2018 (1) TMI 1705 - AT - Income Tax

Income chargeable to tax in India - Income attributable on account of PE - Transaction between the assessee and its AE found at arms length price on the issue of agent for space selling - HELD THAT - Once no income chargeable to tax in India is attributable to the assessee for the reason that the transaction between the assessee and its AE has been found at arms length price, no further income chargeable to tax in India can be said to be attributable on account of PE. Accordingly, this issue is squarely covered in favour of assessee by the decision of Hon ble Supreme Court in the case of E-Funds IT Solution Inc. 2017 (10) TMI 1011 - SUPREME COURT and alsocase of Taj TV Ltd. 2016 (12) TMI 1291 - ITAT MUMBAI and ZEE TV USA INC 2017 (11) TMI 1642 - ITAT MUMBAI . Respectfully following the same, we allow the cross objections of the assessee.

Summary

Issues:
1. Cross objection regarding the taxability of income in India and interest u/s 244A.
2. Determination of arm's length remuneration and commission to agent in India.
3. Tax rate applicable to interest income.
4. Whether the income is taxable in India if no Permanent Establishment (PE) exists.
5. Set-off of interest income against loss from India-related business operations.

Analysis:
1. The judgment deals with eight Appeals and Cross Objections filed against the order of the Commissioner of Income Tax (Appeals)-10, Mumbai. The issues raised in these appeals and cross objections are common and have been clubbed together for convenience. The main focus is on the taxability of income in India, specifically addressing the PE concept and interest u/s 244A.
2. The Cross Objection No. 32/Mum/2010 (AY 2006-07) is taken as the lead case. The grounds of cross objection primarily revolve around the arm's length remuneration and commission paid to the agent in India. The argument is made that if the transaction between the assessee and its Associated Enterprise (AE) is at arm's length price, no further income chargeable to tax in India can be attributed to the assessee.
3. The judgment discusses the tax rate applicable to interest income u/s 244A and the treatment of such income when there is no PE in India. The contention is made that the interest income should be set off against losses from India-related business operations, and if taxable, the tax rate should align with Section 115A(1) of the Income Tax Act.
4. The judgment emphasizes that if the transaction between the assessee and its AE is at arm's length price, there may be no requirement to determine the existence of a PE in India for tax purposes. The decision is supported by previous rulings and principles laid down by the Supreme Court and the ITAT.
5. The judgment concludes by allowing the cross objections of the assessee, stating that no further income chargeable to tax in India can be attributed to the assessee if the transaction with the AE is at arm's length price. Consequently, the department's appeals become academic, and the cross objections are allowed, leading to the disposal of the relevant cases.