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2018 (4) TMI 634 - AT - Income TaxIncome accrued in India - Business Income - Offshore Repair and Supply of Spare Parts - taxability in India - DTAA - Held that - As assessee is held to have an agency PE in India, the business income received in relation to offshore supply of spare parts and offshore repair services outside India were taxable in India under both section 9 (1) (i) of the Act as well as Article 5 read with Article 7 of tax treaty. SEE GE Energy Parts Inc. vs ADIT 2017 (2) TMI 780 - ITAT DELHI Attribution of income - Held that - We direct the attribution of income for the year under consideration in the case of assessee before us at 2.6% as has been held by this Tribunal in assessee s own case in the group concern. Levy of interest under section 234B - Respectfully following the decision of this Tribunal in case of GE Energy Parts Inc. vs ADIT(supra), we allow this ground raised by the assessee.
Issues:
1. Assessment of income for the appellant for the assessment year 2011-12. 2. Taxability of business income related to offshore repair and supply of spare parts in India. 3. Attribution of income to the alleged permanent establishment (PE) in India. 4. Levying of interest under Section 234A, 234B, and 234C of the Act. 5. Initiation of penalty proceedings under Section 274 read with Section 271(1)(c) of the Act. Assessment of Income: The appellant challenged the computation of income by the Assessing Officer (AO) and Dispute Resolution Panel (DRP) for the assessment year 2011-12, arguing that they erred in determining the income at a specific amount instead of accepting the appellant's 'Nil' income return. The appellant contended that they had no income in India under the India-USA DTAA and did not have a permanent establishment (PE) in India. The appellant further argued against the mechanical reliance on previous assessment years and survey findings, emphasizing the separate nature of each assessment year. The appellant highlighted the technical nature of their products and the extensive discussions involved in sales cycles to refute the allegations made by the AO and DRP. Taxability of Business Income: The AO and DRP held that the income received by the appellant for offshore supply of spare parts and repair services outside India was taxable in India under the Income Tax Act and the Tax Treaty. The appellant contested this decision, asserting that the income did not accrue in India and was not taxable under the Tax Treaty. The appellant challenged the attribution of income to a PE in India, arguing against the characterization of GEIIPL as a dependent agent PE and the allocation of profits towards marketing activities in India. The Tribunal dismissed the appellant's grounds based on the precedent set in a previous case involving GE Energy Parts Inc. Attribution of Income to PE: Regarding the attribution of income, the Tribunal directed the attribution of income for the year under consideration at 2.6%, differing from the allocation by the AO/TPO. The Tribunal applied a specific percentage to the sales made by the appellant in India, following a decision in the appellant's own case in a group concern. The Tribunal's decision in this matter was based on the precedent set in the case of GE Energy Parts Inc. Levying of Interest and Penalty Proceedings: The Tribunal addressed the issue of levying interest under Section 234B, citing a favorable decision by the Delhi High Court in the appellant's case for previous assessment years. The Tribunal allowed this ground raised by the appellant. The initiation of penalty proceedings under Section 274 read with Section 271(1)(c) was considered consequential and did not require adjudication at that stage. In conclusion, the Tribunal partly allowed the appeal filed by the appellant, based on the arguments presented and the precedents established in relevant cases.
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