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TMI Blog2007 (10) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... t of printing machines from India; (3) To provide information on latest machineries to prospective customers. The Head Office is engaged in marketing and sale of sophisticated printing machines including auxiliaries, spare parts, packing as well as provision of all related services, for the customers (Principals) in the graphic industry. It by itself is not engaged in the manufacture of such plant, equipments, spares, which it sells. 3. The branch office was set up to primarily provide services of the nature of after sales service like assistance in installation, repair of the machines as supplied by its principals. 4. MAN Ronald Druckmaschines AG, a company incorporated and registered under the laws of Germany and having its registered office at Postffach 100096, D-86, 135 Augsburg, Germany ('MAN Ronald') under an agreement dt. 28-2-96 agreed to supply equipment for enhancing printing capacity of news paper by M/s. Bennett, Coleman & Company Ltd., Mumbai publishing Times of India newspaper. The Head Office was the exclusive sales agent of Man Ronald in the territory of India. The above supply/order was procured by the assessee's branch office as well as the Head Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that all contracts for supplies and services are directly entered into by the customer with the suppliers and the assessee does not have any authority to execute the contracts. Role played by IPP Branch, New Delhi The role as played by the Branch is restricted to collection of information about customers in India, which require products of various suppliers and provide such information to its head office. In addition, it helps in arranging meetings between the suppliers and customers, which are directly attended by the suppliers, with or without the local support staff of the branch. In addition, the branch provides support in making available its engineers for assistance in installation and commissioning, if sought by the supplier. It also provides support in the sale of spare parts locally procured to the customers. The branch has no authority to conclude the contracts on behalf of its head office or the suppliers or receive any monies on their behalf. The role as played by the branch is restricted to merely providing information, local support services like arranging meetings etc. as well as sale of locally procured parts. In respect of such restricted activities, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer therefore held that the assessee understated income earned to the tune of 39,57,520 DM (3,26,000 DM -1,35,000 already accounted) and added the same to the income of the assessee. 9. On appeal by the assessee the CIT(A) restricted the addition by holding that 75 per cent of the receipts should be apportioned to the branch office and 25 per cent to the head office and allowed partial relief to the assessee. The following were the observations of the CIT(A) in this regard. "I have considered the submissions given by the appellant and facts of case carefully. The only dispute is regarding the appropriation of the service charges between the HO and the branch office. The Assessing Officer has taken whole of the service charge as attributable to the branch office in India as against 60 per cent allocated by the appellant. The stand taken by the Assessing Officer is not fully justifiable considering the role of HO in finalization of the supplies from MAN Ronald to Bennett, Coleman & Co. Ltd. in India. From the letter from MAN Ronald I find that Intergrafica Print & Pack, GmbH is the exclusively sale agent to MAN Ronald for the territory of India. Therefore, the off set printing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only by the Indian branch. According to him after sales service is a very important aspect and since the Indian branch provides after sales service the attribution of income to 75 per cent of Indian operations by CIT(A) was justified. He also brought to our notice that even as per the terms of the agreement of sales agency between the head office and Man Ronald there was no fixed percentage of commission and it all depends on the sale value achieved on sale of products in India. According to him this only goes to show the increased role of the branch office in earning the income. 12. We have considered the rival submissions. From the terms of the agreement between the head office and Man Ronald it transpires that the head office was chosen as sales and service partner only because it has local set ups to provide information and logistic support and business in Asia and for the reason that there was no regular business for Man Ronald in India justifying a full office operation. The branch office (the assessee) makes the initial contacts with the customers, collects information about the customers' requirements and forwards it to the head office. Thereafter the head office arranges ..... X X X X Extracts X X X X X X X X Extracts X X X X
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