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2023 (3) TMI 205 - AT - Income TaxExistence of fixed place Permanent Establishment (PE), installation PE, service PE, dependent agent PE and attribution of profit to the PE - assessee is a non-resident corporate entity incorporated in Peoples Republic of China and tax resident of that country - HELD THAT - From the materials available on record, it is observed that while deciding the issue for the first time in assessment years 2005-06 to 2008-09, the Tribunal has considered all aspects relating to existence of PE as well as attribution of profit and upheld the decision of the departmental authorities. In subsequent assessment years, viz., assessment years 2009-10 to 2016-17, the assessee had advanced identical arguments as has been advanced in the present appeal. Though, the Tribunal took note of various submissions made by the assessee, however, adhering to the norms of judicial discipline the Tribunal had followed its earlier decision in assessee s own case and decided the issues against the assessee. Before us, though, learned counsel appearing for the assessee has contended that various arguments advanced before the Tribunal in assessment years 2009-10 to 2016-17 were not considered, however, we are not convinced. A careful perusal of the observations of the Tribunal reproduced above would make it clear that the Tribunal after taking note of various submissions of the assessee took a conscious decision to follow its earlier decision. Therefore, the allegation of learned Senior Counsel that various submissions made by the assessee were not considered in assessment years 2009-10 to 2016-17 is without any substance. The issues have been consistently decided against the assessee by the Tribunal beginning from assessment year 2005-06 to 2016-17. There is no difference in the factual position permeating through different assessment years, including, the impugned assessment year. It is relevant to observe, before us, learned counsel appearing for the assessee has submitted that against the decision of the Tribunal for assessment years 2005-06 to 2008-09, the assessee has preferred appeals before the Hon ble High Court and the appeals have been admitted. Thus, when there are decisions of the Coordinate Bench in assessee s own case on identical set of facts and circumstances upholding the decision of the Revenue Authorities with regard to existence of PE and attribution of profit, as a Bench of equal strength, we are bound by such decisions. Therefore, norms of judicial discipline, decorum and propriety demand that we have to follow the earlier decisions of the Tribunal. In fact, for this very reason, while deciding the appeals for assessment years 2009-10 to 2016-17, the Tribunal had followed its earlier decision. In view of the aforesaid, following the consistent view of the Tribunal in assessee s own case in past assessment years, we uphold the decision of the Departmental authorities on these issues. Accordingly, these grounds are dismissed. Addition towards royalty on sale of software - software component was treated as royalty and brought to tax on gross basis by applying the rate of 10% as per the treaty provisions - HELD THAT - Having considered rival submissions, we find, the Tribunal while deciding the issue in assessment years 2005-06 to 2008-09 2014 (4) TMI 770 - ITAT DELHI has deleted the addition by holding that the receipts are not in the nature of royalty. Thus respectfully following the decision of in assessee s won case, we delete the addition. Ground no. 7 is allowed.
Issues Involved:
1. Validity of the unsigned assessment order. 2. Existence of Permanent Establishment (PE) in India. 3. Attribution of income from supplies made to India to the alleged PE. 4. Attribution of profit from supplies made to the alleged PE. 5. Taxation of revenues from the supply of software. 6. Incorrect income considered. 7. Incorrect levy of surcharge and education cess. 8. Levy of interest and penalty. Detailed Analysis: 1. Validity of the Unsigned Assessment Order: The appellant argued that the assessment order dated February 28, 2022, is unsigned and thus is bad in law and void-ab-initio. However, this issue was not adjudicated separately by the Tribunal. 2. Existence of Permanent Establishment (PE) in India: The appellant contested the decision of the departmental authorities in holding the existence of various forms of PE, including Fixed Place PE, Installation PE, Service PE, and Dependent Agent PE, under the provisions of Article 5 of the India-China Tax Treaty. The Tribunal upheld the Assessing Officer's view, following its earlier decisions in the appellant's own case for the assessment years 2005-06 to 2016-17. The Tribunal noted that the appellant's business in India was conducted with the active involvement of the employees of Huawei India, who jointly prepared bidding documents, negotiated, and concluded contracts on behalf of the appellant with Indian customers. The Tribunal found no reason to deviate from its earlier findings, thus affirming the existence of PE. 3. Attribution of Income from Supplies Made to India to the Alleged PE: The appellant argued that the revenue earned from the supply of equipment is not taxable in India as business profits since the sales were effected outside India and the appellant does not have any PE in India. The Tribunal, however, upheld the Assessing Officer's conclusion that Huawei India constitutes a PE and that the entire revenue from the supply of equipment is effectively connected to the PE in India. 4. Attribution of Profit from Supplies Made to the Alleged PE: The Assessing Officer attributed 20% of the global profits to the PE in India, based on the weighted average net operating profit of 2.51%. The Tribunal upheld this attribution, following its earlier decisions in the appellant's own case. The Tribunal rejected the appellant's argument that no further attribution was required since the PE had been remunerated at arm's length, citing the principle laid down by the Hon'ble Supreme Court in DIT vs. Morgan Stanley & Co. Inc. 5. Taxation of Revenues from the Supply of Software: The Assessing Officer attributed 30% of the revenue from the supply of equipment to software embedded in the hardware and treated it as royalty, taxable at 10% under the treaty provisions. The Tribunal, however, deleted this addition, following its earlier decisions in the appellant's own case for the assessment years 2005-06 to 2016-17, where it was held that the receipts are not in the nature of royalty. 6. Incorrect Income Considered: The appellant pointed out computational mistakes by the Assessing Officer. The Tribunal directed the Assessing Officer to examine the appellant's claim by verifying the facts and materials on record and decide the issue after providing an opportunity of being heard to the appellant. 7. Incorrect Levy of Surcharge and Education Cess: Following the Tribunal's decision in ground no. 7, this ground became infructuous and was dismissed. 8. Levy of Interest and Penalty: The Tribunal dismissed the ground regarding the levy of interest under Section 234B of the Act as consequential. The ground regarding the initiation of penalty proceedings under section 270A of the Act was not pressed at this stage and was dismissed. Conclusion: The Tribunal upheld the existence of PE and the attribution of profit to the PE, following its consistent view in the appellant's own case for previous assessment years. The addition towards royalty on the sale of software was deleted. The computational mistakes were directed to be examined by the Assessing Officer. The appeal was partly allowed.
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