Case Law Details
IN THE ITAT MUMBAI BENCH ‘L’
Linklaters & Paines
Versus
Income-tax Officer, (International Taxation)
M.A. NO. 223 (MUM.) OF 2011
IT APPEAL NOs. 2896 & 5085 (MUM.) OF 2003
[ASSESSMENT YEAR 1995-96]
DECEMBER 19, 2012
ORDER
P.M. Jagtap, Accountant Member
By this miscellaneous application, the assessee is seeking rectification of mistake alleged to have crept in the common order of the Tribunal dated 16th July, 2010 passed in ITA No. 4896/Mum/2003 and 5085/Mum/2003.
2. The learned counsel for the assessee submitted that one of the issues raised by the Revenue in its appeal being ITA No. 5085/Mum/2003 was relating to application of force of attraction principle in computation of profits attributable to the permanent establishment. He submitted that the assessee in the present case is a partnership firm of solicitors having its head office at London with no branch office or any other form of physical presence in India. During the year under consideration, the assessee carried out certain work on Indian projects, majority of which was done in U.K. and some of the work was done in India by persons who visited for short period of time. He submitted that the main issue involved in the assessee’s case was whether the assessee had a permanent establishment in India and the Tribunal vide its order dated 16th July, 2010 (supra) decided the same against the assessee by upholding the decision of the AO that the assessee had a service PE in India.. He submitted that the AO had brought to tax in India the entire income earned by the assessee from Indian projects although only a part of the services in relation to the said projects was performed in India. He submitted that the learned CIT(Appeals), however, agreed with the stand of the assessee that the income in respect of services rendered in India only was taxable in India being attributable to the PE in India relying inter alia on Article 7(3) of the India-UK DTAA. He submitted that the Tribunal, however, has accepted the stand of the Revenue on this issue that the entire income earned by the assessee from Indian projects is taxable in India in view of the force of attraction principle embedded in Article 7 of the India-UK DTAA and allowed ground No. 2 of the appeal of the Revenue. He invited our attention to the relevant portion of the Tribunal’s order as contained in paragraph No. 139 to 149 on this issue and contended that the Tribunal has referred to the provisions of Article 7(1) and 7(2) of the India-UK DTAA while deciding this issue ignoring entirely the provisions of Article 7(3) of the said treaty. He submitted that the Tribunal has relied on Article 7(1)(b) and 7(1)(c) of the UN Model Convention to decide the issue of attribution of profit holding that the said provisions are akin to the provisions of Article 7(1) and 7(2) of the India-UK DTAA. In this regard, he invited our attention to the comparative chart prepared and furnished by him of the relevant provisions of Article 7 of India-UK DTAA and that of UN Model Convention and submitted that there is no provision in Article 7 of UN Model Convention which is akin to the provision of Article 7(3) of India-UK DTAA. He contended that the Tribunal has applied the force of attraction principle embedded in Article 7(1) of India-UK DTAA which provides that the profits of the enterprise may be taxed in the other state but only so much of them as is directly or indirectly attributable to the PE in that State. He contended that what is meant by profits indirectly attributable to PE has been decided by the Tribunal relying on Article 7 of UN Model Convention ignoring that the same has been explained in Article 7(3) of India-UK DTAA as under :
“Where a permanent establishment takes an active part in negotiation, concluding or fulfilling contracts entered into by the enterprise, then, notwithstanding that other parts of the enterprise have also participated in those transactions, that proportion of profits of the enterprise arising out of these contracts which the contribution of the permanent establishment to those transactions bears to that of the enterprise as a whole shall be treated for the purpose of paragraph 1 of this Article as being the profits indirectly attributable to that permanent establishment.”
3. The learned counsel for the assessee submitted that there is no provision in Article 7 of UN Model Convention which is analogous to the provision of Article 7(3) of India-UK DTAA and the non consideration of the said Article 7(3) of the India-UK Tax Treaty which is relevant for the purpose of applying the force of attraction principle in the case of the assessee, has given rise to a mistake apparent from record in the order of the Tribunal. In support of his contention that the failure to consider the relevant statutory provision gives rise to a mistake apparent from record, the learned counsel for the assessee has relied on the following judicial pronouncements :
1. A.H. Wheeler and Co. P. Ltd. v. ITO [1973] 88 ITR 231 (All).
The ITO omitted to apply the relevant provisions of the Finance Acts of 1958 and 1959 due to which, having regard to the dividend distributed by the assessee in the respective previous years, the super-tax rebate should have been reduced. This omission resulted in super-tax being undercharged. The High Court affirmed the Single Judge at page 233 and held that the omission to take into account the relevant statutory provisions of the Finance Acts constituted a mistake apparent from the record.
2. Indian Carbon Ltd. v. CIT [1989] 175 ITR 27 (Gau)
The assessee claimed deduction of managerial remuneration of Rs. 2,07,783, out of which Rs. 54,000 was allowed by the AO and the balance was disallowed by applying the provisions of section 40(c). The Tribunal held that the entire remuneration was allowable as it was reasonable. On a miscellaneous application, the Tribunal noted that it had overlooked the amendment to section 40(c), which limited the maximum allowance of remuneration to Rs.72,000. Accordingly, the Tribunal passed a rectification order restricting the allowance to Rs.72,000. The High Court held that section 40(c) was capable of interpretation only as done by the Tribunal and accordingly upheld the Tribunal’s rectification order.
3. CIT v. Kesaria Tea Co. Ltd. [1998] 233 ITR 700 (Ker)
The assessee, an exporter of goods, was granted weighted deduction under section 35B of the Act. As per 35B(1A), weighted deduction was not to be allowed unless the assessee was engaged in manufacture of the goods which were exported. The assessee had purchased goods and exported them. The High Court noted at page 707 that the provisions of sub-section (1A) [reproduced at page 706] had been omitted to be considered. The High Court after discussing the matter at pages 707-711 held that such overlooking of a mandatory provision was a mistake apparent from the record.
4. CIT v. Janatha Steel Mills Pvt. Ltd. [2007] 294 ITR 668 (Ker)
The assessee was a partner in three firms. He was allowed deduction of investment deposit under section 32AB at 20% of the total income from business, including the share of profit received from the three firms. Proviso to section 32AB (reproduced at page 3) denied deduction under section 32AB to a partner of the firm. The High court held that since the deduction at 20% of the profits from the firm was granted to the assessee in ignorance of the aforesaid proviso, it constituted a mistake apparent from the record.
5. CIT v. Steel Strips Ltd. [2011] 200 Taxman 368 (P&H)
The provisions of section 80VVA placing restriction on the deduction of certain types of expenses were overlooked and that resulted in allowance of deduction in excess of permissible limit. It was held that such overlooking of a statutory provision was a mistake apparent from the record.
6. CIT v. Kushal Bagh Minerals (P.) Ltd. [2009] 310 ITR 125 (Raj)
The AO did not give benefit of clause (v) of Explanation to section 115JA (deduction of profits derived by an undertaking situated in an industrially backward State or District in arriving at book profits). It was held by the Tribunal and affirmed by the High Court that the order suffered from a mistake apparent from the record.
7. CIT v. Carbon & Chemicals India Ltd. [2012] 344 ITR 252 (Ker).
The officer allowed excess deduction for unabsorbed depreciation contrary to clause (b) of Explanation (iii) to section 115JA in determining the assessee’s book profits. He passed a subsequent order under section 154 rectifying the mistake. It was held that overlooking the provisions of clause (b) of Explanation (iii) to section 115JA resulted in a mistake apparent from the record. It is submitted that the provisions of section 154 are identical to section 254(2).
8. The ITO v. Chekka Sriramachandra Murthy [1984] 10 ITD (Hyd) 902
The ITO recognized a partial partition of HUF disregarding the prohibition in section 171(9) of the Act in this behalf. It was held that overlooking the provisions of section 171(9) resulted in a mistake apparent from the record. The Tribunal held in para 5 that the issue was not debatable as there was a clear contravention of the Act. It observed that neither the duration of the argument before it nor the other facts urged would automatically lead to a conclusion that the issue was a debatable one. The Tribunal held that since the language of the statutory provision was clear, an action in contravention thereof constituted a mistake apparent from the record.
9. Asstt. CIT v. Electrical Transformer Co. [1999] 70 ITD 48 (Indore)
The return of loss was not filed within the due date prescribed under section 139(1) but the loss was allowed contrary to the provisions of section 80. The Tribunal held that ignorance of section 80 resulted in a mistake apparent from the record.
4. The learned counsel for the assessee further submitted that the force of attraction principle contained in the UN Model Convention is completely different from the “direct and indirect attribution” principle contained in India-UK DTAA and the conclusion reached by the Tribunal relying on the force of attraction principle contained in UN Model Convention overlooking Article 7(3) of India-UK DTAA explaining what is indirectly attributable to a PE has given rise to a mistake apparent from record inasmuch as the entire income from the Indian projects is held to be taxable in India by the Tribunal irrespective of whether the activity is done in India or not which is erroneous being contrary to the scope of indirect income attributable to PE as expressly defined in Article 7(3) of the India-UK Tax Treaty. He also explained how overlooking a statutory provision gives rise to a mistake apparent from record with the help of one example by reference to the provisions of section 2(41) and section 54(2)(vii). He submitted that the general definition of “relative” given in section 2(41) is narrower as compared to the definition applicable for the purpose of section 56(2)(vii) of the Act and if the applicability of section 56(2)(vii) is decided on the basis of the general definition of relative given in section 2(41) overlooking the definition given in section 56(2)(vii) itself, the conclusion would be erroneous. He contended that similarly the conclusion drawn by the Tribunal ignoring the provisions of Article 7(3) of India-UK DTAA which expressly defines the scope of income indirectly attributable to the PE is erroneous and overlooking the said provision has given rise to a mistake apparent from record.
5. The learned counsel for the assessee further submitted that the Tribunal has interpreted the expression “directly or indirectly attributable” in such a way that the entire income from the Indian projects is to be regarded as income attributable to the PE irrespective of whether the PE was involved in execution of the said projects or not. He contended that this conclusion drawn by the Tribunal is contrary to the decision of Hon’ble Supreme Court in the case of Ishikawajima-harima Heavy Industries Ltd. vs.. Director of Income-tax, Mumbai 288 ITR 408 wherein it was held in para No. 73 that for the profits to be attributable directly or indirectly, the PE must be involved in the activity giving rise to such profits. He contended that the conclusion drawn by the Tribunal thus is contrary to the decision of Hon’ble Supreme court in the case of Ishikawajima-harima Heavy Industries Ltd. (supra) which by itself constitutes a mistake apparent from record as held by the Hon’ble Supreme Court in the case of ACIT v. Saurashtra Kutch Stock Exchange Ltd. 305 ITR 227.
6. The learned counsel for the assessee submitted that even as per Article 7(1)(c) of UN Model Convention, the scope is limited to activities carried on in India and not to the activities carried on by the assessee in London. He submitted that the Tribunal has held the provisions of Article 7(1) of India-UK DTAA and the provisions of Article 7(1)(c) of UN Model Convention to be para materia overlooking the vital and relevant provisions of Article 7(3) of India-UK DTAA which has given rise to a mistake apparent from record as the relevant statutory provisions applicable in the case have been ignored. He submitted that Article 7(1) of India-UK DTAA has to be read with Article 7(2) and 7(3) and the decision rendered by the Tribunal reading Article 7(1) in isolation has resulted in a mistake apparent from record as the relevant provision of Article 7(3) has been overlooked.
7. The learned DR, on the other hand, submitted that Article 7(3) of India-UK DTAA was reproduced by the learned CIT(Appeals) in paragraph No. 6.5 of his order impugned before the Tribunal and the decision was also rendered by the learned CIT(Appeals) relying on the said Article. He submitted that the decision rendered by the learned CIT(Appeals) on this very issue was challenged by the Revenue in its appeal filed before the Tribunal and the Tribunal having decided the same specifically after considering the material available on record including the impugned order of the learned CIT(Appeals), it cannot be said that Article 7(3) has been overlooked by the Tribunal while rendering its decision. He pointed out from paragraph No. 141 of the Tribunal’s order that a finding was given by the Tribunal while deciding this issue of having heard the rival contentions and carefully considered the factual matrix of the case as well as the applicable legal position. He contended that in view of this specific finding recorded by the Tribunal, it cannot be said that Article 7(3) is ignored or overlooked by the Tribunal. He contended that merely because there is no specific reference to Article 7(3) made by the Tribunal in its order, it cannot be said that the Tribunal has ignored or overlooked the said Articles while rendering its decision. He contended that a well considered view has been taken by the Tribunal while deciding this issue which may not be correct as per the assessee but there is no mistake apparent from record as alleged by the assessee. In support of this contention, he relied on the Third Member decision of ITAT, Madras in the case of Dharamchand Surana v. Income-tax Officer 61 ITD 115.
8. The learned DR then submitted that the assessee has already filed an appeal against the decision of the Tribunal on this issue before the Hon’ble Bombay High Court. He invited our attention to the copy of the said appeal along with relevant annexures placed in the paper book and submitted that the submissions made therein clearly show that a view has been taken by the Tribunal on this issue after interpreting the relevant provisions of the Treaty. He contended that when the decision of the Tribunal on this issue has given rise to substantial question of law as claimed by the assessee himself, the present application filed by the assessee seeking rectification of the order of the Tribunal on the very same issue u/s 254(2) is not justified. In support of this contention, he relied on the decision of Hon’ble Patna High Court in the case of Income-tax Officer v. Income-tax Appellate Tribunal (Pat) 229 ITR 651. He also relied on the decision of Hon’ble Bombay High Court in the case of Commissioner of Income-tax v. Ramesh Electric and Trading Co. 203 ITR 497 wherein it was held that error of judgment cannot be rectified u/s 254(2). He also relied on the decision of Hon’ble Supreme Court in the case of Assistant Commissioner of Income-tax v. Saurashtra Kutch Stock Exchange Ltd. – 305 ITR 227 to contend that any error which is required to be explained by long drawn out process of reasoning on points where there may conceivably be two views is not a mistake apparent from record rectifiable u/s 254(2). He submitted that the attempt that is now being made by the learned counsel for the assessee to analyze comparatively the Articles of India-UK DTAA and UN Model Convention at this stage during the proceedings for rectification u/s 254(2) is not permissible. He contended that there is thus no mistake apparent from record in the order of the Tribunal as alleged by the assessee in the present application calling for any rectification u/s 254(2).
9. In the rejoinder, the learned counsel for the assessee submitted that there is nothing in the order of the Tribunal to show that Article 7(3) of India-UK DTAA has been considered by it while rendering the decision. He submitted that there is also no reference to any argument raised either on behalf of the assessee or even on behalf of the Department on this aspect of the matter. He submitted that the review of the decision of the Tribunal no doubt is not permissible u/s 254(2) but the question of review will come only when there is a view taken by the Tribunal. He submitted that even in the appeal filed by the assessee before the Hon’ble Bombay High Court against the order of the Tribunal, ground No. 5 raised on this issue specifically talks about the overlooking of relevant articles of the treaty by the Tribunal. He contended that such overlooking of relevant article of the treaty by the Tribunal has given rise to substantial question of law and at the same time, this constitutes a mistake also which is apparent from record that can be rectified u/s 254(2). He contended that the said appeal filed by the assessee against the order of the Tribunal, however, has not been admitted by the Hon’ble Bombay High Court so far. As regards the various judicial pronouncements relied upon by the learned DR in support of his arguments, the learned counsel for the assessee submitted that none of them is directly applicable to the facts of the present case and there is nothing to dislodge the contention of the assessee that the non consideration of relevant statutory provision constitutes a mistake apparent from record which is supported by various judicial pronouncements already cited.
10. We have considered the rival submissions and also perused the relevant material on record. As submitted by the assessee in the present miscellaneous application and further reiterated by the learned counsel for the assessee at the time of hearing before us, the main mistake that has allegedly crept in the order of the Tribunal is that the decision on the issue of profit attributable to the PE of the assessee in India has been decided by the Tribunal ignoring or overlooking Article 7(3) of India UK DTAA which is relevant to decide the said issue. In our opinion, there can not be any quarrel with the proposition, which is also supported by various judicial pronouncements cited by the learned counsel for the assessee, that non-consideration of relevant statutory provision constitutes a mistake apparent from record. The question, however, is whether the Tribunal in the present case can be said to have rendered its decision on the issue of computation of profit attributable to the PE of the assessee in India without considering Article 7(3) of the India UK DTAA as alleged by the assessee. In this regard, it is observed that the entire income earned by the assessee from projects in India was brought to tax by the AO in the hands of the assessee being attributable to the PE in India. This action of the AO was disputed by the assessee in an appeal filed before the learned CIT(Appeals) wherein the grievance projected by the assessee in ground No.5 was that the AO erred in including in the total income the amounts invoiced by the assessee that were relatable to the services rendered outside India. As claimed by the assessee in the said ground, the AO ought to have assessed the assessee only in respect of fees which were relatable to work performed in India. In support of this ground, reliance, inter alia, was placed on behalf of the assessee before the learned CIT(Appeals) on Article 7(3) which was reproduced by him in his appellate order in paragraph No. 6.5. The learned CIT(Appeals) then had discussed and dealt with the relevance of Article 7(3) in paragraph No. 6.12 of his impugned order which read as under :
“Reference may also be made to Article 7(3). This paragraph states that only that proportion of profits which the contribution of the permanent establishment bears to that of the enterprise as a whole shall be treated as indirectly attributable to the permanent establishment. Fro this it follows that the entire income cannot be treated as indirectly attributable to the permanent establishment. Only a proportionate part of the income can be treated as indirectly attributable. The appellant charges its clients at hourly rates based on the hours spent on the particular job from time to time. Consequently, income proportionate to the time spent in India can be included under this paragraph. Therefore, income which can be directly or indirectly attributed to the permanent establishment of the appellant in India is only the income related to the services performed in India.”
The learned CIT(Appeals) thus had accepted the contention of the assessee that only the income related to the services performed in India was attributable to the permanent establishment in India and only that portion of income ought to be charged to tax in India. Aggrieved by this relief allowed by the learned CIT(Appeals) to the assessee, the Revenue raised its grievance in the appeal filed before the Tribunal which was taken note of by the Tribunal in paragraph No. 139 of its order as under :
“The only other grievance raised in Assessing Officer’s appeal is that the CIT(A) erred in holding the assessee was taxable in respect of only that portion of income that was related to services performed in India, and did not appreciate the scope of “force of attraction” principle embedded in Article 7(1) of the India-UK tax treaty
The Tribunal also took note of the reasons or basis given by the learned CIT(Appeals) to give relief to the assessee on this issue in paragraph No. 140 which is reproduced hereunder:
“As we have seen earlier in this order, the impugned relief given by the CIT(A) was for three reasons reasons – first, the twin factors that the “income earned by the appellant were not in the nature of fees for technical services as defined in section 9(1)(vii) and therefore the AAR Ruling in the case of Steffen, Roberstson & Kirsten Consulting Engineers (supra) will not apply to the facts of the appellant” and that “as per Explanation (a) to Section 9(1)(i), even if there is a business connection in India, only income related to operations carried out in India is taxable in India”; – second, that “in the case of Clifford chance (82 ITD 106) the Hon’ble Mumbai Bench of ITAT has held that the income relating to services rendered outside India is not taxable in India”; and – third, that “as per Article 7, only that portion of income, which is attributable to the permanent establishment in India, can be taxed in India”.
The Tribunal then proceeded to deal with the correctness of the reasons/basis given by the learned CIT(Appeals) in paragraph No. 141 to 148 of its order. In paragraph No. 141, the Tribunal observed categorically that after having heard the rival submissions and having carefully considered the factual matrix of the case as also the applicable legal position, none of the three reasons given by the learned CIT(Appeals) to give relief to the assessee on this issue was found to be sustainable in law. The Tribunal then proceeded further to give its reasons for the said decision and after dealing with the first two reasons given by the learned CIT(Appeals) in paragraph No. 142 and 143, dealt with the third reason/basis given by the learned CIT(Appeals) relying on Article 7 of India-UK treaty in paragraph No. 144 to 148 which read as under :
“144. As far as learned CIT(A)’s reliance on Article 7(1) of the India UK tax treaty is concerned, in support of the proposition that only such profits as attributable to the operations carried out in the PE are taxable in India, this is simply contrary to the plain provisions of the India UK tax treaty. Article 7, as we have seen earlier in this order, provides that if the enterprise carries on business through a PE, the profits of the enterprise may be taxed in the other State but only so much of them as is “directly or indirectly attributable to that permanent establishment.
145. Learned CIT(A) has apparently taken note of the profits in of the work performed in the PE itself but he has not taken note of the position that it is only in respect of the profits directly attributable to work done in the PE but it is in respect of profits “directly” or even “indirectly” attributable to the permanent establishment. The import of “directly or indirectly attributable to PE” has been clearly ignored. The inclusion of ‘profits indirectly attributable to the PE’ clearly incorporates a force of attraction principle in the India UK tax treaty, but the CIT(A) has simply not taken note of that aspect of the matter. In the impugned order, the CIT(A) has, inter alia, observed that, “I also agree with the learned A.R’s arguments that as per Article 7, only that portion of income, which is attributable to the permanent establishment in India, can be taxed in India”, and that, “……….only that portion of income relating to rendering of such services in India can be attributed to the services PE of the appellant in India”. This approach of the CIT(A) is clearly the force of attraction rule embedded in Article 7(2) of India UK tax treaty. In this view of the matter, We cannot, and do not, approve the action of the CIT(A) in this respect.
146. The extension of taxability of profits of PE by including profits directly or indirectly attributable, is akin to the provisions of Article 7(1)(b) and 7(1)(c) of the UN Model Convention which provides that in addition to the “profits attributable to the permanent establishment” the taxability of PE profits will also extend to “(b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or (c) other business carried on in that other State of the same or similar kind as those effected through that permanent establishment”. In our considered view, the connotations of “profits indirectly attributable to permanent establishment” will extend to these two categories. These categories clearly incorporates a force of attraction rule. The basic philosophy underlying the force of attraction rule is that when an enterprise sets up a permanent establishment in another country, it brings itself within the jurisdiction of that another country to such a degree that such another country can properly tax all profits that the enterprise derives from that country ‐ whether the transactions are routed and performed through the PE or not.
147. The provisions of Article 7(1) in India UK tax treaty include the same results as sought to be achieved by Article 7(1)(c) of the UN Model Convention. As to the scope of this provision, we find guidance from the UN Model Convention Commentary in this regard. On this issue, the UN Model Convention Commentary states, inter alia, as follows
………………Some members from developed countries pointed out that the “force of attraction” rule had been found unsatisfactory and abandoned in recent tax treaties concluded by them because of the undesirability of taxing income from an activity that was totally unrelated to the establishment and that was in itself not extensive enough to constitute a permanent establishment. They also stressed the uncertainty that such an approach would create for taxpayers. Members from developing countries pointed out that the proposed “force of attraction” approach did remove administrative problems in that it made it unnecessary to determine whether particular activities were or were not related to the permanent establishment or the income involved attributable to it. That was the case especially with respect to transactions conducted directly by the home office within the country, but similar in nature to those conducted by permanent establishment. However, after discussion, it was proposed that the “force of attraction” rule, should be limited so that it would apply to sales of goods or merchandise and other business activities in the following manner: if an enterprise has a permanent establishment in the other Contracting State for the purpose of selling goods or merchandise, sales of the same or a similar kind may be taxed in that State even if they are not conducted through the permanent establishment; a similar rule will apply if the permanent establishment is used for other business activities and the same or similar activities are performed without any connection with the permanent establishment. (Emphasis supplied by us)
148. In our considered view, therefore, the connotations of “profits indirectly attributable to permanent establishment” do indeed extend to incorporation of the force of attraction rule being embedded in Article 7(1). The way it needs to be implemented, on the facts of the present case, is like this. In addition to taxability of income in respect of services rendered by the PE in India, any income in respect of the services rendered to an Indian project, which is similar to the services rendered by the permanent establishment, is also to be taxed in India in the hands of the assessee – irrespective of the fact whether such services are rendered through the permanent establishment, or directly by the general enterprise. There cannot be any professional services rendered in India which are not, at least indirectly, attributable to carrying out professional work in India. This indirect attribution, in view of the specific provisions of India UK tax treaty, is enough to bring the income from such services within ambit of taxability in India. The twin conditions to be thus satisfied for taxability of related profits are (i) the services should be similar or relatable to the services rendered by the PE in India; and (ii) the services should be ‘directly or indirectly attributable to the Indian PE’ i.e. rendered to a project or client in India. In effect thus, entire profits relating to services rendered by the assessee, whether rendered in India or outside India, in respect of Indian projects is taxable in India. That is precisely what the Assessing Officer had done. The grievance of the Assessing Officer is indeed justified and we uphold the same. We, therefore, vacate the relief granted by the Commissioner (Appeals) and restore the order of the Assessing Officer in this regard.”
11. Keeping in view the relevant portion of the order of the Tribunal on this issue which is reproduced above and having regard to the material available on record before the Tribunal including the order of the learned CIT(Appeals) which was impugned before the Tribunal, we find that the controversy involved in relation to the issue was correctly understood by the Tribunal and even the reasons given by the learned CIT(Appeals) to give relief to the assessee on the said issue were identified by the Tribunal. One of the reasons so given by the learned CIT(Appeals) as identified by the Tribunal was based on Article 7 of the India-UK treaty and the said Article including para 3 thereof was not only reproduced by the learned CIT(Appeals) in paragraph No. 6.5 of his impugned order but the same was also discussed and dealt with by him in paragraph No. 6.12 of the said order before giving relief to the assessee relying on the same. As clearly mentioned by the Tribunal in paragraph No. 141 of its order, the legal position applicable to the issue was carefully considered by it which obviously included Article 7(3) of the India-UK treaty relied upon by the learned CIT(Appeals) and after taking the same into consideration, it was held by the Tribunal that the provisions of Article 7(1) in India-UK treaty included the same results as sought to be achieved by Article 7(1)(c) of the UN Model Convention. Accordingly, relying on the UN Model Convention commentary on this issue, a considered view was taken by the Tribunal that the connotation of “profits indirectly attributable to permanent establishments” did extend to incorporation of the force of attraction rule being embedded in Article 7(1). Keeping in view this text and context of the order of the Tribunal, we are of the view that it cannot be said that the Tribunal has ignored or overlooked Article 7(3) of India-UK treaty while rendering its decision on this issue and that there is any mistake apparent from record in the order of the Tribunal on account of non consideration of the said article as alleged by the assessee.
12. As regards the decision of Hon’ble Supreme Court in the case of Ishikawajima-harima Heavy Industries Ltd. v. Director of Income-tax, Mumbai (supra), it is observed that the decision rendered therein regarding determination of income that can be taxed in India only to the extent as attributable to part played by the permanent establishment in the relevant transaction was based on the facts and circumstances of that case as well as Article 7 of DTAA between India and Japan as well as para 6 of protocol to the said treaty whereas the decision in the present case has been rendered by the Tribunal as per Article 7 of Indo-UK treaty which as found by the Tribunal is akin to Article 7(1)(b) and 7(1)(c) of the UN Model Convention. The decision in the present case, thus has been rendered by the Tribunal on its own facts and by applying the provisions of different Treaty. In our opinion, it therefore, cannot be straightway inferred that the same is contrary to the decision of the Hon’ble Supreme Court in the case of Ishikawajima-harima Heavy Industries Ltd. (supra) giving rise to a mistake apparent from record. As regards the contention raised on behalf of the assessee that the scope of Article 7(1)(c) of U.N. Model Convention is limited to activities carried on in India only, it is observed that the Tribunal has taken a considered view on interpretation of the said Article that the entire profit relating to services rendered by the assessee whether rendered in India or outside India, in respect of Indian Project is taxable in India and it is not permissible to review the decision of the Tribunal in the guise of rectification u/s 254(2) of the Act. We are, therefore, of the view that the order of the Tribunal does not suffer from any mistake apparent from record as alleged by the assessee in the present miscellaneous application.
13. In the result, the Miscellaneous Application of the assessee is dismissed.
