M.K. CHATURVEDI, VICE PRESIDENT ORDER This appeal by assessee is directed against order of CIT(A) and relates to asst. yr. 2000-01. 2. Shri J.D. Mistry, learned counsel for assessee appeared before us. Department was represented by Shri Shaji P. Jacob. Shri Mistry neatly identified issues involved in this case as under : (i) Whether conditions precedent for assuming jurisdiction to make enhancement under s. 251 of IT Act, 1961 (in short Act ) did exist under facts and circumstances of case ? (ii) Whether order of CIT(A) was in conformity with principles of natural justice ? (iii) Whether ASPL was facade created for purpose of taxation, ex consequenti its corporate veil be lifted for consolidating four contracts ? (iv) Whether there exists PE in India in relation to offshore supply activities ? (v) Whether there exists business connection with Neyveli Lignite Corporation (in short "NLC") and Ansaldo Energia SpA ? (vi) Charging of interest under s. 234B of Act. 3 . Over and above at time of hearing Shri Mistry raised following additional ground : "The income earned by appellant from design and engineering services under Contract I with Neyveli Lignite Corporation should not be taxable as Fees for technical services and accordingly, Assessing Officer (AO) has erred in taxing same and CIT(A) erred in upholding action of AO." 4. Apropos first issue various arguments raised before us by Shri Mistry resemble so many radii of circle starting from different points on its circumference but all oriented towards power of CIT(A) in respect of assumption of jurisdiction under s. 251 of Act. Learned counsel for assessee placed before us various precedents to buttress claim. 5. At outset it was pointed out that it is beyond power of CIT(A) to consider enhancement in context of item which was not part of assessment order or which was not processed by AO. mere stipulation in regard to Contract I in order of assessment is not adequate to confer jurisdiction. What is required is consideration of relevant receipts from Contract I from point of view of taxability and not mere incidental reference. He relied on decisions of apex Court rendered in case of CIT vs. Shapoorji Pallonji Mistry (1962) 44 ITR 891 (SC) and in case of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (1967) 66 ITR 443 (SC). It was stated that these decisions were not cited or brought to notice of Division Bench which decided later case of CIT vs. Nirbheram Daluram (1997) 139 CTR (SC) 484 : (1997) 224 ITR 610 (SC). As such this decision of Supreme Court cannot be followed in preference to earlier decisions. If there exists difference between decisions of Hon ble Supreme Court, then Full Bench decision is required to be followed in preference to later Division Bench decision. For this proposition reliance was placed on decision in case of Union of India & Anr. vs. Raghubir Singh (Decd. By Liquidetor) (1990) 87 CTR (SC) 186 : (1989) 178 ITR 548 (SC). 6 . Adverting to powers of CIT(A) learned counsel for assessee contended that it can never be greater than powers of AO. assessment order dt. 27th Feb., 2004 was order under s. 148 of Act. It is therefore sine qua non now to consider whether AO would have had jurisdiction under s. 147. reasons recorded for reopening assessment makes it abundantly clear that AO lacks jurisdiction under s. 147. If CIT(A) assumes jurisdiction on same count it would constitute impermissible change of opinion. Indisputably assessment cannot be reopened under s. 147 on basis of change of opinion. 7 . Learned Departmental Representative submitted that powers of CIT(A) are co-terminous with that of AO. As such he can exercise all powers of AO. Reference was made to various precedents. In case of CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) it was held that CIT(A) can do what ITO can do. He can also direct him to do what he failed to do. Referring to case of Raghubir Singh, supra, it was stated that it is nowhere laid down in this case that earlier decision of Bench of equal strength has to be necessarily followed and later decision has to be ignored. Apex Court only discussed some healthy judicial practice/custom to be followed by all Courts and at same time has held that when relevant statutory provision had not been brought to notice of Court or vital point was not considered, it is duty of Court to review its earlier order and not to perpetuate mistake. This is why even after this decision, three Member Bench of Supreme Court in case of UCO Bank vs. CIT (1999) 154 CTR (SC) 88 : (1999) 237 ITR 889 (SC) held that decision of another three Member Bench of Supreme Court in case of State Bank of Travancore vs. CIT (1986) 50 CTR (SC) 290 : (1986) 158 ITR 102 (SC) was rendered per incurium. Learned Departmental Representative submitted that on this factual backdrop decisions rendered in cases of CIT vs. Shapoorji Pallonji Mistry (supra), CIT vs. Rai Bahadur Hardutroy Motilal Chamaria (supra) and CIT vs. Nirbheram Daluram (supra) are to be considered. first two decisions were rendered under 1922 Act whereas case of Nirbheram Daluram (supra) was rendered under 1961 Act in which Explanation was appended to s. 251. As per this Explanation, CIT(A) may consider and decide any matter arising out of proceedings in which order appealed against was passed. In view of this and considering ratio laid down in cases of CIT vs. Kanpur Coal Syndicate (supra) and Jute Corporation of India Ltd. vs. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC) Supreme Court in Nirbheram Daluram s case (supra) decided issue in favour of Revenue. 8. It was further submitted that CIT(A) did not add any income from totally new source. dictionary meaning of term "source" is "place of origin or place of issue". In this case source of income was contract with Neyveli Lignite Corporation (in short NLC ). Assessee did offer income from Contract II and part of Contract I. Details regarding Contract III and Contract IV were also available before AO. CIT(A) has only added income from Contract III and Contract IV as well as part of income from Contract I. 9 . After considering various details and submissions we find that Contracts I, II, III and IV were treated as part of single composite contract, there was no new source of income which was considered by CIT(A). Hon ble Supreme Court in case of CIT vs. Sun Engineering Works (P) Ltd. (1992) 107 CTR (SC) 209 : (1992) 198 ITR 297 (SC) has held that once assessment is reopened, entire proceedings are open before AO and he can bring to tax any income which escaped assessment. Therefore AO as well as CIT(A) need not restrict themselves to issue on which assessment was reopened. 10. powers of CIT(A) are co-terminous with those of AO. He has plenary powers in disposing of appeal. He can do what AO could do and can also direct latter to do what latter failed to do. Appeal is merely continuation of original proceedings and unless some fetters are placed upon powers of CIT(A), he can exercise same powers as that of AO. There appears to be no reason as to why CIT(A) cannot modify assessment order when such powers are expressly provided to him by statute. 11. It is duty of CIT(A) to consider matter placed before him in all its aspects. This is all moreso when AO had failed to consider matter in detail or in proper manner. In present case issue was with regard to taxability of income arising out of contract with NLC. Assessee did offer income from Contract II and part of Contract I. Details in regard to Contracts III and IV were also available before AO. CIT(A) has only added income from Contract III and Contract IV and part of income from Contract I. 12. Hon ble apex Court in case of CIT vs. Nirbheram Daluram (supra) made it clear that powers of first appellate authority under s. 251 of Act cannot be construed to be confined to matters considered by AO only. First appellate authority is entitled to direct additions in respect of items of income not considered by AO. In cases of Rai Bahadur Hardutroy Motilal Chamaria (supra) and Shapoorji Pallonji (supra), decisions were rendered under 1922 Act. In case of Kanpur Coal Syndicate (supra), apex Court made it very clear that CIT(A) can do what ITO can do. We therefore respectfully following decisions of Hon ble Supreme Court in Nirbheram Daluram (supra) and Kanpur Coal Syndicate (supra), decide this issue in favour of Revenue and against assessee. 13. Next issue relates to observance of principles of natural justice. At outset it was contended by Shri Mistry that no opportunity for cross- examination was given to assessee. In reply to this, learned Departmental Representative submitted that no request to cross-examine any specific person was made by assessee. Questionnaires were issued to NLC and officials of NLC. NLC is Government of India undertaking. Government concern made available relevant records of assessee to Tax Department. No information was gathered from any private individual. Nobody was examined by Department. As such there was no question of allowing any cross- examination. Whatever written replies received from NLC were supplied to assessee who in turn offered written replies to them. Reliance was placed on decision of Tribunal rendered in case of GTC Industries Ltd. vs. Asstt. CIT (1998) 60 TTJ (Bom) 308 : (1998) 65 ITD 380 (Bom). In this case it was held that right to cross-examine witness who made adverse report, is not invariable attribute of requirement of dictum, audi alteram partem. principles of natural justice do not require formal cross-examination. Formal cross-examination is part of procedural justice. It is governed by rules of evidence, and is creation of Court. It is part of legal and statutory justice and not part of natural justice. Therefore, it cannot be laid down as general proposition of law that Revenue cannot rely on any evidence which has not been subjected to cross-examination. However, if witness has given directly incriminating statement and addition in assessment is based solely or mainly on basis of such statement, in that eventuality it is incumbent on AO to allow cross-examination. 14. In present case Revenue only used records of Government concern to find out truth. No person was examined in individual capacity. material gathered was supplied to assessee. Assessee submitted his comments on said material. Besides, these replies cannot be construed as comments on said material. Besides, these replies cannot be construed as directly incriminating statement. While discussing merits Shri Mistry stated that all these replies are either in favour of assessee or irrelevant or innocuous. As such there is no denial of natural justice on this count. 15. Next it was argued that CIT(A) did not pinpoint as to which paper was relied upon and for what purpose it was used. It is abundantly clear from records that in enhancement notice CIT(A) pointed out all relevant details and conclusion was arrived at after considering reply given by assessee. In case of Newton Chikli Collieries Ltd. vs. CIT (1962) 44 ITR 495 (SC) Hon ble Supreme Court has held that s. 143(3) does not contemplate that with regard to every reason which AO formulates for his order, assessee must be given opportunity to produce fresh evidence or fresh explanation, even in case where AO considered whatever materials assessee produced in reply to notices issued to it or even independently of that notice. This argument also is bereft of any merit. 16. Next it was argued that all papers relied on by CIT(A) were not supplied to assessee. This is factually incorrect statement. Learned counsel for assessee did not give details of items said to be relied on by CIT(A) and not given to assessee. All documents considered by CIT(A) and annexed to his order were either furnished by assessee or copy given to assessee. Assessee is party to such document. As such assessee cannot plead ignorance to such document. Learned Departmental Representative produced before us evidence for supply of documents collected by Department. 17. Next it was argued that assessee was not given opportunity to cross- examine NLC engineers. In present case we find that issue in dispute is in regard to question who executed contract in reality and who furnished performance report. As such it is not relevant to cross-examine NLC engineers on technicality of performance report. 18. Natural justice should always be used for furtherance of cause of justice. palladium of justice requires that law suits be not protracted, otherwise great oppression might be done under colour and pretence of law. These lofty principles which are harbinger of justice cannot be used for dragging justice in labyrinth. We have examined facts of present case. In our opinion, there is no failure of natural justice. 19. Next issue relates to question : Whether Ansaldo Services (P) Ltd. (in short "ASPL"). subsidiary company of assessees was facade created for purpose of taxation, ex conseqnti its corporate veil be lifted for consolidating four contracts ? 20. We have heard rival submissions in light of material placed before us and precedents relied upon. Assessee, non-resident company, was engaged in business of setting up power plants. NLC went in for TS-I expansion plan for setting up two units of 210 MW each thermal plants at Neyveli. NLC had given advertisement in leading newspapers calling for offers from "single bidder" for project. Assessee did offer its terms as single bidder. 21. Consequent upon award of contract, assessee suggested to NLC for splitting up contract into four separate contracts. Letter of award was suitably modified splitting contract four in number. Contracts I and II were awarded to assessee whereas Contracts III and IV were awarded to ASPL at specific directions of assessee. 22. Assessee disclosed only income from Contract II, that too 10 per cent of gross receipts as income under s. 44BBB of Act. Assessee did not disclose any income from other three contracts. 23. AO denied benefit of s. 44BBB and brought to tax sum under s. 9(1)(vii) treating it as technical fee. Assessee filed appeal thereagainst. CIT(A) noted that though contract was split into four, it was composite contract from beginning to end. entire work was single package and overall responsibility was with assessee only. In real sense it was only composite contract. 24. CIT(A) did not tinker with profits of Contract II. It was taxed @ 20 per cent as per prescription of s. 9(1)(vii) of Act. In regards to other contracts CIT(A) estimated profits. In respect of Contract I it was noted that it involved sale of various plants and machinery. Besides assessee had also taken overall responsibility and was required to fulfil commitments in eventuality of insolvency of subsidiary company. On this factual backdrop profit rate was estimated at 15 per cent of 75 per cent of activity said to be done in India, therefore, total net profit rate came to 11.25 per cent on whole of contract. With respect to Contracts III and IV assessee reflected loss as such lower profits were to be estimated. Pendency of some arbitration proceeding was also noted which could result in some more benefits to assessee. Considering all this, CIT(A) vide para 30.4 of his order estimated profit @ 7 per cent and relevant portion is reproduced as under : "30.4. With respect to Contracts III and IV, ample justification is provided in pre-pages as to why appellant is to be taxed. In execution part, there are no two different concerns. Appellant completed testing, commissioning and performance guarantee test and handed over plant and machinery which are terms of Contract IV. On this part of activity also appellant is to bear tax. This cannot be ignored. It is also seen that entire contract is composite contract and appellant and subsidiary executed same with common premises, common managers, etc. for purpose of NLC, single bidder responsibility clauses introduced in various agreements, ensured its interest. appellant safeguarded its interest by conducting affairs through its agent, having common premises, common managers, etc. But only for tax purposes, consideration is being split up. Now that there is ample justification to tax appellant on all four contracts, we can estimate profit on entire project taking into consideration losses of Contract III and IV and also profits attributable to PE. Secs. 44AD and 44BBB allow us to estimate income at 8 per cent and 10 per cent respectively. One more factor to be considered is delay in execution of project leading to recovery of liquidated damages collected both from appellant and its subsidiary. This matter is now before arbitrator and no definite conclusion can be drawn at this stage. appellant states that loss was incurred on two contracts. It also cited certain comparable cases where profit is ranging between 5 to 9 per cent. All these points are duly taken into consideration by me. It is my considered opinion that on whole contract, i.e. Contracts I, III and IV, reasonable profit of 7 per cent of receipts can be taken as income of appellant and subjected to tax. On Contract II, it is already decided that consideration should be brought to tax under s. 9(1)(vii) r/w s. 115 as fee for technical services." 25. We have examined advertisement for tender published in April, 1997. scope of work is mentioned as "from beginning to end". It was also stipulated that prime bidder would enter into consortium with business associates. It is seen that ASPL was not associate at that time and ASPL did not have necessary qualifications also. Assessee submitted bid for contract and ASPL was never part of any consortium. Assessee s share in ASPL was only 60 per cent at that point of time. However, assessee had requested NLC to make ASPL also as contractor for onshore supply and service, for which NLC did not agree initially but issue was kept open. By letter dt. 18th Nov., 1997 NLC specified acceptable points and sought clarification. Even at this stage ASPL was not in picture. Assessee revised price bid vide letter dt. 9th Feb., 1998 and even at this stage also ASPL was not in picture. Here it would be pertinent to note that assessee had given discount in respect of Contracts II, III and IV and no discount was given in Contract I. If contracts are different, then under what authority assessee could give discount in respect of Contracts III and IV ? 26. perusal of conditional award letter filed at p. 3 of paper book shows that conditional letter of award was issued in favour of assessee only in which scope of work is defined. It is further seen that in cl. 4 of this award letter consolidated price of DM 24,41,90,280 + 5,47,68,16,195 was given. This clearly shows that there is no force in submission that separate prices have been given in Contracts III and IV because originally only consolidated price was given. 27. Detailed submissions were made in respect of individual contracts and learned counsel for assessee had brought to our attention scope of each contract and price for each contract as well as other terms and conditions. His main emphasis was that each contract could have been executed independently. He had referred to Board s Instruction No. 1829 in which it is provided that in case of power projects whatever is executed outside cannot be taxed in India and in this regard he had also relied on decision of Ishikawajima-Harima Heavy Industries Ltd. vs. Director of IT (2007) 207 CTR (SC) 361 : (2007) 288 ITR 408 (SC). But analysis of contracts does not show things in which they were sought to be demonstrated by learned counsel for assessee. Pages 264 to 470 of paper book contain copy of Contract I. recital clause at p. 274 reads as under : "And whereas Principal Contractor has been entrusted with entire turnkey responsibility in respect of implementation of complete work relating to package , on single-bidder responsibility basis and it has also been agreed that package will be executed under four separate contracts, as has been suggested by Principal Contractor and agreed to by Purchaser ;" above clause clearly shows that contract was split at suggestion of assessee for convenience of assessee because as far as NLC is concerned it still fixed responsibility on assessee only. 28. Clause 2.1.2 at p. 309 of paper book reads as under : "Raw materials As far as possible Contractor should consider standard steel sections and plates available in India. In case Contractor uses raw material other than Indian Standard, he should clearly indicate Indian equivalent of same and approval from Purchaser is to be obtained for use of such raw materials. Analysis of raw materials, wherever made available, shall be treated as guiding figures only. Contractor shall take samples and test them in laboratories in India and/or abroad as may be required at his own cost and time, and fully satisfy himself of suitability of raw materials for purpose of plant and equipment offered by him. Contractor must furnish test results to NLC." If assessee was to supply components on f.o.b. basis outside India, t h e n why he was required to look for raw materials in India and why specifications were provided therein ? This only shows that some of equipments were to be fabricated in India by assessee even under Contract I for which even raw material was to be procured in India. 29. Clause 4.2.10 at p. 334 of paper book reads as under : "The delivery of equipment shall be held to be completed when all equipments including special tools and tackles and consumables and drawings/documentations have been supplied by Contractor. Mandatory spares shall be delivered along with last consignment of equipment of Unit No. 1". It was emphasized by learned counsel for assessee that delivery was completed outside India once goods were handed over f.o.b. on ship abroad whereas this clause clearly shows that delivery was really not completed. This is further clear from cl. 4.4.2 at p. 336 of paper book which reads as under : "Delivery of all indigenous equipment as per Annex. II, steel structures including foundation bolts and inserts, tools and tackles for plant and equipment shall be completed on FOR site basis as given below :" This clause clearly shows that some of equipments were to be manufactured or fabricated at site and delivery would be completed accordingly. These clauses clearly show that it is not correct to say that all equipments came from outside India and their supply was completed outside India when same was supplied on f.o.b. basis. 3 0 . Item (c) of cl. 6.5.2 at p. 355 of paper book which deals with "Supply of plant and equipment" reads as under : "(c) ** Receipt of Verification and equipment at site certification, by Purchaser or 15% (quantity/tonnage Consultant, or equipment basis) received and stored at site." This clause again shows fact that delivery of foreign components in This clause again shows fact that delivery of foreign components in respect of Contract I were not completed outside India but many equipments etc. were to be received and fabricated in India only. 31. Clause 10.3 deals with insurance and cls. 10.3.1, 10.3.2 at p. 376 of paper book read as under : "10.3.1 Indian contractor shall arrange, secure and maintain marine, inland transit, storage and erection insurance as may be necessary and for all such amounts to protect interest of purchaser against all risks as detailed herein. form and limit of such insurance as defined herein together with underwriter thereof in each case shall be acceptable to purchaser. However, irrespective of such acceptance, responsibility to maintain insurance at all times during execution of package shall be that of Contractor alone. Indian Contractor s failure in this regard shall not relieve him of any of his contractual responsibilities and obligations. 10.3.2 Any loss or damage to equipment during handling, transporting, storage and erection, till such time plant is provisionally taken over by purchaser, shall be to account of Indian Contractor. Indian Contractor shall be responsible for preferring of all claims as applicable and make good at Contractor s own cost for damage or loss by way of repairs and/or replacement of portion of Works damaged or lost for timely commissioning of equipment/completion of works....." Reading of these clauses shows that contracts are clearly overlapping because Indian contractor (i.e. ASPL) had nothing to do with items to be supplied under Contract I. Even if Indian Contractor has undertaken to carry out insurance on behalf of assessee why all these clauses were inserted in Contract I instead of Contracts III and IV ? Normally when contracts are independent, terms and conditions in respect of party A, for example, cannot be inserted in case of party B. 3 2 . Clause 10.4 at pp. 381 and 382 of paper book regarding customs clearance reads as under : "The Indian Contractor shall be responsible for expeditious clearance of imported materials consigned (under Contract No. I) to Indian port. In event, materials are unloaded at ports other than specified by Contractor, Contractor shall be responsible to clear consignments from that port and transport same to NLC store/site. All costs and expenses including port rent, port handling, demurrage and wharfage are deemed to be included in Contract Price under port etc." above clause clearly shows that in fact all through assessee was responsible for handling of equipment. That is why Indian contractor (i.e. ASPL) after receiving equipment at port handled same and even did customs clearing. We had specifically asked learned counsel for assessee whether ASPL. i.e. Indian Contractor has done customs clearing for any other person. answer was No. This means ASPL is not expert in customs clearing and if ASPL was independent party, then why it was handling equipment which was dispatched by assessee on f.o.b. basis abroad ? From this it is obvious that contracts were split only for convenience of assessee and for no other purpose. If Contract I was really independent and separate then after delivery of equipment on f.o.b. basis at Port of Genova (Italy) NLC itself would have handled equipment at Indian Port or appointed independent clearing agent. 33. Clauses 10.9.5, 10.9.5.1 and 10.9.5.2 at pp. 389 and 390 of paper book read as under : "10.9.5 Indigenous materials 10.9.5.1 consignee for both rail and road despatches shall be clearly marked as : Neyveli Lignite Corporation Ltd., First Thermal Power Station Expansion, Neyveli-607 807, Tamil Nadu............ 10.9.5.2 By wagons In case of despatch of materials in railway wagons, Contractor shall ensure that following is observed by them and their subcontractors." above clause shows that some indigenous material was involved and it was to be dispatched either by road or by wagons and procedure for handling it was to be dispatched either by road or by wagons and procedure for handling same was detailed in these clauses (we are not reproducing further details as they are not relevant). This only again goes to show that definitely some activities in terms of procurement and fabrication of equipments were to be carried out in India also. 34. Clause 10.34.12 at p. 428 of paper book reads as under : "10.34.12 Defect liability for civil works : (a) Contractor guarantees that within one year from date of work completion certificate or in event more than one certificate having been issued by purchaser from respective date so certified, contract work shall not show any sign of defects, cracks, settlements disfiguration, shrinkage, leakage, dampness or any other faults............" above clause clearly shows that contractor was also required to do s o m e civil works which could be done only at site. This is totally in contradiction of main submission that under Contract I assessee had only supplied plant and equipment and that too on f.o.b. basis at Genova port. If assessee had not done any civil work there was no need to take liability for quality of such civil works as well as undertaking to repair same in case of defects etc. 35. Clause 10.48 relates to labour rules, provision of Minimum Wages Act, and payment of wages. Reporting of accidents to labour, provision of Workmen s Compensation Act. provisions of Apprentices Act, labour returns, labour camps, sanitary arrangements, medical facilities at site, etc. We are unable to understand that if contracts were separate why all these terms and conditions under Contract I were entered into when assessee was only to supply plant and equipment on f.o.b. basis outside India. These clauses only show that assessee was very much involved in erection of plant. 36. Pages 471 to 674 of paper book contain copy of Contract II which is supposed to be mainly for supervision of erection of plant and equipment. It was mainly contended while showing various clauses of Contract I that title of plant and equipment supplied on f.o.b. basis had passed on to NLC when plant and equipment were delivered to shipping carrier on behalf of NLC and assessee was no more responsible for same. However, following clauses in Contract II show otherwise : "10.55 Transfer of titles 10.55.1 Imported portion Title of ownership and property to all imported equipment, materials (including imported components to be further processed in India), drawings and documents to be delivered by Contractor in terms of contract shall pass to Purchaser in accordance with INCOTERMS 1990 and transfer of ownership and property to Purchaser shall be simultaneous at time of delivery to carrier, provided however, such passing of title of ownership and property to purchaser shall not in anyway absolve, or dilute or diminish responsibility and obligations of Contractor under this contract including loss or damages and all risks, which shall vest with Contractor till successful commissioning as per this contract. 10.55.2 Indian portion title of ownership and property to all goods, materials, equipment, etc. originating in India shall pass to purchaser as per terms and conditions of this contract after Contractor has effected dispatch of same to Neyveli first Thermal Power Plant AC Contractor and Contractor has prepared necessary documentation for handing over same to NLC s Authorised Representative, provided however, such passing of titles of ownership and property to purchaser shall not in anyway absolved, dilute or diminish responsibility and obligations of Contractor under this contract including loss or damage and all risks which shall vest with Contractor till successful commissioning as per this contract." Moreover, cl. 10.55.2, supra, again makes it clear that some Indian portion of equipment was also involved which again negates submission that Contract I exclusively deals with foreign element of plant and equipment. 37. We further fail to understand why all these clauses were inserted in 37. We further fail to understand why all these clauses were inserted in Contract II which deals only with erection and supervision. only conclusion which can be reached is that though assessee tried to segregate contracts by redrafting one contract, but failed to remove all clauses successfully. 38. Pages 676 to 880 of paper book contain copy of Contract III which is supposed to have been awarded to ASPL and executed by ASPL. All through it was contended that Contracts III and IV are in respect of Indian component of various plant and equipment as foreign component was exclusively reserved under Contract I. This means that basically Contract III should deal with only various plants and equipment procured in India or fabricated in India. 39. Now let us see cl. 10.2.1 at pp. 792 and 793 of paper book. It is as under : "10.2.1 Import licence As per Export & Import Policy of India, 1992-1997, there is no physical barrier but only tariff barrier in way of import of any new capital goods except if item of import is included in negative list or as provided in policy/under any law. However, if required Contractor shall arrange necessary import licence with assistance of Purchaser. However, for any portion of supplies to be imported by Contractor for incorporation in or manufacture of indigenous equipment, Contractor shall arrange necessary import licence on his own." If Contract III was dealing only with Indian portion of equipment, then there was no need to refer to any import licence etc. because anything to be procured abroad would have been part of Contract I. 40. Clause 10.4 regarding customs clearance at p. 798 of paper book reads as under : "10.4 Customs clearance Indian Contractor shall be responsible for expeditious clearance of imported materials consigned (under Contract No. I) to Indian port. In event materials are unloaded at ports other than specified by Contractor, Contractor shall be responsible to clear consignments from that port and transport same to NLC store/site. All costs and expenses including port rent, port handling, demurrage and wharfage are deemed to be included in contract price under port etc." This clause clearly shows that ASPL specifically took responsibility of getting goods cleared despite fact that it had no expertise in customs clearing. This only shows that assessee involved its own people in handling goods because assessee itself was responsible for everything. 41. When we look at notice inviting tender for Main Plant Package (AO1) (International Competitive Bidding) re-tender under head "Overall scope of work " it is mentioned as under : "The scope of services under specification shall include design, engineering, manufacture, supply and delivery at site of plant and equipment, technological steel structure, civil and building structural work. storage and preservation, handling at site, comprehensive insurance, erection, painting, start- up, trial run, testing, commissioning and performance guarantee test, guarantee and warranty for 2 x 210 MW expansion of thermal power Station-I and handover to purchaser operating plant and package shall include plant and equipment and facilities within defined limits......." Under caption "Qualifying requirement for bidders:" it was made clear that : "tender is open to any single bidder called prime bidder who is manufacturer of (a) Lignite fired steam generator and/or (b) Steam turbine and/or (c) Generator above machine(s) manufactured by Prime bidder should have each been rated for unit capacity of 200 MW or above in thermal power plant. If some bidder is manufacturer of only any one or two of items stated in para 2.1, he shall enter into association with other manufacturer(s) called Principal Associate(s) by remaining item(s). Prime bidder and his Principal Associate(s) jointly or separately must have designed, manufactured, supplied, erected, tested and commissioned at least two numbers of their equipments/systems as listed in para 2.1 above in thermal power plant having unit capacity of 200 MW or above and these should have been successful operation for not less than 2 years on original scheduled date of tender opening. Prime bidder must indicate Principal Associate(s) under cl. 2.2 along with offer. Prime bidder must enter into consortium agreement with Principal Associate(s) which shall be submitted before issue of letter of award and shall be valid till completion of all contractual obligations of Prime bidder with purchaser. 2.5 Contract will be entered into with Prime bidder and he as Group Leader shall be contractually bound to Purchaser for completion of entire scope of work. scope of work of Prime bidder shall be on basis of single bidder responsible. Prime bidder shall be solely responsible and liable for all technical management and all other services required to complete entire scope of work detailed in tender specification." This makes it abundantly clear that NLC invited tender from single bidder. norm set out was for composite contract. Animus is clearly manifested in notice inviting tender. 42. We have also noted that conditional letter of award dt. 10th Aug., 1998 was awarded to assessee only and not to assessee and ASPL. Offer made by assessee, correspondence with assessee and discussion between assessee and NLC are part and parcel of this award. ASPL was not party at all till that time. NLC accepted assessee s offer for design, engineering, manufacture, supply, complete erection, testing at site and commissioning of main plant package. Separate contracts were concluded as per desire of assessee. However, responsibility for total performance from start to successful commissioning and full compliance with specification for performance of equipments, vests with assessee. Assessee vide its letter dt. 1st Sept., 1998 to NLC confirmed that its subsidiary ASPL will execute contracts with full knowledge and expertise for proper and timely implementation of works under Ansaldo Energia management, control and full financial support. Even for failure of Contracts III and IV assessee gave unconditional guarantee. Liquidated damage was payable on aggregate price of four contracts. 4 3 . In eventuality of dissolution, liquidation or bankruptcy of ASPL responsibility was on assessee to execute contract. Mr. Zara, project manager of assessee signed all periodical reports, though it was duty of ASPL, as per Contract III. Though Mr. Zara was one of directors of ASPL. these reports were signed as project manager of assessee and not as director of ASPL. Even where sub-contractors of ASPL correspond to ASPL it was handled by Mr. Zara under designation "Project manager". Performance guarantee test was conducted by assessee although it was work of ASPL. 44. total project cost was Rs. 1,074 crores. Assessee declared only less than Rs. 43 crores as its receipt attributable to PE in India. This constitutes less than 4 per cent of total contract price whereas liquidated damage to be borne by assessee was 17.5 per cent of aggregate contract price which works out to Rs. 184 crores. It is palpable from perusal of price schedule of Contract II that no consideration was earmarked for guaranteeing whole project. 4 5 . Originally parties intended to enter into turnkey contract. This intention is demonstrated with reference to tender documents and various other papers. Later on, on negotiation contract was split into four parts under : (a) Contract I deals with offshore supply of equipments covering designing and engineering (Contract Price DM 224,400.28). (b) Contract II deals with supervision of erection, testing and commissioning (Contract Price DM 1,97,90,000 (Rs. 6,40,000). (c) Contract III : on-shore supply of equipments for which sub-contract was given to ASPL, Bangalore (Contract Price Rs. 2,70,08,46,700). (d) Contract IV : Civil construction, erection, testing, commissioning, execution of which was given to ASPL, Bangalore (Contract Price Rs. 2,77,53,29,495)." 46. It is fact that ASPL never carried out any major projects. Its total turnover till financial year 1998-99 was only Rs. 3.23 crores. Its share capital was only Rs. 30 lakhs. But it was awarded contract of total project cost of Rs. 550 crores. Loans were obtained on guarantee given by assessee. ASPL did not have its own capital to execute contract. Works like handing over of machinery etc. were done by assessee though it was duty of ASPL as per contract. Even for Contracts III and IV assessee gave unconditional guaranty. Assessee agreed to pay liquidated damages in respect of work done by ASPL. overall picture which emerges makes it clear that though contracts were split into 4 parts, intention of parties was very clear that these are to be executed on pattern of composite contract. ASPL did not participate in bidding process of tender. It was not eligible to bid. It had no adequate finance and job experience. It could not have obtained contract directly from NLC. It did not negotiate with NLC in regard to extent and scope of work and price. It did not figure in conditional letter of award dt. 10th Aug., 1998. It only worked under umbra of assessee with capital of Rs. 31 lakhs with brought forward losses of Rs. 63 crores as on 31st March, 1999. It had no sufficient staff to execute. When this contract of Rs. 550 crores was entered into ASPL had only 17 engineers. It was fully controlled by Mr. Zara, project manager of assessee. 47. mere fact that ASPL was assessed to tax is not reason alliunde to which assessee could be exonerated from payment of rightful tax dues. Hon ble Supreme Court in cases of ITO vs. Ch. Atchaiah (1996) 130 CTR (SC) 404 : (1996) 218 ITR 239 (SC) and S.P. Jaiswal vs. CIT (1997) 139 CTR (SC) 436 : (1997) 224 ITR 619 (SC) has held that right person has to be assessed even if some other person has already filed returns and paid taxes thereon. 4 8 . Hon ble jurisdictional High Court rendered judgment in case of assessee s own case in Ansaldo Engergia S.P.A. vs. ITO (2003) 184 CTR (Mad) 88 : (2003) 261 ITR 476 (Mad). It begins with following words : "The petitioner is foreign company registered in Italy. petitioner had entered into contracts with Neyveli Lignite Corporation, second respondent. It is claimed that contracts were on turnkey basis for implementation of comprehensive power project for second respondent." 49. Our attention was also invited on order of Tribunal rendered in assessee s own case for asst. yr. 2001-02. question raised before Tribunal in that case was whether receipt from Contract II is to be assessed under s. 44BBB or s. 9(1)(vii) of Act. issue in present appeal is whether all 4 contracts could be treated as one composite contract. For asst. yr. 2001-02 assessee admitted PE in India, whereas in present case assessee claimed that there is no PE in India. question whether there existed composite contract was not examined by Tribunal in asst. yr. 2001-02. This question was neither raised nor examined. As such decision rendered for that year is not relevant for deciding issue. Hon ble Supreme Court in case of M.M. Ipoh & Ors. vs. CIT (1968) 67 ITR 106 (SC) has held that doctrine of res judicata does not apply so as to make decision on question of fact or law in proceeding for assessment in one year binding in another year. In case of Padmasundara Rao (Decd.) vs. State of Tamil Nadu (2002) 176 CTR (SC) 104 : (2002) 255 ITR 147(SC) it was held that Courts should not place reliance on decisions without discussing as to how factual situation fits in with fact situation of decision on which reliance is placed. Circumstantial flexibility, one additional or different fact may make world of difference between conclusions in two cases. 50. For purpose of ascertaining intention of parties, regard shall be had to terms of contract, conduct of parties and circumstances of case. It is duty of Court to construe contract according to intention of parties. law of contract is intended to ensure that what has been promised shall be performed, and in event of breach party at default shall compensate other. To achieve this task contract must be capable of being executed independently. We have examined all factual details. It was found that tender was invited on turnkey basis as lump sum contract. Analysis of various clauses of Contracts I, II, III and IV shows that contract is basically one consolidated contract only. Clauses in respect of performance guarantee bond and liquidated damages make it abundantly clear that entire responsibility of execution of contract was with assessee only from beginning to end. Mr. Zara, project manager of assessee was present in India all through execution of contract. Site office was made available to assessee in name of ASPL. Assessee was required to ensure quality of local product. Activities done by ASPL were part and parcel of main package contract awarded on single bidder basis. Assessee claimed before Hon ble High Court that contracts were on turnkey basis for implementation of comprehensive power project. Before Tax Department assessee changed its stand as per prompting of situation. It is axiom, canonised in dictum : allegans contraria non est audiendus. He is not to be heard who alleges things contradictory to each other. It expresses, in other language, trite saying of Lord Kenyon, that man shall not be permitted "to blow hot and cold " with reference to same transaction, or insist, at different times, on truth of each of two conflicting allegations, according to promptings of his private interest. Taking into consideration entire conspectus of case, we are of opinion that ASPL was facade created for purpose of taxation, ex consequenti, its corporate veil be lifted for consolidating four contracts. 51. In light of aforesaid discussion it is obvious that contract in question was composite contract, as such corporate veil was required to be lifted. We agree with conclusion of CIT(A) that as far as Contract II is concerned, same was treated to provide certain technical services on which profit rate of 20 per cent was applied which was confirmed by Tribunal in ITA No. 2313/Mds/2003 dt. 5th May, 2006. However, we are unable to agree with estimation of profits made by CIT(A). He has held that profit from Contract I could be estimated at 15 per cent because it involves sale of equipment, etc. and since only 75 per cent activity was attributed to India, therefore, profit rate has been taken at 11.25 per cent and ultimately overall profit was taken at 7 per cent. We are of opinion that activities which are not conducted in India cannot be taxed in India. We agree with estimate made by CIT(A) that only 25 per cent of activity could have been done outside India particularly in view of various clauses of Contract I indicating that many plants and equipments were fabricated in India also. We had asked learned counsel for assessee during course of hearing to file P&L a/c, etc. of subsidiary and other comparative figures. But only thing supplied is chart showing net profit margin. We find that assessee has given following chart at p. 72 of paper book showing net profit margin by different parties in similar power projects : "ANSALDO - Profit margins of similar companies for year 2002. Net Sales Net Company profit (INR crores) Profit % (INR crores) Alstom 1,131.65 78.94 6.98% Projects India Ltd. Bharat Heavy 7,465.90 662.83 8.88% Electricals Ltd. Larsen & 8,166.61 400.48 4.90% Toubro Ltd. Arithmetic 6.92%" mean Taking into consideration of entire conspectus of case, we direct AO to tax profit at 7 per cent in context of Contract I, III and IV. However, in regard to Contract I, 7 per cent profit shall be taken in relation to 75 per cent receipts only, as balance receipts can be attributed towards activities conducted outside India. 52. Next issue relates to question whether there exists PE in India in relation to offshore supply activities. 5 3 . We have heard rival submissions. definition of PE is contained under art. 5(2)(j) of DTAA. As per definition, PE shall include building site or construction installation or assembly project or supervisory activities in connection therewith where such site, project or activity together with such other sites projects or activities, if any continue for period of more than six months or where such project or supervisory activity, being incidental to sale of machinery or equipment, continues for project not exceeding six months and charges payable for project of supervisory activities exceed 10 per cent of sale of machinery and equipment. 54. It was argued on behalf of assessee that it comes within ken of second limb of definition. Since supervisory charges payable are less than 10 per cent of sale price of machinery, there was no PE in India. 55. We have already taken view that contract in question was composite contract. Assessee was executing entire project. Assessee was in India for term exceeding 6 months and hence it has PE in India. Assessee had common site office, residential premises for ASPL. Assessee had absolute control and management for all 4 contracts. Mr. Zara, project manager of assessee entered site on 20th Sept., 1998 and stayed all through. Project manager and site manager of assessee carried out managerial and other activities continuously for period of 4-5 years. Project head office and project site office situated in India constitute PE in India. Therefore, business profits attributable to actual operations conducted in India would be exigible to tax. 56. assessee was engaged in several activities such as unloading, transportation, storage of equipments, fusing together of Indian equipments with foreign products, supply of fuel, changing of designs and drawings, ensuring quality of products, etc. Tribunal in case of Van Oord Dredging & Marine Contractors BV vs. Dy. Director of IT (2007) 106 TTJ (Mumbai) 889 : (2007) 105 ITD 97 (Mumbai) has held that PE is for person and not for any activity alone. Therefore it can be said that assessee had PE in India. 57. Next point relates to question whether there existed any business connection of assessee with NLC and ASPL. As per prescription of s. 9(1) "all income accruing or arising, whether directly or indirectly through or from any business connection in India....." shall be deemed to accrue or arise in India. Income attributable to operations carried out in India is exigible to tax in India. meaning of expression "business connection" is not restricted by definition of business contained in s. 2(13) of Act because that definition is enumerative and not exhaustive. Business connection has not been defined in Act. It is not equivalent to carrying on business. matter in which one has right of interference comes within ambit of expression "business connection . business connection involves relation between business carried on by non-resident which yields profits or gains and some activity in India which contributes directly or indirectly to earning of those profits or gains. It predicates element of continuity between business of non- resident and activity in India. 58. Assessee was required to interact, monitor and co-ordinate with more than 20 contractors to execute work of project. As per Contract I supplies were on-going process at different stages depending on local availability. Management and control of subsidiary was vested with assessee. Testing, commissioning and performance guarantee tests and handing over machinery and finalizing contractual obligation make it very clear that there existed business connection. ASPL took technical advice and availed supervisory assistance from assessee during entire period. Mr. Zara, project manager submitted all periodical reports which were submitted by ASPL as per Contracts III and IV. During relevant period 60 per cent of holding in ASPL was with assessee. In March 2002 it was enhanced to 99.99 per cent. Control management and financing part of ASPL was by assessee. On basis of guarantee given by assessee only, banks in India have advanced money to ASPL. assessee was under obligation to see that entire package was executed properly with utmost precision. Hence there existed business connection with ASPL. business connection with ASPL. 59. In regard to additional ground we have treated whole contract with NLC as composite one with single bidder responsibility. As such there is no question of bifurcation of this part of receipt for which services were utilised in India. 60. Last issue relates to charging of interest under s. 234B of Act. 6 1 . We have heard rival submissions. Learned counsel for assessee submitted that assessee received only income on which tax was deductible. As such there was no liability to pay advance tax. Hence no interest is chargeable under s. 234B. To buttress this proposition, reliance was placed on decision of Special Bench of Tribunal rendered in case of Motorola Inc. vs. Dy. CIT (2005) 96 TTJ (Del)(SB) 1 : (2005) 95 ITD 269 (Del)(SB). Learned Departmental Representative tried to distinguish this decision with reference to ratio laid down in case of CIT vs. Anjum M.H. Ghaswala (2001) 171 CTR (SC) 1 : (2001) 252 ITR 1 (SC), wherein apex Court held that s. 234B interest is mandatory. We find some force in submission of learned Departmental Representative that assessee had approached deductor NLC to deduct tax at lower rate and in turn NLC approached Department to deduct lower tax under s. 197. This means that tax deductible itself was reduced and only that portion of tax could be reduced from total tax which according to assessee was deductible means lower amount for which assessee approached NLC. As per prescription of s. 209 computation of advance tax is to be made after reducing amount of income- tax which could be deductible at source. Therefore, we are of view that interest under s. 234B which is of mandatory nature can be charged only on amount which is payable by assessee after reducing amount of tax which was deductible (in this case lower amount as per request of assessee). Therefore, we set aside order of CIT(A) and remit matter back to file of AO with direction to rework interest as per observations made by us. 62. We have examined all factual details which were available before Revenue authorities and admitted at time of hearing. However, those details which were filed after hearing was over viz. affidavit of Mr. Zara, project manager, etc. were not considered. 63. Before we part with this matter, we would like to categorically observe that various decisions cited by parties have been duly considered. In case some of them do not find mention in order, it does not mean that same have been overlooked. 64. In result, appeal of assessee stands partly allowed. *** ANSALDO ENERGIA SPA v. ASSISTANT DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)