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2022 (9) TMI 1313 - AT - Income TaxIncome deemed to accrue or arise in India - PE in India - profit attributable to the PE in India - company registered and incorporated under the laws of Sweden as contemplated under Article 4 of the India- Sweden Double Taxation Avoidance Agreement - HELD THAT - As we find that the same issue has been decided by the ITAT 2022 (2) TMI 1287 - ITAT DELHI consistently in assessee s favour. The DRP order of AY 2011-12 2020 (10) TMI 1205 - ITAT DELHI which has been preferred and referred by AO as well as by CIT (A) has not been upheld by the ITAT and the ITAT has reversed the decision and decided the issue in favour of the assessee. Since no distinguishing features on the facts of this year and earlier years were brought to our notice, nor it is the case that any of the orders have been reversed by Hon ble jurisdictional High Court, we follow the order of the coordinate Benches of the ITAT and set aside the orders of the Revenue authorities.
Issues Involved:
1. Validity of the CIT(A) order under section 250 of the Income-tax Act, 1961. 2. Existence of an Association of Persons (AOP) between the appellant and BTIN. 3. Determination of BTIN as a "Fixed Place Permanent Establishment" (PE) of the appellant under Article 5(1) of the Indo-Sweden DTAA. 4. Attribution of income to the alleged PE. 5. Taxability of offshore supply of goods under the Indo-Sweden DTAA. 6. Initiation of penalty proceedings under Section 271(1)(c) of the Act. Detailed Analysis: 1. Validity of the CIT(A) Order: The appellant contended that the CIT(A) order under section 250 of the Income-tax Act, 1961, was prejudicial and void ab-initio. However, the tribunal did not find substantial merit in this ground and dismissed it. 2. Existence of an Association of Persons (AOP): The AO concluded the existence of an AOP between the appellant and BTIN concerning their contract with DMRC. The tribunal did not specifically address this issue as the primary focus was on the PE determination. 3. Determination of BTIN as a "Fixed Place Permanent Establishment" (PE): The CIT(A) upheld the AO's action treating BTIN as a "Fixed Place PE" of the appellant under Article 5(1) of the Indo-Sweden DTAA. The tribunal noted that the CIT(A) and AO relied on the DRP's directions for AY 2011-12 without independently analyzing the facts for the year under consideration. The tribunal found that this issue was already decided in favor of the appellant in earlier years by the ITAT, where it was held that BTIN was not a PE of the appellant in India. The tribunal referred to multiple past ITAT orders, including those for AY 2011-12, 2012-13, 2013-14, 2014-15, and 2015-16, which consistently ruled in favor of the appellant. 4. Attribution of Income to the Alleged PE: The AO attributed income of INR 1,11,57,158/- to BTIN PE, which was reduced to 10% of net profits by the CIT(A). The tribunal, following the precedent set in earlier years, directed the AO to delete the impugned additions, thereby ruling in favor of the appellant. 5. Taxability of Offshore Supply of Goods: The appellant argued that the offshore supply of train control and signaling equipment to DMRC was not taxable in India as the equipment was manufactured, sold, and payments were received outside India. The tribunal upheld the appellant's contention, noting that the ITAT had consistently ruled in favor of the appellant on this issue in earlier years, confirming that the income from offshore supply was not taxable in India in the absence of a PE. 6. Initiation of Penalty Proceedings under Section 271(1)(c): The tribunal did not provide a detailed analysis of this issue, as it was consequential to the primary issues discussed. Given the favorable ruling on the primary issues, the initiation of penalty proceedings under Section 271(1)(c) was implicitly rendered moot. Conclusion: The tribunal allowed the appeal of the assessee, setting aside the orders of the Revenue authorities and directing the AO to delete the impugned additions. The tribunal's decision was heavily influenced by the consistent rulings in favor of the appellant in earlier and subsequent assessment years. The appeal was partly allowed, with the tribunal pronouncing the order in the open court on September 26, 2022.
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