9911796707
TMI Blog2021 (5) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that GIA India Laboratories Pvt. Ltd. is not agency PE/PE of the assessee. Consequently, ground No.2 of the appeal is decided in favour of the assessee. Non-granting of TDS credit - We deem it appropriate to restore this issue to the Assessing Officer for re-examination/reconciliation. AO is directed to allow benefit of TDS credit to the assessee after verification of records, in accordance with law. Ground of the appeal is allowed for statistical purpose. Levy of interest u/s 234A - due date of filling returns as assessee is a foreign company - Since, the assessee has filed original return of income within due date under the provisions of section 139(1) of the Act, interest under section 234A is not leviable. The provisions of section 234A are triggered where there is default in furnishing return of income i.e. the return of income is filed beyond due date as mandated under section 139(1) or (4) of the Act. The issue is restored to the file of Assessing Officer for verification of facts. If the return is filed by the assessee within the due date, the provisions of section 234A of the Act are no attracted, hence, no interest to be levied - SHRI PRAMOD KUMAR, VICE PRESIDENT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butable to the alleged PE of the Appellant in India. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no part whatsoever of its receipts are attributable to India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is incorrect, illegal, arbitrary, not in accordance with law and hence ought to be struck down. 3:3 The Appellant submits that the arbitrary action of the Assessing Officer/the Dispute Resolution Panel be struck down and the Assessing Officer be directed to accept the total income as returned. Without prejudice to the foregoing: 4:0 Re.: Estimation of gross profit : 4:1 The Assessing Officer/the Dispute Resolution Panel has erred in holding that the 20.31% of the receipts attributable to the alleged Indian operations ought to be considered as profits of the PE taxable in India. 4:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, even if it is held that the Appellant has a PE in India no further income can be taxed in India as the alleged PE has been remunerated at an arm s length and hence the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the stand taken by the Assessing Officer in this regard is misconceived, incorrect, erroneous and illegal. 8:3 The Appellant submits that the Assessing Officer be directed to delete the interest u/s. 234C so levied on it and to re-compute its tax liability accordingly. 9:0 Re,: General; The Assessing Officer / Dispute Resolution Panel have erred in assessing the total income of the Appellant at Rs.4,55,113/- against the returned income of Rs. Nil thereby determining a demand of Rs.1,67,298/- against the refund of Rs. 2,85,576/- while returning the income for the year. Each of the above grounds is without prejudice to the other. 2. Shri J.D. Mistry, Sr. Advocate appearing on behalf of the assessee submitted that in all these bench of appeals the assessee has raised identical grounds, except for the appeal for assessment year 2010-11wherein the assessee has inter-alia challenged validity of reassessment and other grounds consequential to the addition made. The ld.Counsel for the assessee submitted that the primary issue assailed in all the appeals by the assessee is that the Assessing Officer and the Dispute Resolution Panel have erred in holding that the assesse is having Permane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute of America Inc. vs. Addl. CIT (supra), a group concern of the assessee. 4. We have heard the submissions of rival sides and have examined the orders of authorities below. The appellant/assessee is incorporated in Thailand and is providing gem grading services. The assessee/appellant is a group concern of GIA-US. During the period relevant to the assessment year under appeal the assessee has rendered diamond grading services to its Associated Enterprise (AE) in India ie. GIA India Laboratories Pvt. Ltd. During the course of assessment proceedings the Assessing Officer formed an opinion that the assessee s AE i.e. GIA India Lab. Pvt. Ltd. has all essential components of having PE of the assessee. We observe that in holding Indian AE as PE of the assessee, the Assessing Officer has placed extensive reliance on the assessment order for AY 2011-12 in the case of GIA-US. The Assessing Officer in draft assessment order has verbatim quoted afore said assessment order. In fact, the Assessing Officer has not given independent findings and has merely adopted the findings given in the assessment order for AY 2011-12 in the case of GIAUS stating similarity of facts. 5. We find that the DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the stones to the assessee company for grading purposes; it is not an arrangement between two parties where each party contributes its share in order to undertake an economic activity which is subjected to joint control; in fact, the arrangement is akin to an assignment or sub-contracting of grading services to the assessee company, wherever GIA India Lab does not have the requisite expertise or technology or capacity for carrying out the grading services; further, the aforesaid arrangement has also been accepted as a mere rendering of grading services by the Transfer Pricing Officer both in the case of GIA India Lab and the assessee company. In this background, we may now proceed to decide as to whether the Indian Subsidiary GIA India Lab can be construed as a PE under any of the aspects contained in Article 5 of India-USA DTAA. 10. Firstly, we may examine whether GIA India Ltd. can be constituted as a fixed place PE of the assessee in terms of Article 5(1) of the India- USA DTAA. As per Article 5(1) of the Indo-USA DTAA, a fixed place PE arises when the foreign entity has a fixed place in India through which its business is wholly or partly carried on. In this context, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the articles are at or in the assessee company's facilities. Therefore, the economic risks of the gem grading services rendered by the assessee company vis- -vis stones/diamonds of customers of GIA India Lab shipped to it are borne by GIA India Lab and hence, there is no joint venture arrangement whatsoever between the assessee company and GIA India Lab. In terms of Article 5(6) of the India USA DTAA, it is provided that the mere fact that a company has controlling interest in the other company does not by itself construe the other company to be its PE. Accordingly, the assessee company is not having a 'fixed place' PE in India. 12. In terms of Article 5 (1) of the India - USA DTAA, a service PE arises on the furnishing of services in India by the assessee company through employees or other personnel, but only if: activities of that nature continue in India for a period or periods aggregating to more than 90 days within any twelve-month period; or the services are performed within India for a related enterprise. Hence, a service PE is triggered if the services (other than included services as defined in Article 12 'Royalties and Fees for Included Services') ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status acts in the ordinary course of its business. The OECD Commentary deals with the concept of 'Independent Agent' in paragraphs 36 to 39. In terms of paragraph 37 of the OECD Commentary, a person will be regarded as an independent agent (i.e. it will not constitute a PE of the enterprise on whose behalf it acts) only if: -He is independent of the enterprise both legally and economically, and - He acts in the ordinary course of his business when acting on behalf of the enterprise. In other words, Article 5(5) of the India- USA DTAA stipulates the following conditions which are required to be satisfied in order that an agent may be said to be an independent agent, i.e., - That he should be an agent of independent status; that, he should be acting in the ordinary course of his business; and, that his activities should not be devoted wholly or almost wholly on behalf of the foreign enterprise for whom he is acting as agent. 15. GIA India Lab is an independent/separate legal entity in India which is engaged in rendering of grading services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the primary issue, this ground has become academic, therefore, not deliberated upon. 11. In ground No.5 of appeal, the assessee has assailed non-granting of TDS credit of Rs.3,10,277/-. We deem it appropriate to restore this issue to the Assessing Officer for re-examination/reconciliation. The Assessing Officer is directed to allow benefit of TDS credit to the assessee after verification of records, in accordance with law. The ground No.5 of the appeal is allowed for statistical purpose. 12. In ground No.6 of appeal, the assessee has assailed levy of interest under section 234A of the Income Tax Act, 1961 (in short the Act ). The contention of the assessee is that the assessee is a foreign company. The due date for filing return of income for the impugned assessment year was 31/10/2010. The assessee filed its original return of income on 05/10/2010 i.e. well before the due date. The revised return was filed on 30/03/2012. The Assessing Officer has wrongly levied interest under section 234A of the Act. Since, the assessee has filed original return of income within due date under the provisions of section 139(1) of the Act, interest under section 234A is not leviable. The provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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