M/s. Ansaldo Energia SPA v. The Income Tax Appellate Tribunal Chennai Bench "A"

had any say in the matter. CIT (Appeals) found that "the entirenature of the contract, the terms involved and the conduct of theparties clearly show that only for the tax purposes, the contractwas split up." He found that there is uniformity of control inrespect of all the four contracts, and that the price of Contract Iand II is likely to be loaded higher, to take care of the otherresponsibilities and risks of the assessee with respect toContract III and IV on account of the single bidder responsibility.The CIT (Appeals) found that there was a "permanent establishment"and also that there was a "business connection". The CIT ( Appeals)estimated the profits on the entire project taking intoconsideration the losses of contract III and IV and also profitattributable to Permanent Establishment('PE' in short). 6.The aggrieved assessee went before the Tribunal. TheTribunal took the view that the contract in question was a compositecontract, that the assessee had a common site in the premises ofASPL and had absolute control and management for all contracts andthat, there was a permanent establishment in India, and also "thatthere existed a business connection with ASPL." The Tribunal heldthat, "Taking into consideration the entire conspectus ofthe case, we are of the opinion that ASPL was a facadecreated for the purpose of taxation ex consequent itscorporate veil be lifted for consolidating the fourcontracts." The Tribunal, however, did not agree with CIT in its estimation ofprofits. The Tribunal held that for the activities which are notconducted in India, tax cannot be levied in India. The Tribunalagreed with the estimation made by the CIT that only 25% of activitycould have been done outside India particularly in view of thevarious clauses of contract I indicating that many plant andequipment were fabricated in India also. Then by taking intoaccount the profit margins of similar companies for the year 2002,the Tribunal directed that the profit shall be taxed at 7% in thecontext of contracts I, III and IV and that with regard to contractI, 7% profit shall be taken in relation to 75% receipts only, asbalance receipts can be attributed towards activities conductedoutside India. This order is under challenge here. 7.The substantial questions of law that arise forconsideration in this tax case (appeal) is as follows:"1. Whether on facts and circumstances of the case,the Tribunal erred in not applying the ratio of theHonourable Apex Court in the case of IHHI case especiallywhen the tests laid down by the Apex Court namely (a) https://hcservices.ecourts.gov.in/hcservices/ passing of property outside India (b) payment ofconsideration outside India have been clearly satisfied?2. Whether on facts and circumstances of the casethe Tribunal is right in holding that the 75 percent ofthe offshore supply activities have happened in Indiagiven the fact that the entire manufacturing activity hashappened outside India which has not been disputed by theITAT?8. The learned Senior Counsel appearing for the assesseewould submit that in view of 2007 (288) ITR 408 (SC) (Ishikawajima-Harima Heavy Industries Ltd., Vs. Director of Income-tax, Mumbai(IHHI in short), all the questions must be answered in favour of theassessee. He submitted that factually there is no evidence thatthere is "a business connection" or "a permanent establishment inIndia". When contracts III and IV are loss making contracts thewhole contract cannot still be estimated for profits. The learnedsenior counsel submitted that the finding that ASPL is a facade or adummy company is incorrect. It had entered into contracts with otherparties even prior to the contract with NLC. The clause relating totransfer of title in the present case is identical to the one inIHHI . The fact that the contract was entered into in India is notrelevant. What is relevant is when the title to the goods suppliedoffshore passed to NLC. When the supply was effected outside Indiaand the consideration was paid outside India, the ratio in IHHI casewould clearly apply. The learned Senior Counsel submitted that ifASPL is only a facade, then there could be no business connection.As in IHHI, the different components of the contract had beensegregated and compartmentalised, so only that income that arose inIndia can be taxed. There is absolutely no finding that thebusiness connection or the permanent establishment had any role toplay insofar as contract I is concerned. The learned Senior counselsubmitted that the consideration in the other three contracts couldnot have been loaded on to Contract I, nor could Contract I be sodrafted as to provide a cushion, since NLC is a statutorycorporation and subject to audit and it cannot enter into shamtransactions. In any event, when dealing with a statutorycorporation like NLC the appellant cannot fix the value of thecontract unilaterally and there is no scope for manipulation of theprices. Each contract was signed by the parties to the contract.The learned Senior Counsel relied on Section 114 of the Evidence Actfor raising the presumption regrding official acts. 9.The learned Senior Standing Counsel submitted that theTribunal was right in its findings. She submitted that the CIT hadon the basis of the evidence concluded that "there was a permanentestablishment" and a "business connection". These factual findingscannot be lightly disturbed. She also submitted that there are major https://hcservices.ecourts.gov.in/hcservices/ differences on facts between IHHI and this case. There, theContractor was a consortium consisting of several equal players andthe consideration was fixed by the consortium. Here the secondcontractor namely ASPL had no independent say in settling contractIII and IV and it had "signed on the dotted lines" as directed bythe assessee. What was conceived was a single contract. There wasonly a single bidder. There would have been only a single contractwith, may be sub-contractors, but for tax purposes or other reasons,it was split up into four contracts. While discounts were given forcontracts II, III and IV no discount was given to contract I. Thelearned Senior Standing counsel relied on [2007] 291 ITR 482(Commissioner Income-Tax and another Vs. Hyundai Heavy IndustriesCo. Ltd.). The learned Senior Standing Counsel submitted that thereis no doubt that for the income on offshore supply outside India notax could be levied. In this case, because of the permanentestablishment and business connection, a percentage of the profitson contract fell under Section 9 of the Income Tax Act and were heldto be 'deemed income'. So the authorities made an estimate of this.The learned Senior Standing Counsel also submitted that the clausein this contract relating to passing of title was different from theclause in IHHI case. The learned Senior Standing Counsel submittedthat no substantial question of law arose for consideration. Writtensubmissions were also filed by both sides.10. Article 5(j) of DTAA defines what "permanent establishment”is, “(i) For the purpose of this convention, the termPermanent Establishment means a fixed place of businessthrough which the business of the enterprises is whollyor partly carried on (ii) The term Permanent Establishment includesespecially(a) to (l)....................(j) a building site or construction, installation orassembly project or supervisory, activities in connectiontherewith, where such site, project or activities(together with other such sites, project or activities,if any) continues for a period of more than 6 months orwhen such project or supervisory activity, beingincidental to sale of machinery or equipment, continuesfor a period not exceeding 6 months and the chargespayable for the project or supervisory activity exceed10% of the sale price of the machinery and equipment."11.As regards 'business connection' Section 9(1)(i) of theIncome Tax Act states that "all income accruing or arising, through https://hcservices.ecourts.gov.in/hcservices/ or from any business connection in India is to be subjected to taxunder the Act." That is there should be (a) a business in India (b)a connection between the assessee and the business (c) the assesseemust have directly or indirectly earned income by virtue of orthrough that connection. 12.Since the IHHI case was relied on, we will extract therelevant paragraphs."The appellant there was a Company incorporated inJapan, a resident of the country, and assessed to tax inthat country. It was engaged, inter alia, in the businessof construction of storage tanks as also engineering etc.It formed a consortium along with other Corporations andentered into an agreement with Petronet LNG Limited forsetting up a LNG storage and degasification facility atDahej. The role and responsibility of each member of theconsortium was specified separately. Each of the membersof the consortium was also to receive separate payments.The project was to be completed in 41 months. Thecontract indisputably involved: (i) offshore supply, (ii)offshore services, (iii) onshore supply (iv) onshoreservices and (v) construction and erection. The price waspayable for offshore supply and offshore services in USdollars, whereas for onshore supply and also onshoreservices and construction and erection partly in USdollars and partly in Indian rupees. .........Before theAuthority the issue raised was not with regard to the on-shore components but only with regard to the off shorecomponents. The Authority held that the amount that isreceivable from Petronet in respect of off shore supply ofequipment, materials, etc., is liable to tax in Indiaunder the provisions of the Income-tax Act, 1961. Thematter was taken to the Supreme Court. ..................One of the crucial factors that has to be decidedrelates to passing of title to the goods supplied in thefollowing terms:22.1. Title to equipment and materials and contractor’sequipmentContractor agrees that title to all equipmentand materials shall pass to owner from the supplier orsub-contractor pursuant to Section E of Exhibit H (GeneralProject Requirements and Procedures). Contractor shall,however, retain care, custody, and control of suchequipment and materials and exercise due care thereofuntil (a) provisional acceptance of the work, or (b)termination of this contract, whichever shall first occur.Such transfer of title shall in no way affect owner’s https://hcservices.ecourts.gov.in/hcservices/ rights under any other provision of this contract.”NotesGeneral1. ***2. Offshore supply (Exhibit D-2.1) is the price ofequipment and material (including cost of engineering, ifany, involved in the manufacture of such equipment andmaterial) supplied from outside India on CFR basis, andthe property therein shall pass on to the owner on highseas for permanent incorporation in the works, inaccordance with the provisions of the contract.32. The contract indisputably was executed in India.By entering into a contract in India, although partsthereof will have to be carried out outside India wouldnot make the entire income derived by the contractor to betaxable in India. ..............34. It is not in dispute that title in the equipmentssupplied was to stand transferred upon delivery thereofoutside India on high-sea basis as provided for in Article22.1. Similarly, Article 13.1 provides for a lump sumcontract price, whereas Article 13.3.2 specifically refersto the cost of offshore supplies. The provisions withregard to offshore supplies and offshore services were tobe read with the provisions contained in Ext. D whichformed the basis of customs duty. Clause 13.4 refers toExt. D as the basis for price escalation. ...39. Territorial nexus doctrine, thus, plays an importantpart in assessment of tax. Tax is levied on onetransaction where the operations which may give rise toincome may take place partly in one territory and partlyin another. The question which would fall for ourconsideration is as to whether the income that arises outof the said transaction would be required to beproportioned to each of the territories or not. ...40. Income arising out of operation in more than onejurisdiction would have territorial nexus with each of thejurisdiction on actual basis. If that be so, it may not becorrect to contend that the entire income “accrues orarises” in each of the jurisdiction. The Authority hasproceeded on the basis that supplies in question had takenplace offshore. It, however, has rendered its opinion on https://hcservices.ecourts.gov.in/hcservices/ the premise that offshore supplies or offshore serviceswere intimately connected with the turnkey project. ...62. In CIT v. Mitsui Engg. and Ship Building Co. Ltd.16 onwhich reliance was placed, the contention was that thefinding that the contract for designing, engineering,manufacturing, shop-testing and packing up to f.o.b. portof embarkation could not be split up since the entirecontract was to be read together and was for one completetransaction. It was in the said fact situation held thatit was not possible to apportion the consideration fordesign on one part and the other activities on the otherpart. The price paid to the assessee was the totalcontract price which covered all the stages involved inthe supply of machinery.63. This case is clearly distinguishable from the facts ofthe present case, since the payment for the offshore andonshore supply of goods and services was in itself clearlydemarcated and cannot be held to be a complete contractthat has to be read as a whole and not in parts.64. The principle of apportionment is also recognised byclause (a) of Explanation 1. Thus, if submission of thelearned Additional Solicitor General is accepted that thecontract is a composite one, then offshore supply would beof equipment designed and manufactured in one territory(Japan), and then sold in another tax territory, leadingto division of profits arising in two tax territories,which is not envisaged under our taxation law.65. It gives rise to the question as to what would be themeaning of the phrase “business connection in India”. Mereexistence of business connection may not result in incomeof the non-resident assessee from transaction with such abusiness connection accruing or arising in India....79. Since the appellant carries on business in Indiathrough a permanent establishment, they clearly fall outof the applicability of Article 12(5) of DTAA and into theambit of Article 7. The Protocol to DTAA, in para 6,discusses the involvement of the permanent establishmentin transactions, in order to determine the extent ofincome that can be taxed. It is stated that the term“directly or indirectly attributable” indicates the incomethat shall be regarded on the basis of the extentappropriate to the part played by the permanentestablishment in those transactions. The permanentestablishment here has had no role to play in the transaction that issought to be taxed, since the transaction took placeabroad. https://hcservices.ecourts.gov.in/hcservices/

80. Clause 1 of Article 7, thus, provides that if anincome arises in Japan (contracting State), it shall betaxable in that country unless the enterprise carries onbusiness in the other contracting State (India) through apermanent establishment situated therein. What is to betaxed is profit of the enterprise in India, but only somuch of them as is directly or indirectly attributable tothat permanent establishment. All income arising out ofthe turnkey project would not, therefore, be assessable inIndia, only because the assessee has a permanentestablishment. ...84. The distinction between the existence of a businessconnection and the income accruing or arising out of suchbusiness connection is clear and explicit. In the presentcase, the permanent establishment’s non-involvement inthis transaction excludes it from being a part of thecause of the income itself, and thus there is no businessconnection.85. Article 5.3 provides that a person is regarded ashaving a permanent establishment if he carries onconstruction and installation activities in a contractingState only if the said activities are carried out for morethan six months. Para 6 of the Protocol to India-Japan TaxTreaty also provides that only income arising fromactivities wherein the permanent establishment has beeninvolved can be said to be attributable to the permanentestablishment. It gives rise to two questions, firstly,offshore services are rendered outside India; thepermanent establishment would have no role to play inrespect thereto in the earning of the said income.Secondly, entire services having been rendered outsideIndia, the income arising therefrom cannot be attributableto the permanent establishment so as to bring within thecharge of tax. ...87. In cases such as this, where different severable partsof the composite contract are performed in differentplaces, the principle of apportionment can be applied, to determine which fiscal jurisdiction can taxthat particular part of the transaction. This principlehelps determine, where the territorial jurisdiction of aparticular State lies, to determine its capacity to tax anevent. Applying it to composite transactions which havesome operations in one territory and some in others, it isessential to determine the taxability of variousoperations.88. Therefore, in our opinion, the concepts of profits ofbusiness connection and permanent establishment should notbe mixed up. Whereas business connection is relevant for https://hcservices.ecourts.gov.in/hcservices/ the purpose of application of Section 9; the concept ofpermanent establishment is relevant for assessing theincome of a non-resident under DTAA. There, however, maybe a case where there can be overlapping of income; but weare not concerned with such a situation. The entiretransaction having been completed on the high seas, theprofits on sale did not arise in India, as has beencontended by the appellant. Thus, having been excludedfrom the scope of taxation under the Act, the applicationof the Double Taxation Treaty would not arise. The DoubleTaxation Treaty, however, was taken recourse to by theappellant only by way of an alternate submission on incomefrom services and not in relation to the tax of offshoresupply of goods."Finally, we have the Supreme Court's conclusion with regard tooffshore supply which alone is relevant to us. "(A) Re: Offshore supply(1) That only such part of the income, as is attributableto the operations carried out in India can be taxed inIndia.(2) Since all parts of the transaction in question i.e.the transfer of property in goods as well as the payment,were carried on outside the Indian soil, the transactioncould not have been taxed in India.(3) The principle of apportionment, wherein theterritorial jurisdiction of a particular State determinesits capacity to tax an event, has to be followed.(4) The fact that the contract was signed in India is ofno material consequence, since all activities inconnection with the offshore supply were outside India,and therefore cannot be deemed to accrue or arise in thecountry.(5) There exists a distinction between a businessconnection and a permanent establishment. As the permanentestablishment cannot be said to be involved in thetransaction, the aforementioned provision will have noapplication. The permanent establishment cannot be equatedto a business connection, since the former is for thepurpose of assessment of income of a non-resident under aDouble Taxation Avoidance Agreement, and the latter is forthe application of Section 9 of the Income Tax Act.(6) Clause (a) of Explanation 1 to Section 9(1)(i) statesthat only such part of the income as is attributable tothe operations carried out in India, is taxable in India.(7) The existence of a permanent establishment would notconstitute sufficient “business connection”, and thepermanent establishment would be the taxable entity. The https://hcservices.ecourts.gov.in/hcservices/ fiscal jurisdiction of a country would not extend to thetaxing of entire income attributable to the permanentestablishment.(8) There exists a difference between the existence of abusiness connection and the income accruing or arising outof such business connection.(9) Para 6 of the Protocol to DTAA is not applicable,because, for the profits to be “attributable directly orindirectly”, the permanent establishment must be involvedin the activity giving rise to the profits."13.In (2007) 291 ITR 482(SC) (cited supra) a non-residentforeign company incorporated in South Korea entered into anagreement with ONGC for designing, fabrication, hook-up andcommissioning of certain facilities in Bombay High. The contract wasinter alia in two parts one was the fabrication of the platform andthe other was installation and commissioning of the said platform.In that case also, the assessee contended that it did not have apermanent establishment (PE in short) in India and therefore, theincome was not taxable in India and that if Indian operationsconsisting of installation commenced in India on November 1st 1986and got completed on April 12, 1987, the duration was less than ninemonths. All the contentions were rejected by the Assessing Officer.Before the Supreme Court, the question that needed to be answeredwas, what are the profits reasonably attributable to the assessee'sPE in India. The Supreme Court on a reading of the entire scheme ofthe Act held that,"7.Under Section 4 of the Act it is the totalincome of every "person" which is taxable. A foreigncompany which is not wholly controlled or managed inIndia is a non-resident so far as its residential statusis concerned. Section 5(2) of the Act lays down that asfar as a non-resident assessee is concerned the scope oftotal income of such an assessee is confined to incomewhich accrues or arises in India or is deemed to accrueor arise in India and which income is received or deemedto be received by such foreign company. Therefore, it isclear that under the Act, a taxable unit is a foreigncompany and not its branch or PE in India. A non-residentassessee may have several incomes accruing or arising toit in India or outside India but so far as taxabilityunder Section 5(2) is concerned, it is restricted toincomes which accrue or arise or is deemed to accrue orarise in India. The scope of this deeming fiction ismentioned in Section 9 of the Act. Therefore, as far asthe income accruing or arising in India, an income whichaccrues or arises to a foreign enterprise in India can be https://hcservices.ecourts.gov.in/hcservices/ only such portion of income accruing or arising to such aforeign enterprise as is attributable to its businesscarried out in India. This business could be carried outthrough its branch(s) or through some other form of itspresence in India such as office, project site, factory,sales outlet etc. (hereinafter called as "PE of foreignenterprise"). It is, therefore, important to note thatunder the Act, while the taxable subject is the foreigngeneral enterprise (for short, "GE"), it is taxable onlyin respect of the income including business profits,which accrues or arises to that foreign GE in India. TheIncome-tax Act does not provide for taxation of PE of aforeign enterprise, except taxation on presumptive basisfor certain types of income such as those mentioned underSection 44BB, 44BBA, 44BBB etc. Therefore, since there isno specific provision under the Act to compute profitsaccruing in India in the hands of the foreign entities,the profits attributable to the Indian PE of foreignenterprise are required to be computed under normalaccounting principles and in terms of the generalprovisions of the Income-tax Act. Therefore,ascertainment of a foreign enterprise's taxable businessprofits in India involves an artificial division betweenprofits earned in India and profits earned outside India.The Income Tax Act, 1961 is concerned only with theprofits earned in India and, therefore, a method is to befound out to ascertain the profits arising in India andthe only way to do so is by treating the Indian PE as aseparate profit centre vis-à-vis the foreign enterprise(the Korean GE, in the present case). This demarcation isnecessary in order to earmark the tax jurisdiction overthe operations of a company. Unless the PE is treated asa separate profit centre, it is not possible to ascertainthe profits of the PE which, in turn, constitutes profitsarising to the foreign GE in India. The computation ofprofits in each PE (taxable jurisdiction) decides thequantum of income on which the source country can levythe tax. Therefore, it is necessary that the profits ofthe PE are computed as independent units. However, in acase where the Government of India has entered into a taxtreaty with a foreign country (Korea, in the presentcase) then in relation to an assessee on whom such taxtreaty applies, the provisions of the Act shall applyonly to the extent to which the provisions thereof aremore beneficial to the assessee.”12....Therefore, unless the PE is set up, thequestion of taxability does not arise - whether thetransactions are direct or they are through the PE. Inthe case of a Turnkey Project, the PE is set up at the https://hcservices.ecourts.gov.in/hcservices/ installation stage while the entire Turnkey Project,including the sale of equipment, is finalized before theinstallation stage. The setting up of PE, in such a case,is a stage subsequent to the conclusion of the contract.It is as a result of the sale of equipment that theinstallation PE comes into existence. However, this isnot an absolute rule. In the present case, there was noallegation made by the Department that the PE came intoexistence even before the sale took place outside India.Similarly, in the present case, there was no allegationmade by the Department that the price at which ONGC wasbilled/invoiced by the assessee for supply of fabricatedplatforms included any element for services rendered bythe PE. ... ...We reiterate, in the circumstances, notall the profits of the assessee company from its businessconnection in India (PE) would be taxable in India, butonly so much of profits having economic nexus with PE inIndia would be taxable in India.13.....Therefore, since there is no specificprovision under the Act to compute profits accruing inIndia in the hands of the foreign entities, the profitsattributable to the Indian PE on foreign enterprise arerequired to be computed under normal accountingprinciples and in terms of the general provisions of theIncome-tax Act. Therefore, ascertainment of a foreignenterprise's taxable business profits in India involvesan artificial division between profits earned in Indiaand profits earned outside India."14.So in IHHI case, "the permanent establishment’s non-involvement in this transaction excludes it from being a part of thecause of the income itself, and thus there is no businessconnection.". This is the reason why the profits of offshore supplywas not taxed. This is also clear from what the Supreme Court heldin Hyundai that, “Therefore, unless the PE is set up, the questionof taxability does not arise - whether the transactions are director they are through the PE. In the case of a Turnkey Project, the PEis set up at the installation stage while the entire TurnkeyProject, including the sale of equipment, is finalized before theinstallation stage. The setting up of PE, in such a case, is a stagesubsequent to the conclusion of the contract. It is as a result ofthe sale of equipment that the installation PE comes into existence.However, this is not an absolute rule”.15. Let us look at this contract. The contract was awarded onlyto the assessee. The assessee, and not NLC, selected ASPL to executeContract Nos.III & IV. Therefore, though NLC entered into ContractNos.III and IV with ASPL it was only at the instance of the https://hcservices.ecourts.gov.in/hcservices/ Assessee. ASPL was the assessee's subsidiary company. At least asfar as this Project was concerned ASPL is virtually the "assessee'spresence" in India. The assessee controlled and managed ASPL forquality ensuring, maintenance of time schedule, quality control,progress of work etc. It is Mr. Zara; Project Manager of assesseewho signed all the periodical reports. On the basis of materialsavailable the CIT (Appeals) and the Tribunal concluded that theentire profits of the offshore supply can not be excluded fromtaxation.(ii) Some extracts from the order of the CIT (Appeals) arereproduced hereunder to show how the matter has been considered.a)"The entire machinery supplied, systemsinvolved were manufactured or fabricated to suit thepurpose. During the course of erection and installationdepending on requirements at the site, several parts,tubes, linings were to be designed freshly engineered orfabricated or imported or got manufactured abroad andsupplied so as to fit them to the requirements. This isa continuous on-going process. This is the reason whycontract I referred to of that 'portion of machinery’,which is to be designed, fabricated, manufactured andsent from abroad. Associated Engineering Services arealso to be supplied from abroad. The turnkeyresponsibility is with the appellant till local parts andforeign parts are fused together." b) There is the assessee's letter dated 08-08-1997 by whichthis splitting up of contracts into four contracts was firstsuggested by the assessee, which in the same breath, also guaranteedthe satisfactory execution of the contract as if it was one singlecontract. c) There is a letter dated 01-09-1998 which reads asfollows:"Ansaldo Energia confirms and guarantees thatAnsaldo Services (P) Ltd., will execute the contractswith full knowledge and expertise for the proper andtimely implementation of the works, under Ansaldo Energiamanagement control and full financial support." d)NLC's letter dated 26-09-1998 reads as follows: https://hcservices.ecourts.gov.in/hcservices/ "As desired by Ansaldo Energia, four separatecontracts shall be concluded, encompassing the completescope of work, namely contract numbers I and II betweenNLC and Ansaldo Energia Spa Contract Nos.III and IVbetween NLC and Ansaldo Services P. Ltd., III floor,Gupta Towers, 50/1 Residency Road, Bangalore – 506 025, asubsidiary company of Ansaldo Energia, selected for thepurpose by Ansaldo Energia. "(Emphasis supplied) e).In the letter of award, NLC indicates to theassessee, "You shall be solely responsible and liable forall technical, management and all other services requiredto complete the entire scope of work detailed in tenderspecification." f).Paragraph 15.10 and 16.2 of CIT (Appeals)'s order,reads as follows:"Now it would be sufficient to note at this stagethat the entire contract was a single turnkey packagecontract which was split after awarding to a singleperson i.e. Appellant. No separate tenders were calledfor and procedures followed. However, for all practicalpurposes, the documents show that NLC safeguarded itsinterest by including the clause fixing the overallresponsibility for the completion of the whole work onlyon the appellant though contracts were divided. Theconsideration for each contract was fixed by theappellant and simply accepted by NLC...."g)"Thus, there is interlacing of all the contracts.The consideration received by the appellant covers muchmore scope of work than what is picturised by theappellant. The entire contract appears to be a compositecontract split up for tax purposes. It would not be fairto say that the contracts are disjoint."h)The appellant-company submitted performanceguarantee test reports and handed over the machinesfinally. Site office of 20,000 square metres wereoccupied by both the parties together. The appellantalso used the site office whole through the contract. https://hcservices.ecourts.gov.in/hcservices/ Even in January 2005, personnel of the appellant-companywere residing at NLC. They were also present at the siteoffice.i) "There is no marked separation between the appellantcompany and the subsidiary company with regard to theexecution of the contracts. The Project Manager and theSite Manager were from the appellant company whocontrolled the entire situation and got the contractsexecuted. It also shows that appellant company had asite office and its staff stayed at the NLC over theperiod of contract. "j) Then the CIT (Appeals) has extracted some questionsand answers elicited during the enquiry. Some of thesamples:"A:18: There was day to day inter action between thestaff Ansaldo, Italy and the staff of Ansaldo, Bangalore.A.31: M/s.Ansaldo, Italy took charge of affairs suchas supervision, Testing and Commissioning. They werepresent at site along with the staff of M/s.Ansaldo,Bangalore. A.54: M/s. Ansaldo, Italy carried out the Testing,Commissioning & Performance Tests-NLC & MECON witnessedthe above. Ans: M/s. Ansaldo, Italy and M/s. Ansaldo Bangaloreutilised the site office.Ans: The Principal Contractor used this siteoffice." k)"23.6. Thus all these clearly establish that therewas a Permanent Establishment with respect to thecontract of the appellant. No doubt, the appellantdisputed the existence of Permanent Establishment. It isinteresting to note that the appellant in the latersubmissions stated that Permanent Establishment" (ifany)" existed for the purposes of supervisory functionsonly. This shows the change in the stand of theappellant. This concept of limited PermanentEstablishment is a strange argument now put forth by theappellant for the first time. Appellant has notsubstantiated this argument with support of case law northe legal provisions under which such claim is made. https://hcservices.ecourts.gov.in/hcservices/ Either a PE exists or it does not exist. There cannot bean intermediate situation.l)23.8. Managerial activities lead to the inference ofa permanent establishment. Controlling and Coordinatingcentres also lead to the inference of a permanentestablishment. A complete management is not necessarybut where important and top-level management decisionsare taken, there is a permanent establishment. It isalready seen that the project manager and the sitemanager of the appellant only carried out management andother activities at the site."m) 24.10. In this case, it cannot be denied that majorityof the holding in the subsidiary company is owned by theappellant. Control and management and the financing partof the subsidiary company are in the hands of theappellant. On the basis of the guarantee given by theappellant only, the banks in India have lent to thesubsidiary company. Even to obtain cash credit for ASPL,the appellant only gave bank guarantee unless the Indiancontractor also performs, the contract cannot becompleted and onus is on the appellant to see that theentire contract is completed. Thus, with regard to thisentire contract the subsidiary company itself is abusiness irrespective of this, with regard to the Indiancontractee (NLC), the contract spread over a period of 5years establishes continuity as well as intimate and realrelationship."So the above extracts/exhibits are field-markers to indicate thenature of the contract and how this case is not identical to IHHICase where the different parts of the contract were "clearlydemarcated and cannot be held to be a complete contract that has tobe read as a whole and not in parts." The above extracts/exhibitsdemonstrate that the reasoning of the CIT (Appeals) was based onmaterials on record, and we do not find any palpableunreasonableness or misconstruction of the evidence, which warrantsoutright rejection.16. One of the main planks of the appellant’s case is thatwhen title had passed overseas and when according to IHHI case thatis the sole factor to decide taxability, the profits of ContractNo.I cannot be taxed. The clause in Contract No.I that dealswith passing of title reads thus:"Title of ownership and property to all importantequipment, materials (including imported components to be https://hcservices.ecourts.gov.in/hcservices/ further processed in India), drawings and documents to bedelivered by the Contractor in terms of the Contractshall pass to the purchaser in accordance with theINCOTERMS 1990 and transfer of ownership and property tothe Purchaser shall be simultaneous at the time ofdelivery to the carrier, provided however, such passingof title of ownership and property to the purchaser shallnot in any way absolve, or dilute of diminish theresponsibility and obligations of the Contractor underthis Contract including loss or damage and all risks,which shall vest with the Contractor till the successfulcommissioning as per this Contract. "According to the assessee the clauses relating to passing of titlein Clause 10.55.1 is identical to the clause relating to passing oftitle in IHHI in Ex-D, Clause 2.1, and the words "the contractorshall retain care, custody and control” used in the IHHI contractmeans the same as the terms used in the present case which relateto loss, damage and risks. According to the learned Senior Counsel,when Parliament had not determined the situs where title gottransferred for fixing taxability, one has to rely only on judge-made law and that IHHI lays down the law that passing of title alonefixes the situs for deciding the taxability and for this referred to20th Century Financial Corporation Ltd., and another Vs. State ofMaharashtra (2000 119 STC 182). 17.The above case was with regard to the controversy asregards the power of the State Legislature to levy sales tax underClause 29(A)(d) of Article 366. The Supreme Court said in the 20thCentury Finance Corporation Case that, “21. It may be noted that the transactionscontemplated under sub-clauses (a) to (f) of clause (29-A) of Article 366 are not actual sales within the meaningof “sale” but are deemed sales by legal fiction createdtherein. The situs of sale can only be fixed either bythe appropriate legislature or by judge-made law, andthere are no settled principles for determining the situsof sale. There are conflicting views on this question.One of the principles providing situs of sale wasengrafted in the explanation to clause (1)(a) of Article286, as it existed prior to the Constitution (SixthAmendment) Act, which provided that the situs of salewould be where the goods are delivered for consumption.The second view is, situs of sale would be the placewhere the contract is concluded. The third view is thatthe place where the goods are sold or delivered would be https://hcservices.ecourts.gov.in/hcservices/ the situs of sale. The fourth view is that where theessential ingredients, which complete a sale, are foundin majority would be the situs of sale. There would be nodifficulty in finding out situs of sale where it has beenprovided by legal fiction by the appropriate legislature.In the present case, we do not find that Parliament has,by creating any fiction, fixed the location of sale incase of the transfer of right to use goods. We,therefore, have to look into the decisional law.” 18. IHHI does hold that since in that case the entiretransaction took place outside India no taxable event took place inIndia, but it said so after looking at the “entire contract “and theterms of the contract, necessary to determine whether all parts ofthe offshore transaction took place offshore and it did so afterlooking into whether the PE in India had anything to do with theoffshore supply and also whether the contract was split up or acomposite contract. It was in that context in IHHI case, the SupremeCourt had said that all parts of the transaction in question that istransfer of properties in goods as well as payment took placeoutside the Indian soil and therefore, the transaction could nothave been taxed in India and that, even though the contract wassigned in India that is of no material consequence since allactivities in connection with off-shore supply were outside India.The Supreme Court also held that the contract is not a complete onewhich has to be read as a whole and not in parts. It also held thatthe PE had no role to play in the transaction. So it was not onlythe situs of transfer of title which was the sole criterion todetermine taxability. So though we are of the opinion that theclause relating to passing of title in IHHI, Further the words“care and custody” used in the IHHI contract and the words “loss”,“risk” and “damage” used in this contract have different connotationand are not identical, we are not going into it since on othergrounds; we find this case differs from IHHI case.19. We again go back to the IHHI case. The Supreme Court saidin Clause 1 of Paragraph 99 that only such part of the income, as isattributable to the operations carried out in India can be taxable.The Supreme Court referred to the judgment of the Delhi High Courtin CIT v. Mitsui Engineering and Ship Building Co. Ltd. [2003] 259ITR 248 (Delhi) where in fact it was held that the price paid to theassessee was the total contract price which covered all the stagesinvolved in the supply of machinery and that it was not possible toapportion the consideration for design on one part which evidentlytook place outside the country and the other activities on the otherpart. The Supreme Court held in IHHI case that Mitsui case wasclearly distinguishable on facts, because in IHHI the price for thesupply of goods offshore and onshore was in itself clearly https://hcservices.ecourts.gov.in/hcservices/ demarcated, “and cannot be held to be a complete contract that hasto be read as a whole and not in parts”. (ii) Therefore, what follows is, if a contract is a compositecontract in spite of the apparent demarcation into separate parts,the mere fact that the contract said that for off-shore supply thetitle passed outside India alone not decide taxability. In IHHI,both the title and consideration passed outside the taxableterritory and very importantly, it was found that it was not acomposite contract, nor was there any involvement of the PE in thetransaction.(underlined for emphasis) It was further factuallyfound that the contract was a divisible one segregating the supplysegment and service segment, and that by agreement the parties haddecided when title passed. (iii) Let us also look at the Hyundai's case. There thecontract was in two parts. One was fabrication of the platform andthe other was installation and commissioning of the said platform.Thereto, the department contended that it was an integrated contractwhich was divided in terms of separate activities. The SupremeCourt held that "the installation PE came into existence only afterthe contract with ONGC stood concluded. It emerged only after thefabricated platform was delivered in Korea to the agents of ONGC.Therefore, the profits on such supplies of fabricated platformscannot be said to be attributable to the PE". Further the SupremeCourt held in Hyundai, that no part of the supply of fabricatedplatforms could be attributed to the independent PE unless theDepartment had proved that the supplies were not at arm’s lengthprice. Further sales were directly billed to the Indian customer(ONGC) and above all there was no allegation that the price at whichbilling was done included any element for the services rendered bythe PE and in view of all these facts, the Supreme Court held thatthe profits that accrued to the Korea GE for the Korean operation notax could be levied. (iv) The following facts distinguish Hyundai from the presentcase. a)In Hyundai, the platform itself was delivered in Korea tothe agents of ONGC. Here, the ASPL acted as clearing agent.b) The Department did not establish that the supplies werenot at arm's length price.c)There was no allegation that the price at which billingwas done for the supplies included the services rendered by PE. https://hcservices.ecourts.gov.in/hcservices/ Whereas here the Revenue had made clear allegations regardingprice fixation and price imbalance. 22.In Hyundai, the finding of the authorities was that therewas no allegation that the price at which billing was done for thesupplies included any element in the services rendered by the PE.In this case there is a specific allegation made by the Departmentthat the price of Contract No. I was loaded to take in a portion ofthe contract price for contract Nos.II to IV and while discount wasoffered for Contract Nos.II to IV, with regard to Contract No. I nodiscount was offered. There is also a specific finding that when thevalue of the Contract Nos.III and IV is much less than the value ofthe entire contract put together it does not make any business sensefor the assessee herein to take out the insurance for the wholevalue of the contract and pay premium. 23.The ASPL and the assessee did not form a consortium ofequal players as in the case of IHHI. The facts show that eventhough the assessee requested NLC to separate the single contractinto distinct contracts, NLC did not agree initially, but did soonly after making certain stipulations. ASPL came into the picture,at the instance of the assessee. ASPL is there only so that thesingle contract could be made into four and there would be an entitywhich will execute Contracts III and IV with NLC. The NLC contractwas with the Assessee alone. The fact that separate price hadbeen given to each of the contract would not make a difference. InIHHI also there is a clause which refers to the total price, yet,the Supreme Court held that the price for each component wascompartmentalized and so for the supplies made on high seas therewas no tax liability. But, in IHHI, there was no factual findingthat there was price imbalance in the four contracts and it wasskewed in favour of the off-shore supply contract, nor was there anyfinding that the entity which executed the contracts for the onshore supply and the on shore services were mere facades. In thiscase these are all factual findings for which there is basis on thematerials on record. 24.In (2007) 291 I.T.R. 278 [C.I.T. vs. P. Mohanakala] it isheld as follows:“25. Whether the High Court was justified ininterfering with the concurrent findings of fact arrivedat by all the authorities including the Tribunal? Theassessing officer found that all the so-called gifts camefrom Ariavan Thotan and Suprotoman. The assessees did notdeclare that they are the aliases of Sampathkumar. It isonly as an afterthought that they have come forward with https://hcservices.ecourts.gov.in/hcservices/ the said plea. The assessing officer also found that thegifts were not real in nature. Various surroundingcircumstances have been relied upon by the assessingofficer to reject the explanation offered by theassessees. The Commissioner of Appeals confirmed thefindings and conclusion drawn by the assessing officer.The Tribunal speaking through its Senior Vice-Presidentconcurred with the findings of fact. The findings in ourconsidered opinion are based on the material available onrecord and not on any conjectures and surmises. They arenot imaginary as sought to be contended....27. No question of law much less any substantialquestion of law had arisen for consideration of the HighCourt. The High Court misdirected itself and committederror in disturbing the concurrent findings of fact.” 25.In this case too, the findings are based on materialsavailable on record, and we are not persuaded to disturb theconcurrent findings. The Tribunal has not in fact ignored IHHI, onthe contrary it has applied IHHI to the extent it is applicable. Wereiterate that while in IHHI, the Supreme Court had held that sinceall parts of the transaction namely the passing of title and passingof consideration had taken place outside India the transactioncannot be taxed in Para 99(1) of IHHI, this conclusion cannot beunderstood in isolation or torn from its context. Earlier in Para 63Supreme Court had distinguished the case from Mitsui Engineering onthe ground that in Mitsui the entire contract was one transactionwhereas in IHHI it was not. So, obviously there are situations whereprofits from offshore supply of machinery cannot be totally excludedfrom tax. Similarly, in Para 67 of IHHI, the Supreme Courtdistinguished the facts in Mazagaon Dock Ltd v. CIT and ExcessProfits Tax (1958) 34 ITR 368 (SC), and observed that in that casethere was an extremely close connection between the resident andnon-resident and therefore, the transaction was taxable. So, this isanother situation where taxability would arise. In the same vein inPara 59 of IHHI, the Supreme Court distinguished Anglo-FrenchTextile Co. Lid v .CIT(1954) 25 ITR 27(SC) on the ground that inthat case there was continuity of relationship. So this is yetanother situation which will decide the question of taxability. Sothe passing of title is not the sole determinant to decidetaxability. To quote from IHHI“And the transaction of sale andsupply of goods off-shore has not taken place with the involvementof the permanent establishment, therefore, excluding thistransaction from the scope of taxation in India". https://hcservices.ecourts.gov.in/hcservices/

26.The word "business connection" is too wide to admit anyprecise definition. From the various judgments of the Supreme Courtsome of which will be cited infra we find that, it includes close,real, intimate relationship and commonness of interest between thenon-resident and the Indian person and where there is control ofmanagement or finances or substantial holding of equity shares orsharing of profits by the non-resident of the Indian person, therequirement of principle (iii), i.e., the existence of close, realand intimate relationship and commonness between the non-residentand Indian person, is fulfilled. 27. The learned Senior Counsel appearing for the assesseerepeatedly submitted that in IHHI the Supreme Court had held thatthe concept of permanent establishment is totally different from theconcept of business connection; and that in this case the CIT(Appeals) had totally confused the two concepts. We have alreadyextracted the relevant portions. We cannot reject the findingsregarding the close relationship, the finding that the supplies werean ongoing process and so on. The ASPL has no doubt been inexistence before this Contract. But its involvement in this wholeproject is only at the behest of the assessee. The findings indicatethat ASPL was the equivalent of an alter ego of the assessee as faras this NLC package is concerned.28. We will now look at some judgments on " businessconnection" a) In (1965) 56 ITR 20 (SC) CIT Vs. R.D. Agarwal & Co. itwas held that a business connection involves a relation between abusiness carried by a non-resident which yields profit or gains andsome activity in the taxable territories which contributes directlyor indirectly to the earning of those profits or gains. Itpostulates a real and intimate relation between trading activitycarried on outside the taxable territories the relation between thetwo contributing to the earning of income by the non-resident in histrading activity. 29.In (1979) 119 ITR 986 (AP)(Bharat Heavy Plate & VesselsLtd., v. Addl. Commissioner of Income-tax, A.P) the Andhra PradeshHigh Court considered whether M/s. Skoda Export had businessconnection in the taxable territory through the Bharat Heavy Plate &Vessels Ltd., which is a Govt. of India Undertaking. Agreementswere entered into between the non-resident company and the GOIundertaking, which involved (1) rendering of consultancy servicesfor the construction of the plant, (2) deputation of design expertsto India, (3) assigning of production rights, general and assemblydrawings, technical information and other documentation, (4)continual exchange of information about the promise of deliveriesand erection of works, and (5) supply of personnel who were in the https://hcservices.ecourts.gov.in/hcservices/ pay roll of the foreign company and also training of localpersonnel.30.On the question whether there was a business connectionbetween the Indian Company and the non-resident foreign company, theAndhra Pradesh High Court held that, "even though the sale of machinery, equipment etc.,took place outside India, the fulfillment of aboveobligations established real and intimate connectionbetween the assessee Indian company and the non-residentforeign company and the relationship amounted to abusiness connection of the foreign company in India. Itis thus seen in the case of the present recipient,foreign company that the activities rendered by it undercontract I and other three contracts are inextricablylinked and integral part and parcel of the activity ofthe business of construction, erection and testing andcommissioning of the Power Station in India.Accordingly, it has a direct business connection inIndia.”, and also that," It is no doubt true that so faras the machinery. Equipment and instruments etc; areconcerned the sales took place outside India....... Buton a combined reading of both the agreements there is abusiness connection between the non-resident and theassessee., ....through or from which income accrued orarose to the non-resident."Therefore, it is not just where the title passed, but also whetherthere was a crucial and intimate relation, whether there was anelement of continuity between the business of the non-resident andthe activity within the taxable territories, such transaction notbeing stray or isolated. Therefore, the argument that ASPL hadentered into contracts with third parties before this Project withNLC is neither here nor there. In the Bharat Heavy Plate & Vesselscase, the business connection was found to exist between a non-resident and a GOI undertaking, notwithstanding that the purchase ofmachinery took place offshore.31.In 1981 (128) ITR 27 (Commissioner of Income-tax Vs. FriedKrupp Industries) this Court held,"that there were no operations in India which wereattributable to the foreign Company which could give riseto any profits being earned in India. The terms of theagreement made it clear that none of the three types ofactivities of the foreign company resulted in businessconnection in India: https://hcservices.ecourts.gov.in/hcservices/ (i) The supply of machinery was to be on f.o.b.Terms. The part played by the foreign company ended withputting the machinery on board and there was no operationby that company in India so as to envisage a businessconnection;(ii) The supply of spare parts was also to be onf.o.b. terms, and, as in the case of machinery, there wasno operation by the foreign company in India toconstitute business connection; and(iii) So far as the deputation of the foreignpersonnel for erection of machinery is concerned, suchpersonnel became employees of the Indian company and theforeign company was not responsible for the erection ofthe machinery as such. It was not like a turnkey projectwhere the responsibility of the foreign company wouldcontinue till the machinery is actually run and provesits performance,Thus, there was absolutely no operation in Indiawhich would give rise to a tax liability in India as faras the foreign company was concerned and the Tribunalwas, therefore, right in its conclusion."32. In this case, the part played by the foreign company didnot end with putting the machinery on board. Even the supplies underContract I was an ongoing process, unlike Hyundai where with thesupply of the fabricated platform in Korea, the offshore supplystood concluded. The assessee continued its operations in India.Its Manager Mr. Zara was very much on site, the offshore supplycontinued for several months and the machinery so supplied wasmodulated to suit the need on site in India and as regards theforeign personnel they did not become the employees of ASPL. Theycontinued to be the employees of the assessee and the assessee wassolely responsible for the erection of the machinery and itsresponsibility continued till the entire project was set up andactually run. 33.In IHHI case, the Supreme Court categorically held thatthe concepts of profits of 'business connection' and 'PE(permanentestablishment)' should not be mixed up and that while the concept ofbusiness connection is relevant for the purpose of application ofSection 9, the concept of PE is relevant for assessing the income ofnon-resident in DTAA. In that case, they held that the entiretransaction was completed at the high seas and the profit on saledid not arise in India. In Hyundai case the Supreme Court held thatunless a PE is set up, the question of taxability does not arise andthat, it was as a result of the sale of equipment, that theinstallation permanent establishment came into existence and that https://hcservices.ecourts.gov.in/hcservices/ for the sale in Korea the PE had no role to play. The Supreme Courtmade it clear that this is not an absolute rule. So obviously, thequestion of taxability will depend on the facts.34.In IHHI the Supreme Court referred to Instruction NO 1829issued by CBDT dated Sept 21 1989, which interalia states that:,”(inturnkey execution) One of the companies would for this purpose actas leader to ensure supervision and co-ordination of inter-relatedtasks.” But here the assessee is not just the leader of the twocompanies which executed the contracts viz; assessee and ASPL, theASPL just speaks the “Master’s Voice”. The contract continued forseveral months. It was found that there was a permanentestablishment. The clause relating to transfer of title has alsobeen extracted and it is not identical with the terms relating totransfer of title in IHHI case. In Mitsui the delivery of thegoods was taken by the agents of ONGC. Here the clearing agent wasASPL which had no prior experience, so the Authorities were of theopinion that this too was done only at the instance of the assessee. 35.The CIT (Appeals) also found that there is interlacing ofall the contracts and the consideration received by the assesseeappears to cover more scope of work than what is ostensiblyprojected by the assessee. The site office of 20,000 sq. metres wasjointly occupied by the assessee and the ASPL. The ASPL appears tohave been in existence one year before the contract and entered intoseveral contracts with several parties even without the aid andblessing of the assessee, but as far as this project is concerned,there was virtually no difference between the activity of ASPL andthe foreign company. There was a continued connection. Theassessee had used this site office throughout the contract. Theperformance reports were obtained only from the assessee. The proofregarding monthly progress report and performance guarantee testreports were enclosed by the assessee. Therefore, the CIT(Appeals)found that the assessee was not divested off its responsibilitiestill the plant and machineries was handed over.36.The Tribunal’s factual findings also are in favour of theRevenue as regards the contract being a composite one, ASPL being amere façade, existence of close relationship between the foreignperson and the Indian operations. 37. Another submission was that NLC being an authority forthe purposes of Article 12 of the Constitution of India, all actionstaken by it must be presumed to be done in accordance with lawrelying on Section 114 of the Evidence Act. We do not think thatthis test can be applied. Even if NLC is “State” for the purpose ofArt.12, the contract entered into by it is not an act done in itsofficial capacity, and this is not an instance where the presumptionwill apply. The single bidder namely the Assessee requested NLC toapportion the contract price in a certain manner amongst the four https://hcservices.ecourts.gov.in/hcservices/ contracts and NLC agreed to this. In any event, NLC had protectedits flanks well. It had deducted tax at source on all the paymentsmade under the four contracts. It had secured the due performanceof the whole contract by insisting that the assessee shouldguarantee its performance even if the contract was split up intofour contracts, NLC did not stand to lose since the value of thecontract was fixed even from the beginning. It must be rememberedthat it was open only for a single bidder. It was only for theconvenience of and at the instance of the assessee that it wasdivided into four. Therefore, the question as to whether NLC wouldhave agreed to such a course of action is really not relevant. NLCdid not suffer in any way by splitting up and NLC was bound to paythe entire payment regardless of whether it was equally distributedamong all the four contracts or whether the price was loaded on toContract I or II. 38.Taking into account all these cumulative factors, theTribunal agreed with the view of the CIT that only 25% of theactivity could have been done outside India particularly in view ofthe various clauses of contract indicating that many plant andequipment were fabricated in India. The Tribunal had asked theassessee to file the profit and loss account in respect of thesubsidiary but all that they supplied was the chart showing the netprofit margin. The Tribunal concluded on the basis of IHHI casethat activities which were not conducted in India cannot be taxed inIndia and on the basis of profit margins of similar companiesdirected the Assessing Officer to tax the profit at 7% in thecontext of Contract Nos.II to IV and with regard to Contract No.I7%, profit shall be taken in relation to 75% of the receipts only. 39.In view of the above, we do not think that the Tribunalhas ignored the decision in IHHI's case. On the other hand, it hasapplied the ratio in that case, but, has held, for reasons given inits order that the entire profits of Contract No.I cannot besegregated and dealt with as if they arose outside India.40. For the reasons given above, we confirm the findings that, a) the foreign company and the activities rendered byit under contract No.I and the other three contracts areinextricably linked and it was a composite contract,b) all responsibility from the beginning to the endrested on the assessee, c) there is an intimate, real and continuousrelationship with the subsidiary company andd) that the price of the other contract was loaded onto Contract No.I. https://hcservices.ecourts.gov.in/hcservices/ In these circumstances, we do not think that the first questionarises for consideration.41.As regards the second question it is purely a question offact. The Tribunal held that only 25% of the profits of ContractNo.I can be said to have arisen off-shore and outside the taxableterritory. The Tribunal did not take note of and could not havetaken note of the fact that 20% of the profits of Contract No.I hasbeen offered to tax, since that is an event that took placesubsequent to the order of the Tribunal. We find in Paragraph No.51in the order of the Tribunal, that the Tribunal had asked theassessee to give certain figures. But the assessee did not do so.The Tribunal then confirmed the conclusion of CIT (Appeals) that 75%of the profits of Contract I is taxable. No reason has been givenfor fixing the percentage. So we are remitting the matter to theTribunal to assess the percentage of taxable profit properly,bearing in mind the findings we have confirmed. Both the partiesmay be heard and documents received for the limited purpose ofenabling the Tribunal to work out the percentage. The Tribunalafter hearing the submissions shall fix the percentage and givereasons therefor and pass appropriate orders, on any date, within aperiod of 4 weeks from the date of receipt of a copy of this order.42.The tax case (appeal) is partly allowed to that extent. sd/-Asst.Registrar/true copy/Sub Asst.RegistrarglpTo1.The Income Tax Appellate TribunalChennai Bench "A"Shastri Bhavan, Haddows Road,Chennai – 600 0062.The Commissioner of Income Tax (Appeals) XIUttamar Gandhi Salai, Nungambakkam, Chennai – 600 0343.The Assistant Director of Income TaxInternational Taxation121, Uttamar Gandhi SalaiChennai – 600 034+ 1 c.c. to Mrs. Pushya Sitaraman, Advocate. S.R.No.1514.+ 1 c.c. to Mr. R. Karthikeyan, Advocate. S.R.No.1368. Order inTax Case No.1303 of 2007SA (CO)GSK 05.02.2009.