2018 (1) TMI 1611 - SC - Income Tax

Reopening of assessment - reasons to believe - Income accrued in India - Permanent establishment - attribution of profits - HELD THAT - In view of the fact that the Dispute Resolution Panel has found that there is no permanent establishment in India, the judgment of the High Court is set-aside and the appeals are allowed accordingly

Summary

Issues:
1. Assessment orders allowing special leave petitions filed by Honda Group of Companies and LG Group of Companies.
2. Existence of permanent establishment (PE) in India for tax purposes.
3. Dispute Resolution Panel (DRP) findings impacting assessment orders.
4. Permission to withdraw special leave petitions and pursue statutory remedy under the Income Tax Act, 1961.
5. Appellate Authority's examination of the matter without influence from High Court findings.

Assessment Orders and Special Leave Petitions:
The Supreme Court heard a batch of 38 special leave petitions, with 8 filed by the Honda Group of Companies and 30 by the LG Group of Companies. The assessment orders in these cases were allowed to be brought on record, with the special leave petitions scheduled for further hearing on 7th March, 2018. The court noted the composition of the special leave petitions and divided them into sub-groups based on the companies involved.

Existence of Permanent Establishment (PE) in India:
In cases where the DRP found no permanent establishment (PE) in India, the Assessing Officer dropped the proceedings. The court referenced a previous judgment where it was stated that if no PE was found, the High Court's decision was set aside, and the appeals were allowed accordingly. This ruling was applied to the current cases, leading to the same outcome.

DRP Findings and Assessment Orders:
For matters where the DRP or Assessing Officer concluded the existence of a PE in India, the petitioner sought to withdraw five special leave petitions to pursue statutory remedies under the Income Tax Act, 1961. The court granted permission for the withdrawal of these petitions, emphasizing that the Appellate Authority should independently examine the issue of PE without being influenced by any previous High Court observations or findings.

Permission to Withdraw and Pursue Statutory Remedy:
The court allowed the petitioner to withdraw the special leave petitions related to the existence of a PE in India and pursue remedies under the Income Tax Act, 1961. These petitions were dismissed as withdrawn, with the petitioner granted liberty to pursue statutory remedies as per the tax legislation.

Appellate Authority's Examination:
It was clarified that the Appellate Authority should review the matter without being swayed by any observations or findings made by the High Court regarding the petitioner's permanent establishment in India. This directive aimed to ensure an impartial assessment of the tax implications related to the presence of a PE for the petitioner.

This detailed analysis of the Supreme Court judgment highlights the key issues addressed, including the assessment orders, the existence of a permanent establishment in India, the impact of DRP findings on assessment orders, the withdrawal of special leave petitions to pursue statutory remedies, and the Appellate Authority's independent examination of the PE matter.