BAKER HUGHES ENERGY TECHNOLOGY UK LIMITED ,UNITED KINGDOM vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1)(2), INTERNATIONAL TAXATION, NEW DELHI

For the assessment year under dispute, assessee filed its return of income on 15th March 2022 declaring income of Rs.1,10,69,460/-.

In response to the show-cause notice, the assessee furnished detailed reply stating that it has no fixed place PE by way of project office nor any installation PE at ONGC Gas well, as, it has not carried out any installation activity but was only involved in supply of equipments from outside India. The Assessing Officer however was not convinced with the submissions of the assessee. Referring to the scope of work as per the Memorandum Of Understanding (MOU), the Assessing Officer observed that the contract with ONGC is a integrated contract for offshore supply as well as onshore activities. He further observed that the consortium member is working on behalf of the assessee hence, forms the PE of the assessee in India. In this context, he also referred to the information received from ONGC in pursuance to notice issued under section 133(6) of the Act. Thus, ultimately, he concluded that the contract with ONGC is a turnkey project covering end to end activities starting from design

Against the draft assessment order so framed, assessee raised objections before learned DRP. While disposing of the objections of the assessee, learned DRP followed their directions in assessee’s case in A.Y. 2020-21 and held that the receipts from offshore supply of equipments to ONGC is taxable under section 44BB of the Act. While coming to such conclusion, Learned DRP also expressed the view that the issue of existence of PE is academic in nature as applicability of section 44BB is not dependent upon existence of PE.

Before us, learned Counsel appearing for the assessee submitted that the contract executed with ONGC in the year 2018 continues even in the assessment year under dispute and there is no change in terms and conditions of the contract. He submitted, there is also no change in the facts and circumstances between the earlier assessment year and the impugned assessment year. He submitted, the Assessing Officer has fully misconceived the facts while concluding that the assessee had a fixed place PE as well as installation PE in India. In this context, he drew our attention to the submissions made before the Assessing Officer as also the information given by ONGC in response to notice under section 133(6)

The learned Departmental Representative submitted, the issue in the year under consideration stands on a different footing as the Assessing Officer has brought new facts on record to identify the existence of PE in India.

We have considered rival submissions and perused material on record. The allegation of the Assessing Officer in the show-cause notice issued to the assessee was, the project office of the assessee in India has to be considered as fixed placed PE in terms of Article – 5 of the India – UK DTAA. He has further observed that the gas well of ONGC in Krishna Godavari basin has to be considered as installation of PE of the assessee as the assessee has carried out installation activities. However, while concluding, the Assessing Officer has observed that the consortium member is working on behalf of the assessee, hence, constitutes PE. Unfortunately, learned DRP has not given any finding on existence or otherwise of PE by holding that the issue is academic as existence of PE is not relevant for applicability of section 44BB of the Act.

Be that as it may, it is necessary to examine whether the assessee had any kind of PE in India. From the submissions of the assessee made before the Assessing Officer it becomes very much

In fact, the information given by ONGC in pursuance to notice under section 133(6) of the Act makes it very clear that the assessee was only engaged in manufacturing and supply and support of components including manufacture and supply of subsea and top side control system. Thus the material on record clearly indicate that the assessee was not in any way involved in onshore activities including installation at the site of ONGC. It appears, just to show that facts in the impugned assessment year are different from A.Y. 2020-21, the Assessing Officer has attempted to project the facts in a different manner. In the process, has completely misconceived the facts. Not a single piece of evidence has been brought on record by the Assessing Officer to establish that the assessee had any kind of PE in India in the year under consideration.

In our considered opinion, the facts involved relating to the issue in disputes are more or less identical to A.Y. 2020-21. In fact, DRP has merely relied upon the directions issued in A.Y. 2020-21. Since, the issue has been decided in favour of the assessee by Tribunal in A.Y. 2020-21 vide ITA No.521/Del/2023 dated 06.06.2023 and there is no discernible factual difference in the assessment year under dispute, we are inclined to follow the decision of the Co-ordinate Bench in assessee’s own case (supra) and hold that section 44BB of the Act cannot be invoked to tax the receipts from offshore supply on presumptive basis as the Revenue has failed to establish existence of PE in India. Assessing Officer is directed to delete the addition.