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TMI Blog2015 (10) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... ng an addition of Rs. 84,1O,831 to the total income of the Appellant for the year under consideration. The Appellant prays that the AO be directed to delete the addition of Rs. 84,1O,831. Ground No. 2- Addition of Rs. 10.80.117 on account of Attribution of profits to Permanent Establishment ('PE') 2. On the facts and in the circumstances of the case and in law, the Learned AO erred in concluding that the Appellant constitutes a permanent establishment (hereinafter referred to as 'PE') of Varian Italy in India. The Appellant prays that the AO be directed accordingly. 3. On the facts and in the circumstances of the case and in law, the Learned AO erred in incorrectly interpreting the 'force of attraction' rule under Article 7(1 )(b) and (c) of the Double Taxation Avoidance Agreement between India and Italy and in concluding that profits attributable to the sales made by Varian Italy to its Indian customers are liable to be taxed in India. The Appellant prays that the AO be directed accordingly. 4. On the facts and in the circumstances of the case and in law, the Learned AO erred in concluding that an amount of Rs. 1O,80,117, being 10% of the gross sales made by Varian I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,510 2. Varian-Germany 13,97,784 3. Varian Spa Italy 1,21,472 Total 2,66,67,766 The Assessing Officer required the assessee to furnish the details of reimbursement and since the assessee is receving commission income on gross sales and also on the additional cost forming part of total sale and contract value, threfore, whether the amount of reimbursement being included in the gross sales for the purpose of a calculation of commission income or not. In response, the assessee submitted the details showing item wise reimbursement and in the narration given therein, it was mentioned that the reimbursement of expenses are on account of purchase of additional materials/equipments in India for the main instrument. It was further clarified as under:- "The assessee submitts that the reimbursement of expenses is a pure reimbursement of expenses incurred by the assessee on behalf of the Varian Group Entities ('VCGs'). The assessee debited its financial accounts with the expenses incurred on behalf of VGCs. Subsequently, on receipt of the credit note from VGCs, the assessee credited it under the head 'Other Income' in its financial accounts. Your good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, he also drew our attention to 'Schedule A' to the Distribution Representation Agreement, given at page 25 and page 38 of the paperbook. Similarly, in the case of Varian Germany, though schedule 'A' is not there but the agreement itself provide that it should be on net of sales and not on the entire gross sales. Before the DRP this objection was raised which has not been considered at all. 8. Before us, the ld. DR submitted that the Schedule 'A' which has been referred in agreement, is appearing at page 31 of the paper book, which provides that the assessee shall be entitled to commision of sales value, net of freight, insurance and other charges. There is no such Schedule 'A' which has been referred by the ld. Counsel. In order to prove her point she also reffered to page 28 of the paperbook which is an agreement and in that agreement there is reference to Schedule 'A' which is attached at page 31 of the paperbook; Thus, she submitted that the commission payble has to be considered on the sales value and there is no such stipulation that local or ancillary equipment is not part of sales. Therefore, the Assessing Officer has rightly calculated commission payble on the reimburs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such procurement of equipements by the assessee, commission cannot be imputed, because it is the reimbursment of the cost of local equipments procured. Further, it appears that this relevant piece of document which is also a part of "Distribution and Representation Agreement", has not been examined by the Assessing Officer. Therefore, for the purpose of verification and examining of the content of this schedule, we restore the matter back to the file of AO, to adjudicate this issue afresh in light of the aforesaid document, because it changes the entire colour of the conclusion drawn by the AO. The AO will also examine the fact, whether the commission is on sale of Varian products only or not. The quantum of commission is a question of fact and cannot be imputed or presumed. In case of reimbursement of expenses from Varian Germany also, the matter is set-aside for examining, whether the commission is on gross sales or on the net of sales of the equipments directly procured by the associate enterprises. If the arrangement with this AE is also the same, then the same conclusion should be drawn in this case also. In the result, ground no.1 is treated as allowed for statistical purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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