PE can’t be established merely because Employees of Foreign Company visited India to render some Services: ITAT grants Relief to FCC Co. Ltd [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT), Delhi bench, while granting relief to FCC Co, Ltd, held that the revenue cannot prove the existence of Permanent Establishment merely because the fact that their employees visited FRL in India to render technical services for which TDS is already offered to tax.

In the present case, FRL is alleged to be the place of business from which the business of the assesee, a Japanese Company.The employees of the assessee visited India to assist FRL in relation to supplies made by FRL/FCC Clutch to its customers; resolving problems relating to production, fixing of machines, maintenance of machines; checking safety status at the premises and suggesting ways for enhancing safety; support in quality control; IT related services; support for launch of new segment line; etc. the Revenue was of the view that this is sufficient to establish that the assessee has a PE in India and demanded tax.

The bench consists of Mr. N K Billaiya (Accountant Member) and Ms. Astha Chandra (Judicial Member) found thatiIt is well settled position that in order to constitute a Fixed Place PE it is a prerequisite that the alleged premise must be at the disposal of the enterprise.

“The Hon’ble Supreme Court in the case of Formula One world Championship Vs. CIT [Civil Appeal No. 3849 of 2017] has held that merely giving access to the premise to the enterprise for the purposes of the project would not suffice. The place would be treated as at the disposal of the enterprise when the enterprise has right to use the said place and has control thereupon,” the bench said.

“In our considered opinion, none of these activities performed by the employees are in the nature of supervisory functions, supervision being the act of overseeing or watching over someone or something which is not reflected in the work done by the engineers in India for FRL,” the bench added.

Deleting the impugned order, the bench held that “Moreover, no installation or assembly project was on going at FRL’s premises. FRL is in the existing business since many years and no new line of business has been launched by FRL. The employees were not rendering any services in connection with building site or a construction project or an installation project or an assembly project. From the nature of the services rendered by the employees, it is amply clear that these activities were not in connection with a building site or construction installation or assembly project. Hence the issue of computation of period of six months also becomes academic. The employees are visiting India on year to year basis under the contract. In AY 2014-15 and AY 2015-16, the employees visited India to render certain technical services under the Licence Agreement read with Dispatch of Engineers Agreement which have been duly offered to tax by the assessee as FTS as per the provisions of India-Japan DTAA. We therefore hold that the there is no Supervisory PE of the assessee for the AYs under consideration.”

To Read the full text of the Order CLICK HERE

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