9911796707
TMI Blog2013 (1) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... or of assessee Initiation of penalty u/s 271(1)(c) - Held that:- penalty proceeding are independent proceeding - the ground raised by the assessee is not pressed and accordingly we reject the ground taken by the assessee being pre-matured/not pressed is rejected X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had further submitted that the above issue is squarely covered by the order of the ITAT dtd. 3-6-2011 (ITA No. 7420/Mum/2010 for A.Y. 2006-07) in its own case wherein the ITAT has held that the assessee does not have PE in India and is not taxable for sales which have been made from outside India. However, the A.O. observed that the department has preferred an appeal before the Hon'ble Bombay High Court against the order passed by the Tribunal. The A.O. noted that the assessee has entered Exclusive Sales Representation Agreement dtd. 1-4-2000 and Sales and Marketing Agreement Metalworking Products dtd. 1-1-2002 with LIL. The A.O. after considering the said agreements observed that the assessee has a PE in India and thereby the ensuing income is taxable in India in terms of Article 5(1) (fixed place of business), 5(2) (an office) and 5(4) (Agency PE) of the India-USA DTAA. The A.O. also applied the force of attraction rule to bring profit on sales made by the assessee. In essence, the A.O. has applied the following reasoning: "a. LIPL maintains stocks of various products made by the assessee, b.LIPL is virtual projection of assessee company in India and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or AY 06-07 was assessed at ₹ 2.29 crores). The tax effect on the said profit not disclosed in the return of income would be substantial and income escaping assessment will definitely exceed ₹ 1Lac. Therefore, I have reason to believe that the profits earned by the assessee on sales had escaped assessment." Since there is no dispute that the original assessment was completed u/s 143(1) of the Act and no regular assessment has been completed, we are of the opinion that the issue involved in the present case is no more res integra and is covered by the decision of the Hon'ble Supreme Court in ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC) wherein it has been held that the A.O. had jurisdiction to issue notice u/s 148 for bringing to tax income escaping assessment in an intimation u/s 143(1)(a). Respectfully following the authoritative pronouncement of the Hon'ble Apex Court, we uphold the action of the A.O. in initiating and completing the reassessment proceeding. The ground taken by the assessee is, therefore, rejected. 8. Grounds No. 2 to 6 are against the confirmation of the A.O.'s finding that the assessee has Permanent Establishment (PE) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The assessee sold the products directly to the Indian customers. Contract of sale is concluded once the purchase order is accepted by the assessee in USA. On confirmation of the order and receipt of direct payment from Indian customer, the assessee sends the products in the name of Indian customer with the invoices raised by the assessee directly on Indian customers. The LIPL assists the assessee in the direct sale of products to Indian customers and communicates information in relation to tenders and competitive bids from the customers. The LIPL does not have authority to negotiate the terms of the sale or conclude the contract on behalf of the assessee. The final decision regarding price, terms and conditions is taken by the assessee. The assessee has no operation in respect of manufacture or sale of product carried out in India. Sales are made by the assessee to LIPL on principal to principal basis. The assessee a1so does not have a right to use LIPL premises. Having regard to all these facts of the case, we are of the view that the learned counsel has demonstrated by (sic) the assessee does not have a PE in India. For this conclusion, we derive support from the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, allowed. 15. Ground No. 7 is against the levy of interest u/s 234B of the Act. 16. At the time of hearing the ld. Counsel for the assessee submits that since the assessee is a foreign company not liable to tax in India, therefore, following the decision of the Hon'ble Bombay High Court in Director of Income-tax (International Taxation) v. NGC Network Asia LLC (2009) 313 ITR 187 (Bom) the interest charged by the A.O. u/s 234B is liable to be deleted. 17. On the other hand, the ld. D.R. supports the order of the A.O. 18. We have carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the ld. Counsel for the assessee that the issue is covered in favour of the assessee by the decision of the Hon'ble jurisdictional High Court (supra) wherein it held that "when a duty was cast on the payer to deduct the tax at source, on failure of the payer to do so, no interest could be imposed on the assessee". Respectfully following the same and keeping in view of our finding recorded in paras 12 to 14 of this order, we delete the interest charged by the A.O. u/s 234B of the Act and accordingly the ground taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not have PE in India. Following the view taken in paras 12 to 14 of this order, we delete the addition made by the A.O. in this regard and allow the grounds taken by the assessee. 26. Ground No. 7 is against the levy of interest u/s 234A of the Act. 27. The ld. Counsel for the assessee submits that since the Tribunal in A.Y. 2006-07 (supra) has deleted the addition made by the A.O., therefore, following the same consequential relief be allowed to the assessee. 28. On the other hand, the ld. D.R. supports the order of the A.O. 29. We have carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the ld. Counsel for the assessee that the assessee is entitled to consequential relief in levy of interest u/s 234A of the Act and accordingly the A.O. is directed to allow relief after giving effect to the order of the Tribunal (supra). 30. Grounds 8 & 9 are against the levy of interest u/s 234B & 234C of the Act. 31. After hearing the rival parties and perusing the material available on record, we keeping in view the finding recorded in assesse's appeal for A.Y. 2004-05 in para 18 of this order, the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
