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TMI Blog2014 (4) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... plied by the assessing officer and the income was taken - This was approved by the DRP in its order, the other claims made by the AO in the remand report were rejected. The basis of both the notices has been knocked out of existence by the DRP’s order in the reassessment proceedings of SEC for the same assessment year- On the date on which notices were issued to the petitioner u/s 148 and 201(1)/(1A), there was an uncontested finding by the revenue authorities in the case of SEC that SEC cannot be taxed in respect of the sales made in India through the assessee on the footing that the assessee is its PE - If no income arose to SEC on account of sales in India since the petitioner cannot be held to be its PE in India, two consequences follows that the payments made by the petitioner to SEC for the goods are not tax deductible u/s 195(2) and they were rightly allowed as deduction in the original assessment of the petitioner and the assessee cannot be treated as one in default u/s 201(1) and no interest can be charged u/s 201(1A - the notice u/s 201 is a verbatim reproduction of the remand report of the assessing officer in SEC’s case filed before the DRP – thus, both the notices u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed on 30-10-2009, which was later rectified by an order passed on 12-11-2009 under section 154 reducing the adjustment to Rs. 1,24,86,79,414/-. The respondent proposed a draft assessment order under section 144C of the Act on 22-12-2009 computing the total income at Rs. 1,62,44,65,280/-; no disallowance of the payments made to SEC was proposed under section 40(a)(i) in the draft order. The petitioner filed its objections to the draft order before the Disputes Resolution Panel ( DRP ). The DRP issued directions to the respondent vide order dated 30-9-2010 and the respondent completed the assessment of the petitioner under section 143(3) of the Act by order dated 19-10-2010, after making an adjustment of Rs. 1,24,86,79,414/- to the international transactions with the associated enterprises as originally proposed in the draft assessment order read with the rectification order dated 12-11-2009. 4. During the pendency of the objections before the DRP, a survey under section 133A was conducted in the premises of the petitioner on 24-6-2010, in the course of which statements from some of the employees, including expatriate-employees, were recorded. Certain directions would app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e supply of technology and marketing of the products and (iii) the petitioner, though incorporated in India as a company, is an agent of SEC. On the basis of these submissions, it was contended by the assessing officer in the remand report that all the sales made by the petitioner were sales made by SEC in India. In its order dated 29-9-2012, the DRP agreed with the assessing officer that SEC had a fixed place PE in India but rejected the plea that the petitioner is the agency PE of SEC in India and hence the (income from the) sales by SEC in India are chargeable to tax in India. That order of the DRP would appear to have attained finality. An assessment order was accordingly passed on SEC on 18-10-2012 computing its income at Rs. 1,07,22,431/-; needless to add that no income from its sales made in India was brought to tax. 6. Turning back to the petitioner s case, on 30-3-2013 a notice was issued to it under section 201(1) and (1A) of the Act proposing to treat it as an assessee in default for not deducting tax from the payments made to SEC and other associated enterprises and to charge interest for the default. On the same day (i.e., 30-3-2013), the respondent also issued a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from DDIT, International Taxation, Circle2(2), New Delhi that a TDS survey was conducted on Samsung Electronics India Pvt. Ltd and liaison office of M/s Samsung Electronics Co. Ltd., Korea on 24.06.2010. After that notices u/s 148 were issued for AYrs. 2004-05 to 2009-10 in the case of Samsung Electronics Co. Ltd. Korea and Draft assessment order u/s 148 read with section 144c were passed on 30.12.2011 wherein, 10% mark up was taken on remuneration to expatriate employee after holding that the assessee company has service PE in India. On the basis of re-examination of copies of documents found during survey and on further analysis of statements recorded during survey and post survey it was concluded that Samsung Electronics Corporation has: i) Permanent Establishment alongwith it there is ii) Fixed Place PE and iii) May be dependent agent PE The DRP has confirmed the order of AO in this regard. Final order was passed by AO of Samsung Electronics Corporation on 18.10.2012. A show cause dated 30.03.2013 in the proceedings u/s 201/201(1A) read with section 195 of the Income Tax Act, 1961 in the case of Samsung India Electronics Pvt. Ltd has been issued by DDIT, International Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , I.P.Estate, New Delhi-110002. In response to the notice, the petitioner filed a letter dated 8-4-2013 stating that the return of income originally filed by it may be treated as the return filed in response to the notice of reopening. Thereafter, on 22.11.2013 the petitioner filed its objections with the assessing officer. These objections were rejected and disposed of by the assessing officer by order dated 20.1.2014, which is impugned herein. RIVAL CONTENTIONS: 7. The common contention taken on behalf of the petitioner is that since the revenue itself took a decision in the reassessment proceedings of SEC that no income accrued or arose to SEC from sales made by the petitioner in India, the petitioner was not liable to deduct tax from the payments made to SEC under section 195(2) with the consequence that: (i) it cannot be treated as an assessee in default under section 201(1) and therefore no interest was chargeable under section 201(1A) and (ii) the payments made to SEC were rightly allowed in the original assessment as deduction and the notice issued under section 148 to disallow them under section 40(a)(i) is without jurisdiction. Strong reliance is placed on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64. Besides, he has strongly contended that the disclosure made by the petitioner in the course of the original assessment proceedings vis-a-vis payments made to SEC was not full and true; the petitioner did not disclose that it did not deduct the tax on such payments. The order of the DRP in the reassessment proceedings of SEC, in his submission, is irrelevant as it is passed in proceedings relating to the recipient of the money and those findings should not be projected into the petitioner s case. DECISION: 10. The key to the decision is the answer to the question whether any income arose or accrued to SEC through its PE in India in respect of the sales made in India. If the answer is in the affirmative, both the notices would be good notices; if the answer is in the negative, both the notices would be bad. The answer in our opinion should be in the negative, because even as per the revenue, as reflected in the order passed by the DRP in the reassessment proceedings of SEC, no income accrued to SEC in India. In this regard, the DRP rejected the specific request made by that assessing officer in his remand report that the petitioner be treated as the permanent establishment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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