2021 (5) TMI 1085 - AT - Income Tax

Accrual of income in India - 'Permanent Establishment' ( PE ) in Indi or not? - scope of business model of the assessee and the provision of Article 5 of India US DTAA - HELD THAT - We find that Article -5 of India-US DTAA and Article -5 of India -Thailand DTAA have almost similar clause. Both sides are unanimous in stating that the nature of transactions and terms and conditions of transactions between assessee and Indian AE in both the cases are similar. The Revenue has not brought on record any distinguishing factor in the present set of appeals before us. Therefore, the findings given by the Co-ordinate Bench of Tribunal AY 2011-12 while adjudicating the appeal in the case of assessee s group concern GIA-US would mutatis mutandis apply to present appeal. Respectfully following the order of Co-ordinate Bench we hold that GIA India Laboratories Pvt. Ltd. is not agency PE/PE of the assessee. Consequently, ground No.2 of the appeal is decided in favour of the assessee. Non-granting of TDS credit - We deem it appropriate to restore this issue to the Assessing Officer for re-examination/reconciliation. AO is directed to allow benefit of TDS credit to the assessee after verification of records, in accordance with law. Ground of the appeal is allowed for statistical purpose. Levy of interest u/s 234A - due date of filling returns as assessee is a foreign company - Since, the assessee has filed original return of income within due date under the provisions of section 139(1) of the Act, interest under section 234A is not leviable. The provisions of section 234A are triggered where there is default in furnishing return of income i.e. the return of income is filed beyond due date as mandated under section 139(1) or (4) of the Act. The issue is restored to the file of Assessing Officer for verification of facts. If the return is filed by the assessee within the due date, the provisions of section 234A of the Act are no attracted, hence, no interest to be levied

Issues Involved:
1. Validity of re-assessment proceedings.
2. Holding that the Appellant has a 'Permanent Establishment' ("PE") in India.
3. Attribution of receipts to the alleged PE.
4. Estimation of gross profit.
5. Credit for tax deducted at source.
6. Levy of interest under section 234A of the Income-tax Act, 1961.
7. Levy of interest under section 234B of the Income-tax Act, 1961.
8. Levy of interest under section 234C of the Income-tax Act, 1961.
9. General assessment of total income.

Detailed Analysis:

1. Validity of Re-assessment Proceedings:
The assessee challenged the validity of re-assessment proceedings under section 148 of the Income-tax Act, 1961. The Tribunal dismissed this ground as no submissions were made by the counsel for the assessee on this legal ground. Hence, the ground was dismissed.

2. Holding that the Appellant has a 'Permanent Establishment' ("PE") in India:
The primary issue was whether the assessee had a PE in India. The Tribunal noted that the facts of the case were similar to those in the case of Gemmological Institute of America Inc. vs. Addl. CIT, where it was held that GIA India Laboratory Pvt. Ltd. was not a PE of GIA-US in India. The Tribunal observed that the Assessing Officer had relied extensively on the assessment order of GIA-US for AY 2011-12 without independent findings. The Tribunal held that GIA India Laboratories Pvt. Ltd. is not a PE of the assessee, thus deciding this ground in favor of the assessee.

3. Attribution of Receipts to the Alleged PE:
Since the primary issue of PE was decided in favor of the assessee, the alternate ground of attribution of 50% of receipts to the alleged PE became academic and was not deliberated upon.

4. Estimation of Gross Profit:
Similarly, the ground of estimation of gross profit became academic as the primary issue was decided in favor of the assessee and was not deliberated upon.

5. Credit for Tax Deducted at Source:
The assessee contended that credit for tax deducted at source amounting to Rs. 3,10,277/- was not granted. The Tribunal restored this issue to the Assessing Officer for re-examination and directed to allow the benefit of TDS credit after verification of records, allowing this ground for statistical purposes.

6. Levy of Interest under Section 234A:
The assessee argued that interest under section 234A was wrongly levied as the original return was filed within the due date. The Tribunal restored this issue to the Assessing Officer for verification of facts, directing that if the return was filed within the due date, no interest under section 234A should be levied. This ground was allowed for statistical purposes.

7. Levy of Interest under Section 234B:
The Tribunal noted that the charging of interest under section 234B is consequential and did not require separate adjudication.

8. Levy of Interest under Section 234C:
Similarly, the charging of interest under section 234C was found to be consequential and did not require separate adjudication.

9. General Assessment of Total Income:
The Tribunal did not specifically address this ground as it was general in nature.

Conclusion:
The appeal for the assessment year 2010-11 was partly allowed, and the appeals for the assessment years 2011-12 to 2016-17 were allowed. The primary issue of the assessee having a PE in India was decided in favor of the assessee, rendering other grounds academic. The issues of TDS credit and interest under section 234A were restored to the Assessing Officer for verification.

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