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Issues: (i) whether the assessee had an agency permanent establishment in India and whether offshore supply of spare parts and offshore repair services were taxable in India; (ii) what portion of the income was attributable to the India operations; (iii) whether interest under section 234B of the Income-tax Act, 1961 was leviable.
Issue (i): whether the assessee had an agency permanent establishment in India and whether offshore supply of spare parts and offshore repair services were taxable in India.
Analysis: The appeal followed an earlier Tribunal decision in the group matter, and the assessee accepted that the controversy on permanent establishment stood covered. The Tribunal applied the same reasoning and held that the assessee had an agency permanent establishment in India. On that basis, the receipts from offshore supply and offshore repair services were treated as taxable under the domestic law and the treaty framework relied upon in the order.
Conclusion: Decided against the assessee.
Issue (ii): what portion of the income was attributable to the India operations.
Analysis: The Tribunal rejected the Revenue's approach of attributing 35% of the profits and followed its earlier view in the group cases. It held that the appropriate attribution for the year was 2.6% of the sales made in India.
Conclusion: Decided partly in favour of the assessee by restricting attribution to 2.6%.
Issue (iii): whether interest under section 234B of the Income-tax Act, 1961 was leviable.
Analysis: The Tribunal followed the binding decision of the jurisdictional High Court in the assessee's own case for earlier years and accepted the assessee's challenge to levy of interest under section 234B.
Conclusion: Decided in favour of the assessee.
Final Conclusion: The appeal succeeded only in part. The Tribunal sustained the finding of taxable presence in India, restricted the attribution of income to 2.6%, and deleted the interest levied under section 234B.
Ratio Decidendi: Where an earlier binding/group decision covers the existence of an agency permanent establishment, the same approach governs offshore receipts and the Tribunal may restrict attribution to the percentage it has already accepted on the same facts, while interest cannot be levied where the jurisdictional High Court has already settled the issue against such levy.
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