2022 (11) TMI 1346 - HC - Income Tax

Court dismisses appeal on PE status in India, finding no legal question.

The Commissioner of Income Tax – International Taxation-2 Versus Mitsui & Company Ltd.

The Court dismissed the appeal as it found no substantial question of law for consideration. It was established in a previous case that the Liaison Office ... Income taxable in India - PE in India - Liaison Office in India - whether no income is liable to attributable in India even MIPL is taken as Dependent Agency PE to the assessee in India? - HELD THAT:- Admittedly, the learned predecessor Division Bench of this Court in the case of the respondent-assessee itself [2018 (3) TMI 434 - DELHI HIGH COURT] after considering the survey report held that the Liaison office of the assessee did not constitute a Permanent Establishment (for short ‘PE’). Consequently, the first two substantial questions of law do not arise for consideration in the present appeal. Dependent agency PE to the assessee liable to tax in India - As this Court finds that both CIT(A) and ITAT have given concurrent findings of fact that MIPL is not performing additional function and in absence of material, it cannot be taken as dependent agency PE to the assessee liable to tax in India. Since the said finding has not been challenged on the ground of perversity, even the third substantial question of law does not arise for consideration. Issues:1. Whether the Liaison Office constitutes a Permanent Establishment (PE) liable to tax in IndiaRs.2. Whether the ITAT/CIT(A) erred in holding that the Liaison office does not constitute a PERs.3. Whether any income is liable to be attributed in India if MIPL is considered a Dependent Agency PE to the assessee in IndiaRs.Analysis:Issue 1:The appellant-Revenue raised concerns about whether the Liaison Office of the assessee constituted a Permanent Establishment (PE) liable to tax in India. However, the Division Bench of the Court, in a previous case involving the same respondent-assessee, had already determined that the Liaison office did not constitute a PE. Therefore, the first two substantial questions of law raised by the appellant were deemed irrelevant in the present appeal.Issue 2:The second substantial question revolved around whether the ITAT/CIT(A) erred in holding that the Liaison office did not constitute a PE. The Court noted that since the previous Division Bench had already established that the Liaison office was not a PE, this question did not require consideration in the current appeal.Issue 3:Regarding the third substantial question about the attribution of income in India if MIPL was considered a Dependent Agency PE to the assessee, both the CIT(A) and ITAT had concurred that MIPL was not performing additional functions to be deemed a dependent agency PE. Since this finding was not challenged on grounds of perversity, the Court concluded that even the third substantial question of law did not warrant consideration in the appeal.In conclusion, the Court found that no substantial question of law arose for consideration in the present appeal, and therefore, the appeal was dismissed. The judgment highlighted the importance of previous determinations regarding the PE status of the Liaison office and the factual findings regarding the attributability of income in India.