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The Commissioner of Income Tax v/s Steag Energy Services GMBH

Company & Directors' Information:- H-ENERGY PRIVATE LIMITED [Active] CIN = U40300MH2007PTC175626

Company & Directors' Information:- A A ENERGY LIMITED [Active] CIN = U40100MH2005PLC157604

Company & Directors' Information:- K M ENERGY PRIVATE LIMITED [Active] CIN = U40300UP2014PTC067293

Company & Directors' Information:- R. R. ENERGY LIMITED [Active] CIN = U40109CT2004PLC016580

Company & Directors' Information:- ENERGY INDIA CORPORATION LIMITED [Strike Off] CIN = U40101MH2008PLC181157

Company & Directors' Information:- B & S ENERGY PRIVATE LIMITED [Active] CIN = U40108KA2008PTC048416

Company & Directors' Information:- T-3 ENERGY SERVICES INDIA PRIVATE LIMITED [Active] CIN = U40200PN2008FTC135459

Company & Directors' Information:- M. E ENERGY PRIVATE LIMITED [Active] CIN = U51503PN1998PTC114226

Company & Directors' Information:- K ENERGY COMPANY LIMITED [Active] CIN = U40100CT2007PLC020433

Company & Directors' Information:- U R ENERGY (INDIA) PRIVATE LIMITED [Active] CIN = U40108GJ2011PTC067834

Company & Directors' Information:- B & G ENERGY PRIVATE LIMITED [Active] CIN = U40107TN2006PTC061362

Company & Directors' Information:- J C I ENERGY PRIVATE LIMITED [Converted to LLP] CIN = U40102KA2011PTC058550

Company & Directors' Information:- ENERGY INDIA LIMITED [Strike Off] CIN = U74899DL1998PLC096211

Company & Directors' Information:- STEAG ENERGY SERVICES (INDIA) PRIVATE LIMITED [Active] CIN = U31101DL2001PTC188324

Company & Directors' Information:- INDIA ENERGY PRIVATE LIMITED. [Strike Off] CIN = U74899DL2000PTC103993

Company & Directors' Information:- V ENERGY PRIVATE LIMITED [Active] CIN = U40102TG2011PTC073693

Company & Directors' Information:- S M M ENERGY PRIVATE LIMITED [Active] CIN = U40109TG2014PTC092679

Company & Directors' Information:- C & C ENERGY PRIVATE LIMITED [Active] CIN = U29299DL2010PTC204724

Company & Directors' Information:- U S G ENERGY PRIVATE LIMITED [Active] CIN = U29307TZ2005PTC012414

Company & Directors' Information:- A B T ENERGY PRIVATE LIMITED [Active] CIN = U40108KA1983PTC005321

Company & Directors' Information:- A & T ENERGY PRIVATE LIMITED [Strike Off] CIN = U40106GJ2012PTC070207

Company & Directors' Information:- K E ENERGY PRIVATE LIMITED [Strike Off] CIN = U40300TN2011PTC080288

Company & Directors' Information:- V A R ENERGY INDIA PRIVATE LIMITED [Strike Off] CIN = U40300TG2014PTC095926

Company & Directors' Information:- C & N ENERGY PRIVATE LIMITED [Strike Off] CIN = U40100KL2011PTC028837

Company & Directors' Information:- M K D ENERGY PRIVATE LIMITED [Active] CIN = U31908UP2015PTC070501

Company & Directors' Information:- C I T L ENERGY PRIVATE LIMITED [Strike Off] CIN = U40108TG2010PTC066844

Company & Directors' Information:- C R B ENERGY PRIVATE LIMITED [Active] CIN = U40108TG2010PTC066845

Company & Directors' Information:- J S ENERGY PRIVATE LIMITED [Active] CIN = U45202HP2006PTC030006

Company & Directors' Information:- T V G ENERGY PRIVATE LIMITED [Strike Off] CIN = U52100UP2014PTC066243

Company & Directors' Information:- G G ENERGY PRIVATE LIMITED [Strike Off] CIN = U74899DL1994PTC058590

Company & Directors' Information:- V G ENERGY PRIVATE LIMITED [Strike Off] CIN = U40100MH2005PTC156544

Company & Directors' Information:- D R R ENERGY PRIVATE LIMITED [Active] CIN = U40102TN2009PTC073741

Company & Directors' Information:- Q - ENERGY PRIVATE LIMITED [Strike Off] CIN = U74920WB2012FTC182047

Company & Directors' Information:- ENERGY SERVICES PRIVATE LIMITED [Strike Off] CIN = U74210WB1999PTC088792

Company & Directors' Information:- H R ENERGY PRIVATE LIMITED [Strike Off] CIN = U40101RJ2003PTC018712

Company & Directors' Information:- E TAX SERVICES PRIVATE LIMITED [Active] CIN = U93030MH2012PTC238948

Company & Directors' Information:- J R J R ENERGY PRIVATE LIMITED [Strike Off] CIN = U40100MH2005PTC153641

Company & Directors' Information:- R M ENERGY PRIVATE LIMITED [Strike Off] CIN = U40108MH2003PTC142881

Company & Directors' Information:- S V E ENERGY PRIVATE LIMITED [Active] CIN = U40100TN2009PTC073738

Company & Directors' Information:- L V S ENERGY PRIVATE LIMITED [Under Process of Striking Off] CIN = U40101TG2010PTC068290

Company & Directors' Information:- A. S. R. ENERGY PRIVATE LIMITED [Strike Off] CIN = U40105TG2008PTC056907

Company & Directors' Information:- S S E ENERGY (INDIA) PRIVATE LIMITED [Strike Off] CIN = U40108TG2014PTC093709

Company & Directors' Information:- K & H ENERGY PRIVATE LIMITED [Strike Off] CIN = U40109AP2012PTC079162

Company & Directors' Information:- P & S ENERGY PRIVATE LIMITED [Strike Off] CIN = U40109TG2011PTC072632

Company & Directors' Information:- P A ENERGY PRIVATE LIMITED [Strike Off] CIN = U40100HP2006PTC030328

Company & Directors' Information:- S & G ENERGY PRIVATE LIMITED [Strike Off] CIN = U31101CH2010PTC032133

Company & Directors' Information:- P M S ENERGY INDIA PRIVATE LIMITED [Active] CIN = U74999DL2012PTC236645

Company & Directors' Information:- D M ENERGY PRIVATE LIMITED [Strike Off] CIN = U40107DL2010PTC199110

Company & Directors' Information:- S K S ENERGY PRIVATE LIMITED [Strike Off] CIN = U40108DL2003PTC119741

Company & Directors' Information:- C P ENERGY PRIVATE LIMITED [Strike Off] CIN = U40109DL2010PTC204395

Company & Directors' Information:- 3 A S ENERGY PRIVATE LIMITED [Strike Off] CIN = U40300DL2013PTC250263

Company & Directors' Information:- I S R ENERGY PRIVATE LIMITED [Under Process of Striking off] CIN = U40103AP2012PTC084585

Company & Directors' Information:- T AND F ENERGY PRIVATE LIMITED [Active] CIN = U40100MP2011PTC026065

Company & Directors' Information:- V V ENERGY PRIVATE LIMITED [Active] CIN = U40101KA2008PTC046429

Company & Directors' Information:- E P C ENERGY PRIVATE LIMITED [Strike Off] CIN = U40107KA2010PTC053645

Company & Directors' Information:- R J ENERGY PRIVATE LIMITED [Active] CIN = U40100GJ2009PTC056990

Company & Directors' Information:- I ENERGY PRIVATE LIMITED [Active] CIN = U40100GJ2009PTC058473

Company & Directors' Information:- ENERGY O & M SERVICES PRIVATE LIMITED [Active] CIN = U74120GJ2013PTC077449

    W.P.(C). No. 7216 of 2018

    Decided On, 17 July 2018

    At, High Court of Delhi


    For the Petitioner: Zoheb Hossain, Sr. Standing Counsel, Deepak Anand, Jr. Standing Counsel for Revenue. For the Respondent: Deepak Chopra, Harpreet Singh Ajmani, Rohan Khare, Advocates.

Judgment Text

S. Ravindra Bhat, J.


1. The Revenue’s writ petition – challenges the order of the Settlement Commission dated 26.10.2017 made for the Assessment Year (A.Y.) 2009-10 to 2014-15.

2. The respondent is headquartered in Essen in Germany – it is the Engineering and Nuclear Technology Division of STEAG GmbH, which provides professional and specialised energy services in Germany and elsewhere. It has a wholly owned subsidiary in India i.e. M/s STEAG Energy Services (India) Pvt. Ltd. (hereinafter 'SESI') set up in 2001 to provide cost-effective consultancy services by integrating resources of its parent company and those of SESI units in India. It entered into an operation and maintenance (O&M) contract with HPL Cogeneration Limited (HPLCL) on 30.06.2006 for operation and maintenance in Engineering support for the 116 MW Combined Cycle Cogeneration Power Plant at Haldia, West Bengal. As per the contract, the SESI had to operate and maintain the plant on behalf of HPLCL. For that activity, SESI sub-contracted a part of the contract to the respondent on 01.09.2006; the latter deputed the three personnel to work at the plant site for the period of 3 years i.e. from September, 2006 to April, 2010. In relation to this arrangement the engineering and technical services were rendered by the respondent to SESI. A survey was conducted on 04.01.2016 under Section 133A of the Income Tax Act of the respondent in its office at NOIDA, U.P. As a consequence of the survey, the respondent applied under Section 245C(1) of the Act for the period in question (A.Y. 2009-10 to 2014- 15).

3. An order was made under Section 245D(2C) of the Act and the Commissioner of Income Tax furnished a report under Rule 9 of the Income Tax Settlement Commission Rules. After considering the materials on record, the Settlement Commission rendered its findings. The issues which it dealt with concerned (i) the existence of a permanent establishment; (ii) the TDS on payment of salary, wages etc.; (iii) royalty for supply of software and (iv) Transfer Pricing issues (reference to Transfer Pricing Officer, Adjustments made in respect of reimbursements, delay in receivables from Associated Enterprises and fee for technical services (FTS) that was offered by the assessee.

4. The final order – which is impugned in this case held the assessee/petitioner liable to pay for a total income of Rs.53,75,27,974/-. The Commission had made an addition of Rs.59,38,707/- upon an additional income of Rs.53,15,89,267/- offered by the assessee/ petitioner.

5. The Revenue urges that the Settlement Commission’s order impugned in the present petition was unsustainable on two grounds; firstly, as the respondent had violated the provisions of Section 40a(iii) of the Act since it was not paid within the time the additions needed to be made; secondly, the question of royalty, which according to the Revenue was erroneously held against the Revenue and in favour of the assessee given the true meaning of the term under Explanation 2 to Section 9(1)(vi) of the Act. It was lastly contended that the Settlement Commission also fell into error in permitting the assessee to exclude adjustments in respect of Jharsuguda project, Orissa (for A.Y. 2010-11 to 2013-14).

6. So far as the first two issues i.e. the question with respect to TDS and the payment of royalty (on software) goes, this Court notices at the outset that the findings of the Settlement Commission fully accord with the law declared by this Court in ANZ Grindlays Bank vs. DCIT; 382 ITR 156 (Del) and with DIT vs. Infrasoft Ltd., 220 Taxman 273 as far as the second issue urged with respect to royalty on software is concerned.

7. On the third issue i.e. exclusion of the outstanding receivable of the Jharsuguda project, this is what the Settlement Commission had to say:-

'We have considered the submissions made by the A.R and find considerable force in the argument that at least on account of outstanding receivables of Jharusugoda project there is absolutely no case for an adjustment as the applicant has already shown super-normal profits of 500%. We are therefore of the view that no adjustment is warranted on account of outstanding receivables in the case of Jharsugoda project for A.Y. 2010-11 to 2013- 14.…………………………………………………………'

8. The Revenue’s complaint is that even whilst the assessee conceded that without prejudice to its contentions it was open to adjustments in respect of the receivables the exclusion of Jharsugoda project only on the ground that in that unit it had reflected 'super-normal profits of 500%' is entirely without logic or rationale. It is submitted that the question of accepting such reasoning is contrary to the spirit of the provisions of the Income Tax Act. Having agreed to the adjustments, the mere fact that in the Jharsugoda project the assessee had reflected substantive profits which were offered by it to tax did not mean that the adjustments in that regard ought not to have been gone into.

9. This Court notices, at the outset, that out of the three errors sought to be highlighted two issues are covered by the previous decisions of the Court - against the Revenue. As far as the third issue i.e. the exclusion of adjustments in respect of Jharsugoda project goes, the matter is factored. The case law as to the scope of the Court’s remit under Article 226 of the Constitution of India while dealing with the orders of the Settlement Commission are categorical, it is only in the case where there is manifest and egregious findings of law that are erroneous; which call for interference. The other g

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rounds on which the Court is permitted to interfere with the Settlement Commission’s findings are non-application of mind or lack of bona fides, or as emphasised in ‘CIT, Mumbai vs. Anjum M.H. Ghaswala, (2001) 252 ITR 1 (SC) and ‘Brij Lal & Others vs. Commissioner of Income Tax, (2011) 1 SCC 1 where no true and full disclosure was made by the assessee. 10. In the opinion of this Court none of these vitiating factors have been disclosed by the Revenue calling for interference with the Settlement Commission’s order impugned in the present case. Consequently, the petition has to fail and is accordingly dismissed.