9911796707
TMI Blog2023 (1) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years 2006-07 to 2013-14. Taxability of link charges - As this issue has also been decided by the Tribunal in assessee s own case in assessment years 2013-14 [ 2020 (11) TMI 1101 - ITAT DELHI] relying on New Skies Satellite BV [ 2016 (2) TMI 415 - DELHI HIGH COURT ] held that the amendment in section 9 will not affect the DTAA, thus find that the payment of link charges received by the Appellant from Conuergys India Services Rut. Ltd. would not qualify as process royalty in terms of Article 12 of lndia-US 39 DTAA. Hence, the ground of appeal allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act as well as Article 12(2) read with Article 12(3)(b) of India - USA DTAA and process royalty in terms of explanation 6 to section 9(1)(vi) of the Act and Article 12 of DTAA. In the aforesaid line, the Assessing Officer completed the assessment. Against the assessment order so passed, the assessee preferred an appeal before learned Commissioner (Appeals). While deciding the appeal, learned Commissioner (Appeals) agreed with the submissions of the assessee that the assessee does not have a dependent agent PE and service PE in India. However, he held that the assessee had a fixed place PE in India. With regard to attribution of profit to the PE, learned Commissioner (Appeals) held that profits could be attributed on account of assets provided by the assessee to CIS. In this regard, learned Commissioner (Appeals) followed the methodology provided in the order of the Tribunal in assessment year 2006-07. Further, learned Commissioner (Appeals) held that receipts from link charges do not qualify as equipment royalty and process royalty under Article 12 of the tax treaty. Being aggrieved, both the assessee and Revenue are before us. 4. Learned counsel appearing for the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the transfer pricing analysis placed by the taxpayer is exhaustive of attribution of profits and that would depend on the functional and factual analysis to be undertaken in each case. Lastly, it may be added that taxing corporates on the basis of the concept of economic nexus is an important feature of attributable profits (profits attributable to the PE)." The application of transfer pricing principles is also supported by the decisions of the Bombay High Court in Set Satellite (Singapore) Pte. Ltd. (307 ITR 205), jurisdictional High Court in Rolls Royce Singapore Pvt. Ltd. (202 Taxman 45) (Del.), Director of Income Tax vs. BBC Worldwide Ltd. (203 Taxman 554) (Del.) D. The ld. CIT (A) has held. that further profit was required to be attributed on account of Assets provided by the assessee to CIS and management of risk by the assessee in India. In our view no attribution of profits can be made on account of management of risk as risk resides outside India. Even otherwise the charge for the employees seconded to CIS and employees visiting India to provide the technical services is subsumed in the transfer pricing analysis of CIS. Therefore, attribution can only be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Apropos TPO's estimation, we are of the view that the same is not justified as it involves a very unrealistic method of counting the worldwide number of employees and dividing it with CMG's global revenue without considering the relevant aspects. The finer and material aspects about the status, capacity of the employees are over looked and result become very vague and distorted. Therefore, the method adopted by assessing officer cannot be relied on as most appropriate method. 11.21. Apropos CIT(A)'s estimate about attribution, though he accepted the proposition that there cannot be notional addition to India revenue, however, CIT(A)'s method also does not become a rational inasmuch as the various expenditures incurred by CMG i.e. research & development, depreciation, amortization etc. have not been considered and 50% of selling, general and administrative expenses have been ignored along with other expenses incurred by CMG outside India for earning the revenue from end customers. In our considered view, this approach is also not viable and appropriate. 11.22. As the methods for calculating the attribution profit as adopted by TPO and CIT(A) are not reliable. Ld. Counsel has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate Bench has held as under: "6.2 After duly considering the submissions of both the sides as well as the impugned order, we are of the considered opinion that the Tribunal in assessee's own case for Assessment Years 2006-07 and 2008-09 has reached the conclusion that there was a fixed place PE of the assessee in India and that profit attribution had to be made in the hands of the assessee due to such fixed place PE. Although, the assessee has approached the Hon'ble High Court against the said order of the Tribunal holding that the assessee had fixed place PE in India, the appeals are yet to be disposed of by the Hon'ble High Court. Thus, as of date, the order of the Co-ordinate Bench of the Tribunal for Assessment Years 2006-07 and 2008-09 have a binding precedential value for us because bound by judicial discipline, we are to follow the decisions of the Co-ordinate Bench, especially if the same have been rendered in assessee's own case. The relevant observations and findings of the ITAT in assessee's own case for Assessment Years 32 2006-07 and 2008-09 are contained in para 9.8 of the said order and the same are reproduced herein under for a ready reference:- "9.8 Looking a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to the assessee not having a service PE in India are contained in paragraph 3.10 of the order of the Tribunal and it has been followed by the Ld. CIT (A) in the year under consideration. Observations of the Tribunal are contained 34 in Para 3.10 and the same is being reproduced here in under for ready reference:- "3.10. Aggrieved with the order of the CIT (A), both assessee and revenue have preferred appeals before the ITAT. The revenue has not challenged the order of the CIT (A) holding that assessee has no Service PE. Thus, the revenue has accepted that CMG does not have a Service PE in India." 7.0.1 We also note that the Ld. CIT (A) has returned a finding based on the order of the ITAT and has also noted that even in assessment year 2006-07, the Ld. CIT (A) had held that there was no service PE in India and that the AO had not challenged this before the ITAT. The findings of the Ld. CIT (A) are reproduced here in under for a ready reference:- "On the issue of service PE, AO has mentioned in the assessment order for AY 2013-14 that the Appellant is providing services to CIS and these services are not in the nature of fee for included services. In this regard, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss the related grounds in department's appeal in this year also." 8. Thus, as could be seen from the aforesaid observations of the Coordinate Bench, all the issues relating to existence of PE and attribution of profit have been decided/resolved in assessee's own case in earlier assessment years. Therefore, the decision of the Tribunal, as referred, will squarely apply to the present appeals as well. Though, learned counsel for the assessee attempted to make out a case that there was no fixed place PE in the year under consideration, however, we are not convinced as the arrangement between the assessee and PE remains identical with earlier years. As regards attribution of profit to PE, we direct the Assessing Officer to follow the directions of the Tribunal in assessment years 2006-07 to 2013-14. 9. As far as the only other surviving ground raised by the assessee in relation to taxability of link charges, this issue has also been decided by the Tribunal in assessee's own case in assessment years 2013-14, holding as under: "7.2 Similarly, the issue of payment link charges/IPLC charges being taxable under royalty has been decided in assessee's favour by the Tribunal in assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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