9911796707
TMI Blog2019 (2) TMI 2044X X X X Extracts X X X X X X X X Extracts X X X X ..... arm's length price has been found to have been applied and paid, nothing more would be left to be taxable in India by attributing further income to the PE of the foreign enterprise. The aforesaid proposition, in our view, is fully attracted in the present case having regard to the fact that for the instant assessment year, the commission has been found to be at arm's length price in the hands of the recipient Indian subsidiary, i.e. Hempel India. The ratio of the judgment of the Hon'ble Delhi High Court in the case of BBC Worldwise Ltd. [ 2011 (9) TMI 548 - DELHI HIGH COURT] is fully attracted in the present case and, therefore, the addition to the returned income is clearly untenable in the facts of the instant case. We hold so. - Decided in favour of assessee. - ITA NO. 7296/MUM/2017 - - - Dated:- 8-2-2019 - SHRI G.S. PANNU, VICE PRESIDENT AND SHRI RAVISH SOOD, JUDICIAL MEMBER Appellant by : Shri Madhur Agrawal Respondent by : Shri Samuel Darse ORDER PER G.S. PANNU, VICE PRESIDENT : This appeal is directed against the order dated 27.10.2017 passed by the Assessing Officer under Section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appellant therefore prays that the profit attributable to the PE based on the operations carried out in India and also, attributable to the risks undertaken by the PE be accepted. 6. On the facts and circumstances of the case and in law, the Hon'ble DRP / Ld. AO erred in rejecting the transfer pricing study and computation of arm's length price in the hands of Hempel Paints (India) Pvt. Ltd. ('Hempel India') when the same has been accepted in the hands of Hempel India in assessment order passed under section 143(3) of the IT Act. The Appellant therefore prays that the Ld. AO be directed to treat the compensation received by Hempel Singapore PE as at arm's length. 7. On the facts and circumstances of the case and in law, the Hon'ble DRP erred in confirming the action of the Ld. AO in levying interest u/s. 234B of the Act. The Appellant therefore prays that the Ld. AO be directed to delete the levy of consequential interest u/s. 234B of the Act. 8. On the facts and circumstances of the case and in law, the Hon'ble DRP erred in confirming the action of the Ld. AO in initiating the penalty proceedings under section 271(i)(c) of the Act. The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was claimed as an expenditure and accordingly, assessee PE filed return of income declaring NIL income. The Assessing Officer, however, did not concur with the assessee and he estimated profits of the assessee PE at an ad-hoc rate of 25% of the sales. The Assessing Officer worked out the sales at Rs. 30,60,30,500/-, which corresponded to commission payment of Rs. 2,50,02,693/-, and accordingly estimated the profit at Rs. 7,65,07,629/-. The payment of commission to Hempel India of Rs. 2,50,02,693/- was allowed as an expenditure and the net profit attributable to assessee PE in India was worked out at Rs. 5,15,04,936/-. Accordingly, as against NIL income returned by the assessee, the Assessing Officer has finalised the assessment at Rs. 5,15,05,000/-. Notably, the aforesaid action was proposed by the Assessing Officer in the draft assessment order dated 29.12.2016, which has since been affirmed by the DRP in its order dated 22.09.2017 and thereafter, the Assessing Officer has finalised the assessment under Section 143(3) r.w.s. 144C(13) of the Act dated 27.10.2017. In this background, assessee is in appeal before us. 5. Before us, the learned representative for the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly, it has appointed its 100% owned subsidiary, Hempel India as a sales agent, who is rendering sales support services. It is compensating its Indian subsidiary at cost plus 8.17% mark-up as commission on sales effected through the agent in India. There is no dispute about the existence of assessee's agency PE in India. A foreign company is liable to be taxed in India on so much of its business profits as is attributable to its PE in India. In the present case, the point sought to be made by the assessee is that the commission payment to Hempel India by the assessee is adequate and justified on the basis of transfer pricing analysis, which has indeed been affirmed by the income-tax authorities in the case of Hempel India for the instant assessment year. Therefore, according to the assessee, no further income could be attributable to its agency PE again. In other words, as per the assessee, once transfer pricing analysis of the transaction between assessee and its agent in India has been undertaken, there is no further need to attribute profits to the agency PE so long as the remuneration to the Indian agent has been held to be at an arm's length price. Undoubtedly, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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