9911796707
TMI Blog2018 (3) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... in India was exempt in view of Agreement for Avoidance for Double Taxation between India and Japan? c) Whether the learned ITAT erred in holding that the Assessing Officer on direction for inquiry from CIT (A) under section 250(4) could have carried out survey under section 133A of the Act? d) Whether the ld. ITAT erred in holding that burden of proof has shifted to Revenue Authorities though Assessee is canvassing a benefit and seeking preferential treatment under the statute?" Background facts 3. The background facts are that the Respondent-Assessee is a non-resident foreign company formed and incorporated under the laws of Japan having its Head Office ("HO") in Tokyo, Japan. It is an international trade house undertaking business activities in a large number of countries. 4. Admittedly, the Assessee has Liaison Offices ("LO") in India at Kolkata, Chennai, Mumbai and New Delhi. It also undertakes several turnkey projects. The Assessee has been regularly assessed to tax in India under the Income Tax Act, 1961 ("Act") as a non-resident foreign company. It has been filing reports under the Act on a consolidated basis both for the LOs as well as the projects. 5. For AY 2001- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. As a result, after allowing the expenses incurred by the Assessee at its offices located in India, the entire profit of the Assessee from the sale of goods in India was held to be taxable in India. The net taxable income was, therefore, determined as Rs. 65,03,70,558/-. Order of the CIT (A) 9. The Assessee then went in appeal before the Commissioner of Income Tax (Appeals) ["CIT (A)"]. During the pendency of the appeal before it, the CIT (A) sought a remand report from the AO to examine "as to whether the facts in these two years were same as in earlier years and to offer his comments that whether the appellant had any PE in India during these years." 10. Pursuant to the said direction of the CIT (A), the AO undertook a survey of the LO of the Assessee in Delhi under Section 133A of the Act and submitted a detailed report dated 31st January 2005 in which he observed that the Assessee was carrying on business in a regular way from the LOs in India. The AO also recorded the statement of Mr. Yuki Morata, Administrative Head of the LO on oath and also obtained copies of various documents found on the said premises. The AO in his remand report submitted as under: "During ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the income attributable to PE in India accordingly. Therefore, this ground is partly allowed." Impugned order of the ITAT 13. The Assessee then went before the ITAT which, by the impugned order, allowed its appeal. The ITAT noticed that under Article 5 (6) (e) of the Double Taxation Avoidance Agreement ("DTAA") between India and Japan, "a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character" was excluded from the definition of a PE. 14. The ITAT took note of the decision of the Special Bench of the ITAT for AYs 1980-81 and 1981-82 holding that the LOs of the Assessee were only carrying on the work of supply of information and liaison work. They were not carrying on any trade in India and therefore, could not be considered to be a PE. It was further noticed that the Special Bench decision was consistently followed by the ITAT in all succeeding AYs up to AY 1998-99. 15. The ITAT then discussed each of the materials referred to by the CIT (A) in its order and came to the following conclusions:- (a) The document at para 10 (i) above was merely a business report prepared at Tokyo and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no clinching evidence to establish that the LO finalized and transacted a business deal on its own or in the name of the HO. The ITAT also discussed in detail the statement of Mr. Yuki Morata recorded during the survey undertaken on 25th January 2005. Whatever he explained of the role and activities of the LO did not show that the LO was undertaking any trade or commercial activities by itself. It was noted that in response to Questions 9 and 11, Mr. Yuki Morata specifically noted that the pre-contract negotiations were done by the HO personnel with Indian clients and after the award of the contract, the LO did not take part in follow-up of payments for supplies transacted by the HO. Further, in answer to Question 10, it was stated that the LO had no role to play in the logistical aspects of the contract undertaken by the HO. Again, in response to Question 14, it was stated that the LO had no role to play in after sales service. In response to Question 15, it was stated that the LO did not have any technical personnel on its rolls. 17. The ITAT then discussed the power of the CIT (A) under Section 250 (4) of the Act to direct the further enquiry by the AO and submit a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
