2024 (9) TMI 1123 - AT - Income Tax

Accrual of income in India - PE and business connection in India - HELD THAT - As relying on assessee own case 2023 (8) TMI 1537 - ITAT MUMBAI AY 2020-21 we allow these grounds in favour of the assessee after holding that the assessee did not have a PE in India. Attribution and estimation of gross profit - This ground is treated as academic and hence infructuous as it has already been held hereinbefore that the assessee does not have a PE in India.

Issues Involved:
1. General assessment of total income.
2. Validity of reassessment proceedings.
3. Permanent Establishment (PE) in India.
4. Business connection in India.
5. Attribution of receipts to PE.
6. Estimation of gross profit.
7. Taxation of royalty income under Section 44DA.
8. Taxation of royalty income as per APA.
9. Restricting the taxation of royalty income connected to PE.
10. Excess levy of interest under Section 234B.
11. Excess levy of interest under Section 234D.

Detailed Analysis:

General Assessment of Total Income:
The appellant contested the assessment of total income at Rs. 4,04,30,43,830/- against the returned income of Rs. 3,54,29,79,350/-. The Tribunal did not specifically address this ground separately, as it was general in nature.

Validity of Reassessment Proceedings:
The appellant argued that the reopening of the assessment under Section 148 was in excess of jurisdiction and bad in law. However, this ground was not pressed at this stage, and thus, it was left open and not decided by the Tribunal.

Permanent Establishment (PE) in India:
The appellant contended that it did not have a PE in India. The Tribunal noted that this issue was covered by the orders of the co-ordinate benches in the appellant's own case for earlier assessment years, specifically AY 2010-11 and subsequent years. The Tribunal reiterated that the appellant did not have a PE in India based on the consistent findings of the co-ordinate benches, which concluded that the Indian subsidiary GIA India Lab could not be construed as a PE of the appellant under Article 5 of the India-USA DTAA.

Business Connection in India:
Similarly, the issue of whether the appellant had a business connection in India was also covered by the co-ordinate benches' orders for earlier years. The Tribunal followed the same reasoning and held that the appellant did not have a business connection in India.

Attribution of Receipts to PE:
The appellant argued that no part of its receipts should be attributable to the alleged PE in India. Since the Tribunal held that the appellant did not have a PE in India, this ground was rendered academic and infructuous.

Estimation of Gross Profit:
The appellant contested the estimation of gross profit at 20.31% of the receipts attributable to the alleged Indian operations. This issue was also rendered academic and infructuous due to the Tribunal's finding that the appellant did not have a PE in India.

Taxation of Royalty Income under Section 44DA:
The appellant argued that the royalty income was not taxable under Section 44DA as it did not have a PE in India. The Tribunal noted that the AO had already calculated the correct amount by applying the rate as per the APA. Consequently, these grounds were treated as withdrawn on account of being infructuous.

Taxation of Royalty Income as per APA:
The appellant requested that the royalty income be taxed in accordance with the APA. The Tribunal acknowledged that the AO had already applied the APA rate, rendering this ground infructuous.

Restricting the Taxation of Royalty Income Connected to PE:
The appellant argued that if any part of the royalty income was connected to the alleged PE, it should be restricted to the amount in accordance with the APA. This ground was also treated as infructuous due to the AO's adherence to the APA rate.

Excess Levy of Interest under Section 234B:
The appellant contested the excess levy of interest under Section 234B. The Tribunal directed the AO to recalculate the interest as per the law.

Excess Levy of Interest under Section 234D:
The appellant also contested the excess levy of interest under Section 234D. Similar to the previous issue, the Tribunal directed the AO to recalculate the interest as per the law.

Conclusion:
The appeal of the appellant was allowed, with the Tribunal following the consistent findings of the co-ordinate benches that the appellant did not have a PE or business connection in India, rendering several grounds academic and infructuous. The AO was directed to recalculate interest under Sections 234B and 234D as per the law.

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