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The AO concluded that the assessee has a service PE in India through which it is carrying out its business in India and the royalty received by the assessee from JCB India is effectively connected to the PE. The AO held that once it is established that there exists a PE and that there are receipts which are attributable to such PE, it needs to be seen as to how much of the receipts can be attributable to such PE. In the instant case, r. 10(iii) of the IT Rules, 1962 was invoked and held that 20 per cent of the receipts represent the expenses exclusively incurred by the PE of the assessee in India. In other words, 80 per cent of the receipts accruing to the assessee is to be taxed at the prevailing tax rate applicable to the foreign companies. Thus, the AO held that an amount of Rs. 12,54,49,786 (80 per cent of 15,68,12,232) is taxable at the rate applicable to foreign companies for business income, i.e., 40 per cent and hence taxed accordingly. The amount of Rs. 18,01,674 was taxed at 40 per cent Further, the amount of rectification work i.e., Rs. 22,52,093 was taxed similarly i.e., 20 per cent of the receipts were treated as representing the expenses incurred wholly and exclusively by the PE of the assessee in India. From the perusal of these observations of the AO, it can be seen that while arriving at this conclusion, the AO mentioned that the assessee was not able to explain as to for what reason and purpose such rectification was carried out. No documentary evidence in support of the same was furnished so as to corroborate its claim that such receipts were merely reimbursements. What benefit was extended by the assessee or what services were exactly provided by the assessee to the payers of such ‘rectification of work’ was not elaborated by the assessee. And therefore, the AO held that these are Fees for Technical services receipts. After going through the records, we observed that the assessee has provided the details of rectification and rework in respect of component export services activity, but the AO has not at all discussed the same while giving the findings. Therefore, it will be appropriate to remand back this issue to the file of the AO/TPO for proper adjudication in consonance with the evidences filed by the assessee before the AO/TPO. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Thus, ground Nos. 1 and 2 are partly allowed for statistical purpose. As regards to ground Nos. 3 and 4, the same are consequential in nature, hence, these grounds are not adjudicated upon at this juncture. Ground Nos. 3 and 4 are dismissed.

Shanti Prime Publication Pvt. Ltd.

Sec. 90 of Income-tax Act, 1961— Double taxation relief—The assesseeJC Bomford Heavy Products Ltd. was a company incorporated under the laws of the United Kingdom. It is a non-resident company for the purposes of Indian Tax laws and is a tax resident of U.K under art. 4 of the DTAA entered into between India and U.K. It is a wholly owned subsidiary of M/s J.C. Bamford Excavators Ltd., England. The assessee filed return of income for asst. yr. 2011-12. the AO held that an amount  is taxable at the rate applicable to foreign companies for business income, i.e., 40 per cent and hence taxed accordingly. Further, the amount of rectification work  was taxed similarly i.e., 20 per cent of the receipts were treated as representing the expenses incurred wholly and exclusively by the PE of the assessee in India. Against the assessment order, the assessee filed the appeal before tribunal.
Tribunal observed that the assessee has provided the details of rectification and rework in respect of component export services activity, but the AO has not discussed the same while giving the findings. Therefore, it will be appropriate to remand back this issue to the file of the AO/TPO for proper adjudication in consonance with the evidences filed by the assessee before the AO/TPO. The assessee be given opportunity of hearing by following principles of natural justice. Appeal of the assessee was partly allowed for statistical purpose . --- JCB HEAVY PRODUCTS LTD. vs. Deputy CIT.[2020] 23 ITCD Online 145 (DEL)