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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 ..... f the assessee for the purpose of the Act, is that of a Non-Resident company. It opened its branch office in New Delhi with the approval of RBI, vide its letter dt. 17-2-1993 and registered with Registrar of Companies on 1-2-1994. The branch office as per the permission granted by RBI, was permitted to carry out the following activities in India :- (1) Representing its Head Office in connection with buying, selling, import/export of sophisticated machines, including provision of after sales services; (2) Export 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 incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suppliers in making quotations to the customers, which are directly made by the suppliers from their offices in Germany and other places; (3) To help the suppliers in following up the tenders, enquiries, negotiations etc.; (4) To help the suppliers in finalizing the contracts to be entered into with the customers; (5) To arrange after-sales-services like assistance in installation and commissioning through local offices. The assessee explained 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 supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales commission of 5,21,000 DM should be treated as assessee's income. With regard to the claim of the assessee regarding its action in offering only 1,35,000 DM as receipts in this year, the Assessing Officer accepted 1,95,000 DM had been accounted for in the preceding year. With regard to the balance sum of 3,26,000 DM (5,21,000 - 1,95,000 DM) the same should be accounted for as assessee's income. The Assessing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere made before the revenue authorities. On the principle to be applied regarding attribution of income between the enterprise and the permanent establishment, he relied on the decision of the Special Bench of the Tribunal in the case of Motorola Inc. v. Dy. CIT [2005] 95 ITD 269 (Delhi)/147 Taxman 39 (Mag.). The ld. D.R. on the other hand submitted that the main ground work was done 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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