2011 (6) TMI 1027 - AT - Income Tax

Summary

Issues involved: Challenge to assessment order regarding existence of permanent establishment (PE) and attribution of profit to the PE.

Regarding existence of PE: The appellant challenged the assessment order which confirmed the PE status of the assessee subsidiary in India. The Dispute Resolution Panel (DRP) upheld the assessment order without addressing the detailed submissions made by the assessee's representative. The appellant argued that the order passed by DRP ignored the principles of natural justice as it did not deal with the submissions in a speaking manner. The matter was restored to the file of the DRP to grant a reasonable opportunity of being heard to the assessee and pass a speaking order.

Regarding attribution of profit: The Assessing Officer based the attribution of profit on available details and explained the taxability of claimed expenses, including IPLC cost at 10% as per Double Taxation Avoidance Agreement (DTAA) and decisions of Advance Ruling and ITAT. The appellant's objections to the draft order were not considered by the DRP, leading to the matter being restored for a proper hearing and a speaking order to be passed.

Decision: The appeal was treated as allowed for statistical purposes, emphasizing the importance of following due process and principles of natural justice in tax assessments.