2014 (11) TMI 1173 - HC - Income Tax

Income accrued in India - presence of the Assessee in India is through an agent - PE in India - DTAA benefits - Held that - The Tribunal has rightly observed that even during the course of the proceedings before it no material was placed on record which would prima facie demonstrate or even indicate that the transactions between the principal namely the Assessee and the agent are not under at arm s length conditions. Once this onus is not discharged by the Revenue and the Tribunal has confined its observations and conclusions to the facts and circumstances peculiar to the Assessee s case and for the particular assessment year then we agree with Mr. Irani that this Appeal does not raise any substantial question of law. However we do not find any basis for the submission made by Mr. Singh that the Tribunal should have examined the matter in the light of applicability of Article 5(1)(2) of the DTAA. The departmental representative has given up that because there was no finding rendered by the Assessing Officer. The Tribunal as rightly held was not obliged to go into the same. Even on this ground the Tribunal s order cannot be faulted.

Summary

Issues:
Challenge to Income Tax Tribunal's order, applicability of section 44B of the Income Tax Act, 1961, interpretation of Double Taxation Avoidance Agreement (DTAA) Article 5, determination of permanent establishment in India, examination of factual findings, consideration of substantial questions of law.

Analysis:
The appeal challenged the order passed by the Income Tax Tribunal in a case involving the assessment year 2006-07. The appellant, a tax resident of France engaged in the operation of ships in international traffic, claimed no permanent establishment in India to avoid taxation. However, the Assessment Officer found indications of a permanent establishment due to the presence of an Indian agent responsible for various functions. The appellant challenged the assessment, leading to the impugned order by the Tribunal.

The appellant contended that the Tribunal erred in not considering the applicability of Article 5(1) of the DTAA, focusing instead on Article 5(5) and 5(6). The respondent argued that the Tribunal's decision was based on factual findings and the concession made by the departmental representative regarding the application of Article 5(5) and 5(6). The respondent emphasized that examining different issues at this stage would cause prejudice and dismissed the need for substantial questions of law.

The Tribunal clarified that its decision was confined to the facts of the case and the specific assessment year, not addressing broader issues. The discussion revolved around the interpretation of Article 5 of the DTAA concerning permanent establishment. The Tribunal's order was upheld based on the failure of the Revenue to demonstrate that the transactions between the appellant and the agent were not at arm's length. The Tribunal was not obligated to remand the matter due to the absence of such a finding. The appellant's argument for examining Article 5(1) and 5(2) was rejected as there was no basis for it, given the lack of a finding by the Assessing Officer.

In conclusion, the Appeal was dismissed as it did not raise any substantial question of law. The Tribunal's decision was upheld, emphasizing the specific factual circumstances of the case and the absence of evidence regarding the transactions between the appellant and the agent not being at arm's length.