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2023 (4) TMI 1205 - AT - Income TaxTDS u/s 195 - non-deduction of TDS u/s 40(a) (i) - assessee company is a subsidiary company of its parent company in Japan - whether assessee had a Dependent Agency Permanent Establishment (DAPE) in India? - HELD THAT - CIT(A) correctly concluded Mitsui India Pvt. Ltd. (appellant company in the instant case) is a Dependent PE agent of Mitusi Co. Ltd (Japan) have now been decided by the ITAT. The ITAT has already held that the appellant is not the PE of Mitusi Co. Ltd (Japan), hence in view of said findings of the Honorable ITAT there is no question of attribution of any profit of Mitusi Co. Ltd (Japan) to the appellant company. Accordingly, there is no question of deduction of tax on the same. In view of the same, the disallowance made by the AO under section 40(a)(i) of the Act, is directed to be deleted. Decided in favour of assessee.
Issues Involved:
1. Deletion of disallowance of Rs. 16,94,51,775/- on account of non-deduction of TDS u/s 40(a)(i) of the Income Tax Act 1961. Summary: Issue 1: Deletion of disallowance of Rs. 16,94,51,775/- on account of non-deduction of TDS u/s 40(a)(i) of the Income Tax Act 1961 The Revenue appealed against the order of the CIT(A)-37, New Delhi, which deleted the disallowance of Rs. 16,94,51,775/- due to non-deduction of TDS u/s 40(a)(i). The AO had attributed 50% of the gross profit of Mitsui Japan to its Indian PE, concluding that Mitsui India should have deducted TDS on payments made to Mitsui Japan. The CIT(A) noted that the disallowance was based on the assessment of Mitsui & Co. Ltd. Japan for AY 2009-10, which relied on findings from AY 2005-06. However, the ITAT had adjudicated in favor of Mitsui & Co. Ltd. Japan, holding that Mitsui India was not a dependent agent PE. The CIT(A) quoted the relevant findings of ITAT, which stated that Mitsui India did not habitually secure orders for Mitsui Japan, nor did it maintain a stock of goods or merchandise. The ITAT concluded that none of the conditions for being a dependent agent PE under Article 5(7) of the DTAA between India and Japan were fulfilled. Based on these findings, the CIT(A) concluded that there was no question of attributing any profit of Mitsui & Co. Ltd. Japan to Mitsui India, and thus no requirement for TDS deduction. The CIT(A) directed the deletion of the disallowance made by the AO u/s 40(a)(i). The Revenue's appeal was dismissed by the ITAT, which upheld the CIT(A)'s order, citing precedents from various ITAT and Delhi High Court orders that supported the assessee's position. Order pronounced in the open court on 02nd March, 2023.
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