9911796707
TMI Blog2024 (12) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents in terms of notice dated 26 March 2013 [WP(C) 1936/2014] and 29 March 2014 [WP(C) 9092/2014] issued under Section 148 of the Income Tax Act, 1961 Act. 2. As we view the order dated 12 March 2014 disposing of the objections which had been preferred by the writ petitioners, the reassessment was based on the following reasoning: 2. It was noticed from the statements of the employees/ expatriates recorded and information obtained during the survey and post survey proceedings that the non-resident parent company, M/s Honda Motor Japan (HMJ) and other affiliate companies had a business connection and a Permanent Establishment in India as per the provisions of section 9(1)(vii) of the I.T. Act and the relevant tax treaties. It was also seen from Form No. 3CEB report that the assessee company (HCIL) made a number of various kinds of payments to the parent company and other affiliate companies/ associated enterprises. The assessee company made such payments totalling Rs. 1057,30,04,248/- during the financial year 2005-06 relevant to A.Y. 2006-07. The above said payment s represented business/ trading receipts in the hands of the recipient companies and since the recipient companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Honda Group has held that affiliates do not have a PE in India. Copy of Apex Court decision is placed on record. The relevant extract of the order is as follows: In view of the fact that the Dispute Resolution Panel has found that there is no permanent establishment in India, the judgment of the High Court is set aside and the appeals are allowed accordingly. The Supreme Court relied on the Hon'ble DRP order which held that other Honda affiliate entities do not have a PE in India, considering that no expatriate has been deputed by the affiliates to HCIL. Thus, DRP held that they do not have any income chargeable to tax in India and hence, there is no liability to deduct TDS u/s 195 Further, we wish to submit that the department has not filed an appeal against the above DRP directions and accepted the position that other Honda affiliate entities are not having PE in India (even when DRP order was appealable). Also, post DRP directions, the Ld. AO has held that there is no PE and hence, no income chargeable to tax in India in case of other Honda affiliate entities for other A Y and also dropped the 148 proceedings in case of rest of the other Honda affiliate entities. The DRP or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed PE and hence no income is taxable in India. Accordingly, HCIL is not required to deduct TDS from the payments made to HTAS. Since HCIL was not under an obligation to deduct tax from payments made to HTAS, the question of treating HCIL as an assessee in default under section 201 of the Act does not arise and thus we request you to drop the proceedings. Since HTAS does not have a PE in India, the income is not chargeable to tax in India as per the provisions of DTAA. Thus, in absence of any taxable income, there is no liability for payer to deduct tax as held by Hon'ble SC in case of GE India Technology Centre vs CIT (2010)(10 SCC 29) has held that unless the payees are held to be taxable in India payer cannot be held responsible for not deducting appropriate taxes. After considering the assessee's submission carefully it has come to noticed that there has been significant legal development in the matters of HMJ and its affiliates since 2010. On the basis of Findings of the ITAT order ITA Nos.2056 3229/Del/2014 for A.Y.2009-10 it can be concluded that all transactions between HCIL and HMJ and its affiliates had been determined at arm s length basis. TPO has passed the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards the holding company. Whatever the benefits that are derived by the Indian subsidiary by such communication are offer to tax in India. We therefore find that the activities spoken by the expatriate employees in their statements are in the nature of reporting required in the course of discharge of the functions of the subsidiary company towards the holding company, and such activities do not constitute a PE under Article 5(4)(d), (e) and (f) of the DTAA. From a reading of Art.5 of the DTAA, we understand that in order to constitute a PE, there must be a fixed place of business available to the assessee, through which the business of assessee is wholly or partly carried on. In the preceding paragraphs we held that what the expat employees are doing is only the discharge of the functions of subsidiary towards the holding company, which is for the benefit of the business of the subsidiary to make the GBM understand the priorities and preferences of the Indian customers by providing India specific Information to GBM's which in turn then carry out research and development to develop India specific products. By no stretch of imagination could it be said that it is in furtheranc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
