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TMI Blog2015 (12) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the issue is fully covered in favour of the assessee by virtue of the consistent orders of the ITAT on identical facts and law decided and concluded in 2001-02; 2002-03; 2003-04 2005-06 assessment years. Paper Book running into 57 pages already on record was relied upon stating that it included copies of the said decisions. Referring to the same the ld.AR made a brief argument to show how the issue is covered in asessee s favour. Over ruling the objection posed it was deemed appropriate to afford an opportunity to the Revenue to consider the claim of the assessee and the hearing was adjourned to the next date. 2. In the said background, the appeal came up for hearing on the next date. It was a common stand of the parties before the Bench that since the facts, circumstances and the issues in both the appeals remained identical thus arguments advanced in 2004-05 assessment year would address the grounds raised in 2009-10 assessment year also. The only difference in 2004-05 assessment year it has been stated is that in the said year, the Revenue has also challenged the re-opening of the assessment quashed by the CIT(A) which issue is not under challenge in 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the CIT(A) has erred in ignoring the factual finding of AO that liaison office of the assessee in India did not constitute its PE. 6. Whether on the facts and circumstances of the case the CIT(A) has erred in ignoring the factual findings of AO that the representatives of the assessee in India do not constitute its Dependent Agent PE under Article 5(4)/5(5) of the Indo-US treaty. 7. Whether on the facts and circumstances of the case the ITAT has erred in inferring that the representatives of the assessee in India do not constitute its Dependant Agent PE under Article 5(4)/5(5) of the Indo-US treaty ignoring the facts marshaled by the AO to show that the agents are not acting in the ordinary course of their business or independent both legally and economically when working for the assessee and, cannot handle the work of cross-border money transfers without the active and constant support of assessee. 8. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in not attributing any profits against the activities being carried out by the assessee through its PE in India. 9. The appellant prays for leave to add, amend, modify or alter any g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that in 2004-05 assessment year the original return filed by the assessee assessed u/s 143(3) was re-opened by issuance of notice u/s 148. Inviting attention to page 6 7 of the assessment order, it was submitted that the AO rejected the assessee s claim that Liaison office does not constitute PE in India. The assessee before the AO had relied upon the order of the Tribunal dated 10.03.2006 in 2001-02 assessment year and the consolidated order of the CIT(A) dated 01.01.2010 for 2002-03; 2003-04 and 2005-06 assessment years. 5.1. Inviting attention to pages 7 to 9 of the assessment order it was submitted that the assessee s claim that the Representatives of the assessee in India did not constitute a PE of the assessee was supported by the findings of the Tribunal which had been followed by the CIT(A) in 2002-03; 2003-04 and 2005-06 assessment years. 5.2. Referring to pages 10-12 of the assessment order, it was submitted that the assessee s claim that the software provided to the representatives did not constitute PE was also supported by the finding in the aforesaid orders of the ITAT and the CIT(A). Despite the precedents available it was submitted that the claim was rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advanced therein on behalf of the Revenue relying upon the decision rendered in the case of Amadeus Global Travel Distribution SA v DCIT [2011] 11 taxmann.com 153 (Del.). The ITAT considering the entire issue afresh held that the order in the case of Amadeus Global Travel Distribution SA was distinguishable on facts and the view taken in assessee s own case was followed. 5.9. In these afore-mentioned facts and circumstances, it was submitted that the issue has been considered and discussed thread bare and it is fully covered in assessee s favour. 6. Considering the submissions the Ld. CIT DR relied upon the assessment order re-iterating his earlier position that the department is keeping the issue alive. No contrary fact or submission canvassing a contrary view was brought to the notice of the Bench. 7. We have heard the rival submissions and perused the material available on record. Considering the grievance posed by the Revenue in Ground No.2, we find on consideration of the facts on record which are not in dispute and the judicial precedent we find that in the absence of any contrary fact or decision on the point at issue the detailed and well-reasoned finding of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 CTR 11 (P H) is squarely applicable to facts of the present case wherein it has been held that: It may be seen that the AO had no fresh material before him. A perusal of the reasons recorded by him for reopening the assessment proceedings vide notice dt. 22nd March, 2004 shows that the same reasons haven recorded which were stated in the earlier notice served under s. 148 of the Act on the basis of which the assessment was made on 14th February, 2003 and which was quashed being barred by limitation. Thus, from the facts itself, it is crystal clear that though the present proceedings were initiated by the AO within the prescribed period of limitation yet it is clear that the same were initiated only to circumvent the earlier order of the Tribunal vide which the assessment dt. 14th February. 2003 was held to be timebarred. Thus, the AO cannot be allowed to initiate fresh proceedings on identical facts as the first assessment proceedings had failed to result in a valid assessment due to lapse on the part of the IT authority. 4.2.3. Further, notice u/s 148 has been issued beyond four years from end of the relevant assessment year and original assessment has been compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computer in USA. Thereafter, he would make the payment to the claimant after ascertaining his bona fides through documentary evidence. On completion of the transaction, the agent was to be remunerated by the assessee by way of a commission at an agreed percentage for his services. For the purpose of carrying out business in India, the assessee entered into agreements appointing four types of agents in India, the department of posts, commercial banks, nonbanking financial companies and tour operators. Generally, said appointments were for an initial period of five years which was extendable for any number of times for periods of one year at a time. In terms of agreement, the money so transferred by it was required to be first paid out by those agents and thereafter he would be reimbursed the same together with the commission due to him, which was called the base commission in the agreement. The agents were given the power to appoint sub-agents at their own costs but their services could be terminated by the assessee if it was found that the appointed sub-agent was acting in a manner prejudicial to its interest. Pursuant thereto, after obtaining the RBI s requisite permission, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17] Therefore, the instant case had to be approached first from the point of view of the Act and it was required to be seen if any tax liability could arise. In case, no tax liability arises under the Act, nothing further requires to be done. But if there is a tax liability arising under the Act, it is open to the non-resident to claim that either there is no or less tax liability if the provisions of the DTAA are applied and if such a claim is made, it has to be enquired into. If the claim is found to be correct, then it has to be given effect in preference to the provisions of the Act. Thus, in the instant case, one would need to first examine whether the income-tax authorities were right in applying section 9 to hold that there was a business connection. Only if it was found that there was a business connection, one would need to examine the DTAA with USA to find out if the case could be brought under those provisions as claimed by the assessee. [Para 19] The term business connection is so broad in scope according to the judgments that it was not possible to hold in the instant case that there was no business connection. Explanation 2inserted below section 9(1) by the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness connection seemed to be a much wider concept than a PE. The former has not been statutorily defined whereas the latter has been defined in the DTAA where the criteria has been more specifically laid down. The Board, in its Circular No. 23, dated 23-7-1969, recognizes that the expression business connection , admits of no precise definition. [Para 21] Article 5.1 of the DTAA says that PE means a fixed place of business through which the business of an enterprise is wholly or partly carried on. Article 5.2 includes several places as a PE of the foreign enterprise. Neither the Assessing Officer nor the Commissioner (Appeals) had pinpointed which particular description of the PE in article 5.2 would apply to the assessee. The general definition of the PE in the first part of the article postulates (a) the existence of a fixed place of business in India and (b) that the business of the foreign enterprise shall be carried on (wholly or partly) through the said place. The assessee, admittedly did not have an outlet of its own in India. That way, there was no fixed place of business in India. A PE should project the foreign enterprise in India. The assessee had appointed dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, the LO had facilitated the visit of the director-operations of the assessee to the agents so that he could satisfy himself about the quality standards. Finally, the LO had provided the management software (Voyager) to the agents (free of cost) and trained their staff on the usage and versatility thereof. Those activities were in line with the activities mentioned in the annexure to the application to the RBI seeking permission to open the LO. The annexure also stated what activities would not be undertaken by the LO. There were no activities which the LO had undertaken, which did not conform to the list of activities given in the annexure. There was no allegation of any violation of the conditions of approval. [Para 24] On the said facts, the LO could not be considered to be the fixed place PE of the assessee as it carried out activities which were of a preparatory or auxiliary character. It had not carried on any trading activity for the assessee in India. It had only a small number of executives and a support staff. The LO had also filed status reports to the RBI listing out the activities which it actually carried on during the years. None of the activities could be desc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.4 on the basis of the Agreements which continue to remain the same. After examining the roles, responsibilities and the terms of the Agreements, the Revenue s stand was not accepted. The relevant extract is reproduced hereunder:- As regards the question as to whether the agents were independent agents under article 5.4, three conditions were required to be satisfied in order that an agent might be said to be an independent agent: (1) he should be acting in the ordinary course of his business; (2) his activities should not be devoted wholly or almost wholly on behalf of the foreign enterprise for whom he is acting as agent and (3) the transactions between the foreign enterprise and the agent should be at arm s length. [Para 30] Any activity which is being systematically and continuously carried on with the object of earning profits is a business activity. That way, the activity engaged in by the agents of paying the monies to the beneficiaries or claimants in India, after satisfying themselves about their identity and after accessing the MTCN number to verify the genuineness of the claim, amounts to carrying on of the business of money transfer. The agreement of agenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies amounting to business. They were not carrying on the activity for the assessee, as agents, in exclusion of their other businesses or activities. In that situation, just because they were not acting as agents for any other company carrying on money transfer business, it could not be said that their activities were wholly or almost wholly devoted to the assessee. [Para 33] The agreements filed showed that the basic compensation was 30 per cent in the case of the Department of Posts and 25 per cent in the case of others. There was no material to show that the rates of compensation were higher in other cases so as to indicate that the agents were discriminated against. The higher rate of compensation in the case of the Department of Posts was probably because its reach was much wider compared to the commercial banks, NBFCs or tour operators. The terms of appointment of sub-agents were uniform in all cases. Thus, there seemed to be no basis for the charge that the compensation paid was not adequate for the services rendered by the agents. There was no finding contrary to the claim made by the assessee that the rates of compensation were uniform throughout the world. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standards, maintenance of records, security and confidentiality, accounting, use of software, indemnity, conditions of termination etc. Nowhere, in the sub-agency agreement had any authority to conclude contracts had been given to them. In fact, when the agents themselves had no such authority under their agreement, they could not delegate the same to their subagents. [Para 39] There was also no material to hold that the agents had habitually exercised the authority to conclude contracts. The authority must be to conclude contracts in the proper conduct of the business of the foreign enterprise. The fact that the agents concluded in India the commitment of the assessee made abroad could not be considered as an authority to conclude contracts. The contract was between the remitter abroad and the assessee. It was entered into outside India. The agents were not party thereto. The agents merely carried out the concluding step in the arrangement embodied in the contract. In other words, the assessee undertook, outside India to transfer the money to India. It was only the payment part of the undertaking that was executed by the agents in India. The contract was already concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Revenue s claim on examination was found to be incorrect on facts as the Revenue it was found failed to draw any parallel with the facts and circumstances of assessee s case with the facts and circumstances of Amadeus Global Travel Distribution SA (cited supra). Infact the Co-ordinate Bench found the facts of the two sets of cases were entirely distinguishable and after discussing therein the arguments in detail and considering the judicial precedent cited relying upon State of A. P. vs M. Radha Krishna Murthy [Criminal Appeal No.386 of 2002] and CIT vs Sun Engineering Works Pvt. Ltd. [1992] 198 ITR 297 (SC) followed the leading order of the ITAT in assessee s own case. For ready-reference, the relevant paras are reproduced hereunder:- 6.2. The Id. DR contended in his written submissions that the aforesaid decision of the ITAT in the assessee's own case for the AY 2001-02 was not applicable in the years under consideration on the issue of PE in view of decision of the ITAT in Amadeus Global Travel Distribution SA (supra). We are not inclined to accept this contention of the Id. DR. There is nothing to suggest that the facts and circumstances in the cited decision a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business for carrying on the business of the enterprise in India. But for the supply of computers, the configuration of computers and connectivity which were provided by the assessee either directly or through its agent AIPL would amount to operate part of its CRS system through such subscribers in India and accordingly, assessee could be said to have established a PE within the meaning of para 1 of art.5 of Indo-Spain treaty. Besides, the ITAT found that AIPL was dependent agent of the assessee and had authority to conclude contract on behalf of the assessee and in fact, entered into contract with the travel agents in India on behalf of the assessee. Accordingly, the ITAT concluded that the assessee had a PE in India. But such are not the facts and circumstances in the instant case the assessee did not exercise any control over the computer systems which were independently owned by agents and were not provided by the assessee. The activities of the agents were not wholly or almost wholly devoted on behalf of the assessee and that the agents were not 'dependent agents' of the assessee nor had they any authority to conclude contracts in India on behalf of Western Union .In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision on which reliance is placed. Observations of Courts are neither to be read as Euclid's theorems not as provisions of the statute arid that too taken out of their context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes. 8. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. 9. The following words of Lord Denning in the matter of applying precedents have become locus classicus: Each case depends on its own facts and a close similarity between one case and another is not enough because even a single significant detail may alter the entire aspect, in deciding such cases, one should avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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