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2022 (2) TMI 163 - AT - Income TaxIncome taxable in India - Permanent establishment in India or not? - business connection in India - HELD THAT - As respectfully following the decisions of the co-ordinate benches in assessee's own case for assessment years 1999-2000 2009 (7) TMI 1341 - ITAT DELHI and the orders of the subsequent assessment years, we also hold that there is no infirmity in the order of the learned assessing officer in holding that assessee has permanent establishment in India and, therefore, income of the assessee is chargeable to tax in India. It further held that assessee has also a business connection in India in terms of the provisions of the Income-tax Act. Accordingly, ground 2 of the appeal is dismissed. Income attributable to the permanent establishment - HELD THAT - As decided in own case 2009 (7) TMI 1341 - ITAT DELHI the income attributable to the functions performed by the permanent establishment is 15% of the gross receipts. It further held that if the amount paid by the assessee to its agency PE is higher than the above amount, then no further income is attributable to the permanent establishment in India. In the present case, we find that the gross receipts attributable to India is ₹ 231,77,31,028/- and 15% thereof is the income which amounts to ₹ 34,76,59,654/- against which the subsidiary has offered the service for income of ₹ 78,32,46,525/- and, therefore, no further income is required to be attributed. No change in the facts and circumstance of the case has been pointed out before us. Therefore, respectfully following the decision of the co-ordinate benches in assessee's own case for earlier assessment years, we allow ground 3 of the appeal of the assessee. 10% of the reimbursement of expenditure held to be the income of the assessee - HELD THAT - The details of the reimbursement were furnished along with documentary evidences. The above sum was reimbursed by Indian entity to the assessee for various activities undertaken by the assessee on behalf of Indian subsidiary. The assessing officer held it to be the business income holding that 10% of such payment received by the assessee from subsidiary should be the income of the assessee. Accordingly ₹ 1,26,355/- were held to be liable to be taxed in India. The assessee preferred an objection before the learned DRP, which was rejected, and the order of the assessing officer was confirmed. Assessee submitted before us that identical issue arose in the case of the assessee, fist in assessment year 2004-05 and the co-ordinate bench held that 10% of the gross income of the reimbursement along with other income attributed to the PE is lower than the sum paid by the assessee to entertain subsidiary and therefore, no further income is required to be attributed. No change in the facts and circumstances of the case were shown before us. Therefore, respectfully following the decision of the co-ordinate bench in the case of the assessee itself for earlier assessment years, we confirm the action of the learned assessing officer by treating the 10% of the sum as income out of the reimbursement. However, in the present year, as the amount paid by the appellant to its dependent agency PE is higher, no separate addition is required. Accordingly, ground 4 of the appeal is allowed with above direction. Interest under section 244A - Claim of interest on such refund till the date on which the refund is actually received by the assessee - HELD THAT -. We direct the learned assessing officer to re-compute the interest under section 244A of the Act up to the date of grant of refund. Accordingly, ground 6 of the appeal is allowed.
Issues Involved:
1. Business connection/permanent establishment in India. 2. Income attributable to the permanent establishment (PE). 3. Reimbursement of expenses. 4. Granting TDS credit. 5. Granting interest under section 244A. 6. Levying interest under section 234B. 7. Initiating penalty proceedings under section 270A. Detailed Analysis: 1. Business Connection/Permanent Establishment in India: The primary issue was whether the appellant had a business connection and a permanent establishment (PE) in India under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The tribunal upheld the findings of the lower authorities, referencing previous decisions in the appellant's own case from assessment years 1999-2000 to 2014-15. The tribunal concluded that the appellant had a PE in India through its wholly-owned subsidiary, which performed activities solely for the appellant. This was consistent with the earlier determination that the subsidiary was a dependent agent, thereby constituting a PE. Consequently, the tribunal dismissed the appellant's ground challenging the existence of a PE in India. 2. Income Attributable to the Permanent Establishment: The tribunal examined the method for attributing income to the PE. The appellant argued that the income attributable to the PE should be calculated as 15% of the gross receipts from India, consistent with prior rulings in its own case. The tribunal found that the gross receipts attributable to India were ?2,317,731,028, and 15% of this amount (?34,76,59,654) was the income attributable to the PE. Since the marketing fees paid to the subsidiary (?78,32,46,525) exceeded this amount, no further income was chargeable to tax in India. The tribunal followed the precedent set in previous years, allowing the appellant's ground on this issue. 3. Reimbursement of Expenses: The appellant contested the inclusion of 10% of the reimbursement of expenses as business income. The tribunal noted that the issue had been previously decided in favor of the appellant, where it was held that 10% of the reimbursement should be treated as income. However, since the marketing fees paid to the subsidiary exceeded the income attributable to the PE, no additional income was chargeable. The tribunal allowed the appellant's ground with the direction that no separate addition was required for the reimbursement of expenses. 4. Granting TDS Credit: The appellant claimed that the TDS credit of ?12,36,79,232 was not granted, and no reasons were provided for this omission. The tribunal did not address this issue in detail, as the appellant did not press this ground, resulting in its dismissal. 5. Granting Interest Under Section 244A: The appellant argued that interest under section 244A should be granted until the date of the refund. The tribunal directed the assessing officer to re-compute the interest under section 244A up to the date of the actual grant of the refund, allowing this ground of the appeal. 6. Levying Interest Under Section 234B: The tribunal did not specifically address this issue in detail, as it was not pressed by the appellant, resulting in its dismissal. 7. Initiating Penalty Proceedings Under Section 270A: The tribunal noted that the issue of initiating penalty proceedings under section 270A was premature. Consequently, this ground was dismissed. Conclusion: The tribunal partly allowed the appeal, affirming the existence of a PE in India and the method for attributing income to the PE, while directing the re-computation of interest under section 244A. The tribunal dismissed grounds related to TDS credit, interest under section 234B, and penalty proceedings as either not pressed, premature, or general in nature.
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