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TMI Blog2023 (4) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... And Supriya Mehta, CA ORDER PER SHAMIM YAHYA, AM, This appeal by the Revenue is directed against the order of the Ld. CIT(A)-37, New Delhi, dated 25.07.2019 and pertains to Assessment Year 2009-10. 2. The grounds of appeal reads as under:- 1. Whether on fact and in circumstances of the case Ld. CIT(A) is legally justified in deleting the disallowance of Rs. 16,94,51,775/- on account of non-deduction of TDS, u/s 40(a) (i) of the Income Tax Act 1961 (the Act) by ignoring finding of facts recorded by the Assessing Officer (the AO) that the AO of Mitsui Japan attributed 50% of the gross profit i.e. Rs. 28,56,46,263/- (50% of Rs. 57,12,92,527 /-) as income attributable to India PE. 2. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of Rs. 16,94,51,775/- on account of non-deduction of TDS, u/s 40(a) (i) of the Income Tax Act 1961 (the Act) by ignoring findings of the fact recorded by the AO that Mitsui Japan being a non-resident, tax is payable by it in India on income attributable to India PE. Mitsui India should have deducted an amount of Rs. 11,42,58,505/- (40% of Rs. 28,56,46,263/-) as fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce made by the Assessing Officer is based on the assessment completed in the case of Mitusi Co. Ltd. Japan for the year under consideration i.e. AY 2009-10 wherein the Assessing Officer of the said company has relied upon the finding of the Assessing Officer of that company in the AY 2005-06, wherein it was observed that the assessee company i.e. Mitusi India is the dependent agent PE of the Mitusi Co. Ltd. Japan. It was further stated before the Ld. CIT(A) that the said issue has now been adjudicated in favour of Mitusi Co. Ltd. Japan holding that Mitusi India (assessee company) is not the dependent agent PE of Mitusi Co. Ltd. Japan. The Ld. CIT(A) quoted the relevant finding of ITAT in the case of Mitusi Co. Japan for Assessment Year 2005-06 as under:- 4. The Second ground is regarding finding of the learned CIT (Appeals) holding that no income is liable to be attributed in India even if MIPL is considered to be Dependent Agent PE in India. On this issue the learned CIT-DR though stated that though in view of the TPO order under Section 92CA (3) holding the transactions between the assessee and the MIPL at arm's length, addition may not be sustainable, yet arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. 4.1 As per above clause (7) a person other than an independent agent is treated as PE if he fulfills any of the three conditions, (a), (b) or (c). It is not the case of the Assessing Officer that MIL habitually exercised authority to conclude contracts. It is also not the case of the Assessing Officer that MIPL habitually maintains a stock of goods or merchandise. Thus, the condition of (a) and (b) are not fulfilled. The third condition in (c) is habitually securing orders for the assessee. In this regard we note that the Assessing Officer has made this allegation on the basis that commission has been paid by the assessee company to the MIPL. On this basis it has been assumed that MIPL is securing orders. This contention of the Assessing Officer does not appear to be correct. As per the agreement which has been quoted by the Assessing Officer in the assessment order, MIPL is supposed to put best effort to collect information with regard to Instant Noodle project etc. to make the best effort to find the best candidate, to attend/take care of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of the learned CIT-DR that MIPL habitually secures order for the assessee company. And accordingly, none of the condition prescribed in Article 5(7) are fulfilled. 4.3. The second contention of the learned DR was that MIL is economically dependent on assessee company as major revenue of MIPL is from assessee company. We are of the view that this per se cannot be ground to hold that MIPL is a Dependent Agent. For invoking this clause, first one of the three conditions needs to be fulfilled. As we have held hereinabove that MIL does not get covered Agent. The learned DR also made a reference to Conventions on Double Taxation by Klaus Vogel to support its contention that where a person works only for one principle such person is economically dependent on the principal. In these circumstances the agent though not legally but will be bound to obey his principal's instructions and be regarded as being Dependent Agent. This contention of the learned CIT-DR again ignores the basic requirement ie. fulfilling one of the three conditions. It is also important to note that the DTAA provide for treating a person as Dependent Agent. The DIA A has to be strictly interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erused the records. The Ld. Counsel for the assessee stated that this issue is squarely covered in favour of the assessee by a series of orders of ITAT and also the matter has travelled to Hon ble Delhi High Court. The case laws relied upon by the assessee is as under:- i. CIT (International Taxation)-2 vs M/s Mitsui and Co. (ITA No.38/2023)(Del. HC) ii. CIT (International Taxation)-2 vs M/s Mitsui and Co. (ITA No.321/2018)(Del. HC) iii. DCIT vs M/s Mitsui Company India Pvt. Ltd. (ITA No.1608 1672 /Del/2016) iv. M/s Mitsui Company Ltd. vs ADIT (ITA No.2335/Del/2011) v. DDIT vs Mitsui Co. Ltd. (ITA Nos.2801, 4329 4367/Del/2011, ITA No.794 795/Del/2012) vi. DCIT (International Taxation) vs M/s Mitsui Co. (5106 5108/Del/2015 and CO Nos.296 297/Del/2016) vii. Mitsui Co. Ltd. vs DDIT (ITA No.4377/Del/2016) viii. ACIT (International Taxation) vs Mitsui Co. Ltd. (ITA No.4764/Del/2016 CO No.363/Del/2016) ix. ACIT (International Taxation) vs Mitsui Co. Ltd. (ITA No.5901/Del/2016 CO No.28/Del/2017) 8. It may be gainful to refer the order of the Hon ble Delhi High Court in ITA No.321/Del/2018 vide order dated 31.01.2023 in this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X
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