9911796707
TMI Blog2018 (9) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... ould reproduce the "reasons to believe" recorded by the Assessing Officer for the Assessment Year 2007-08. The "reasons to believe" for the Assessment Year 2007-08 read as under:- "A survey in this case was conducted on 24/06/2010. During the course of survey it was found that M/s Samsung India Electronics Ltd is a subsidiary of M/S Samsung Electronics Co. Ltd., South Korea. M/s Samsung India Electronics Ltd is in the business of manufacturing as well as trading of consumer electronics. The items manufactured by the company are washing machine, televisions, air-conditioners, refrigerators and mobile phones. These items are manufactured under the technical assistance of the present (sic. parent) company for which the parent company receives fees for technical services. The parent company M/s Samsung Electronics Co Ltd, South Korea has not been paid any royalty for use of its brand name 'SAMSUNG' by the subsidiary company. Thus, income of the Korean company in the form of royalty has escaped assessment. As per information available on internet, the sales of M/s Samsung India Electronics were Rs. 8,000 Crores during the previous year relevant to A.Y.2007-08. The amount of ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase price is negotiated with the headquarters i.e. Samsung Korea. (vii) (vii) Even the sale price of the products manufactured in India is decided after discussion with the headquarters. (viii) From the above it can be seen that the Indian company's office is being used as place of management for South Asia operations by the parent company M/s Samsung Electronics Co. Ltd, South Korea therefore the Indian company would constitute PE of the foreign parent company under Article 5(2)(a) of the DTAA and a part of income from sales in South Asian countries such as Bangladesh, Nepal, Bhutan and Maldives should be attributed to Samsung Electronics, Korea. (ix) Further, it can be inferred from the above that the Indian company is acting as a dependent agent of the foreign company in terms of Article 5(5) of the DTAA, and the transactions between the two are not at arm's length. Hence an adjustment is needed in this regard. (x) A perusal of records shows that the assessee has not filed its return of income in India for AY 2007-08. (xi) In view of the above, I have reasons to believe that income chargeable to tax has escaped assessment by reason of failure on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and separate assessee. Pertinently, the appellant-assessee in response to the notices under Section 147/148 of the Act had filed returns of income for the assessment year 2007-2008 including and accounting for fee from technical services and royalty received from the Indian subsidiary. This income though earned and taxable in India, had not been disclosed and accounted for in the returns filed by the branch office in relation to their operations and earnings. Thus, even if it is assumed that the returns filed by the branch office at Bangalore were returns filed by the appellant, the appellant had disclosed new and additional source of income and also the income earned from the said sources in the returns filed in response to notice under Section 147 read with Section 148 of the Act. This was true for the assessment year 2007-08. 7. Aspect and question of permanent establishment and attribution of income to the permanent establishment were issues examined by the Assessing Officer and adverse findings against the assessee were recorded. No doubt, the said findings have been overturned by the Tribunal, but when we examine the question of initiation of reassessment proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed solely basing on the statements of the expatriate employees. Apart from the statements, the non disclosure of receipt of royalty as disclosed by the tax returns of the branch indicated that the royalty received from SIEL was not disclosed. Ld. AO considered the explanation of the assessee and observed in letter dated 18.11.2011 (page No 45 of the Paper book) that the manufacturing Royalty/FTS received by the assessee from the Indian subsidiary as reflected in the tax returns filed by the SIEL was not reported by the assessee, and it is only in the returns filed in response to the notices issued u/s 148 of the Act, such an income was reported. Assessee admitted the fact that they did not declare this income in the original return of income. This fact is borne by the Assessment order dated 18.10.2012 vide paragraph No.7.1 to 7.3, wherein Ld.AO recorded that, to the notice issued u/s 148 of the Act, the assessee replied that the royalty/FTS received from SIEL was omitted by the assessee due to inadvertence to be declared in the original tax return u/s 139(1) of the Act. 14. Following are the details relating to the income as per original return of income, income as per retu ..... 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