2023 (8) TMI 1182 - AT - Income Tax

Assessee's Permanent Establishment Ruling: Profit Attribution, Agent Authority, Service PE

Concentrix CVG Customer Management Group Inc. Versus ACIT (Intt. Taxation) 1 (2) (1), New Delhi. And (Vice-Versa)

The Tribunal determined that the assessee had a fixed place permanent establishment in India, leading to profit attribution. However, it ruled that there ... Determination of fixed place of permanent establishment of assessee in India - HELD THAT:- As decided in assessee own case [2013 (11) TMI 564 - ITAT DELHI] employees of the assessee frequently visited the premises of CIS to provide supervision, direction and control over the operations of CIS and such employees had a fixed place of business at their disposal. CIS was practically the projection of assessee’s business in India and carried out its business under the control and guidance of the assessee and without assuming any significant risk in relation to such functions. Besides assessee has also provided certain hardware and software assets on free of cost basis to CIS. Thus, the findings of the CIT(A) that assessee has a fixed place PE in India under Article 5(1) of the DTAA is upheld. The ground is decided against the assessee and the order of Ld. CIT(A) in holding that assessee has a fixed place PE in India is upheld. Dependent Agent PE in India - HELD THAT:- This issue is decided in favour of assessee in A.Y. 2006-07 [2013 (11) TMI 564 - ITAT DELHI] as held even assuming, CIS is not an agent of CMC, it does not have any authority to conclude contracts or secure orders on behalf of CMC and hence CMC does not have a Dependent Agent PE in India. Taxability of link charges/IPLC as royalty - HELD THAT:- As decided in assessee own case for A.Y. 2006-07 [2013 (11) TMI 564 - ITAT DELHI] there is no transfer of the right to use, either to the assessee or to CIS. The assessee has merely procured a service and provided the same to CIS, no part of equipment was leased out to CIS. Even otherwise, the payment is in the nature of reimbursement of expenses and accordingly not taxable in the hands of the assessee. Therefore, it is held, that the said payments do not constitute Royalty under the provisions of Article 12 of the tax treaty and the ground is allowed in favour of assessee. Issues involved:The judgment involves issues related to determination of fixed place of permanent establishment, dependent agent permanent establishment, service permanent establishment, profit attribution methodology to the permanent establishment, and taxability of link charges as royalty.Fixed place of permanent establishment:The issue arises from the determination of the fixed place of permanent establishment of the assessee in India. The Tribunal considered past decisions and upheld that the assessee had a fixed place permanent establishment in India, leading to profit attribution in the hands of the assessee.Dependent agent permanent establishment:The issue pertains to the dependent agent permanent establishment in India. The Tribunal concluded that the agent did not have the authority to conclude contracts or secure orders on behalf of the assessee, hence, there was no dependent agent permanent establishment in India.Service permanent establishment:The question was whether there was a service permanent establishment of the assessee in India. The Tribunal found that there was no service permanent establishment in India based on previous rulings and the nature of services provided by the assessee.Profit attribution methodology to the permanent establishment:The issue involved the methodology for attributing profits to the permanent establishment in India. The Tribunal directed the Transfer Pricing Officer to adopt the same methodology as per past decisions, allowing the ground for statistical purposes.Taxability of link charges as royalty:The issue focused on the taxability of link charges as royalty. The Tribunal held that the payments did not constitute royalty under the tax treaty provisions, as they were considered reimbursement of expenses, thus deciding the issue in favor of the assessee.Separate Judgment by Judges:The judgment was delivered by Shri Anubhav Sharma, Judicial Member, and Shri G.S. Pannu, President.