Page 175 - GSTL_6th August 2020_Vol 39_Part 1

2020 ] IN RE : HITACHI POWER EUROPE GMBH 101
provided they have seemed a contract from an Indian company to execute a pro-
ject in India. The contract for execution of project in India would be executed by
the Foreign Company in its own name with the Indian Company prior to setting
up a Project Office in India. The Project Office is set up for a specific project and
hence cannot engage in any other activity/business other than the business in
relation to the Project. The project should be funded directly or indirectly from
abroad by the Foreign Company to the Project Office. The funds arising out of
the Project can be remitted to the Foreign Company subject to the condition that
the remittance of funds to Foreign Company should not affect the completion of
projects in India. Any shortfall of funds for meeting any liability of the Project
Office in India would be met by the Foreign Company by way of inward remit-
tance. Hence, the Foreign Company would be responsible for the liabilities out-
standing for the Project Office. The Project Office cannot directly sign or enter
into any contracts/agreements in India for supply of goods/services from the
said Project Office. The Project Office should close down its operations in India
after completion of the specified project.
2.8 Applicant has discussed a ‘Foreign company’, its definition and re-
sponsibilities and the obligations of a Project Office in India, under the Compa-
nies Act, 2013.
2.9 Further, it is also submitted that a Project Office has to obtain a
Permanent Account Number (PAN) and Tax Deduction and Collection Account Num-
ber (TAN) to be issued in the name of the Foreign Company.
2.10 In the subject case, HO has obtained the PAN for the Project Office
in India and HPE Germany’s Project Office in India supplies goods and services
for undertaking onshore portion of the project on payment of applicable GST to
customers in relation to the specific projects carried out at the various sites in
India and for this purpose, the Project Office has obtained registration under the
GST legislation in various States in India.
2.11 For carrying out the projects in India, the Expat employees would
work from the Project Office in India. As the Project Office is not a separate legal
entity and merely an extension of Head Office in India, these Expat employees
are employees of Project Office. With regard to these Expat employees, the Ap-
plicant has submitted that :
(a) VISA has been issued by mentioning the name of HC i.e., ‘Hitachi
Power Europe GmbH’ under the column ‘Organizational Name’ with
the address of the Project Office in India.
(b) Applicant has deducted TDS under the head ‘Income under Salaries’
for these employees under the Income-tax Act, 1961 in India.
(c) Form 16 under the Income-tax Act, 1961 for salary deduction has
been issued in India for these employees by the Applicant for FY
2018-19.
(d) The quantification of the above salary cost and payment of the same
to most of these Expat employees were made from the Head Of-
fice’s bank accounts to the employees’ bank account outside India.
2.12 As per the Companies Act, 2013, the Foreign Company is required
to prepare its financial statement accounting for all expenses and its correspond-
ing income earned in India from the India Projects and in order to comply with
the above requirements, the Foreign Company makes an accounting entry

GST LAW TIMES  6th August 2020  175