.06.2023 wherein, it was held as under:- “8. In the facts of the instant case, During AY 2015-16 Assessee Company has Written off amounting to Rs 9,081,394/-. The amounts were earlier parked in Input service tax receivable account pertaining to revenue expenditure in the nature of rental, clearing and forwarding charges, security expenses etc. however, on service tax audit, such amounts were reversed due to technical points i.e. held as common inputs and not direct cost and therefore reversed under a formulae prescribed under the service tax law. However, there is no questioning on the nature and bonafide of these payments. As is evident, the input cost is revenue in nature and accordingly service tax paid on such revenue costs is also eligible to be claimed as revenue expenditure. Further, the matter is covered as the Assessee Company has been given relief by Hon'ble DRP panel where adjustment of "Advances written off is reversed. The Id. CIT(DR) have not controverted above factual position. Therefore we are inclined to hold that the input cost is revenue in nature and accordingly service tax paid on such revenue cost is also eligible to claim as revenue expenditure u/s. 37(1) of the Act. Our conclusion further gets support from the order of co-ordinate bench of

ITA No.2085 & 2086/Del/2022 GE Hydro France ITAT Chandigarh in the case Mohan Spg. Mills vs. ACIT (supra). It is also relevant to mention that the co- ordinate bench of ITAT Hyderabad in the case of NCS Distilleries P. Ltd. vs. ITO held that the amount of advance in the course of business which become irrecoverable is deductable or allowable as business expenditure/loss. Accordingly, ground no. 3 of assessee is allowed.” 11.4. The said loss is also allowable as business loss u/s 37(1) of the Act. Reliance in this regard has also been rightly placed by the ld AR on the decision of Hon‟ble Bombay High Court in the case of CIT Vs. Wackhardt International Ltd reported in 314 ITR 11 (Bom) as under:- “2. A few facts may be set out. The assessee is exporter. He had exported certain goods which were returned and thereafter re-exported the goods. However, it was not in a position to furnish necessary documents as in the meantime the records of the assessee were lost on account of collapse of the building where the assessee maintained his records. It is the case of the assessee that they made attempts to reconstruct the records. However, as they were not in a position to reconstruct the records, they treated the said amount as bad debt for the assessment year 1996-97. The Assessing Officer disallowed the same against which an appeal was filed to the Commissioner of Income-tax (Appeals). The learned Commissioner (Appeals) considering the facts on record allowed the claim of the assessee. The Revenue preferred an appeal. That appeal came to be dismissed. Consequently, the present appeal and the questions as framed. 3. The contention as urged on behalf of the Revenue is that the loss have been shown as bad debt for the financial year 1993-94 and not for the assessment year 1999-2000. In our opinion, the issue is squarely covered by the judgment of this court in Lord's Dairy Farm Ltd. v. CIT [1955] 27 ITR 700. In that case also there was defalcation between May, 1946, and April, 1947. The amount actually embezzled in the relevant accounting year 1st April, 1947, to 31st Mach, 1948. The assessee therein claimed deduction in the assessment year 1947-48. The learned Bench of this court was pleased to hold that as the assessee wrote of this amount in the year of account, the court was entitled to presume that the amount became irrecoverable when the assessee wrote it off in its books of account and that, therefore, the assessee was entitled to claim the amount. In our opinion, therefore, even if duty drawback was available for the previous assessment year, what will be relevant was when the same is treated as bad debt by the assessee in his books of account. Considering the ratio of that judgment, in our opinion, there is no infirmity in the view taken by the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal. That question, therefore, would not arise. In so far as the second question is concerned, merely because there was no income in the course of assessment year 1999-2000 would not disentitle the assessee from claiming the business expenditure in the said assessment year. We find no infirmity with the view taken by the Commissioner of Income-tax (Appeals) and/or the Income-tax Appellate Tribunal. In the light of that, we find no merit in the appeal. Consequently, the appeal dismissed.”

ITA No.2085 & 2086/Del/2022 GE Hydro France 11.5. In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, ground No. 12 raised by the assessee is hereby allowed. 12. Ground No. 18 raised by the assessee is challenging the levy of interest u/s 234B of the Act. The ld. AR submitted that in the rectification orders passed for the AYs 2018-19 and 2019-20, interest u/s 234B of the Act had been charged to the tune of Rs 1,55,82,996/- and Rs 11,24,840/- respectively. The ld. AR argued that interest u/s 234B of the Act is not chargeable on the ground that the buyer has deducted tax at source and remitted to the account of the Central Govt in accordance with the proviso to section 209(1)(d) of the Act and hence there would be no liability for the assessee to pay advance tax. In the present case, THDC, who is buyer of offshore supplies made by the assessee which has been brought to tax by the ld AO in the final assessment order, had duly deducted tax at source before making the said payment. Hence, it was submitted that there was no default on the part of the assessee in payment of advance tax. This issue is no longer res integra in the view of the decision of the Coordinate Bench of this Tribunal in the case of BG International Vs. JCIT in ITA 62/DDN/2019 for AY 2015-16 dated 24.02.2020, wherein, it was held in para 32 and 33 as under:-

“32. We have heard the rival contentions and perused the record. The AO while computing the income in the hands of the assessee has charged interest u/s 234B of the Act at Rs.39.46 crores (approx.). The assessee is aggrieved by the aforesaid charging of the interest. The case of the assessee is that the tax due on the income of the assessee was subjected to tax deduction at source. Our attention was drawn to the computation of the tax liability in the hands of the assessee by the Assessing Officer which was placed on record. It was pointed out that the assessee had not paid any taxes by way of advance tax and total tax payable was adjusted against the tax deducted at source at Rs.17.54 crores (approx.). The question which arises is that where the liability to pay tax was on the payer which in turn had to deduct tax at source, then the shortfall if any in the taxes due cannot be attributed to the assessee and for such default no interest chargeable, u/s 234B of the Act. 33. Under the provision of section 209(1)(d) of the Act, it is provided that against the income tax calculated under the provision of Act then amount of income tax which would be deductible or collectible

ITA No.2085 & 2086/Del/2022 GE Hydro France at source during the said Financial Year from any income would be deducted. The provisions of section 234B of the Act deals with payment of Advance tax, whereas in the present case, this does not amount to default of payment of Advance tax, but amounts to default in deduction of tax at source. Hence, the provisions of section 234B of the Act are not applicable and so also the proviso under section 209(1)(d) of the Act.” 12.1. Respectfully following the same, we hold that interest u/s 234B of the Act is not chargeable in the instant case. Accordingly, the Ground No. 18 raised by the assessee is allowed.

ITA No. 2086/Del/2022 – AY 2019-20 17. All the grounds raised by the assessee for AY 2019-20 are identical to grounds raised for AY 2018-19 except variance in ground numbers and figures. Hence the decision rendered by us for AY 2018-19 shall apply mutatis mutandis for AY 2019-20 also in respect of identical issues. 18. The only new ground to be adjudicated in AY 2019-20 is ground No. 15 with regard to MAT credit entitlement u/s 115JAA of the Act not being allowed to the assessee in full. This is a matter requiring factual verification and accordingly, we deem it fit to restore this issue to the file of the ld AO to decide the same in

ITA No.2085 & 2086/Del/2022 GE Hydro France accordance with law. Accordingly, ground No. 15 raised by the assessee for AY 2019-20 is allowed for statistical purposes. 19. To sum up, the appeal in ITA No. 2085/Del/2022 for AY 2018-19 is partly allowed and appeal in ITA No. 2086/Del/2022 for AY 2019-20 is partly allowed for statistical purposes. Order pronounced in the open court on 13/03/2024. -Sd/- -Sd/- (C. N. PRASAD) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:13/03/2024 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi