2018 (4) TMI 1515 - AT - Income Tax

Income accrued in India - fixed place PE in India - Income taxable in India - place of business in India - assessee has paid arm s length remuneration/commission to its agent in India - Held that - since transactions between the assessee and its AE have been found at arm s length prices no further income chargeable to tax in India can be said to be attributable for the PE of the assessee. See Assistant Director of Income Tax-I, New Delhi Versus M/s E-Funds IT Solution Inc. 2017 (10) TMI 1011 - SUPREME COURT OF INDIA - Hence this ground is decided in favour of the assessee.

Summary

Issues involved:
1. Whether the assessee has a Permanent Establishment (P.E.) in India and if its business is taxable in India.
2. Whether interest under Section 234B is payable by a non-resident whose total income is subject to deduction of tax at source.

Detailed Analysis:
1. The Revenue appealed against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the existence of a Permanent Establishment (P.E.) in India and the taxability of the assessee's business in India. The Revenue argued that the Ld. CIT(A) erred in holding that the assessee does not have a P.E. in India and that its business is not taxable in India. The Cross objection by the assessee challenged the order of the Ld. CIT(A) on similar grounds. The Ld. Counsel for the assessee contended that the issue of taxability in India is decided in favor of the assessee in a previous case for A.Y. 2007-08, where it was held that if the transaction between the assessee and its Associate Enterprise (AE) is at arm's length price, no further income chargeable to tax in India can be attributed to the assessee. The Coordinate Bench decision was cited to support this argument.

2. The issue of interest under Section 234B was raised in the cross objection by the assessee. The Ld. Counsel for the assessee argued that interest under Section 234B is not payable as the entire income of the assessee is subject to tax deduction at source, and hence no advance tax was payable. The argument was supported by citing relevant legal precedents. The Ld. DR supported the Assessing Officer's orders. The Tribunal found that the issue of interest u/s. 234B became consequential to the decision on the taxability of the assessee's income in India. Since it was held that no further income chargeable to tax in India can be attributed to the assessee, the ground regarding interest u/s. 234B was dismissed.

In conclusion, the Tribunal allowed the cross objection filed by the assessee partly and dismissed the appeal of the Revenue. The decision was based on the finding that no further income chargeable to tax in India could be attributed to the assessee due to the transactions with its AE being at arm's length prices, as established in previous cases and supported by legal precedents.