2015 (4) TMI 505 - HC - Income Tax

Income derived through operations as Liaison office in India - purchase of goods in India for the purpose of export - Entitlement of exemption provided in explanation 1(b)to section 9(1)(i) of the Act - AO observed that the activities of the assessee relate to supply chain management activities for Tesco International Sourcing Ltd., Hongkong Company and is not covered in the exception provided in Explanation 1(b) to Section 9(1)(i) of the Act. - Held that - The Tribunal at Para No.7.2 has clearly set out the facts of the Nike case as well as in this case and after applying the law laid down in the aforesaid case has granted the relief to the assessee. The factual positions are not disputed. Therefore, it is the judgment rendered by this Court in Nike s case 2013 (8) TMI 194 - KARNATAKA HIGH COURT which is applicable to the facts of this case and the Tribunal has relied upon the said judgment and followed the same. No case is made out for interference as rightly pointed out by the Tribunal. - In that view of the matter, the substantial question of law raised is answered in favour of the assessee and against the revenue. - Decided against the revenue.

Summary

Issues:
- Whether the activity of the liaison office is confined to purchasing goods in India for export, thus not liable to tax under Section 9(1)(i) of the Income Tax Act.

Analysis:
The judgment by the Karnataka High Court involved appeals by the revenue against the Tribunal's decision that the assessee, a liaison office, did not derive income in India and thus was not liable to tax under Section 9(1)(i) of the Act. The assessee acted as a service agent for a Hong Kong company, coordinating with manufacturers and the head office. The Assessing Authority initially held the activities were taxable, leading to appeals. The Dispute Resolution Panel and Assessing Authority upheld the tax liability, prompting the assessee to appeal to the Tribunal.

The Tribunal referenced judgments in similar cases and found the assessee entitled to exemption under Explanation 1(b) to Section 9(1)(i) of the Act, setting aside the Assessing Authority's orders. The revenue challenged this decision, arguing the Tribunal erred in applying the law from a different judgment. The assessee countered that the Tribunal correctly applied the law from the Nike case to the current scenario, distinguishing it from the Jebon Corpn. India Liaison Office case.

The High Court considered the arguments and upheld the Tribunal's decision, stating that the facts aligned with the Nike case, making it applicable. The Court found no grounds for interference, as the Jebon Corpn. India Liaison Office judgment did not apply to the present case. The substantial question of law raised was answered in favor of the assessee, leading to the dismissal of the appeals by the revenue.

In conclusion, the High Court affirmed the Tribunal's decision, emphasizing the applicability of the Nike case to the current scenario and rejecting the revenue's appeal. The judgment highlighted the importance of factual alignment with precedent cases in determining tax liability for liaison offices operating in India.