2024 (9) TMI 1515 - AT - Income Tax

Accrual of income in India or not - Permanent Establishment P.E. in India - attribution of profits - estimation of gross profit attributable to the assessee - HELD THAT - Respectfully following the decision of the co-ordinate benches in the earlier assessment years 2022 (1) TMI 1465 - ITAT MUMBAI for AY 2017-18, we hold that the assessee does not have a PE in India. Accordingly, Ground Nos. 2, 3 and 4 are decided in favour of the assessee.

Issues Involved:
1. Validity of reassessment proceedings.
2. Existence of a Permanent Establishment (PE) in India.
3. Attribution of profits to the alleged PE.
4. Estimation of gross profit attributable to the alleged PE.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The first ground relates to the validity of reassessment proceedings. The appellant contended that the reopening of the assessment under Section 148 of the Income-tax Act, 1961, was in excess of jurisdiction and bad in law. However, the appellant's representative submitted that this ground is not being pressed at this point of time. Accordingly, this ground is left open.

2. Existence of a Permanent Establishment (PE) in India:
The appellant argued that the Assessing Officer (AO) and the Dispute Resolution Panel (DRP) erred in holding that the appellant has a PE in India. The appellant contended that considering the facts and circumstances of its case and the prevailing law, it has no PE in India. The AO and the DRP's conclusions were deemed unwarranted and unsupported by relevant material. The appellant's representative pointed out that these issues are covered by the order of the co-ordinate benches in the appellant's own case for AY 2010-11 to AY 2016-17 and ITA No. 978/Mum/2021 for AY 2017-18. The Department's representative conceded that the PE issue stands decided in favor of the appellant, as covered by the earlier years' orders of the co-ordinate benches. The Tribunal held that the appellant does not have a PE in India, following the decision of the co-ordinate benches in the earlier assessment years.

3. Attribution of Profits to the Alleged PE:
The appellant argued that the AO and the DRP erred in holding that 50% of the receipts are attributable to the alleged PE in India. The appellant contended that no part of its receipts is attributable to the alleged PE in India, and the stand taken by the AO and the DRP is incorrect, illegal, arbitrary, and not in accordance with law. The Tribunal noted that since the primary issue of the existence of a PE was decided in favor of the appellant, the alternate ground regarding attribution of profits became academic and was not deliberated upon.

4. Estimation of Gross Profit Attributable to the Alleged PE:
The appellant argued that the AO and the DRP erred in holding that 20.31% of the receipts attributable to the alleged Indian operations ought to be considered as profits of the PE taxable in India. The appellant contended that even if it is held that it has a PE in India, no further income can be taxed in India as the alleged PE has been remunerated at an arm's length. The Tribunal held that since the primary issue of the existence of a PE was decided in favor of the appellant, this ground also became academic and was not deliberated upon.

Conclusion:
Respectfully following the decision of the co-ordinate benches in the earlier assessment years, the Tribunal held that the appellant does not have a PE in India. Accordingly, Ground Nos. 2, 3, and 4 were decided in favor of the appellant. The appeal of the appellant was allowed. The order was pronounced in the open court on 09.09.2024.

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