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TMI Blog2021 (3) TMI 1470X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Sachit Jolly, Advocate For the Department : Dr. Prabha Kant, CIT ORDER PER K. NARASIMHA CHARY, JM Aggrieved by the order dated 30/1/2021 passed under section 143(3) read with section 144C of the Income Tax Act, 1961 (for short the Act ), passed by the assistant Commissioner of income tax, circle-(3) (1) (2), International Taxation, New Delhi ( learned Assessing Officer ) pursuant to the directions dated 16/11/2020 given by the Ld. Dispute Resolution Panel (DRP)-2, New Delhi ( Ld. DRP ), in the case of M/s Samsung Electronics Co Ltd ( the assessee ), for the assessment year 2017-18, assessee preferred this appeal. 2. Brief facts of the case as are relevant for the purpose of this appeal and as could be culled out from the record are that the assessee is a company incorporated under the laws of South Korea and is a tax resident of South Korea; that its principal activity is manufacturing and sales of various categories of televisions, home appliances, telecommunication terminals, semi-conductors as well as other state of the art IT products for global markets; that the assessee company also has two wholly owned subsidiaries in India under the name and style of Samsung India Elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AR brought it to our notice that the the issue involved in this matter is no longer res Integra and was considered by the Tribunal in assessee s own case for assessment years 2004-05 to 2009-10, 2011-12 to AY 2015-16 in ITA numbers 65 to 70/del/2013, 315, 982/del/2016 and 4705 and 4706/del/2017 by order dated 22/3/2018, which was followed by another Bench in assessee s own case for the assessment years 2013-14 and 2015-16 in ITA numbers 5759 and 5760/del/2018 by order dated 14/12/2018. Ld. AR submitted that since the facts giving rise to the additions for all these years are identical, the consistent view taken by the Tribunal in assessee s own case may be followed in view of the addition of the Hon ble Supreme Court in the case of Radha Soami Satsang Vs. CIT,193 ITR 321 (SC). 8. Per contra, Ld. DR submitted that the view taken by the Tribunal for the earlier assessment years has not been accepted by the Department and is under challenge by the Department before the Hon ble High Court and therefore, the matter needs to be decided afresh. He, however, does not dispute that the facts giving rise to the additions for all these years are identical and, for that matter, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is the holding company of the Indian subsidiary, (SIEL) in a highly globalised and competitive business environment, it is essential for group companies spread across the globe to communicate with each other to sustain its supply chain management, without which exchange of information on the aspects as to what sort of models/designs are preferred by the customers in the market on mid-term to long-term basis, relevant forecast, plan strategy to sell the products, detailed stock/Logistics status etc it would not be possible for any company to place optimized purchase orders at a right timing nor to acquire most promising manufacturing technologies. In this case also, as is evident from the statements recorded by the assessing officer, there is a constant exchange of information between the subsidiary and the Global Business Management ( GBM ) to perform the product/strategy functions from a global market perspective. 21. Learned AR submitted that it is to be noted that none of the statements of the employees reveal that the key decisions with regard to the products, pricing, launching etc are taken by the assessee but they are well within the realm of the Indian subsidia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the employees with reference to the bank accounts that SEC paid the amount to personal bank account of the employees when such amount is limited to SEC, however the remittance of salaries are made to SEC on quarterly basis, which means that a person would get his salary in the his South Korean bank after 3 months of the receipt of salary in India and certainly it s not the to the convenience of such person. 24. Ld. DR further argued that the details are available show that the debit note has been raised by SEC, Korea and then after payment is made from SIL India, which implies the salaries are not paid to the employees of SIL after the payment has been received from India but the salaries are paid as if such expats were their own employees and then a debit note in respect of such salaries is raised by SIL India. Basing on this he argues that the expatriate employees are in fact the employees of the Korean entity and the beneficiary of the payments from SIL is the Korean entity. 25. Ld. DR further drew our attention to Point No. 9 of the letter of appointment of Mr K W Cho, wherein it is stated that, - your services may be utilized in any of the offices of the branches of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in India and is confirming to all the rules and regulations that govern the operations of a cooperate body, filing its returns of income and paying taxes by reporting the international transactions under Transfer Pricing Regulations, it cannot be said that the SIEL which is subsidiary company is a PE and rejected the findings of the AO on that aspect. 29. So also the Ld. DRP by paragraph no. 5.4.4.4 rejected the contention of the AO that SIEL may be treated as a dependent agent for the purpose of Article 5. Ld. DRP also rejected the view of the AO that SIEL is a place of management for south east operations and held that no PE of the assessee exists under Article 5(2)(a) of the treaty with regard to south east operations. 30. Vide paragraph no. 5.4.4.6, Ld. DRP rejected the suggestion of the Ld. AO that SIEL can be considered as a service PE of the assessee. Lastly Ld. DRP held that the SIEL had nothing to do with the provision for royalty and fee for technical services. 31. Having rejected all the grounds pleaded by the AO, Ld. DRP reached a conclusion that SIEL be treated as a deemed fixed place PE of the assessee, and the relevant observation is to the effect that,- Although t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of the entire matter including the statements of the expatriate employees, extracted supra, we are of the considered opinion that the statements show that such information exchange relates to the models/designs to the liking of the Indian consumers, plans and strategies relating to the sale of the products, detailed stock/logistical status, the market strategies both the mid and long terms etc. 33. As rightly argued by the Ld. AR that none of the statement would go to show that the any activity of the global business management (GBM) has ever been conducted in India or that the market survey that is conducted in India, as spoken by the expatriate employees has nothing to do with the business of the Indian subsidiary and it is solely for the benefit of the assessee. All the activities that are spoken by the expatriate employees related to the specificity of the products, stock verification, they designs according to the preferences of the Indian consumers, the market strategies to be adopted etc are clearly within the ambit of the business of the Indian subsidiary. Such a communication would primarily benefit the Indian subsidiary, and would help the assessee in its GBM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in India is taken by the assessee, we find it difficult to agree with the authorities below that through the expatriate employees the assessee has been conducting the business of assessee in India. Further, except stating that 10% of the remuneration of these employees has to be assumed as the income of the assessee, absolutely there is no evidence that is placed on record by the assessing officer to show that by way of business through these expatriate and seconded employees, the assessee derived any business income in India. 38. For these reasons, we are of the considered opinion that there is neither any business conducted by the assessee in India through the expatriated employees nor any income is derived by them though the activities of the employees. Consequently, we hold that there is no fixed place PE of the assessee constituted through the expatriated employees. Issue is, therefore, answered in favour of the assessee. ADDITION OF 10% ESTIMATED INCOME ON THE TOTAL REMUNERATION COST OF EXPATRIATE EMPLOYEES SECONDED TO SIEL IN INDIA, 40. Ld. AO, in the assessment order, proceeded to attribute income in respect of such permanent establishment as per Article 7 of the Indo South ..... X X X X Extracts X X X X X X X X Extracts X X X X
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