2023 (9) TMI 507 - AT - Income Tax

Income attributed to PE in India - whether the assessee had a Permanent Establishment (PE) either in the nature of a fixed place PE or Supervisory PE under Article 5 of Indian-Japan Double Taxation Avoidance Agreement (DTAA)? - Assessee is a non-resident corporate entity incorporated in Japan - HELD THAT it is very much clear that the factual position qua the disputed issue is identical to the earlier assessment years. As already discussed in foregoing paragraphs, this is a legacy issue continuing from assessment year 2014-15 onwards. In the latest order passed for assessment year 2017-18 2023 (2) TMI 1107 - ITAT DELHI hold that the assessee had no PE in India in any form whatsoever. Therefore, the addition made by attributing a part of the income of the assessee to the alleged PE has to be deleted. Thus we hold that the assessee had no PE in India, either fixed place or supervisory, to which the profit from revenue earned from sale of raw-material and finished capital goods can be attributed. Accordingly, we delete the addition made by the Assessing Officer. Grounds are allowed

Summary

Issues involved:
The judgment involves determining whether the assessee had a Permanent Establishment (PE) under Article 5 of the Indian-Japan Double Taxation Avoidance Agreement (DTAA).

Details of the Judgment:

Issue 1: Existence of Permanent Establishment (PE)
The assessee, a non-resident corporate entity from Japan, engaged in manufacturing activities, sold goods to its Indian group entity. The Assessing Officer held that the assessee had a fixed place and supervisory PE in India, attributing 50% of the profit to the PE and taxing it in India. The assessee contended that it had no PE in India, citing previous Tribunal decisions in its favor. The Tribunal, in line with its earlier rulings, found that the conditions for a Fixed Place PE were not met, as the alleged premise was not at the disposal of the assessee. Regarding Supervisory PE, the Tribunal determined that the activities performed by the employees in India did not constitute supervisory functions as required under the DTAA. Consequently, the Tribunal held that the assessee had no PE in India, deleting the addition made by the Assessing Officer.

Issue 2: Interest under Section 234A, 234B, and 234C
The Tribunal considered the issues of levy of interest under Section 234A, 234B, and 234C as consequential and did not require adjudication.

Issue 3: Premature Ground
A pre-mature ground raised by the assessee was dismissed as it was deemed premature at that stage.

In conclusion, the Tribunal allowed the appeal, holding that the assessee had no PE in India, and dismissed the stay application filed by the assessee, which had become infructuous. The judgment was pronounced on 19th April 2023.