DDIT Vs Mitsui & Co. Ltd. (ITAT Delhi)
Learned DR contended that MIPL is economically dependent on assessee company as major revenue of MIPL is from assessee company. We are of the view that this per se cannot be ground to hold that MIPL is a Dependent Agent. For invoking this clause, first one of the three conditions needs to be fulfilled. As we have held hereinabove that MIPL does not get covered as PE under Article 5(7), it cannot be considered to be a Dependent Agent. The learned DR also made a reference to Conventions on Double Taxation by Klaus Vogel to support its contention that where a person works only for one principle such person is economically dependent on the principal. In these circumstances the agent though not legally but will be bound to obey his principal’s instructions and be regarded as being Dependent Agent. This contention of the learned CIT-DR again ignores the basic requirement i.e. fulfilling one of the three conditions. It is also important to note that the DTAA provide for treating a person as Dependent Agent. The DTAA has to be strictly interpreted. The DTAA having prescribed the conditions, no further conditions can be read. What learned CIT-DR is canvassing will mean adding new condition in the DTAA. Further, it may be relevant to note that as per Para 9 of this Article 5 in DTAA, it has been specifically provided that if a company in the contracting state is controlled by a company in the other contracting state that itself shall not itself constitute either of company a permanent establishment of the other. Thus, the fact that MIPL is controlled by the assessee company shall not mean that MIPL is a PE of the assessee company. In view of the above, we hold that MIPL is not a Dependent Agent PE of the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
ITA No.2801/Del/2011 filed by the assessee is directed against the order dated 28th March, 2011passed by the CIT(A)-7, New Delhi, relating to Assessment Year 2006-07. ITA No. 4329/Del/2011 filed by the Revenue and ITA No. 4367/Del/2011 filed by the assessee are cross appeals and are directed against the order dated 25th July, 2011 of the CIT(A)-7, New Delhi relating to A.Y. 200708.
2. ITA Nos.794/Del/2012 filed by the Revenue and ITA No. 795/Del/2012 filed by the assessee are cross appeals and are directed against the order dated 3rd October, 2011 of the CIT(A)-21, New Delhi, relating to A.Y. 2008-09.
3. Since common issues are involved in all these appeals, therefore, these appeals were heard together and are being disposed of by this common order for the sake of convenience.
ITA No.2801/Del/2011 (by the Revenue) (A.Y. 2006-07)
4. Facts of the case, in brief, are that the assessee is a foreign company incorporated in Japan and is one of the biggest trading house of the world. It is involved in trading from needle to airplane engines. It has established a Liaison Office in New Delhi and undertakes several projects in connection with big industrial installations and power projects. It filed its return of income on 13th December, 2006 declaring total income at Rs.2,71,37,369/-. During the course of assessment proceedings, the AO noted that the assessee has received consideration for executing two projects, namely, Teesta & Purulia Projects. The assessee has entered into contracts with National Hydroelectric Power Corporation Ltd. (NHPC) for carrying out Electrical & Mechanical Works of “Teesta H.E. Project” [3 X170 MW (Stage-V) (Sikkim, India)]. These agreements are –
a) First Contract – For CIF/CIP Supply of all offshore equipments and materials including Mandatory Spares for Lot-6 Electrical & Mechanical works of Teesta FIE Project (Stage-V).
b) Second Contract – For Ex-works supply of all equipments and materials of Indian origin for Lot-6 Electrical & Mechanical works of Teesta HE Project (Stage-V).
c) Third Contract – For providing all onshore services in respect of all equipments supplied under First & Second Contract and other services for Lot-6 Electrical & Mechanical works of Teesta HE Project (Stage-V).
5. The assessee has also entered into contracts with West Bengal State Electricity Board, Calcutta (WBSEB) in respect of Purulia Pumped Storage Project. These agreements are:
a) Contract for Erection, Testing and Commissioning of Equipment and Materials in respect of Electro Mechanical Equipment (Lot 6.1) of Purulia Pumped Storage Project.
b) Contract for supply of equipment and materials in respect of Electro Mechanical Equipment (Lot 6.1) of Purulia Pumped Storage Project.
6. In the notes attached to the statement of assessable income, the assessee stated that taxable income from execution of the above projects has been computed @ 10% of the gross receipts u/s 44BBB of the Income-tax Act, 1961. The AO asked the assessee to furnish the details of offshore supplies made during the year under Teesta and Purulia projects in response to which the assessee furnished the following details:-
