1. These Review Petitions being connected, we are disposing of the same by this common order.
2. The Revenue is the appellant/review petitioner. In the appeals, we notice the following substantial questions of law were sought to be raised by the review petitioner:
| "1. |
Whether in the facts and circumstances of the case the income of an assessee arising from contract, in India, be treated as taxable in India as PE of an assessee exists in terms of article 5(2)(a) (b) (c) beside 5(2)(j) of DATA with USA? |
2. |
Whether interest income earned in India can be treated as Business Income for taxation and can be not taxed as per DATA with USA?" |
3. It would appear that, against the judgment sought to be reviewed, SLPs were carried before the Hon'ble Apex Court; but the same came to be withdrawn with liberty to file review petitions and it is, thereafter, that the present Review Petitions have been filed.
4. We had condoned the delay in filing the Applications for Review. We have heard the learned counsel for the appellant/review petitioner and the learned counsel for the respondent/assessee.
5. According to Mr. H.M. Bhatia, learned counsel for the Revenue, the question, which arose for consideration, was whether the assessee had a Permanent Establishment in India. This is an issue, which is to be decided with reference to the terms of the Double Taxation Avoidance Treaty. The relevant clauses appear to be Clauses (a) (b) (c) & (j) of Article 5(2).
6. What we notice from the judgment is that the Court had discussed the issue relating to Article 5(2)(j). The Court agreed with the Tribunal's order finding that, unless the rig is actually used for a period of 120 days, it would not be sufficient to attract Article 5(2)(j) of the Agreement. It was not found sufficient that the rig was entered for maintenance and it is ready for use.
7. We have already held that, in an appeal under Section 260A of the Income Tax Act, a review can be filed on an error apparent on the face of record. We see no error apparent as such on the face of record so as to warrant interference in review.
8. The learned counsel for the Revenue drew our attention to sub-section (4) of Section 260A of the Income Tax Act. It reads as follows:
"(4) The appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question:
Provided that nothing in this sub-section shall be deemed to take away or abridge the power of the court to hear, for reasons to be recorded, the appeal on any other substantial question of law not formulated by it, if it is satisfied that the case involves such question."
9. He would, therefore, submit that the Court has not answered the substantial question of law, which was formulated, insofar as it has not given its finding in regard to the availability of a Permanent Establishment in India on the basis of the provisions contained in Clauses (a) (b) & (c) of Article 5(2) of the Agreement.
10. Article 5(2) provides that the term 'permanent establishment' includes especially (a) a place of management; (b) a branch; and (c) an office.
11. From the perusal of the orders passed, we notice that the appeals were never admitted. The question of law was not formulated as such by the Court under Article 5(2) (a), (b) & (c). It is true that the learned counsel for the appellant/review petitioner points out the sentence in the judgment as follows:
"The point in issue to be decided was, whether the assessee had a permanent establishment in India during the relevant assessment years."
12. It is not in dispute that the Assessing Officer, in this case, proceeded on the basis of Article 5(2)(j). In other words, Article 5(2) (a), (b) & (c) was not in issue. Before the first appellate authority, before whom the assessee carried the matter in appeal, the finding was confirmed with reference to Article 5(2)(j), for the Assessment Year 2002-2003; whereas, in respect of other two years, which are subject matter of other two appeals, the appeals of the assessee were allowed with reference to Article 5(2)(j) and this gave rise to appeals by the Revenue and by the assessee before the Tribunal. Before the Tribunal, we notice that the issue was sought to be raised by the Revenue and the following appears to be the reasoning of the Tribunal in declining to consider the question of Permanent Establishment with reference to Article 5(2) (a), (b) & (c):
"9. Then, there is a question-whether, the assessee had PE under any provision other than Article 5(2)(j). The case of the ld. DR is based solely on the Mumbai address of the assessee mentioned in agreement with Petrom SA. It has been mentioned earlier that the assessee has been described as a "contractor", a body corporate established under the laws of USA, having its office at 1101, Phil Tower Building, City of Tulsa, Oklahoma, USA, and also having its India office at 501, Balaram, Bandra-Kurla Complex, Bandra (East), Mumbai-400051. It is submitted that the agreement had been concluded from this office and all business activities in pursuance of the agreement and the other agreement have been managed and controlled from this office. Therefore, this office constitutes PE in terms of Article 5(1), 5(2)(a) and 5(2)(c). On the other hand, the submission of the ld. counsel is that there is no fact on record to show that the business of the assessee was wholly or partly carried on from this office. Further, there is no evidence that the activities of the rig were managed from this office. There is also no evidence to show as to whether it was only an address given in the agreement for correspondence with Saipem SA or an office from which business activities were carried on. In this connection, our attention has been drawn towards paragraph numbers 11, 12, 36 and 37 of the OECD commentary. According to paragraph no. 11, activities to prepare the fixed place for conducting business is to be excluded. According to paragraph 12, various illustrations given in paragraph 5(2) have to be seen in the background of general definition given in paragraph 1. This means that it is to be examined whether the business of the assessee was partly or wholly carried on from the place of management or the office. Paragraph 36 excludes preparatory and auxiliary activities from the main activity of carrying on the business. The fixed place of business or the PE ceases to exist so when the business carried on therefrom comes to an end. Thus, the nature of activities carried out from Mumbai office has to be examined before coming to the conclusion that this office constitutes permanent establishment in terms of paragraph 5(1), 5(2)(a) or 5(2)(b). The lower authorities have not mentioned about any fact in this regard. The ld. DR proceeded to invoke these provisions on the ground that no new fact is required to be ascertained. She has also not moved any application for admission of any additional evidence in pursuance of her plea so that it could be ascertained whether the assessee had a PE in terms of the aforesaid provisions. From the OECD commentary in the matter, which is of persuasive value, and reading of paragraphs (1) and (2) of Article 5, it is clear that it has to be shown that the business of the assessee had been wholly or partly carried on from this office. There is no evidence to show that any business was carried on except that the address has been mentioned in the agreement. That by itself does not lead to inference of PE under these provisions. Therefore the matter is decided accordingly."
13. The learned counsel for the respondent, in fact, would submit that finding of this nature does not even give rise to a substantial question of law. That is to say, according to him, the argument was raised, for the first time, before the Tribunal and there are no facts on record to back-up the plea raised under Article 5(2) (a), (b) & (c).
14. We notice that, in fact, the Revenue did not move any application for admission of additional evidence, as is noted.
15. As we have already noted, a review can be successfully premised in an appeal under Section 260A of the Income Tax Act only on the review petitioner establishing that there is an error apparent on the face of the record. We are unable to perceive any error apparent on the face of the record in the judgment sought to be reviewed. The Review Petitions fail and they are dismissed. No order as to costs.