9911796707
TMI Blog2014 (1) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... Court] - To the extent of the receipt representing reimbursement of the expenses the same were not taxable - It is only when there was surplus that the same should be taxed - Decided against assessee. - ITA Nos. 2015/Del/2008, 2435/Del/2010 & 5026/Del/2011 - - - Dated:- 17-1-2014 - Shri G. D. Agrawal And Shri I. C. Sudhir,JJ. For the Appellant : Shri Salil Agarwal, Advocate. For the Respondent : Shri Sanjeev Sharma, CIT-DR ORDER Per G. D. Agrawal,VP : These appeals by the assessee are directed against separate orders of learned CIT(A), Ghaziabad dated 05.02.2007, 16.03.2010 and 16.08.2011 for the AY 2003-04 to 2005-06 respectively. 2. In all these appeals, common grounds have been raised. Therefore, we shall discuss in detail the grounds as well as facts for AY 2003-04. 3. In this year, the assessee has raised as many as 20 grounds. However, they are all against the determination of income at Rs. 24,86,703/- as against the declared loss of Rs. 38,86,254/-. 4. At the time of hearing before us, it is stated by the learned counsel that the assessee i.e. M/s Brown Sharpe INC is incorporated in USA and it is 100% subsidiary of Hexagon AB (Publ), Sweden. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eive up to 25% of the annual remuneration as incentive. He also stated that the liaison office had employed not only the Chief Representative Officer but also the Technical Support Manager. The Assessing Officer had examined the Chief Representative Officer i.e. Shri Anoop Prasad Verma and his statement was recorded. From his statement, it was evidently clear that the liaison office was promoting the brand products of the assessee and the performance of the employees was being judged by the number of orders that the company received. He, therefore, submitted that the liaison office was not simply a communication channel and as claimed by the assessee but it was rendering the services for promotion and sales of the products of the assessee company. That apart from getting permission from RBI for opening the liaison office, the assessee company is registered with the Registrar of Companies for establishment of place of business in India. He referred to the certificate issued by the Registrar of Companies, NCT of Delhi and Haryana in this regard. He also stated that the assessee itself had filed the return of income not only for this year but also for all subsequent years claiming the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be met through remittances from the applicant's head office in Hong Kong. On these facts the applicant applied to the Authority for an advance ruling on the question whether the applicant could be said to have received income taxable in India. On the facts stated the Authority ruled that a plain reading of Explanation 1(b) to section 9(1)(i) of the Income-tax Act, 1961, indicating that no income would be deemed to accrue or arise to a non- resident through or from operations confined to the purchase of goods in India for the purpose of export. The proposed activities of the liaison office of the applicant in India were to be confined to purchase of goods for export. It was immaterial whether the export of goods was to Hong Kong or to any other country. The applicant company could not, therefore, be said to earn income from the proposed activities under the provisions of the Income-tax Act." 10. In the case of K.T. Corporation (supra), the Authority for Advance Rulings held as under:- "The applicant, a Korean company, is telecommunication carrier/reseller. It has opened a Liaison Office ('LO') in India with the permission of the Reserve Bank of India (RBI) to act as a commun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as sales incentive. Though during the assessment proceedings Shri Anoop Prasad Verma i.e. Chief Representative officer of the liaison office had stated that sales incentive plan was not actually acted upon but, nevertheless, it is not in dispute that in the employment contract between the assessee and the employees, there was a sales incentive plan and employees were to be provided with the remuneration based upon the achievement of the target for the sales of the goods of the assessee company in India. The statement of Shri Anoop Prasad Verma was also recorded by the Assessing Officer and, in reply to question 14, he stated "The employee of the liaison office was assigned the task to promote Brown Sharpe Brand's products and to understand the Indian market. The performance judged by number of direct orders that the company received as well as extend the awareness of the Brown Sharpe Company in India." The above factual finding recorded by the Assessing Officer could not be controverted by the assessee either before the CIT(A) or before us. Further, the assessee company registered itself with the Registrar of Companies for carrying on the business in India and the certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia was only collecting and sending the information from India to Japan. On these facts, the ITAT Kolkata Bench held that the authorities below were not justified in estimating the income of the assessee on the ground that the assessee was having a PE in India. But, the facts in the case of the assessee are altogether different. The assessee company is registered with the Registrar of Companies in India for carrying on the business. The liaison office, apart from having Chief Representative Officer and other staff, is also having a Technical Expert. The employees of the assessee company are promoting the sales of the goods of the assessee company as per service conditions. There is a sales incentive plan by which employees are provided the incentive for achieving the sales target and the performance of the employees is being judged by the orders secured by the assessee company. All these activities clearly establish that the liaison office of the assessee was promoting the sales of the assessee company in India and, therefore, the Assessing Officer was fully justified in holding that the income attributable to liaison office is taxable in India. 14. Now, coming to the determinat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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