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2020 (10) TMI 934 - AT - Income TaxDependent Agent PE of the assessee company in India - Income accrued in India - HELD THAT - Since the lower authorities following the orders of the preceding years 2020 (9) TMI 922 - ITAT DELHI have held that M/s. Mitsui Co. Ltd. has been constituted as Dependent Agent PE of the assessee company in India , therefore, following the consistent decisions of the Tribunal in assessee s own case in the preceding assessment years and in absence of any contrary material brought to our notice against the decision of the Tribunal we hold that MIPL is not a Dependent Agency Permanent Establishment of the assessee. No attribution of income should be made to MIPL Attribution of profits to DAPE Dependent Agency Permanent Establishment - HELD THAT - Respectfully following the consistent decisions of the Tribunal in assessee s own case 2020 (9) TMI 922 - ITAT DELHI also relying decision of the preceding assessment years 2020 (2) TMI 1053 - ITAT DELHI and in absence of any contrary material brought to our notice we hold that no further profit could be attributed since assessee is not a Dependent Agency Permanent Establishment. Commission on the total sale - CIT(A) deleted the addition made by the AO observing that TPO has accepted the payment being at arm s length - HELD THAT - We do not find any infirmity in the order of the Ld. CIT(A) on this issue. First of all this issue becomes academic in nature in view of our finding that MIPL is not dependent agency PE and therefore no income is attributable to the assessee and therefore when there is no income there is no question on any disallowance - such commission claimed by the assessee has been accepted in earlier years by the Ld. CIT(A) and the revenue had not preferred any appeal although they had filed appeal against the order on other issues decided by the Ld. CIT(A) in favour of the assessee. Merit in the arguments advanced by the Ld. Counsel for the assessee that once the department has accepted the view taken by the Ld. CIT(A) in the preceding years the said view cannot be disputed in the current year in view of the principles of rule of consistency.
Issues Involved:
1. Dependent Agent Permanent Establishment (DAPE) status of Mitsui India Pvt. Ltd. (MIPL) 2. Attribution of profits to DAPE 3. Deduction of commission paid to MIPL 4. Additions on account of guarantee fee and network maintenance service fee Issue-wise Detailed Analysis: 1. Dependent Agent Permanent Establishment (DAPE) status of Mitsui India Pvt. Ltd. (MIPL): The primary issue was whether MIPL constituted a Dependent Agent Permanent Establishment (DAPE) of the assessee company in India. The Assessing Officer (AO) had held that MIPL was a DAPE of Mitsui & Co. Japan, attributing significant profits to the PE. However, the Income Tax Appellate Tribunal (ITAT) found that this issue was already decided in favor of the assessee in previous years (AY 2005-06, 2006-07 to 2008-09, and 2010-11). The Tribunal consistently held that MIPL did not habitually secure orders for the assessee, nor did it have the authority to conclude contracts or maintain stock of goods. Therefore, MIPL was not a DAPE of the assessee. The Tribunal reiterated that "MIPL is not a Dependent Agent PE of the assessee." 2. Attribution of profits to DAPE: The AO had attributed 50% of the gross trading profit to the Indian operations of the assessee, which was reduced to 20% by the CIT(A). However, since the Tribunal held that MIPL was not a DAPE, the question of attributing profits to the DAPE did not arise. The Tribunal followed its earlier decisions, including the one for AY 2010-11, where it was held that no further profit could be attributed since the assessee was not a DAPE. Consequently, the grounds related to the attribution of profits were allowed in favor of the assessee. 3. Deduction of commission paid to MIPL: The AO had restricted the commission paid to MIPL to ?35,33,48,865/- by applying a rate of 0.8905556%, whereas the assessee had claimed a commission of ?84,06,07,736/-. The CIT(A) allowed the full commission claimed by the assessee, noting that the Transfer Pricing Officer (TPO) had accepted the payment as being at arm’s length. The Tribunal upheld the CIT(A)'s decision, emphasizing the principle of consistency since the department had accepted the CIT(A)'s view in preceding years without appeal. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's ground on this issue. 4. Additions on account of guarantee fee and network maintenance service fee: The AO had made additions of ?22,31,645/- for guarantee fees and ?5,88,86,927/- for network maintenance service fees due to mismatches in Form 26AS. The CIT(A) upheld these additions. However, the Tribunal dismissed the related grounds of appeal as not pressed by the assessee's counsel. Therefore, these additions were not contested further in the Tribunal's order. Conclusion: The appeal filed by the revenue was dismissed, and the cross-objection filed by the assessee was allowed. The Tribunal ruled that MIPL was not a DAPE of the assessee, no profits were attributable to a non-existent DAPE, and the commission paid to MIPL was justified and consistent with prior years' decisions. The additions on account of guarantee fees and network maintenance service fees were not pressed and thus upheld.
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