TaxTMI 
TaxTMI 
2012 (10) TMI 128
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....by the A.O. in pursuance to the direction of the Dispute Resolution Panel (DRP) u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act). Since the facts are identical and the issue involved is common, both these appeals are disposed by this common order for the sake of convenience. 2. Briefly stated facts of the case extracted from ITA No. 2760/Mum/2009 for A.Y. 2006-07 are that the assessee is a non-resident company and deals in cut and polished diamonds and diamond studded jewellery. In this case a survey u/s 133A of the Act was carried out on 20-1-2006 by ITO (IT) (OSD)-III, Mumbai. The A.O. on the basis of the finding recorded by the survey party appearing in para 2.1 and 2.2 of the assessment order issued a show cause notic....
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....14,73,15,724/- and after deducting expenses pertaining to PE Rs. 2,22,32,983/- determined the assessee's income at Rs. 12,50,82,741/- vide assessment order passed dtd. 10- 12-2008 u/s 143(3) of the Act. 3. On appeal the ld. CIT(A) following the appellate orders for the assessment years 2003-04, 2004-05 and 2005-06 while distinguishing the decision relied on by the A.O. of the Authority for Advance Rulings in the case of UAE Exchange Centre LLC (In Re) 268 ITR 9 held that the appellant's office in India cannot be considered as a PE in India and no profits can be attributed to the PE and accordingly deleted the addition made by the A.O. 4. Being aggrieved by the order of the ld. CIT(A) the Revenue is in appeal before us taking the follo....
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....e Tribunal in detail in assessee's own case for the assessment years 1999-2000 to 2003-04 (supra). It has been held by the Tribunal vide para 3.8 and 3.9 of the order as under:- "3.8 We have heard the rival contentions and perused the relevant record. Undisputedly, the L.O. of the assessee was performing the activities of assorting of diamonds, checking of the right quality of diamonds and price negotiation as per the instructions and specification of the assessee. These activities of the LO is only part of the purchasing process of the diamonds and did not bring any physical or qualitative change in the goods purchased. Even otherwise, the function of the LO as mentioned above are prior to purchase of the diamonds and not subsequent to ....
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....rived by the resident person from that business and include such amount in the total income of the resident person. (6) ......... ` (7) EXTENT OF THE PROFIT ASSESSABLE UNDER SECTION 9 - Section 9 does not seek to bring into the tax net the profits of a non-resident which cannot reasonably be attributed to operations carried out in India. Even if there be a business connection in India, the whole of the profit accruing or arising from the business connection is not deemed to accrue or arise in India. It is only that portion of the profit which can reasonably be attributed to the operations of the business carried out in India, which is liable to income-tax. To constitute a business connection, some continuity of relationship, bet....
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....the case of a non-resident, no income shall be deemed to accrue or arise in India through or from operations which are confined to purchase of goods in India for the purpose of export. Accordingly, the mere existence of an agency established by a non-resident in India will not be sufficient to make the non-resident liable to tax, if the sole function of the agency is to purchase goods for export. This legal position has also been explained in para 3(5) of the Boards Public Circular cited above." 3.9 In view of the above discussions and facts and circumstances of the case as well as the decisions cited supra, we hold that no income arises or accrued in India to the assessee by virtue of the purchases made by the assessee for export." ....