2023 (10) TMI 967 - AT - Income Tax

PE in India - Income deemed to accrue or arise in India - existence or otherwise of a Permanent Establishment (PE) in India - HELD THAT - Departmental authorities have turned a blind eye to all the submissions and facts brought on record by the assessee. Merely following the decision taken by the appellate authorities and Hon ble High Court in past assessment years, the departmental authorities have concluded the existence of PE without looking into or examining the facts and evidences brought on record, which are very much relevant for deciding the existence of PE in the impugned assessment years The departmental authorities have failed to controvert either the submission or the materials and evidences brought on record by the assessee to demonstrate that they did not have any PE in India in these assessment years. In fact, even at the stage of Tribunal, no contrary material has been brought on record by the Revenue to rebut the claim of the assessee that no PE existed in these years. That being the factual position emerging on record, we hold that the decision taken in case of Nuovo Pignone International SRL Vs. DCIT 2023 (6) TMI 1321 - ITAT DELHI would squarely apply to the facts of the present appeals. Accordingly, we hold that the assessee did not have any PE in India in the assessment years under dispute so as to attribute profit to such PE. The departmental authorities have failed to controvert either the submission or the materials and evidences brought on record by the assessee to demonstrate that they did not have any PE in India in these assessment years. In fact, even at the stage of Tribunal, no contrary material has been brought on record by the Revenue to rebut the claim of the assessee that no PE existed in these years. That being the factual position emerging on record, we hold that the decision taken in case of Nuovo Pignone International SRL 2023 (6) TMI 1321 - ITAT DELHI would squarely apply to the facts of the present appeals. Accordingly, we hold that the assessee did not have any PE in India in the assessment years under dispute so as to attribute profit to such PE.

Summary

Issues:
The judgment involves challenges to final assessment orders under the Income-tax Act for the assessment years 2018-19 and 2019-20, primarily focusing on the existence of a Permanent Establishment (PE) in India.

Existence of Permanent Establishment (PE):
The case involved non-resident corporate entities engaged in offshore supply of plants, equipment, and services to customers in India. The Assessing Officer previously held that the entities had a PE in India based on activities conducted at a specific location. However, the entities argued that the factual circumstances had changed in the assessment years under dispute, with the premises being vacated, no expatriate employees present, and a significant increase in remuneration paid to an Indian entity. Despite the entities' contentions, the departmental authorities upheld the existence of PE without considering the changed circumstances. The Tribunal highlighted that the existence of a PE must be determined on a year-to-year basis and emphasized the Revenue's burden to establish the PE's existence. The Tribunal concluded that the entities did not have a PE in India during the assessment years under dispute, based on the uncontroverted evidence presented.

Other Issues:
Given the resolution of the PE controversy, the Tribunal deemed all other issues raised in the appeal as of academic interest and not requiring adjudication.

Conclusion:
The Tribunal partly allowed the appeals, ruling that the entities did not have a PE in India during the relevant assessment years. The decision was based on the failure of the departmental authorities to rebut the entities' evidence and the application of a precedent involving similar circumstances. As a result, the other issues raised in the appeal were not addressed, and the appeals were partly allowed.