2022 (2) TMI 1287 - AT - Income Tax

Income deemed to accrue or arise in India - PE in India - Attributing profits to assessee s PE in India - treatment of Bombardier Transportation India Ltd. (BTIN) as the Fixed Place Permanent Establishment ( Fixed Place PE ) of the assessee in India - HELD THAT - As decided in own case 2020 (10) TMI 1205 - ITAT DELHI appellant does not have any place of business in India and all business activities with respect to offshore supplies are carried outside India. The equipment supply has been manufactured at overseas manufacturing facility of the appellant and sale of equipment has occurred outside India and payment has also been received by the appellant and outside India. Entire findings of the DRP are based on erroneous appreciation of wrong facts and on such erroneous appreciation of wrong facts, the DRP held that BTIN is the PE of the appellant in India without appreciating the true facts that the appellant has no place of disposal in India in the office of BTIN from where the appellant could have conducted its business in India. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Determination of Fixed Place Permanent Establishment of the assessee in India.

Analysis:
The appeal was filed against the order of the CIT(A) for the assessment year 2014-15. The primary issue revolved around the treatment of Bombardier Transportation India Ltd. (BTIN) as the "Fixed Place Permanent Establishment" of the assessee in India. The assessee, a company registered in Sweden, was engaged in manufacturing train control and signaling systems for mass transit. The AO attributed profits to the assessee's PE in India based on contracts with Delhi Metro Rail Corporation Limited (DMRC) and BTIN. The CIT(A) upheld the AO's decision, following the findings from the assessment year 2011-12. However, the Tribunal, in a previous decision, found errors in the DRP's conclusions, emphasizing that the appellant had no business place in India and conducted offshore activities outside India for equipment supply. The Tribunal directed the AO to delete the additions, ruling in favor of the assessee.

The Tribunal's decision was based on the fact that the appellant did not have a business place in India and conducted all offshore activities outside the country. The erroneous findings of the DRP led to the incorrect conclusion that BTIN was the PE of the appellant in India. The Tribunal highlighted specific errors in the DRP's analysis, such as misdirected consideration of contracts and incorrect identification of employees related to specific contracts. By finding parity in facts with a previous decision, the Tribunal directed the AO to delete the additions made by attributing profits to the assessee's PE in India. Consequently, the appeal filed by the assessee was allowed, and the order was pronounced in the open court in favor of the assessee.

In conclusion, the Tribunal's detailed analysis focused on the lack of a business place in India for the appellant and the errors in the DRP's assessment that led to the incorrect attribution of profits to the PE in India. The decision highlighted the importance of factual accuracy and proper consideration of contracts and employees in determining the existence of a Fixed Place Permanent Establishment.