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2014 (3) TMI 1109 - AT - Income TaxPE in India - Income accrual in India - Held that - We are not inclined to interfere with the finding of CIT(A), who has held that the assessee does not have PE in India. Under the facts and circumstances, no revenue earned by assessee could be said to be attributable to PE, even if one was to come to the conclusion that a PE, even if no taxability could arise under Article 7. The assessee has offered the royalties and fee for technical services for taxability in India under article 12A and to that extent, admitted tax liability exists. This approach of Assessing Officer was rejected by CIT(A) in A.Y. 2006-07, which was upheld by us. Following the same reasoning, we uphold the order of CIT(A) on the issue. - Decided against revenue
Issues involved:
1. Existence of Permanent Establishment (PE) in India 2. Taxability of receipts sourced from India under the treaty 3. Appeal grounds and amendments Detailed Analysis: 1. Existence of Permanent Establishment (PE) in India: The case involved a foreign company with subsidiaries in India. The Assessing Officer (AO) claimed that the company had a PE in India through its subsidiary, which was acting as a dependent agent. However, the first appellate authority, the Commissioner of Income Tax (Appeal) (CIT(A)), examined the nature of the business carried out by the company and concluded that there was no fixed PE in India. The Income Tax Appellate Tribunal (ITAT) Pune also referred to previous judgments in the company's own cases for other assessment years to support this conclusion. The ITAT upheld the CIT(A)'s decision that the company did not have a fixed PE in India, and therefore, no income could be attributed to a PE in India. 2. Taxability of receipts sourced from India under the treaty: The AO had taxed the company's income sourced from India under various categories without allowing any deductions. However, the CIT(A) rejected this approach and held that under the India-Germany Double Taxation Avoidance Agreement (DTAA), India did not have the right to tax certain receipts as business profit under Article 7. The ITAT concurred with the CIT(A) and concluded that even if a PE existed, no taxability could arise under Article 7 as no revenue earned by the company could be attributed to a PE in India. The ITAT also noted that the company had offered royalties and fees for technical services for taxability in India under Article 12A, and to that extent, admitted tax liability existed. 3. Appeal grounds and amendments: The appeal filed by the revenue against the CIT(A)'s order raised specific grounds related to the existence of a PE in India and the taxability of receipts sourced from India under the treaty. The ITAT dismissed the revenue's appeal and upheld the CIT(A)'s order, emphasizing that the company did not have a PE in India and that no revenue earned by the company could be attributed to a PE in India. The ITAT's decision was based on the findings regarding the nature of the company's business operations and the provisions of the India-Germany DTAA. In conclusion, the ITAT Pune's judgment in this case clarified the issues surrounding the existence of a PE in India and the taxability of receipts sourced from India under the treaty, providing a detailed analysis based on the facts and legal provisions involved in the matter.
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