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TMI Blog2022 (1) TMI 1465X X X X Extracts X X X X X X X X Extracts X X X X ..... both the cases are similar. Revenue has not brought on record any distinguishing factor in the present set of appeals before us. Therefore, the findings given by the Coordinate Bench of Tribunal while adjudicating the appeal in the case of assessee s group concern GIA-US would mutatis mutandis apply to present appeal. Thus, we 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. Assessee has assailed attribution to the alleged PE in India. Since, the assessee has succeeded on the primary issue, the alternate ground has become academic, therefore, not deliberated upon. Appeal of the assessee is allowed. - SHRI VIKAS AWASTHY, JUDICIAL MEMBER AND SHRI M.BALAGANESH, ACCOUNTANT MEMBER For the Assessee : Shri J.D. Mistry, Senior Advocate Shri Niraj Sheth, Advocate For the Revenue : Shri Milind S. Chavan, Senior AR ORDER PER M. BALAGANESH (A.M): This appeal in ITA No. 978/Mum/2021 for A.Y.2017-18 preferred by the order against the final assessment order passed by the Assessing Officer dated 20/04/2021 u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, hereinafter referred to as Act, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 stand taken by the Assessing Officer/the Dispute Resolution Panel in respect thereof is incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 3 : 3 The Appellant submits that the Assessing Officer be directed to accept the total income as returned. 4 : 0 Re.: General: The Assessing Officer / the Dispute Resolution Panel have erred in assessing the total income of the Appellant at Rs. 2,01,75,060- against the returned income of Rs. Nil thereby determining a demand of Rs. 1,20,24,330/- against the refund claimed of Rs. Nil/- while returning the income for the year. The Appellant craves leave to add, alter, amend and/or substitute all or any of the foregoing grounds of appeal at or before the hearing of the appeal. 4. The ground No.1 raised by the assessee is with regard to existence of Permanent Establishment (PE) in India. All other grounds raised by the assessee vide ground Nos.2-3 revolves on the existence of PE in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts in the case of assessee and that of GIA-USare similar. Now, that it is an established position that the facts in the case of assessee and GIA-US are similar, the case of assessee is squarely covered by the order of Tribunal in the case of GIA-US in ITA 1138/Mum/2015 (supra). Therefore, the assessment order is liable to set aside on the sole ground that the assessee is not having any PE in India. The ld. Counsel for the assessee contended that if ground No.2 of appeal i.e. Whether the assessee is having PE in India, is decided in favour of the assessee, there would be no need to decide ground No.1 challenging validity of reassessment proceedings. Even the other grounds in appeal assailing attribution and estimation of gross profit, raised without prejudice to primary ground would become academic. 3. Shri Sanjay Singh representing the Department vehemently defended the impugned order. However, the ld.Departmental Representative fairly admitted that the main ground in the present set of appeals viz. appellant having PE in India has been adjudicated by the Tribunal in the case of Gemmological Institute of America Inc. vs. Addl. CIT (supra), a group concern of the assessee. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of completeness relevant extract of the findings of Tribunal are reproduced herein under:- 9. We have carefully considered the rival submissions, perused the relevant material, including the orders of the lower authorities as well as the case laws referred at the time of hearing. Notably, the controversy before us primarily revolves around as to whether or not the subsidiary of the assessee company i.e., GIA India Lab can be construed as its PE in India. The income-tax authorities have invoked section 9 of the Act and/or Article 5 of the India-US Treaty in order to say that the assessee company has a PE in India. On the contrary, as per the assessee, the impugned receipts are in the nature of business profits, and in the absence of any PE in India, the same are not taxable in India. Factually speaking, it is evident that the on perusal of the agreements, the transaction of grading services between assessee company and GIA India Lab cannot be considered to be in the nature of a joint venture, since GIA India Lab has its own independent expertise but only due to its technology/capacity constraints, it forwards the stones to the assessee company for grading purposes; it is not an ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r partnership with Indian subsidiary as the businesses of the assessee company and the Indian subsidiary were inter-linked and closely connected (which is also contended in the case of the assessee before us) and therefore the Indian subsidiary was regarded as PE of foreign company in India. The aforesaid argument of the Revenue was repelled since the conditions under Article 5 of the DTAA were not met and it has been held that PE cannot be established merely because of transactions between associated enterprises or the principal sub- contracting or assigning the contract to the subsidiary. 11. Factually, in the case of the assessee company, there is no joint venture arrangement between the assessee company and GIA India Lab vis- -vis gem grading services rendered by the assessee company to GIA India Lab since it is GIA India Lab who enters into agreement with the client and bears all the risks including credit risks, client facing risks, etc. Also, in terms of the agreement, GIA India Lab bears the risk of loss or damage to articles while in transit to and from the assessee company and also during the time when the articles are at or in the assessee company's facilities. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... US/DTAA, an agency PE is created where a person-other than an agent of an independent status to whom paragraph 5 applies - is acting in India on behalf of an enterprise of the USA, that enterprise shall be deemed to have a permanent establishment in India, if: (a) he has and habitually exercises in India an authority to conclude on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 3 which, if exercised through a fixed place of business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph; (b) he has no such authority but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise, and some additional activities conducted in the State on behalf of the enterprise have contributed to the sale of the goods or merchandise ; or (c)he habitually secures orders in India wholly or almost wholly for the enterprise. 14. The definition excludes from the ambit of a PE any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an AE in both the cases are similar. The Revenue has not brought on record any distinguishing factor in the present set of appeals before us. Therefore, the findings given by the Coordinate Bench of Tribunal while adjudicating the appeal in the case of assessee s group concern GIA-US would mutatis mutandis apply to present appeal. Respectfully following the order of Co-ordinate Bench, we 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. 9. In ground of appeal No. 3, the assessee has assailed attribution to the alleged PE in India. Since, the assessee has succeeded on the primary issue, the alternate ground has become academic, therefore, not deliberated upon. 10. In ground of appeal No. 4, the assessee has assailed estimation of gross profits. Since, the assessee has succeeded on the primary issue, this ground has become academic, therefore, not deliberated upon. 5. The ground No.4 raised by the assessee is general in nature and does not require any specific adjudication. 6. In the result, appeal of the assessee is allowed. Order pronounced on 17/ 01 /2022 by way of proper me ..... X X X X Extracts X X X X X X X X Extracts X X X X
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