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TMI Blog2024 (11) TMI 955X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 2023. Six weeks time was given to the AO to furnish the report. AO furnished the report in December 2023, the said report is stated to be based on the information provided by the assessee. AO had also expressed his helplessness in providing the said report without complete verification due to paucity of time. We do not agree with the Revenue/AO on the excuse of time limitation in furnishing the report. This appeal is taken up for hearing after almost 10 months from the date of furnishing report. If, the AO had something more to add to the report dated 19.12.2023 or had any contrary material to rebut the contentions of the assessee, the AO could have very well furnished the same by way of supplementary report. The AO has not placed on record any material whatsoever to rebut contentions of the assessee with regard to closure of LO operations and no expatriate employees in India during the relevant period. The closure of LO operations in India result in paradigm shift in taxability and attribution of profits in India. With the closure of LO operations in India, the assessee will have no PE or DAPE in India. Revenue has not placed on record any material to show that even after clos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from said appeal. ITA No. 1974/Del/2020 for AY 2017-18 2. This appeal by the assessee is directed against the assessment order dated 29.10.2020, passed u/s. 144C(13) r.w.s 143(3) of the Income Tax Act, 1961(hereinafter referred to as the Act ). 3. Shri Sachit Jolly appearing on behalf of the assessee narrating facts of the case submitted that the assessee is a US based company engaged in the business of supplying goods from outside India. The assessee is a wholly owned subsidiary of a General Electric Company. During the relevant period, the assessee made offshore sale of goods and offshore sale of software and related support services to its various customers in India. In the past, the assessee has been carrying out similar activities through its Liaison Office (LO) in India. Due to presence of LO in India the Assessing Officer (AO) in the preceding assessment years i.e. AY 2002-03 to 2006-07 held that the assessee has PE in India. Since, the assessee was held to be carrying out its operation through Permanent Establishment (PE), the AO attributed profits to assessee s PE in India. The Dispute Resolution Panel (DRP) in principle following its earlier directions for AY 2001-02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the year under consideration. The findings of the AO are contrary to facts and documents on record. The assessee had shifted its operations from AIFACS Building as General Electric International. Operations Co. Inc. (GEIOC) had shifted its place of business from said building to Aggarwal Millennium Tower, Wazirpur, Delhi. The assessee in order to substantiate change of office had furnished copy of Form 52 before the AO, wherein the assessee had given the new/current address. The said form was filed before the Registrar of Companies. He further pointed that even in Form no 49C, the copy of which was provided to AO, the principal place of business was mentioned as 401/402, 4th Floor Aggarwal Millennium Tower, Wazirpur, Delhi and not the premises at AIFACS as stated by the AO. The AO has finalized assessment order in the impugned assessment year on wrong appreciation of facts by merely placing reliance on earlier assessment orders. 6. The ld. Counsel for the assessee stated that the Tribunal during the course of hearing of appeal on 13.09.2023 had observed that the authorities below while considering factual matrix particular to the subject years have dealt with the issue in a ske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 13.06.2023 on similar set of facts wherein the Tribunal reversed findings of the AO and held that the assessee was not having PE on DAPE in India during the relevant period. 9. Per contra, Shri Vijay B Vasanta, representing the department vehemently defended the impugned assessment order. He pointed that during assessment proceedings a specific query was raised by the AO that as to whether there is any difference in factual matrix or business model during the subject assessment year as compared to the earlier year. The assessee in reply to the query raised by AO categorically stated that there was no change in the factual matrix of the business as compared to the earlier year. Accordingly, the AO completed assessment after considering the facts of the impugned assessment year and following the assessment orders for AY 2001-02 to 2006-07. 10. We have heard the submissions made by rival sides and have examined the orders of authorities below. The ground of appeal no. 1 to 11 are against the findings of AO in holding that the assessee is having PE in India and attribution of profits to assessee's PE in India. At the outset, we may record that in the preceding assessment years t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings, has been that it has neither a Fixed place PE or a Dependent Agent PE for the reasons that - (i) AIFACS building has since been vacated by GEIOC LO on 01.05.2012; (ii) no expatriate employee was present in India in these assessment years; and, (iii) the remuneration paid to GEIIPL had increased substantially from cost +5% to cost +25%. However, in the impugned orders passed by the income-tax authorities, the conclusion drawn for assessment years 2002-03 to 2006- 07 has been followed. At the time of hearing today, both parties have been heard at some length. The case put-forth by the appellant is that the factual assertions made by it have not being countered by the income-tax authorities, but merely disbelieved, and thus the conclusion drawn is not factually tenable. Having perused the impugned orders, it is noticeable that the factual matrix peculiar to the subject years have been considered by the authorities in a very sketchy manner. In the absence of any meaningful and credible discussion in the impugned orders, even the Ld. CIT (DR) is also not in a position to assist the Bench in support of the case of the Revenue. We, therefore, deem it fit and proper to require th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter recording the fact that there is no change in business activities as compare to earlier years has completed the assessment on similar lines as was done in AY 2002-03 to 2006-07. So much so that the AO has failed to look into documents furnished by the assessee to substantiate shifting of office premises of GEIOC from AIFACS building to Aggarwal Millennium Tower. A perusal of Form 52 at page 15 of the paper book reveals that GEIOC had shifted its premises in May 2012. However, the AO still recorded in the assessment order that the assessee has failed to furnish any documentary evidences to substantiate the change of office premises. Further, the assessee had furnished Annual Statement u/s. 285 of the Act in Form 49C at page no. 21 of the paper book. A perusal of the same reveals that in response to query at serial no. 7 i.e. Nature of activities undertaken by LO. The assessee replied, No activity is undertaken by the LO. Management doesn t intend to continue the LO and intends to file for closure of LO. In so far as total number of employees working in the LO during the relevant period, the assessee answered, Not applicable, LO had no employees during the subject financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case and documents on record, we hold that since no business activity was carried out by the assessee during the relevant period through LO and no expat employee were engaged by the assessee at LO, the assessee ceases to have any PE or DAPE in India in the impugned AY. 17. In somewhat similar facts in the case of assessee s group company Nuovo Pignone International SRL vs. DCIT (supra) the coordinate Bench after examining the facts held as under:- 11. However, as far as the facts relating to impugned assessment year are concerned, AIFACS building, which earlier constituted the fixed place PE of the assessee in India, was vacated on 01.05.2012. In fact, this was brought to the notice of both the Assessing Officer and learned DRP in course of proceedings before them. In fact, on 29th May, 2018, the assessee has furnished annual statement u/s. 285 of the Act in Form 49C for the financial year 2017-18, clearly indicating that since no activity was undertaken by the liaison office, the Management does not intend to continue the liaison office and is to file for closure of the liaison office. Thus, the fact that AIFACS building has been vacated, no expatriates visited I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities by any specific factual finding. In case of Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. (supra), Hon ble jurisdictional High Court, while dealing with the issue of reopening of assessment based on information received from third party, observed, though such information can form basis for an examination/investigation by the Assessing Officer, but the decision to reopen the assessment has to be of the Assessing Officer and not of the third party. The Assessing Officer cannot merely do a cut and paste job for reopening the assessment without independent application of mind or verification or investigation. The aforesaid ratio laid down by Hon ble jurisdictional High court squarely applies to the facts of the present appeal, as the departmental authorities have merely followed the decision taken by them and higher appellate authorities in assessee s cases in past assessment years without independent application of mind to the facts brought on record by the assessee or making proper verification/investigation of the evidences. 14. Thus, essentially, the evidences brought on record by the assessee remain uncontroverted. When the evidences brought on record by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not arise. In the result, ground no. 1 to 11 of appeal are allowed. 21. In ground no. 12 to 17 of appeal, the assessee has assailed the findings of AO in holding receipts from supply of software in India as Royalty . The ld. Counsel for the assessee submitted that the software supplied by the assessee is embedded in the hardware. The reasons given by AO to treat the receipts as Royalty in the impugned assessment year are similar to the one as were stated in the preceding assessment years. The assessee in AY 2012-13, 2014-15 2015-16 carried the issue in appeal before the Tribunal in ITA Nos. 743/Del/2017, 6304/Del2017 484/Del/2019, respectively. The Tribunal vide common order dated 07.03.2021 decided the issue in favour of the assessee. 22. The ld. DR vehemently defending the findings of the AO on this issue. However, he fairly stated that this issue has been considered by the Tribunal in assessee s own case in the preceding assessment years. 23. We have heard the submissions made by both sides. We find that in the assessment order the AO has treated the receipts from sale of software as royalty under the provisions of section 9(1)(vii) of the Act. The assessee raised objections b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is not the pay of royalty for the use of copyright in the computer software, and that same does not give rise to any income taxable in India, as a result of the persons referred to in section 195 of the Income-tax Act were not liable to deduct any TDS under section 195 of the Income-tax Act. The answer to this question will apply to all four categories of cases enumerated by paragraph 4 of this judgment. The appeals from the impugned judgments of the High Court of Karnataka are allowed, and the aforesaid judgments are set aside. The rule the AAR in Citrix Systems (AAR) (supra) is set aside. The appeals from impugned judgments of the High Court of Delhi are dismissed. 24. Respectfully following the decision of the Hon'ble Supreme Court [supra] we direct the Assessing Officer to delete the impugned addition in the captioned Assessment Years. Since, the facts in the impugned assessment year are perimetria, we see no reason to take a different view. Ergo, ground no. 12 to 17 are allowed for parity of reasons. 24. Ground no 18 to 20 of appeal are without prejudice and alternate to ground no. 12 to 17. Since, we have accepted primary contention of the assessee in respect of ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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