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TMI Blog2024 (8) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... 10) TMI 1011 - SUPREME COURT] On the issue of existence of a PE, it was held that the finding itself of existence of a PE is without any cogent reasons. Tribunal has rejected the reasons and conclusions on which the findings of the AO and Hon ble DRP were premised. Accordingly, the additions made by the Ld. AO in the impugned case deserve to be deleted on the merit for the year under consideration. Thus, the grounds raised are allowed and appeal of asseessee is allowed. - SHRI G.S. PANNU, HON BLE VICE PRESIDENTAND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER For the Appellant : Shri Ravi Sharma, Advocate Ms Shruti Khimta, AR For the Respondent : Shri Om Parkash, Sr. DR ORDER PER ANUBHAV SHARMA, JM: Heard and perused the records. 2. The Stay Application in hand has been filed for the stay of demand in regard to AY 2021-22 and, during the course of argument, it was submitted by the ld. AR on behalf of the applicant/appellant that the issues in the appeal are fully and squarely covered in favour of the appellant by the orders of the Tribunal for AY 2010-11 to 2015-16 and the additions stand deleted. Ld. DR could not dispute aforesaid and also did not cite any distinction of facts in regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Adobe products is delivered electronically or via subscription of cloud-based offerings. The contracting and invoicing functions between ADIR and its Indian distributors/resellers and end-customers take place outside India. Furthermore, the sales consideration for supply of Adobe products is also received by ADIR directly in Ireland i.e. outside India. Therefore, all the business activities pertaining to contracting, purchase, sale and invoicing take place outside India. It is claimed that Adobe India is not involved in the sale and supply of software belonging to the Appellant. Adobe India does not enter into contracts with the distributors/resellers/end-customers on behalf of the Appellant. Adobe India is not authorised to negotiate contracts on behalf of the Appellant. Furthermore, Adobe India does not accept orders or execute agreements in the name of the Appellantor on its own behalf. Furthermore, Adobe India does not hold stock of any items provided to the distributors/resellers. 3.1 In relevant AY, the Appellant had filed its return of income under section 139(1) of the Act on March 12, 2022, declaring an income of Rs. 65,29,00,600/- (rounded off), taxable on a gross b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rections dated September 29, 2023, DRP had allowed the benefit of the India-Ireland tax treaty to the Appellant by holding that the contention of the Ld. AO regarding the Appellant being a conduit entity was baseless. 3.7 However, the allegation that Adobe India constitutes the Appellant s PE in India was affirmed on the presumption that Adobe India habitually and regularly concludes contracts and secures orders for the Appellant. Additionally, the interest paid under section 244A of the Act on the refunds determined for previous years was directed to be taxed at 10% as per the rate provided under the India-Ireland DTAA. 3.8 Consequently, a final assessment order has been passed by the Ld. AO, wherein, an addition of INR 2,34,77,36,435/- has been made to the income of the Appellant and a consequential demand of INR 1,20,61,40,640/- has been determined as payable by it [the refund for this year was previously issued to the Appellant persuant to the processing of the tax return under section 143(1) of the Act/adjustment with the outstanding demands for other assessment years. 4. Referring to para 20 on page no 40 of the Assessment Order and para 8.4(i) of the DRP Directions, Ld. AR h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for AY 2010-11. We find that the above submission by no stretch of imagination can be said to be distinguishing the decision of the Hon ble Apex Court from being applicable from the facts of the present case. Very well understanding this proposition, the Revenue itself urged that without prejudice to the above, the judicial decision of the attribution of profit by applying FAR analysis has not been accepted by the Indian Government and the profit has to be determined by apply of provisions of DTAA r.w.s. 10A of the Income Tax Rules, 1962. In view of the above, we are of the opinion that the decision of the Hon ble Apex Court as above squarely applies in this case. Hence holding that since the transactions between the assessee and its Indian AE has been found to be at Arm s Length in the transfer pricing adjustment, no further attribution can be made to the PE of the appellant as claimed. Hence, this issue needs to be decided in favour of the assessee. 5.1 On the issue of existence of a PE, it was held that the finding itself of existence of a PE is without any cogent reasons. Relevant extracts is reproduced below:- 16. As regards the risk recoverable from distributors, the hypothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to above, we hold that the amount received by the assessee from supply of software and automated services, are not taxable in India. The Assessing Officer is directed to delete the additions. AY 2018-19 and AY 2019-20 (supra) 9. In the aforesaid scenario, the issue which arises for consideration is, in a case where the transaction between the assessee and its AE in India has been found to be at arm s length, whether further profit can be attributed to the dependent agent PE in India, if at all, such a PE exists in India. In the facts of the present appeal, in assessment year 2018-19, though, the TPO has proposed transfer pricing adjustment in relation to the international transactions between the assessee and its Indian AE, however, learned DRP has deleted such adjustment. In other words, the transaction between the assessee and its Indian AE has been found to be at arm s length. In assessment year 2019- 20, no reference was made to the TPO, which effectively means, the Assessing Officer himself accepted the transactions between the assessee and the AE to be at arm s length. 10. Keeping in view the aforesaid factual scenario, if we examine the issue at hand, it can be seen that wh ..... 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