9911796707
TMI Blog2016 (12) TMI 1670X X X X Extracts X X X X X X X X Extracts X X X X ..... arketing of Electronic Components and Modules. It is well known for its superior products in the segment of capacitors, Ceramic components, Capacitors and Inductors. 3. During the course of assessment proceedings the Assessing Officer noted that the assessee is in receipt of income of Rs. 16,72,75,797/-, the breakup of which is as under : Sr.No. Description of the Income Amount (Rs) 1 Receipt from Product Marketing Services 8,56,61,873/- 2 Income from Sales Support Services 77,83,023/- 3 Income from IT Support Services 4,87,48,738/- 4 Interest Received on ECB Loans 2,50,82,163/- Total 16,72,75,797/- 4. The Assessing Officer noted that as per the TDS certificate the amount paid or credited by the Indian ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the Indian Subsidiaries by issuance of directions through emails etc. and the entire spectrum of activities of the Indian Subsidiaries are monitored by the assessee thus having control and management of Indian Subsidiaries and thereby constituting a PE in India. 2. Whether on the facts and in the circumstances of the case, the DRP, Pune erred in law by holding that even if a PE, exists but if the receipts sourced from India are not attributable to the PE, then the case of the assessee would still fall under Art.12(2) and exclusion clause provided in Art.12(5) would not be invoked thereby not triggering Art.7 of the treaty for the rate purposes. 3. The appellant craves leave to add, amend/alter or delete any ground other than the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order of the Tribunal from para 5 onwards read as under : "5. Both sides heard. We have perused the orders of authorities below and have also considered the decision of the Tribunal in the case of the assessee in earlier assessment years. We find that the issue raised in the present appeal has been already adjudicated by the Coordinate Bench of the Tribunal in assessee's own case. The relevant extract of the order of Tribunal for the assessment year 2003-04 which has been subsequently followed in the other assessment years reads as under: "Conclusion on the first issue i.e. on existence of PE: 41.1 In the light of these discussions, in our considered view, the assessee company did not have any PE in India, much less a PE to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, the 'royalties and fees for technical services' are to be necessarily taxed in India under art. 7. That is clearly erroneous, because, as noted above, twin conditions of existence of the PE as also the effective nexus between the PE and the subject 'royalties' and 'fees for technical services' are to be satisfied. We are of the view that on account of existence of a PE in India, only such profits of the assessee company can be brought to tax in India as are "attributable to that PE". It is a typical chicken and egg situation of circular logic. On one hand, the wording of art. 12(5) is such that this exclusion clause is triggered only when 'royalties and fees for technical services' have a live economic n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. Just because there is a PE in the source country, one cannot infer that entire income from the source country is attributable to the PE and liable to be taxed in the source country for that reason. There is no justification for the Revenue authorities to come to the concision that entire receipts of the assessee company are attributable to 'PE' and are, therefore, taxable under art. 7 for that reason. Unless the conditions of art. 7(1) are not satisfied, there is no occasion to invoke taxability as profits attributable to PE. It would perhaps need a force of attraction rule of widest amplitude to do so. As to how should this profit attribution exercise done, the guidance is available from art. 7(2). 45. Under art. 7(2), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o question of allowing deductions there from. That aspect of the matter is entirely infructuous. The limitation under s. 44D is, therefore, not relevant in the present case. The same is the position with regard to the lower rate prescribed under s. 115A of the Act. There is no warrant for application of s. 44D and s. 115A unless there is a positive income from 'royalties and fees for technical services' which can be brought to tax under art. 7. Conclusion on the second issue i.e., taxability @ 20 per cent in terns s. 44D r/w S.115A in case PE is found to be in existence : 47. In our considered view, in terms of the indo German tax treaty provisions, it will have to be demonstrated that such royalties and fees for technical servi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
