Decided on June 27,2014

Gfa Anlagenbau Gmbh Appellant
Dy./Asstt. Director Of Income -Tax Respondents


B.Ramakotaiah, Member (A) - (1.) THERE are six appeals in this bunch. While ITA No. 2226/Hyd/2011 is directed against the order of the Commissioner of Income -tax (Appeals) -V, Hyderabad dated 31.10.2011 for the assessment year 2008 -09, the remaining five are directed against the orders of assessment passed by the Assessing Officer, viz. Assistant Director of Income -tax (International Taxation) -I, Hyderabad, in pursuance of the orders of Dispute Resolution Panel (DRP) Hyderabad, for the assessment years 2005 -2006 to 2009 -2010. Since common issues are involved, these appeals are being disposed of by this common order for the sake of convenience. ITA No. 1649/Hyd/10 -Assessment Year 2007 -08 ITA No. 1292/Hyd/11 - Assessment year 2005 -06 ITA No. 1293/Hyd/11 - Assessment year 2006 -07 ITA No. 1294/Hyd/11 - Assessment year 2008 -09 ITA No. 1274/Hyd/12 - Assessment year 2009 -10
(2.) FACTS of the case in brief are that the assessee is a foreign company incorporated in Germany. It is engaged in the activity of supervision, erection, commissioning of plant and machinery for steel and allied plants in India. Assessee filed the return of income for the assessment year 2005 -06 reflecting gross receipts of Rs. 8,19,32,566 on 27.10.2005. During the year under consideration, the assessee had received contractual receipts aggregating to Rs. 8,19,32,526 from the M/s. Tata Iron & Steel Co. Limited, Bombay, M/s. SMS Demag Pvt. Ltd., New Delhi and M/s. Jindal Strips Ltd., Bhubaneshwar, Steel Authority of India for rendering technical and supervision services. It was also noticed that the assessee had rendered services to the above mentioned resident companies by engaging foreign technicians at the work -sites in India and the total stay of technicians deputed by the assessee -company on one project in the case of Jindal Strips Ltd. had exceeded 183 days. (220 days). On the basis of these particulars of stay, Assessing Officer concluded that the assessee was having Permanent Establishment within the meaning of Article 5 of DTAA between India and Germany. AO was of the view that the income of the assessee was liable to be taxed under the head 'business profits' in terms of Article 7 of the DTAA between India and Germany. Accordingly, the Assessing Officer issued notice under S. 148 to the assessee on 30.3.2010. No expenditure was allowed to assessee and entire receipts in respective years were taxed as business income at higher rate. Ultimately, as per the directions of the Disputes Resolution Panel in terms of S. 144C of the Act contained in its order dated 12.4.2011, the Assessing Officer proceeded to assess the total contractual receipts of Rs. 8,19,32,526, after allowing deduction at 50% from the gross receipts towards expenditure incurred in relation to the execution of contracts, determined the income at Rs. 4,09,66,263, imposing tax applying a rate of 40% in addition to surcharge and education cess, as applicable under the provisions of S. 44DA of the Act, i.e. treating the same as profits and gains of the business, vide assessment order dated 5th May, 2011 passed under S. 143(3) read with S. 144C of the Act. Facts of the case are similar in all other years, except for the fact that the issue of reopening of assessment under S. 148 was not there in the assessment year 2007 -08, and for the difference in the amounts of gross receipts and the incomes determined thereupon.
(3.) EVEN though assessee has raised the issue of reopening under section 147 in assessment years 2005 -06, 2006 -07, 2008 -09, the issue is to be decided on merits for A.Y. 2007 -08. Therefore, since the issue is common in all the years, we intend to decide the issue on merits first. Facts of the case, as taken from the appeal for the assessment year 2007 -08, are as follows -;

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