2018 (1) TMI 1470 - HC - Income Tax

The following questions of law arise - (1) Did ITAT fell into error in its findings with respect to existence of a fixed place Permanent Establishment (PE) of the assessee in India? (2) Did ITAT fell into error in concluding that assessee/appellant s separately independent agent PE, was located in India? (3) Whether on the facts and the circumstances of the case and the law, the ITAT was justified in attributing as high as 35% of the profits to the alleged marketing activities and thereafter, attributing 75% of such 35% profits to the alleged PE of the Appellant in India?

Summary

Issues:
1. Existence of a fixed place Permanent Establishment (PE) in India
2. Existence of a separately independent agent PE in India
3. Justifiability of attributing profits to marketing activities and the alleged PE in India

Analysis:
The High Court of Delhi addressed multiple issues in this judgment. The first issue pertained to whether the Income Tax Appellate Tribunal (ITAT) erred in determining the existence of a fixed place Permanent Establishment (PE) of the assessee in India. The second issue raised was whether the ITAT incorrectly concluded that the assessee/appellant's separately independent agent PE was situated in India. Lastly, the court examined whether the ITAT's decision to attribute 35% of the profits to marketing activities and subsequently assigning 75% of this 35% to the alleged PE of the Appellant in India was justified based on the facts, circumstances, and applicable law.

The court admitted the case and identified the key questions of law to be addressed. These questions encompassed the core issues of PE existence, attribution of profits, and the correctness of the ITAT's findings. The court directed the issuance of a notice of appeal to the respondent-Revenue, represented by Mr. Ruchir Bhatia, Advocate. The case was scheduled for a final hearing on 11th April 2018, with a requirement for both parties to submit a concise synopsis not exceeding seven pages each. The synopsis was expected to outline relevant arguments supported by references to the record and precedent relied upon.

In conclusion, the judgment highlighted the critical aspects of PE determination, profit attribution, and the legal reasoning behind the ITAT's decisions. The court's detailed analysis and procedural directions underscored the significance of the issues at hand and the need for a thorough examination of the relevant facts and legal principles.