TGE Gas Engineering GmbH Versus DCIT

ITA No.1958/Del/2022

Facts of the Case

Appellant-TGE Gas Engineering GmbH entered into a consortium agreement with IOT to participate in the tender floated by Petronet LNG Limited (‘PLL’) for expansion of the LNG facility at Dahej LNG terminal. (herein after referred as ‘Consortium ‘).

Consortium was awarded a contract by PLL for Engineering, Procurement, Construction and commissioning (‘EPCC Contract’) of Top Side facilities for stand by Jetty at Dahe LNG Terminal.

Appellant established a Project Office (‘PO’) in India in for execution of said Contract.

EPCC Contract was terminated by PLL without making any payment to the consortium.

Consortium invoked arbitration mechanism with PLL.

During the pendency of arbitration proceedings, IOT approached TGE to settle the dispute with PLL.

Accordingly, a Memorandum of Understanding (‘MOU’) was signed between TGE and IOT to jointly approach PLL for settlement.

A settlement agreement was signed between TGE-IOT and PLL, pursuant to which they approached the arbitral tribunal with the settlement agreement and a request was made to pass appropriate order.

The Appellant raised an independent invoice on IOT for settlement of arbitration for Euro 2 million under the settlement agreement in lieu of Liability clause (Article 12) under consortium agreement dated 22 December 2010 entered between TGE Germany and IOT.

Arbitral tribunal accepted the settlement reached between the parties and issued order terminating arbitration proceeding

The Arbitration settlement payment of Euro 2 million was received by the Appellant from IOT.

The appellant electronically filed its return of income u/s 139(1) of the Income Tax Act (‘the Act’) for AY 2018-19 on September 07, 2018 vide e-filing acknowledgement number 286346921070918, declaring loss of Rs. 3,77,110.

Deputy Commissioner of Income Tax, Circle International Tax 3(1)(1), Delhi (‘Ld. AO’) issued draft assessment order u/s 143(3) r.w.s 144C of the Act dated September 28, 2021 wherein the addition of amount received under the settlement of INR 16,13,20,000 was made treating it effectively connected to the PE in India of the appellant.

The matter was pursued before the Dispute Resolution Panel and pursuant to directions of DRP, AO issued a draft assessment order adding the receipt of settlement and treating that to be connected to the PO of appellant that constituted the PE in terms of India Germany DTAA.

Also can you add the following in the end of the Article : -“Author of this article: Adv. Ravish Bhatt, Solicitor, Senior Courts of England and Wales, ADIT, Chartered Institute of Taxation

Connect with Mr. Bhatt on Linkedin: www.linkedin.com/in/ravish-bhatt

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