In ITA No.2009/Del/2015- ITAT-  MTR Corporation Ltd. does not have Permanent Establishment in India, Section 44DA of the Income Tax Act Inapplicable: ITAT (Delhi)
Members G.S. Pannu (President) & Saktijit Dey (Judicial) [16-05-2023]

Read Order: MTR Corporation Ltd v. DCIT

Chahat Varma

New Delhi, May 19, 2023: Ruling that MTR Corporation Ltd.(assessee) did not have a Permanent Establishment (PE) in India, the Delhi bench of the Income Tax Appellate Tribunal has held that the provisions of section 44DA of the Income Tax Act would not be applicable and the income offered by the assessee under section 115A read with section 9(1)(vii) of the Income Tax Act should be accepted.

Factual matrix of the case was that the assessee was a non-resident corporate entity based in Hong Kong and was a tax resident of Hong Kong. Delhi Airport Metro Express Pvt. Ltd. (DAMEPL) issued a global tender for engineering and project management consultancy services for the airport line of Delhi Metro. The assessee participated in the tender and was awarded the contract on 19.05.2008. In the year under consideration, assessee received a sum of Rs. 28,51,54,304/- from DAMEPL. The assessee considered this amount as Fee for Technical Services (FTS) as defined under section 9(1)(vii) of the Income Tax Act. In the income tax return filed, the assessee included the amount in the taxable income on a gross basis, applying the tax rate of 10% as per section 115A of the Act. However, after examining the terms of the contract and the information provided by the assessee, the Assessing Officer (AO) discovered that a total of 24 employees had visited India during the relevant year. Among them, 21 employees had stayed in India for more than 183 days. Based on these findings, the AO concluded that the assessee had a PE or business connection in India. As a result, the AO determined that the receipt of Rs. 28,51,54,300/- from DAMEPL should be assessed as income from business and profession under section 44DA of the Income Tax Act.

The Tribunal observed that the facts presented in the case did not establish that the space and facilities provided to the assessee by DAMEPL could be regarded as a fixed place of business where the assessee conducted its business wholly or partially. The Tribunal referred to the case of Assistant Director of Income Tax v. M/s E-funds IT Solution Inc [LQ/SC/2017/1542], where the Supreme Court emphasized that the control over the physically located premises is a crucial factor in determining the existence of a fixed place of business.

The Tribunal held that it was DAMEPL that had control over the premises and the assessee had only been granted access and provided with certain space and facilities. Observing that no supporting evidence had been provided to demonstrate that the assessee conducted its business in India wholly or partly through a fixed place of business, the Tribunal concluded that the assessee did not have a PE in India.