TaxTMI 
TaxTMI 
2014 (4) TMI 529
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....) or a 'Permanent Establishment' ('PE') in India under various provisions of Article 5 including Articles 5(1), 5(2), 5(5) and 5(6) of the India-Germany Tax Treaty ('Tax Treaty'). 1.2 The AO and the DRP failed to appreciate that the Appellant operates entirely from outside India, has no fixed place of business in India as envisaged under Section 9(1 )(i) of the Act or Article 5(1) or 5(2) of the Tax Treaty directly or in the form its Indian Subsidiary and further Article 5(5) and 5(6) of the Tax Treaty do not apply to its case as they relate only to local Indian agents engaged in buying and selling goods in India on behalf of their Overseas Principal which is not the fact in the case of the Appellant and the Appellant claims relief accordingly. Ground No. 2 - No attribution of income deemed to accrue / arise in India possible to the alleged PE of the Appellant in India 2.1 Without prejudice to the above and on the facts and in the circumstances of the case, the AO erred in proposing and the DRP further erred in not interfering with the AO's conclusion that the Appellant's I....
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....actual tax deducted or collected at source and the AO be directed to delete the interest charged under Section 234B of the Act. Ground No. 5 - Lack of adequate opportunity 5.1 Without prejudice to the above and on the facts and in the circumstances of the case and in law, the AO erred in not granting sufficient opportunity to the Appellant before passing the order under Section 144C(1) of the Act and the DRP further erred in not considering the objections / submissions of the appellant while giving directions under Section 144C(5) of the Act and the said orders / directions being passed in violation of the principles of natural justice be kindly quashed or set aside. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing." 2. At the outset of hearing, the learned Authorized Representative did not press grounds of appeal Nos.3 and 5, so they are being dismissed as not pressed. Regarding grounds of appeal No.1, the assessee has raised as u....
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....rder of the CIT(A) was not accepted by the Revenue. There is no DRP for the period relevant to the assessment year 2003-04. Therefore, the order then challenged was passed by toe CIT (A) and the said order was confirmed by the Tribunal upholding the non-existence of PE. In this regard, we find it relevant to reproduce paras 39 to 41.1 of the Tribunal's order as under: Is it necessary that the FE can only be said to exist, under the basic rule, when core business activity is carried out by the PE? 39. We quite agree with the stand of the Revenue authorities to the extent that as long as an economic activity is carried out in the fixed place of business available to foreign enterprise, whether such an activity is a core activity or a peripheral activity, it has to be concluded that the foreign enterprise has a PE in the source jurisdiction. Model Convention Commentary states that the activity carried out by the PE may not be a productive character, though the commentary does recognize that it could perhaps be argued that in the general definition, some mention should also be made to the other characteristic of the PE, namely tha....
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....ective, and bearing in mind the fact that by no stretch of logic it could be held that any significant or critical business activity by the EPCOS AG was carried out in India, even if there is a PE in India, that will be wholly academic and will not lead to any taxability of income. Not only the work done in India, if at all, did not constitute significant or ''critical business activity, the assessee company did not earn any revenues as a result of the activities so carried out by the employees of Indian subsidiaries and, therefore, no part of the revenues actually generated by the assessee company could be said to be attributable to the PE. The question of existence of PE of the assessee company, in these circumstances, has no impact of taxability of the assessee company. 41. The requirements of exclusion clause under art. 15(5) also highlight this aspect of profit attribution. While we we're examining interplay between art. 12 and art. 7, we had noticed that this exclusion clause has twin requirements of (a) existence of the PE through which business is carried out; and of (b) existence of effective connection between such a PE and the rights....
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....to follow the jurisdictional decision of the Tribunal in assessee's own case for the AY 2003-04. The same was not followed and surprisingly, they have not even distinguished. They simply ignored stating that the said order- is not accepted by the Revenue and the matter is pending before the Hon'ble High Court of Bombay. Considering the above, we are of the considered opinion that there is no case for sending the files to the Revenue. In fact it is the case of the assessee that the facts are identical vis-a-vis the facts of the assessment year 2003-04. In these circumstances, we are of the opinion that the decision comprised in para 41.2 is equally relevant for the .year under consideration in respect of Ground No. 1. Accordingly, Ground No. 1 raised by the assessee is allowed." 2.2 Nothing contrary was brought to our knowledge on behalf of revenue. Facts being similar, so following the same reasoning, we are not inclined to concur with the finding of DRP. We are of the view that the assessee did not have any PE in India, much less a PE to which subject royalties and fees for technical services could be attributed. In terms of India-German DTAA, India does not have right to....
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...., 1961. 49. There is no dispute on the basic facts. The amounts received by the assessee company on this account meet the definition of 'royalties' and of fees for technical services' under S.44D which, in turn, refers to Expln.2 to s. 9(l)(vi) respectively. Accordingly, the limitation on deductions, as set out in 5.'MD, does apply on the facts of the case, and entire amount is to be taxable on gross basis. However, in view of the provisions of s.115A, the rate of tax on such income will indeed be 20 per cent. 50. In view of the above discussions, the taxability of amounts received by the assessee company on account of 'royalties' and 'fees for technical services', on the facts of this case and under the Indian IT Act, will be @ 20 per cent on gross basis, That aspect of the matter is, however, academic since we have already held that, on the facts of this case, source country does not have the right to tax income in question, except under art. 12(2) of the tax treaty and at a rate not exceeding 10 per cent. The assessee has already accepted tax liability to that extent, and there is no dispute so f....