9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (4) TMI 1303 - AT - Income TaxAccrual of income in India - income from business or profession related to PE of the assessee - Fixed place Permanent Establishment ( PE ) for business in India, to carry on the business of sale of software, export of goods, reimbursement and Royalty for use of technology and brand - DTAA between India and Ireland - AO proposed for addition of business income related to Permanent Establishment ( PE ) @ 40% - HELD THAT - Revenue failed to rebut the fact that impugned transaction of sale of software/hardware was undertaken outside India to group company in India and were subjected to transfer pricing scrutiny in the hands of the alleged PE and same was accepted to be at arm s length price. Therefore, nothing further would be attributable to the alleged PE Looking to the facts of the present case, we find merit into the contention of the assessee that the Assessing Authority was not justified in making addition in the hands of the assessee when in the case of alleged PE of the assessee, the transactions have been treated to be arm s length price. Furthermore, the assessee has pointed out that while making addition, the AO has also included the transaction related to hardware whereas allegation of PE is related to software. In the light of the binding precedents, we are of the considered view that the authorities below erred in making the impugned additions. We therefore, direct the AO to delete the same. Ground Nos. 1 to 10 raised by the assessee are hence, allowed.
Issues Involved:
1. Computation of total income. 2. Existence of Permanent Establishment (PE) in India. 3. Attribution of income to the alleged PE. 4. Levy of interest under Section 234B. 5. Initiation of penalty proceedings under Section 270A. Summary: 1. Computation of Total Income: The assessee contested the computation of total income at INR 72,81,14,426 for AY 2018-19 and INR 86,99,01,785 for AY 2019-20 against the returned income of INR 28,89,94,067 and INR 23,25,76,760 respectively. The contention was that the Assessing Officer (AO) and Dispute Resolution Panel (DRP) erred in law and on facts in computing the total income. 2. Existence of Permanent Establishment (PE) in India: The assessee argued that the AO and DRP grossly erred in alleging that the appellant has a Fixed place PE for business in India without any factual foundation. The AO failed to provide any evidence that NCR Corporation India Pvt. Ltd. (NCR India) was used or at the disposal of the appellant. The assessee cited the Supreme Court judgments in ADIT vs E-Funds IT Solution Inc. and Formula One World Championship to support its claim. The Tribunal found merit in the assessee's contention that the sale of software/hardware was executed offshore and subjected to transfer pricing scrutiny in the hands of the alleged PE, which was accepted to be at arm's length. 3. Attribution of Income to the Alleged PE: The assessee contended that the AO and DRP erred in attributing income to the alleged PE without any valid basis and purely based on speculations. The Tribunal noted that the AO included transactions related to hardware, whereas the allegation of PE was related to software. The Tribunal directed the AO to delete the additions, citing the Supreme Court's decision in DIT vs Morgan Stanley & Co., which held that if transactions are at arm's length, nothing further would be attributable to the PE. 4. Levy of Interest under Section 234B: The assessee challenged the levy of interest under Section 234B of the Act. The Tribunal held that the levy is consequential in nature. 5. Initiation of Penalty Proceedings under Section 270A: The assessee contested the initiation of penalty proceedings under Section 270A of the Act. The Tribunal dismissed this ground as premature. Conclusion: The Tribunal allowed the appeals partly for both AY 2018-19 and AY 2019-20, directing the AO to delete the impugned additions and holding that the assessee's transactions were at arm's length, thus not warranting further attribution to the alleged PE. The Tribunal's decision in ITA No. 1756/Del/2022 for AY 2018-19 applied mutatis mutandis to ITA No. 1776/Del/2022 for AY 2019-20.
|
