9911796707
TMI Blog2010 (1) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee falls under s. 5 is not acceptable. X X X X Extracts X X X X X X X X Extracts X X X X ..... d the opinion that prima facie the details furnished by the assessee in the return are incorrect. He held the assessee's activities are in the nature of business activities resulting in accrual or arising of income which was not offered to tax in India. Therefore, a survey action under s. 133A was initiated on 12th Jan., 2006. During the course of survey and also post-survey statements were recorded from officials of the company which led to the conclusion that assessee is not carrying out liaison activities but in fact was carrying out business activities under the guise of liaison office. A notice under s. 148 was issued and served on the assessee. In response to the notice assessee filed the return on 22nd May, 2006 showing nil income. The activities carried on by the assessee are briefly mentioned by the AO in his order which is reproduced below: (a) Tracing the most reliable qualified suppliers of textile products; (b) Checking and expediting the production of merchandise; (c) Attending upon buyers and other representatives of the buyers; (d) To follow-up of orders; (e) To provide quality assurance; (f) To arrange for inspection; (g) To arrange for logistics and export. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he information and then the supplier is either approved or rejected, or sometimes kept in the panel for future reference. Thereafter when the buyer makes an enquiry either with the SPM or with the merchandiser, the merchandising team of the branch office will decide on the appropriate supplier for the client, fix the price and delivery period with the supplier and communicate the same either directly to the buyer with copy marked to SPM. If the terms are acceptable, order is confirmed. The quality technicians approve the samples from the suppliers and after checking the same send it to the buyer for their approval. Then a decision is taken at the meeting which is binding on the buyer and the supplier if found acceptable. The quality technicians give approval of the product after rejecting the defective materials and a random sample is selected and sent to the buyer for final acceptance. The buyer reserves the right to refuse or reject the order at this stage or accept the order with a price negotiation. If the goods are acceptable, then the supplier shall ship out the goods. Answering to question No. 3 as to whether branch office of Mondial Orient Ltd. is having any financial asso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Europe M/s Edinburgh Woollen Mills Ltd. Ottoagn. GCFPL procured orders from these clients for readymade garments manufactured by it. After inspection by quality control teams, the garments were exported to the clients. Answering to question No. 3 as to the role of Mondial Orient Ltd., and how the supplier, GCFPL came into contact with Mondial Orient Ltd., it was stated that basically their agents for C&A would do a follow-up on the status of the orders placed by C&A and also were to look after the quality control. After their inspection and issuance of certificate, which is one of the required documents for GCFPL, negotiations would take place for final payments. It was further stated that a fellow exporter suggested GCPFL to meet M/s C&A who was represented by Intexco International but later on they were replaced by Mondial Orient Ltd. Answering to question No. 5 as to whether GCFPL had any agreement with Mondial Orient Ltd., as a quality certifying agent which was replied in the negative; but furnished a copy of inspection certificate issued by Mondial Orient Ltd. and letter of credit which certified the fact of inspection from that party for getting payment from the bank. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention. The AO concluded that this appears to be only an afterthought of the assessee to circumvent the tax. He arrived at the above conclusion for the reason that from the statements recorded from various employees including the country manager and quality manager it appeared that services were rendered by Mondial Orient Ltd. for the buyer i.e., C&A agent. While coming to the above conclusion AO also took note of the fact that one of the suppliers GCFPL who exported the goods as certified by the assessee, has stated that they were not aware of any entity called Mondial Services Ltd. If was further contended by the assessee that the assessee was purchasing the goods in India for the purpose of export and hence there was no income that accrued or deemed to have accrued to the assessee in India. This contention was rejected for the reason that employees of the assessee clearly stated that assessee was not doing any buying activity for export. The assessee was only rendering certain services and certain quality inputs and received charges for the same for the services rendered. Hence, he held that the receipt is attributable to the activity in India and accordingly taxable in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The branch office in India started providing part of the aforesaid services from August, 2002. The services conducted by the assessee branch are very essential for the purpose of purchase of garments and accessories. The assessee was not purchasing goods by itself in its own name but was providing assistance in connection with purchase of goods for the purpose of export. The various activities such as identification of suppliers, quality control, pre-production meeting, online inspection, post-manufacturing inspection, handling of logistic and co-ordination of shipment constitute essential activities performed in the course of purchase of garments in India. The activities and operational field of the assessee branch are confined to purchase of garments in India for the purpose of export, as stated by Lalih Fernando. The provisions of cl. (b) of Expln. 1 to s. 9(1)(i) apply to income from operations relating to purchase of goods in India for the purpose of export and it is not necessary that the goods are purchased by non-resident assessee carrying out such operations on its own account. It was stated the statements of the employees clearly established that the branch of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It does not secure orders from the customers directly or indirectly on behalf of its head office. It does not carry out any product designing and development activity as claimed by the AO. PE postulates a fixed place of business". Even if there is a fixed place of business, if that branch only supplies information, advertisement or similar activities which have a preparatory or auxiliary character for the non-resident enterprise, then it does not constitute a PE. This branch of the assessee was only doing liaison work between India and the head office/buyers outside India. It is in fact only preparatory or auxiliary in nature. The assessee for the above proposition also relied on the decision of the Authority for Advance Rulings in the case of Gutal Trading Est., In re (2005) 198 CTR (AAR) 417 : (2005) 278 ITR 643 (AAR). This was a case wherein it was held that the branch of a foreign company did not constitute its PE in India, as the branch was prohibited from carrying on business/commercial activity in terms of the permission of RBI and was only acting as a communication channel between its suppliers and the Indian purchaser, but did not have any authority to conclude contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies to a non-resident whose income accrues or arises in India or is deemed to accrue or arise in India and held that s. 9 applies to such income. 16. The CIT(A) noted the issue involved in the instant case of the assessee is whether the assessee is covered by the saving provisions of Expln. 1(b) of s. 9(1)(i). If it falls within the scope of this Explanation, the activities carried out by the Indian branch office of the assessee tantamount to "business connection" in India and constitute a course of dealing or continuity of relationship which contributes directly or indirectly to the earning of income by the assessee outside India. If it is so, then income would be deemed to accrue or arise in India by virtue of s. 9(1)(i) and thereby taxable in India under the main provision itself. The question is therefore, whether the activities of the assessee are preparatory and auxiliary in character and are relevant only in the context of DTAA which contains exclusion for such activities carried out by the branch office. He held, a branch office carrying out preparatory or auxiliary activities does not constitute a PE of its head office in India. He held since there is no DTAA between Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artments of Dutch, British and German C&A head offices. RSC has three divisions providing support to all C&A operations in Europe, and the logistic division is one of the three divisions. Logistic division is managing and controlling the flow of products and related information from the source of production to the market place. This incorporates global inbound logistics. the import/export process and the distribution to the retail countries. Logistics works in close co-ordination with the European buying organization and the retail countries. Thus the CIT(A) found that the assessee was not acting as buying agent of MSL but was only providing supply chain management, services to customers of MSL. The CIT(A) further noted that in his letter dt. 10th Dec., 2008, the assessee explained as follows: "The appellant has service contract with MSL. Further, MSL has service contract with Mondial International, Belgium who in turn has service agreement with C&A Buying KG. C&A Buying KC is the entity which buys the merchandise for all international C&A retail companies." The income earned by the assessee from provision of such services is deemed to accrue or arise in India and is accordingly ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any contract or arrangement in the name of or on behalf of MSL. But he found the actual state of affairs is different. As regards the activity of identification of local suppliers. Mr. Lalih Fernando in his deposition recorded on 16th Jan., 2006 explained the process of evaluation of the local manufacturers by the Indian branch office, after which the supplier is either approved or rejected or kept in the panel for future reference and use. The CIT(A) further found from the statement of Nihal Mudalige, quality manager of the Indian branch office, that his targets for achievement are set by the head office in Brussels, Belgium, which is to select and identify textile processing units/component manufacturing units in the sub-continent.......... and prepare a list to be included in the "nominated list" of suppliers to C&A. From this, the CIT(A) held it gives an impression that he is working for C&A Group having its headquarters at Brussels rather than the assessee which has its head office in Hongkong. It was the assessee who was discussing the price and delivery period with the supplier and communicate the same directly to the buyer with a copy marked to SPM (sourcing product mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.5.60 Designs ... confirmed/price confirmed .... Orders have been issued today. Correct samples are needed a.s.a.p ....." (v) The foreign buyer sends the order confirmation to the appellant. (vi) The foreign buyer sends his comments on the samples as to whether the samples are OK or need any modifications, whether buttons are matching or whether fabric design and colour are OK or whether fitting and styling are OK, whether stitching is OK etc. Upon examining the samples after removal of defects, etc., the foreign buyers convey to the appellant that 'the orders are approved for production'. (vii) Samples are sent again to the foreign buyers at the post-production stage for seeking their "approval". (viii) The appellant keeps foreign buyers apprised of the shipping schedule of various orders and the reasons for delay in any of the shipments, if any. (ix) Export invoice is raised by local manufacturer in India on the foreign buyers directly (mainly C&A entities) and the name of the appellant does not figure anywhere on the export invoices as a buying agent of the foreign buyers/C&A affiliates. (x) The appellant issues a certificate of inspection for the shipped goods to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SL or was neither buying any goods on behalf of MSL nor exporting to MSL. 21. Coming to the other decision of the Authority for Advance Rulings in Gutal Trading Est., In re, it was held that the scope of activities of the liaison office was confined to provide information about the technology used by the principal company to receive and reply the trade enquiries of the customers with no right to enter into negotiations with the customers in India for import or purchase of goods from the principal company. On these facts, it was held that there was no business connection within the meaning of s. 9(1)(i) and no income would accrue to the assessee through such liaison office, whereas in the instant case of the assessee, it is inter alia carrying out price negotiations with the local suppliers through its branch office in India and hence its income from such activities would be liable to tax in India. 22. Similarly the CIT(A) distinguished the decision in the case of Nike Inc. and held the assessee is neither purchasing agent for its subsidiaries or associated enterprises nor a parent company. The branch office set up by the assessee in India was providing supply chain management ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter receipt thereof in such place and in such currency as MOL may from time to time direct." 25. He also brought our attention to paper book 1 p. 67 that is a letter dt. 27th March, 2002 from the assessee to the Exchange Control Department of the RBI seeking permission to establish a branch in India elucidating the kind of activities the assessee branch will undertake which reads as under: (a) Identification of the local suppliers. (b) Assistance to the local suppliers in the development of new samples and merchandise. (c) Checking the quality of the products to be exported. (d) Co-ordinating timely delivery of the products. (e) Co-ordinating timely payment to the local suppliers. 26. Again he brought our attention to p. 69 cl. 3 which briefly describes the activities which reads "buying services for export of readymade garments. accessories and other merchandise from various countries including India." 27. Again our attention was drawn to cl. 4(iii) which gives the particulars of the proposed branch/liaison office as under: (a) Details of the activities/ Buying services for export of services: proposed to be readymade garments, accessories undertaken/rendered by the and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orld on a job to job basis and has arrangement with its subsidiaries for purchasing the manufactured goods directly and pay for the same to the respective manufacturers. With a view to ensure quality of its various products in India through its liaison office, it employed various people like merchandiser, product analyst, quality engineer, apparel product integrity manager, fabric controller, transport specialist, etc., In order that from every point of view the quality is maintained, supply of the merchandise is made as per schedule as are concerned with the selection of the fabric, mixture of threads, manufacturing process, cleanliness, cleaning and many more, the various staff attached to the liaison office create awareness in the staff of the manufacturer. The rate or price for each apparel is negotiated with manufacturer. The quality of each apparel is also indicated. The timeframe for manufacture and shipment is also indicated. The samples so developed are forwarded to the US office. The liaison office only proposes and gives its opinion about the reasonability of the price and all related issues, etc., the US office decides about the price, quality and quantity, to whom to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt with the agreement concerning the manufacturing terms and conditions that were entered with Karle International. The fundamental arrangement is brought out in the preamble and this is reproduced as under: "This agreement concerning manufacturing terms and conditions ('agreement') is entered into effective as of the 4th day of October, 2002 (the 'effective date') by and between Nike Inc., an Oregon corporation, having its principal place of business at 1, Bowerman Drive, Beaverton, Oregon 970 005, USA, acting as buying agent for its affiliates (as defined below) and Karle International, and Nike Corporation having its principal place of business at Karle International, 73, Nagasandra Village, Tumkur Road, Bangalore ('manufacturer'). Nike Inc.'s affiliates (as defined below) are engaged in the manufacturing, distribution, marketing and sale of sports and fitness footwear, apparel, equipment, accessories and related products on a worldwide basis. As buying agent for certain of its affiliates, Nike Inc. assists such affiliates with manufacturer for selection, purchasing, production, scheduling, quality control, and transportation and logistics management. Nike Inc., as buying ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident that there are various activities that are ancillary, incidental and confined to the purchase of goods. In particular, we would like to highlight the following clauses in the contract: (1) In p. 1 of the contract (as highlighted), it is stated that all 'supplies and services' which are incidental and ancillary to the activity of purchase and sale are covered by the agreement. This clearly postulates that the operation of purchase entails additional 'services' which are necessary in a logical conclusion to the contract. (2) Para 1.3 states that the products supplied by the seller shall be furnished in accordance with all terms and conditions of this agreement and any subsequent engineering change orders in relation to the purchase from the buyer shall be entertained by the seller, subject to the conditions of the agreement. This postulates the situation where there could be communication back and forth between the seller and the buyer on various specifications or other aspects related to the goods. (3) Para 6.1 states the fact that a buyer from time to time may direct changes in design specifications relating to any order for products. (4) Para 6. 2 restricts the rights of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itation wherein the Tribunal reproduced the findings of the CIT(A) which read as under: "I have gone through the submissions of the Authorised Representative, remand report thereon and the rejoinder. It is an admitted fact that the appellant is not involved in the purchase of goods in India for the purpose of export. Purchase involves transfer of title of goods purchased from the seller to the purchaser. In this sense, the Nike Inc. India can at no point of time be said to be a purchaser. In his own words: The contract for the purchase of goods is entered into directly between Nike Inc., USA, and third party manufacturers. The liaison office's activities are restricted to merely identifying the manufacturers'." The learned counsel again reiterated exactly this is the finding in the instant case of the assessee as well, by the first appellate authority. 36. The learned counsel again brought our attention to the decision of the Tribunal in Nike Inc., particularly to para 33 wherein the Tribunal had recorded the activities carried out by the liaison office in India, as under: factory training; product development; factory evaluations; price negotiations; technical services viz., f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filiates and in accordance with the instructions and approval by the assessee that the goods are being shipped at the price agreed to with the assessee. So it is a case of the assessee purchasing the goods for the purpose of exports. In the absence of there being any prima facie contract between the assessee and the local manufacturer, the only relationship is that of buyer's agent and the local manufacturer knows the assessee only as the agent of the buyers. The local manufacturers know that the agent of the buyer, viz., the assessee, has placed the orders on it with a view to buy the goods in the course of export and as directed exported it to various affiliates of the assessee. Therefore, the Expln. (1)(b) purchase for the purpose for export clearly applies to the assessee and hence, no income is derived by it in India through its operations of the liaison office in India." The learned counsel submitted the facts in the instant case are identical to the case of Nike Inc. and, therefore, the appeal by the assessee is to be allowed. 39. The learned counsel submitted the finding of the Revenue authorities that the assessee is not involved in any purchase activities in India and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a PE for the Indian branch is to be treated as such, is a finding without merit. India does not have any DTAA with Hongkong and, therefore, in the absence of DTAA between India and Hongkong, the concept of PE cannot be imported to the section and the branch office in India cannot be treated as PE of the head office. Without prejudice to the above, the learned counsel further submitted the aforesaid activities of the Indian branch do not tantamount to business in India and do not result in a PE of the assessee in India. The branch office, it will be appreciated, operates only as a communication channel and it does not secure orders for its customers in any manner, directly or indirectly or sign any contract on behalf of its head office. The branch office does not carry out any product development and designing activity as held by the AO. A 'PE' postulates a fixed place of business. A fixed place of business is not a PE, if the activities thereof relate to supply of information, advertisement or similar activities which have a preparatory and auxiliary character for the non-resident. The activities carried out by the branch in India are liaison work between the vendors in India and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Hongkong and the remaining 25 per cent will be attributed to India. Capital cost: Capital is the main requirement for any successful business. A weightage of 15 per cent is attributed as a factor for earning the income since no capital cost is involved in India and hence the entire 15 per cent is attributed to Hongkong and no attribution to India. With this, 75 per cent of the total income arising or accruing to the assessee is attributed to its Hongkong office and 25 per cent is attributable to India." 43. It was contended before the CIT(A), the database relied upon by the AO was not confronted to the assessee in terms of requirement of the provisions of s. 92C(3) which deals with computation of "arm's length price". Therefore, the comparable companies relied upon by the AO for computing the income of the assessee at 0.28 per cent of FOB value of export as against cost + 5 per cent. mark up in terms of service agreement entered into with MSL are liable to be excluded from the consideration. Without prejudice to the above, it was further submitted only a miniscule part of the activities was performed by, the branch in India attributing 25 per cent of the income of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the capability/capacity of the suppliers, risk of cancellation of the orders, risk relating to system failure, risk relating to the quality of the products supply etc. Service agreement between the assessee and MSL for rendering services was entered on 28th Feb., 2002 and on account of this agreement assessee was required to provide buying services to MSL not only in respect of Indian territory but also in respect of territories like Indonesia, Korea, Malasia, Philippines, China, Singapore, etc. As far as India is concerned, the agreement became operative only from 1st Aug., 2002 after getting approval to establish branch in India. For the above services, assessee was receiving payments much before the survey was carried out in the Indian branch office of the assessee. In support of the above assessee also submitted agreement between MSL and assessee. An affidavit of the director of the assessee confirming that the assessee does not have any agreement other than the service agreement with MSL and certificate from C&A buying agent were produced. 46. Coming to the stand of the Revenue that the employees of the Indian branch of the assessee were not aware of the existence of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing written submissions briefly as under. The assessee is a Hongkong based company which is engaged in the business of providing services to customers of an associated enterprise i.e., M/s Mondial Services Hongkong Ltd., involving export of readymade garments/accessories like merchandise from India, opened its Indian branch obtaining RBI approval. Returns were filed for the asst. yrs. 2003-04, 2004-05 and 2005-06 declaring nil income, for the reason that assessee's operations are confined to purchase of goods for the purpose- of export and is not liable for tax in India in relation to its activities, in the light of the provisions of Expln. 1(b) to s. 9(1)(i). There was a survey action under s. 133 on 12th Jan., 2006 and statements were recorded from various employees of the assessee during the course of survey. Assessments for two years were reopened under s. 147 and completed assessments for the three years denying the benefit of Expln. 1(b) to s. 9(1)(i) holding that the assessee is liable to be taxed in India on total income of Rs. 20,05,977; Rs. 33,35,158; and Rs. 34,98,315 for the asst. yrs. 2003-04 to 2005-06 respectively. The CIT(A) confirmed the order of the AO holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinating timely delivery and timely payment to local suppliers. The application column No. 4(iii)(a) of the Form FNC-1 enclosed, reiterates the service proposed to be undertaken by the branch office which merely states buying services for export of readymade garments, accessories like merchandise primarily from India, but also from neighbouring countries like UAE, Nepal and Maldives. Merely because the approval of RBI was obtained for export of readymade garments/accessories from India and neighbouring countries i.e., UAE, Nepal and Maldives, does not take away the undeniable facts that the assessee is a service provider and not a buyer for the benefit of Expln. 1 (b) to s. 9(1)(i). 53. Coming to the service agreement dt. 28th Feb., 2002, he submitted there has been an agreement between Mondial Services (Hongkong) Ltd. and Mondial Orient Lid. (assessee), both Hongkong based entities. Assessee is the Indian branch office of Mondial Orient Ltd. In fact, the assessee Mondial Orient Ltd. has been retained by MSL Hongkong Ltd. to provide services for the benefit of its clients worldwide. It is pertinent to note that MSL and not the assessee appears to be an associated enterprise consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is neither in the nature of liaison activity nor of preparatory and auxiliary character as argued by the learned counsel. It constitutes substantial business activity giving rise to income accruing or arising or deemed to arise or accrue in India. 55. Coming to ground No.3 of the assessee that the CIT(A) erred on facts and in law by holding that the approval of RBI was obtained by the assessee by suppressing the facts, the learned submitted there is no mention about the service agreement dt. 28th Feb., 2002, in assessee's application made to the RBI. Therefore, this finding of the CIT(A) is to be upheld. 56. Coming to ground No. 4, that is the CIT(A) went wrong in holding that the activities of the assessee branch in India were in the nature of liaison activities etc., the Departmental Representative submitted there is no DTAA between India and Hongkong and, therefore, taxability of the Indian branch office is strictly governed by the provisions of s. 5 r/w s. 9. The question whether the services rendered by the Indian branch office are of preparatory and auxiliary character, etc., has no relevance. It is relevant only where DTAA exists and not otherwise. 57. The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and parcel of the organization and indistinguishable from it. In these circumstances, the Hon'ble Tribunal held that the purchase by the agent tantamount to purchase by the principal and therefore upheld the applicability of Expln. 1(b) to s. 9(1)(i). I would submit, Your Honours, that the facts in the instant case are quite different. The appellant, in this case, is a third party relative to the purchaser and is a contract service provider for the purchaser. I would, therefore, strongly argue that the decision in the case of Nike Inc. cannot be mechanically applied to this case." 58. The learned Representative reiterated the submissions made hereinabove. 59. Considering the rival submissions, we are of the view that the appeal of the assessee is to be allowed. The main thrust of the reasoning which was reiterated by the learned Departmental Representative is that assessee is a service provider and is not purchasing goods for the purpose of export and. therefore, assessee's activities were basically in the nature of providing services in the nature of supply chain management. This is clear from assessee's application dt. 27th March, 2002 to RBI seeking permission to establish bra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is relevant only if a DTAA exists between the two countries. In this case, there is no DTAA between Hongkong and India. Therefore, this argument by the assessee is irrelevant. 62. Before coming to the conclusion let us go through the relevant provisions. Sec. 9 deals with income deemed to accrue or arise in India: "9. (1) The following incomes shall be deemed to accrue or arise in India- (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India. Explanation 1: For the purposes of this clause- (b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export;" According to the Revenue, Expln. 1(b) to s. 9(1)(i) of the Act is not applicable in the instant case of the assessee since the assessee has not purchased the goods in its own name and was not selling/exporting the goods to MSL or its customers. Therefore, according to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any business activity carried out through a person who, acting on behalf of the non-resident has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident. In the instant case, no doubt the branch office has no authority to conclude contracts. The assessee only passes information collected by it to its head office. Coming to cl. (b) of Expln. 2 which states a person acting on behalf of non-resident has no such authority, but habitually maintains in India stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident. There is no case that the assessee is having a stock or habitually maintains stock of goods or merchandise from which it regularly delivers goods or merchandise on behalf of the non-resident. In fact, it is one of the cases of the Revenue that assessee is only providing service of supply chain management. Coming to cl. (c) of Expln. 2, it deals with business activity carried out through a person acting on behalf of the non-resident, is a person who habitually secures orders in India, mainly or wholly for the non-resident or for that non-resident and other non-residents contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Rulings that liaison office, is only providing information about technology received during feedback and passed on information to the head office but was not entitled to do negotiations by itself and in such case there is no income deemed to accrue to arise to non-resident in India. One of the arguments advanced by the learned Departmental Representative is that assessee is carrying out price negotiations. However, except negotiations, assessee had no, right to conclude the contact. Therefore, this point is also not relevant as far as the instant case of the assessee is concerned. 67. In the light of the foregoing discussions, we are of the view that the appeals by the assessee are liable to be allowed and hence allowed. ITA Nos. 386 to 388/Bang/2008-By the Revenue: 68. The Revenue has filed appeals against the findings of learned CIT(A) in accepting cost plus 5 per cent as the income of the branch office and while accepting the income of the branch office at 5 per cent cost, the learned CIT(A) has not provided opportunity to the AO for examining the comparables given by the assessee. It is further mentioned in the ground of appeal that the learned CIT(A) should have determin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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