TaxTMI 
TaxTMI 
2012 (6) TMI 479
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..... CIT(A) has erred in holding that M/s. Daimler Chrysler India Ltd. (DCIL) does not constitute a permanent establishment of the assessee under Article 5(2) of the DTAA between India and Germany with regard to sale of completely Knowcked Down (CKD) Units, especially in the light of Clauses 1, 5, & 6 of General Agency Agreement entered into between the assessee and DCIL." 3. The brief facts are that the assessee M/s. Daimler AG (formerly known as Daimler Chrysler AG) is a company incorporated under the laws of Germany and is a tax resident of Germany. The assessee is one of the major players in the automotive industry worldwide. The assessee filed its return of income on 28/11/1997 offering to tax an income of Rs. 2,15,285/-. This included royalty income earned from Bajaj Tempo Limited (BTL). The same was offered to tax on a gross basis at 30% under section 115A of the IT Act. In 1994, the assessee entered into a joint venture with TELCO and set up Mercedes-Benz India Private Limited (MBIL) (formerly known as Daimler Chryser India Private Limited) for the manufacture/ assembly and sale of cars in India. At the time of formation of the joint venture, the assessee held 51% of the sh....
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....ear 2001-02 in ITA No. 9211/M/04 held as follows: "11. After hearing both the sides, we find force in assessee's arguments. The Assessee merely sells the raw materials/CKD units to DCIL. It is DCIL which carries out further activity of assembling the same and selling the finished cars. There are no further activities carried out by Appellant in India in India in this connection. This transaction ends with the Appellant selling the raw materials/CKD. No income from such sale accrues or arises to the Assessee in India. In other words no part of such profits accrue from or can be attributed to any activities of the assessee or his agent in India. The Apex Court in the case of CIT v. Hyundai Industries Ltd. (29 1 ITR 482) has held that in the case of an agreement with a South Korean Company for fabrication and installation of Oil exploration platform, the PE attributable to installation and commissioning came into existence only after the supply of the equipment. Therefore, profits from supply of the platform did not accrue in India. Similarly in the case of Ishikawajima Harima Heavy Ind. Ltd v. DIT (288 ITR 408), the Apex court held that profit will not accrue in India in respect o....
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....roach DCIL or their agents evidencing to buy CBUs from the Appellant DCIL passes on communication both sides. Negotiations of price, specifications etc were concluded by the Appellant. The sale to the customer was on principle to principle basis. The risk of diminishing in value or damages to the cars is to the account of customer's right from the port of shipment at the manufacturing end. The cars were cleared through customs in India for and on behalf of the ultimate customers. Thus, DCIL had no role to play from the sale or in any activity in promoting the sale to the Assessee directly to the customers in India. They are only collection of information and activities of preparatory or auxiliary in nature. The prices offered to the clients are as per the list price notified by the Assessee. DCIL has no authority to conclude any deal. Thus the mere acting as post office between the Assessee and the client will not render DCIL as a dependent agent. DCIL cannot be considered as habitually procuring orders for the Assessee. In fact DCIL themselves are manufacturing and selling the cars aid procurement of orders for direct shipment of cars by the assessee would in fact he contrary to a....
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....goods/merchandise belonging to the foreign company and also carries on a variety of activities besides promoting examinations of the foreign company, the applicant enjoys an independent status. Accordingly, the applicant cannot be deemed to be a PE of the foreign company in India. Similarly, in case of Specialty Magazines P Ltd (274 ITR 310) (Refer Pg 633 & 644 of Paper Book Volume II), the AAR ruled that since 22% - 25% of the income of the applicant is derived from. other clients, it cannot be said that its activities are carried out wholly or almost wholly for the foreign company. Thus the applicant, being an independent agent is not covered by the definition of PE in article 5 of the DTAA" 32. From the above it can be seen that merely acting for a non resident principal wou1d not by itself render an agent to be considered as PE for the purpose of allocating profits taxable in the hands of the principal. There should be some definite activity of the PE to which profits can he attributed. Unless it is so established, merely calling a person as agent acting on behalf of foreign non-resident would not by itself render him to be considered as an agency PE and pro tanto part of....
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....ablishment of the assessee under Article 5(2) of the DTAA between India and Germany with regard to sale of completely Knowcked Down (CKD) Units, especially in the light of Clauses 1,5, & 6 of General Agency Agreement entered into between the assessee and DCIL." 12. Grounds of appeal raised by the revenue are identical to the grounds raised by the revenue in A.Y 1997-98, which we have already discussed while deciding ITA NO.6074/M/10. For the reasons stated therein these grounds of appeal are dismissed. 13. Ground No. 3 raised by the revenue reads a follows: "3. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in directing to delete the addition of EURO 1,00,000/- made on account of income in respect of rights of SAP system ignoring the facts that the actual addition is of EURO 30,000 only and EURO 70,000 has been offered on adhoc basis by the assessee itself." 14. Briefly the facts are that the assessee had been using the SAP-System application for recording its transactions pertaining to the AY 2000-01. However the assessee did not use this application anymore due to several up-dates. During the assessment proceedings the assessee contend....
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....here is any income which can be said to have accrued to the Appellant leave apart the question of estimating the income. 6.2.3 The following case lows cited by the Appellant also support its stand: - Seth Nathuram Munnalal v. Commissioner of Income-tax (1954) (025 ITR 0216) - Dhakeshwari Cotton Mills Ltd v. Commissioner of Income Tax (1954) (26 ITR 775) - Raj Mohan Saha v. Commissioner of Income Tax (1964) (52 ITR 231) (Ass) 6.2.4 Therefore, I hold that the addition of Euro 100,000 made by the AO is hereby directed to be deleted." 16. Aggrieved by the order of the CIT(A) revenue has raised Ground No.3 before the Tribunal. 17. We have heard the rival submissions. Admittedly confirmation filed by the assessee before the CIT(A) was not confronted to the AO. We are of the view that the AO should be afforded opportunity for examining the claim made by DCIPL before the CIT(A). We, therefore, set aside the order of the CIT(A) and remand the issue to the AO for fresh consideration in the light of the additional evidence filed before the CIT(A) by the assessee. We also make it clear that the assessee would be at liberty to establish its case by such other evidence as ma....
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....lating to A.Y. 2002-03. In this appeal revenue has challenged the order of CIT(A) whereby the CIT(A) cancelled the order of the AO imposing penalty on the assessee under section 271(1)(c) of the Act. The penalty was imposed on the assessee for the addition made in the course of assessment proceedings whereby the AO treated income from sale of CBU Cars by assessee in India as income chargeable to tax in India and that the assessee had a PE in India and, therefore, the said income is chargeable to tax in India. 22. On appeal by the assessee the CIT(A) found that the Tribunal had already confirmed order of the CIT(A) in ITA No. 6718/M/06 dated 31/3/2010, whereby the addition made by the AO was deleted. In view of the above the CIT(A) cancelled the order of the AO imposing penalty on the assessee. Aggrieved by the order of the CIT(A) the revenue has preferred the present appeal before the Tribunal. 23. We have heard the rival submissions. In our view since the addition in respect of which penalty was imposed by the AO has already been deleted by the Tribunal by confirming the order of CIT(A) in the quantum appeal, the very basis of imposing penalty on the assessee no longer survi....