ITAT Delhi Rectifies Order, Acknowledges Oversight on Treaty Benefits and Profit Attribution; Reduces Attribution to 15.

The ITAT Delhi allowed the assessee's applications for rectification of an order dated January 10, 2023, in ITA Nos. 1566 & 1567/Del/2022. The Tribunal acknowledged the oversight in not deciding ground no. 5, which concerned the denial of treaty benefits and profit attribution to a PE in India. The Tribunal ruled in favor of the assessee, noting insufficient evidence for the conduit entity claim and aligning with historical decisions to reduce profit attribution to 15%. Additionally, a typographical error was corrected. The order was pronounced on October 6, 2023.

---

---

The Appellate Tribunal ITAT Delhi, consisting of President Shri G. S. Pannu and Vice President Shri Saktijit Dey, addressed applications filed by the assessee for rectification of an order dated January 10, 2023, in ITA Nos. 1566 & 1567/Del/2022. The assessee's Authorized Representative, Sh. S.K. Aggarwal, argued that ground no. 5 was left undecided in the original order and a typographical error in paragraph 13 misidentified 'ground no. 7' as 'ground no. 6'. The Departmental Representative, Sh. Sanjay Kumar, did not contest these claims.

The Tribunal acknowledged the oversight regarding ground no. 5, which involved the Assessing Officer's denial of treaty benefits to the assessee, alleging it as a conduit entity and attributing 25% of the turnover as profit to a Permanent Establishment (PE) in India. Historical decisions by both the Tribunal and the Hon'ble Jurisdictional High Court had recognized the existence of a PE but reduced the profit attribution to 15% of gross revenue less expenses.

The Dispute Resolution Panel (DRP) had directed verification of whether the department appealed against previous Tribunal and High Court decisions. The Tribunal noted that the conduit entity allegation lacked substantial evidence and was irrelevant to determining the taxability of the assessee's income in India. Consequently, ground no. 5 was decided in favor of the assessee.

The Tribunal also corrected the typographical error in paragraph 13, modifying 'ground no. 6' to 'ground no. 7'. The miscellaneous applications were allowed, and the order was pronounced in open court on October 6, 2023.

---