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2018 (2) TMI 1767 - AT - Income TaxIncome accrued in India - Business connection / permanent establishment ( PE ) in India - India- Singapore Double Taxation Avoidance Agreement - Held that - We find that the issue as to whether the assessee had a PE in India, or not, had been deliberated upon by the Tribunal in the assesses own case for A.Ys 1999-2000 to 2004-05. The Tribunal in the aforementioned appeals upholding the orders of the lower authorities had concluded that the assessee was having business connection and PE in India. We find that though the assessee had raised a ground of appeal assailing the observations of the DRP that the assessee had a PE in India in terms of Article 5(1) and 5(8) of the India-Singapore DTAA, but however, during the course of the hearing of the appeal no contention was advanced by the ld. A.R to support his aforesaid claim. We thus following the orders passed by the coordinate benches of the Tribunal in the assesses own case in A.Ys 1999-2000 to 2004-05, uphold the order of the DRP that the assessee had a business connection/PE in India. The Ground of appeal No. 1 raised by the assessee before us is dismissed. Aamount of income as attributable to its PE in India - Held that - following the view taken by the coordinate bench of the Tribunal in the assesses own case for the preceding years, therefore, conclude that 15% of the gross receipts pertaining to India bookings shall be the income attributable to the India operations of the assessee. We may herein observe that we are also persuaded to be in agreement with the view taken by the Tribunal in the assesses own case for A.Ys 1999-2000 to 2004-05 that as the commission paid by the assessee to its NMC, viz. ADSIL at 25% of its gross receipts pertaining to India bookings was higher than the income attributable to India, therefore, no part of the aforesaid income would remain in the hands of the assessee which could be brought to tax in India. We thus in terms of our aforesaid observations allow the Ground of appeal No. 2 raised by the assessee before us. 10% of the expenses reimbursed by ADSIL to be held as the business income of the assessee - Held that - As given a thoughtful consideration to the contention advanced by the ld. A.R that 10% of the reimbursement amount as claimed by the assessee which had been characterized by the CIT(A) as the business income would justifiably be entitled for set off against the commission payment made by the assessee to ADSIL, merits acceptance. However, we may herein observe that as the quantification of the gross receipts and commission paid to ADSIL had been restored by the CIT(A) to A.O, therefore, the commission paid by the assessee to its NMC, viz. ADSIL would be that as determined by the A.O. The Ground of appeal No. 3 raised by the assessee is allowed in terms of our aforesaid observations. Fees for technical services - Held that - as per the facts borne from the records it emerges that ADSIL was simply rendering services in the nature of marketing to the assessee, but however, there is nothing available on the records which could persuade us to conclude that the aforesaid receipts were in the nature of fees for technical services‟ paid by ADSIL to the assessee, which thus were liable to be brought to tax as per Article 12 of the India-Singapore DTAA. We thus as observed hereinabove are of the considered view that 10% of the amount claimed by the assessee to have been received from ADSIL by way of reimbursement of expenses is to be assessed as business income‟, which would be entitled for set off against the amount of commission paid by the assessee to ADSIL. Tax should be levied on interest income @ 20% by applying the provisions of Sec. 115A instead of 15% as per DTAA - Held that - As relying on the order passed by the Tribunal in the assesses own case for A.Y 2004-05 and thus denying the benefit of Article 11 of the India-Singapore Tax Treaty had held that the interest on Income tax refund was liable to be brought to tax under Sec. 115A of the Act. We are of the considered view that as the issue and the facts involved in the present appeal remain the same, therefore, no infirmity emerges from the aforesaid findings of the CIT(A). Transfer pricing adjustment in respect of USD denominated interest free ECB loan which was advanced by the assessee to its wholly owned subsidiary company in India, viz. ADSIL - Held that - the application of the State Bank of India PLR of 11.75% for determining the ALP of the interest on loan advanced in USD by the assessee to its AE, could not be approved. We have deliberated on the issue under consideration and finding ourselves to be in agreement with the view taken in the aforesaid judicial pronouncements, are thus of the considered view that the ALP of the interest on the loans advanced by the assessee to its subsidiary company, viz. ADSIL was to be determined on LIBOR and not as per the Indian PLR rate so adopted by the A.O/TPO. We thus in the backdrop of our aforesaid observations direct the A.O/TPO to take ALP of the interest on the loan advanced by the assessee to ADSIL as per the LIBOR rate plus 2%. We thus in terms of our aforesaid observations partly allow the Ground of appeal No. 5 raised by the assessee before us. Interest levied on the assessee under Sec. 234B deleted
Issues Involved:
1. Business connection/permanent establishment (PE) in India. 2. Income attributable to PE. 3. Reimbursement of expenses. 4. Applicability of Article 24 of India-Singapore DTAA and Interest income. 5. Transfer pricing adjustment on advances. 6. Levy of interest under section 234B. Issue-wise Detailed Analysis: 1. Business Connection/Permanent Establishment (PE) in India: The primary issue was whether the appellant had a PE in India under Articles 5(1) and 5(8) of the India-Singapore DTAA. The CIT(A) and the Tribunal upheld that the appellant had a PE in India, relying on the Tribunal's decisions in the appellant's own case for earlier years (A.Ys 1999-2000 to 2004-05) and the DRP's decisions for subsequent years (A.Ys 2006-07 to 2010-11). The Tribunal followed the principle of consistency and dismissed the appellant's ground of appeal on this issue. 2. Income Attributable to PE: The CIT(A) confirmed the AO's action of attributing 10% of the gross receipts from Indian operations as income attributable to the PE in India. The Tribunal, following the decisions in the appellant's own case for earlier years, concluded that 15% of the gross receipts pertaining to India bookings should be the income attributable to the India operations. Since the commission paid to ADSIL was higher than the income attributable to India, no further income was chargeable to tax in India. The Tribunal allowed the appellant's ground of appeal on this issue. 3. Reimbursement of Expenses: The issue was whether the expenses reimbursed by ADSIL to the appellant were part of the business income. The CIT(A) held that 10% of the reimbursed expenses should be taxed as business income. The Tribunal observed that the appellant failed to substantiate its claim that these were pure reimbursements. However, it allowed the set-off of this income against the commission paid to ADSIL, following the principle laid down in the appellant's own case for A.Y 2004-05. 4. Applicability of Article 24 of India-Singapore DTAA and Interest Income: The CIT(A) upheld the AO's decision that the benefit of Article 24 of the DTAA was not available to the appellant due to the failure to provide evidence of remittance to Singapore. Consequently, the interest income was taxed under section 115A of the Act at 20%. The Tribunal upheld this decision, following the Tribunal's decision in the appellant's own case for A.Y 2004-05. 5. Transfer Pricing Adjustment on Advances: The CIT(A) confirmed the transfer pricing adjustment made by the AO/TPO by applying the Indian PLR of 10.50% to the interest-free loan given by the appellant to ADSIL. The Tribunal, however, directed the AO/TPO to determine the ALP of the interest based on LIBOR plus 2%, following the judgments in CIT Vs. VFS Global Services Pvt. Ltd. and CIT Vs. Cotton Naturals (I) Pvt. Ltd. 6. Levy of Interest under Section 234B: The CIT(A) upheld the AO's levy of interest under section 234B. The Tribunal, following the judgment of the Bombay High Court in the appellant's own case for A.Y 2003-04, directed the AO to delete the interest levied under section 234B, as the payer was responsible for deducting tax at source. Conclusion: The Tribunal partly allowed the appellant's appeals for A.Ys 2005-06 to 2011-12, directing adjustments based on the principles established in earlier years and judicial precedents. The appeal of the revenue for A.Y. 2005-06 was dismissed. The Tribunal emphasized the principle of consistency and adherence to judicial precedents in determining the issues.
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