9911796707
TMI Blog2024 (1) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... by Tax authorites. Thus, we are inclined to decide the ground no. 1 in favour of the assessee. Existence of a PE - Determining income on presumptive basis attributable towards Permanent Establishment ( PE ) - Tax authorities have found existence of fixed place PE on allegation that the assessee is procuring its Indian business of supplying goods and services to various customers in India through the use of Indian subsidiary and also provides it with necessary services and supervision. However to establish this, the AO has not brought on record any evidence but has drawn inference for the failure of assessee to provide necessary evidences to AO. The case of assessee is that assessee was not given sufficient time to file the relevant evidences. Tax Authorities below have fallen in error to hold the existence of a PE on the basis of the mere assumption that as assessee company has a subsidiary in India and therefore whatever sales in the form of export is made by it to Indian entities, same is assumed to be with indulgence of Indian subsidiary without substantiating as to how Indian subsidiary was privy to the purchases by other entities. There is substantial force in the arguments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etal cutting as well as the industrial operation of a galvanizing plant. The company has a subsidiary in India named Mosdorfer India Private Limited which was incorporated in India in 2007. 2.2 During the course of assessment proceedings, in response to the notice dated 13.01.2022, the assessee filed its submission dated 19.01.2021 and submitted that during the year the assessee has received the following revenue directly/indirectly from India: Nature of Revenue Amount of revenue (In Rs.) Software related services 9,94,173 Consultancy and professional services 71,726 Interest received on fully convertible debenture 60,72,254 Supervision & Repair charges received 6,98,727 Reimbursement of expenses received 1,36,660 2.3 Apart from the above, Mosforfer GMBH has also received an amount of EURO 6911796 from India on account of supplied/exported goods and other tangible assets. Further, out of the total receipts the assessee has declared Rs. 78,36,879/- and claimed Rs 1,36,660/- as exempt income as reimbursement of actual expenses incurred on behalf of the subsidiary company. 2.4 As with regard to first issue covered by ground no. 2, the AO had vide notice dated 02.03.2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e received on account of supply/export goods or other tangible assets should not be considered as income for the year:- 1. Please provide copy of agreement/contract alongwith invoices for supply of goods and other tangible assets entered with Indian entities during FY 2012-13. Please also provide details of all the Indian parties to whom the goods/tangible assets were supplied during the year. 2. Please provide details about insurance made regarding transfer of goods to various Indian parties alongwith documentary evidence. 3. Please provide bill of lading of goods supplied from Austria to various Indian entities. 4. Please provide custom clearance certificate for the goods supplied in India during the year. 5. Please also explain as to why the income receipts from supplied/export goods and other tangible assets should not be considered as income for the year. 3.1 In response to the above notice the assessee on 14.03.2022 made following submissions; "As per our earlier response, Mosdorfer GMBH has supplied/ exported goods and other tangible assets of EURO 6,911,796 from Austria to various Indian customers on a principal-to-principal basis. As per CBDT circula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO observed that the assessee has provided software related services, consultancy and professional services and supervision & repair services to its Indian subsidiary. AO took note of the fact that the assesse has a subsidiary in India namely Mosdofer India Private Limited and as per the ROI filed for A.Y, 2013-14 the assessee held 74% shareholding of it. Further that the assessee is procuring business in India by Mosdofer India Private Limited. AO noticed that as per the services rendered to Mosdofer India Private Limited during the year it is clear that the assessee has not only supplied goods or tangible assets to its Indian subsidiary but also supervise it and provided repair service for it. The AO, thus concluded that to provide such services the assessee has deputed its expatriate personnel to supervise and to provide repair services to Mosdofer India Private Limited. Accordingly, the AO held that the assessee has fixed place of business in India in the form of Mosdofer India Private Limited. Further, the 'core business' of the assessee is conducted through Mosdofer India Private Limited. Therefore, the assessee has a permanent establishment in India through Masdofe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te through a 'PE situated therein. PE is generally classified into six categories: i. Place of Management or Place of Effective Management (POEM); ii. Fixed Place PE (branch, office, factory, workshop, warehouse, sales outlet, website, etc.); iii. Construction PE (building site or construction); iv. Installation or assembly project PE (Criteria duration of each installation project); v. Service PE, i.e., vi. Dependent Agency PE. i.e., the enterprise does not have any economic or functional independence." It is seen from the structure of the assessee that Mosdorfer GMBH has a global footprint it has a subsidiary in India namely Mosdorfer India Pvt. Ltd., of which the assessee has a 74% shareholding. The Indian business of the assessee is being procured through M/s Mosdorfer India Pvt. Ltd., the assessing has been supplying goods and services to various customers in India through the use of Indian subsidiary and also provides it with necessary service and supervision. Therefore it can be safely concluded that assessee has a fixed place permanent establishment in India and its business is being conducted through its subsidiary namely M/s. Mosdorfer India Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing conducted through its subsidiary, MIPL. 9) On the facts and in the circumstances of the case and in law, Learned DRP/AO has erred in law in holding that the Appellant has not provided documentary evidence in support of its direct exports from locations outside India at the project offices outside India of its Indian Customers/Clients, which evidence has duly been provided in fact. 10) On the facts and in the circumstances of the case and in law, Learned DRP/AO has erred in invoking Rule 10 of the Income Tax Rules ("Rules in short) and estimating 10% profits on presumptive basis and applying 35% of such profit as liable to tax in India. 11) The Appellant craves leave to alter, modify, revise, add/delete ground (s) with the leave of Hon'ble Bench." 7. It is pertinent to mention that ground no 1 is general in nature and Ld. AR has argued on all grounds except ground no 6. 8. As with regard to ground no 2, Ld. AR has primarily reasserted the aforesaid facts arguing that Ld. Tax Authorities below have fallen in error in not taking into consideration the evidence which were sufficient to establish that expense of Rs. 1,36,660/- was merely by way of reimbursement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and the reimbursement invoice of 1900EUR made available at page no. 156. The Ld. DRP have fallen in error in considering the same to be in consultancy and professional services to the Indian associates. In spite of accepting that it was a reimbursement expense the DRP considered it to be substantially FTS in nature. We are of considered view that the assessee had not added any value to the laboratory report. Assessee had not played any role except for being a medium to procure a report from a laboratory having higher credibility. The same cannot at all be in the nature of FTS, as erroneously held by Tax authorites. Thus, we are inclined to decide the ground no. 1 in favour of the assessee. 13. In regard to ground no. 3 to 5 and 7 to 10, it will be appropriate to take them collectively as the same are based on common set of facts where the tax authorities have found existence of fixed place PE on allegation that the assessee is procuring its Indian business of supplying goods and services to various customers in India through the use of Indian subsidiary and also provides it with necessary services and supervision. However to establish this, the AO has not brought on record any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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