Bombardier Transportation Sweden AB vs DCIT, Circle-1(1)(2), International Taxation, New Delhi: PE Issue Under India-Sweden DTAA

Case Summary: Bombardier Transportation Sweden AB vs DCIT, Circle-1(1)(2), International Taxation, New Delhi

Case Number: ITA 6071/DEL/2019
Appellant: Bombardier Transportation Sweden AB, New Delhi
Respondent: DCIT, Circle-1(1)(2), International Taxation, New Delhi
Assessment Year: 2016-17
Case Filed On: 16th July 2019
Order Type: Final Tribunal Order
Date of Order: 26th September 2022
Pronounced On: 26th September 2022

Introduction

This case involves an appeal filed by Bombardier Transportation Sweden AB against the Deputy Commissioner of Income Tax (DCIT), Circle-1(1)(2), International Taxation, New Delhi, concerning the assessment year 2016-17. The core issue in this case revolved around whether Bombardier Transportation Sweden AB had a Permanent Establishment (PE) in India under the India-Sweden Double Taxation Avoidance Agreement (DTAA) concerning its contract with the Delhi Metro Rail Corporation (DMRC).

Background of the Case

Bombardier Transportation Sweden AB, a company registered in Sweden, entered into a contract with DMRC for the design, manufacture, supply, installation, testing, and commissioning of train control and signaling systems (Contract CS01). The company claimed that it had no PE in India, and therefore, the income from the offshore supply of equipment to DMRC was not taxable in India. The company argued that the goods were manufactured and sold outside India, with payments received outside India, and hence, there was no taxable income within India as per the provisions of the India-Sweden DTAA.

However, the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] disagreed with this contention, relying on the findings of the Dispute Resolution Panel (DRP) from the earlier assessment year 2011-12. They concluded that Bombardier Transportation India Ltd. (BTIN), a subsidiary of Bombardier Transportation Sweden AB, constituted a Fixed Place Permanent Establishment (PE) of the appellant in India, and thus, the income from the offshore supply was taxable in India.

Arguments by the Appellant

The appellant, represented by counsel, argued that the issue was squarely covered in its favor by previous rulings of the Income Tax Appellate Tribunal (ITAT) in its own case for earlier assessment years, including 2011-12, 2012-13, 2013-14, 2014-15, and 2015-16. The appellant contended that the contract in question (CS01) was similar to those in the previous years, where the ITAT had ruled that no PE existed in India, and thus, no income from offshore supplies was taxable in India.

Tribunal’s Analysis and Findings

The ITAT, comprising Shri Shamim Yahya (Accountant Member) and Shri Kul Bharat (Judicial Member), carefully considered the appellant’s arguments and reviewed the record. The tribunal noted that similar issues had been consistently decided in favor of the appellant in the previous assessment years, where the ITAT had held that BTIN did not constitute a PE of Bombardier Transportation Sweden AB in India. The ITAT found no distinguishing features or new facts in the current assessment year that would warrant a different conclusion.

The tribunal also referred to its recent decision in the appellant’s case for the assessment year 2014-15, where it had categorically stated that the DRP’s findings were based on an erroneous appreciation of facts, and the appellant had no place of disposal in India through BTIN. The tribunal reiterated that the appellant’s income from offshore supplies was not taxable in India under the provisions of the India-Sweden DTAA.

Conclusion and Order

The ITAT concluded that the issue was covered in favor of the appellant by its own rulings for earlier and subsequent assessment years. The tribunal found that the CIT(A) had erred in upholding the AO’s decision to attribute income to the alleged PE in India. The ITAT set aside the orders of the lower authorities and ruled in favor of Bombardier Transportation Sweden AB, directing the deletion of the impugned additions.

Order Pronounced in Open Court: 26th September 2022

Accountant Member: Shri Shamim Yahya
Judicial Member: Shri Kul Bharat

Assistant Registrar: ITAT, New Delhi

Bombardier Transportation Sweden AB vs DCIT, Circle-1(1)(2), International Taxation, New Delhi: PE Issue Under India-Sweden DTAA