TaxTMI 
TaxTMI 
2015 (12) TMI 904
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....ered in asessee's favour. Over ruling the objection posed it was deemed appropriate to afford an opportunity to the Revenue to consider the claim of the assessee and the hearing was adjourned to the next date. 2. In the said background, the appeal came up for hearing on the next date. It was a common stand of the parties before the Bench that since the facts, circumstances and the issues in both the appeals remained identical thus arguments advanced in 2004-05 assessment year would address the grounds raised in 2009-10 assessment year also. The only difference in 2004-05 assessment year it has been stated is that in the said year, the Revenue has also challenged the re-opening of the assessment quashed by the CIT(A) which issue is not under challenge in 2009-10 assessment year. In the above-stated position the appeals were heard. 3. Considering the arguments advanced on behalf of the assessee, the Ld. CIT DR placed reliance upon the assessment orders. Addressing the orders of the Tribunal available on record in assessee's case on merits it was submitted that the issue is being kept alive as the claim has not been given up by the Revenue. However, no distinguishing fact or positio....
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....e the ITAT has erred in inferring that the representatives of the assessee in India do not constitute its Dependant Agent PE under Article 5(4)/5(5) of the Indo-US treaty ignoring the facts marshaled by the AO to show that the agents are not acting in the ordinary course of their business or independent both legally and economically when working for the assessee and, cannot handle the work of cross-border money transfers without the active and constant support of assessee. 8. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in not attributing any profits against the activities being carried out by the assessee through its PE in India. 9. The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal." 4.1. Addressing the same it was submitted that Ground No.1 is general in nature. Alongwith the residuary Ground No.9 it was submitted that these grounds would not require any adjudication. 4.2. Ground No.2, it was submitted assails the re-opening quashed by the CIT(A) which is questioned by the Revenue. Referring to the said ground it was submitted that in all fairness, it cannot be ar....
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....d 01.01.2010 for 2002-03; 2003-04 and 2005-06 assessment years. 5.1. Inviting attention to pages 7 to 9 of the assessment order it was submitted that the assessee's claim that the Representatives of the assessee in India did not constitute a PE of the assessee was supported by the findings of the Tribunal which had been followed by the CIT(A) in 2002-03; 2003-04 and 2005-06 assessment years. 5.2. Referring to pages 10-12 of the assessment order, it was submitted that the assessee's claim that the software provided to the representatives did not constitute PE was also supported by the finding in the aforesaid orders of the ITAT and the CIT(A). Despite the precedents available it was submitted that the claim was rejected by the AO. 5.3. Inviting attention to page 20-21 of the assessment order it was submitted that ignoring all these orders the AO wrongly concluded on the very same facts and law that the assessee had a PE in India. 5.4. Addressing page 22 of the assessment order it was submitted that the AO concluded that in terms of section 9(1) of the Income tax Act, 1961 the income accruing or arising on account of its business connection in India is liable to tax as per Income....
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....d discussed thread bare and it is fully covered in assessee's favour. 6. Considering the submissions the Ld. CIT DR relied upon the assessment order re-iterating his earlier position that the department is keeping the issue alive. No contrary fact or submission canvassing a contrary view was brought to the notice of the Bench. 7. We have heard the rival submissions and perused the material available on record. Considering the grievance posed by the Revenue in Ground No.2, we find on consideration of the facts on record which are not in dispute and the judicial precedent we find that in the absence of any contrary fact or decision on the point at issue the detailed and well-reasoned finding of the CIT(A) under challenge cannot be faulted with. In the absence of any contrary fact or position of law, we uphold the following finding thereby dismissing Ground No.2 of the Revenue. The relevant finding upheld by us is extracted hereunder from the impugned order:- 4.2 Finding: 4.2.1. "I have carefully gone through submissions of the appellant and other material on record. I have gone through various case laws relied upon by the appellant. The undisputed facts are that the appellant ....
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.... limitation. Thus, from the facts itself, it is crystal clear that though the present proceedings were initiated by the AO within the prescribed period of limitation yet it is clear that the same were initiated only to circumvent the earlier order of the Tribunal vide which the assessment dt. 14th February. 2003 was held to be timebarred. Thus, the AO cannot be allowed to initiate fresh proceedings on identical facts as the first assessment proceedings had failed to result in a valid assessment due to lapse on the part of the IT authority. " 4.2.3. Further, notice u/s 148 has been issued beyond four years from end of the relevant assessment year and original assessment has been completed u/s 143(3). Therefore, 1st proviso to section 147 is applicable. There is pre-requirement of failure on part of the appellant to disclose fully and truly all material facts necessary for assessment. In present case, the appellant has furnished material facts in notes attached to the return. The appellant has taken a reasoned view that there is no PE in India and hence no income is taxable in India. This view of the appellant has been upheld by CIT(A) and ITAT in preceding and succeeding AY's....
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.... said appointments were for an initial period of five years which was extendable for any number of times for periods of one year at a time. In terms of agreement, the money so transferred by it was required to be first paid out by those agents and thereafter he would be reimbursed the same together with the commission due to him, which was called the base commission in the agreement. The agents were given the power to appoint sub-agents at their own costs but their services could be terminated by the assessee if it was found that the appointed sub-agent was acting in a manner prejudicial to its interest. Pursuant thereto, after obtaining the RBI's requisite permission, the assessee set up its Liaison Office (LO) with its own stipulation that it would not represent any party other than the assessee. Thereafter, in accordance with the legal requirements and the arrangements with the agents, the assessee kept the RBI posted with the activities of its LO and also started remitting monies to India followed by commission payable thereon as remuneration. However, the assessee did not file its return on the ground that it was not taxable in India but ultimately filed the same declaring nil....
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....en it has to be given effect in preference to the provisions of the Act. Thus, in the instant case, one would need to first examine whether the income-tax authorities were right in applying section 9 to hold that there was a business connection. Only if it was found that there was a business connection, one would need to examine the DTAA with USA to find out if the case could be brought under those provisions as claimed by the assessee. [Para 19] The term 'business connection' is so broad in scope according to the judgments that it was not possible to hold in the instant case that there was no business connection. Explanation 2inserted below section 9(1) by the Finance Act, 2003 with effect from 1-4-2004 expands the scope of the expression. Though the Explanation did not apply to the year under consideration, even applying the tests laid down in decided cases, the issue had to be resolved against the assessee. The business of the assessee was to transfer monies across countries. There was, thus, a receiving aspect and a paying aspect to the transaction. They could not be segregated; to do so would be artificial. There was a seamless integration between the two. The transaction, ....
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....several places as a PE of the foreign enterprise. Neither the Assessing Officer nor the Commissioner (Appeals) had pinpointed which particular description of the PE in article 5.2 would apply to the assessee. The general definition of the PE in the first part of the article postulates (a) the existence of a fixed place of business in India and (b) that the business of the foreign enterprise shall be carried on (wholly or partly) through the said place. The assessee, admittedly did not have an outlet of its own in India. That way, there was no fixed place of business in India. A PE should project the foreign enterprise in India. The assessee had appointed different agents in India. Those agents were the Department of Posts of the Government of India, commercial banks, non-banking financial companies and tour operators. Those agents had their own or hired premises from which they operated. All that they had to show that they were agents of the assessee, was a display board which would show that they were the agents of the assessee. That could not by any stretch of imagination, amounted to projection of the assessee in India. It could not be postulated that the post offices of the dep....
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....re no activities which the LO had undertaken, which did not conform to the list of activities given in the annexure. There was no allegation of any violation of the conditions of approval. [Para 24] On the said facts, the LO could not be considered to be the fixed place PE of the assessee as it carried out activities which were of a preparatory or auxiliary character. It had not carried on any trading activity for the assessee in India. It had only a small number of executives and a support staff. The LO had also filed status reports to the RBI listing out the activities which it actually carried on during the years. None of the activities could be described as anything other than of preparatory or auxiliary character. Therefore, the LO could not be considered to be the PE of the assessee in India. [Para 25]" 7.5. The Co-ordinate Bench it is further seen also considered the ramification of the facts whether the limited usage of the software "Voyager" permitted by the assessee to its agents would constitute a PE in India and considering the facts and the Agreements answered it on facts in favour of the assessee in the following manner:- "As regards the question as to whether the....
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.... or almost wholly on behalf of the foreign enterprise for whom he is acting as agent and (3) the transactions between the foreign enterprise and the agent should be at arm's length. [Para 30] Any activity which is being systematically and continuously carried on with the object of earning profits is a business activity. That way, the activity engaged in by the agents of paying the monies to the beneficiaries or claimants in India, after satisfying themselves about their identity and after accessing the MTCN number to verify the genuineness of the claim, amounts to carrying on of the business of money transfer. The agreement of agency was initially for a period of 5 years and to be renewed for successive periods of one year each. The agents could appoint sub-agents for carrying out the activity. They had to maintain records and measure up to the standards set by the assessee. They had received training from the assessee in the use of the software and in the communication systems. All those were activities which were carried on systematically and continuously with a set purpose and, hence, amounted to business. [Para 31] Having regard to the variegated services provided by the ....
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....at the rates of compensation were higher in other cases so as to indicate that the agents were discriminated against. The higher rate of compensation in the case of the Department of Posts was probably because its reach was much wider compared to the commercial banks, NBFCs or tour operators. The terms of appointment of sub-agents were uniform in all cases. Thus, there seemed to be no basis for the charge that the compensation paid was not adequate for the services rendered by the agents. There was no finding contrary to the claim made by the assessee that the rates of compensation were uniform throughout the world. Therefore, there was no merit in the claim that the transactions between the assessee and the agents were not under arm's length. [Para 35] The result was that (1) the agents were acting in the ordinary course of their business; (2) their activities were not devoted wholly or almost wholly to the foreign enterprise and (3) the transactions were under arm's length. Therefore, the agents were independent agents under article 5.5 of the treaty. [Para 36]" 7.9. Thereafter proceeding to consider the consequences of the said conclusion which it was held did not automatic....
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....ss of the foreign enterprise. The fact that the agents concluded in India the commitment of the assessee made abroad could not be considered as an authority to conclude contracts. The contract was between the remitter abroad and the assessee. It was entered into outside India. The agents were not party thereto. The agents merely carried out the concluding step in the arrangement embodied in the contract. In other words, the assessee undertook, outside India to transfer the money to India. It was only the payment part of the undertaking that was executed by the agents in India. The contract was already concluded outside India. The agent had no say over the contract. He had to merely execute the payment part, after satisfying himself as to the genuineness of the transaction and the identity of the beneficiary in India. By executing the last leg of the contract which had already been concluded, he was not concluding the contract for the assessee, much less habitually. The appointment of sub-agents was merely to facilitate the work of the agent. That apart, what was considered to be a 'duty' could not be considered to be an 'authority'. By making payment to the beneficiary, the agent i....
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....s Pvt. Ltd. [1992] 198 ITR 297 (SC) followed the leading order of the ITAT in assessee's own case. For ready-reference, the relevant paras are reproduced hereunder:- 6.2. "The Id. DR contended in his written submissions that the aforesaid decision of the ITAT in the assessee's own case for the AY 2001-02 was not applicable in the years under consideration on the issue of PE in view of decision of the ITAT in Amadeus Global Travel Distribution SA (supra). We are not inclined to accept this contention of the Id. DR. There is nothing to suggest that the facts and circumstances in the cited decision are similar to the facts and circumstances in the case before us. In the Amadeus case, the issue was as to whether Computer hardware/software provided by the assessee to travel agents in India for booking tickets constituted PE of the assessee in India. In that case, the passenger in India through the travel agent in India, who used the hardware and software system CRS supplied by the assessee for booking tickets in India, approached him for booking ticket. By virtue-of the software and communication links the computer at the desk of the travel agent became the interface of the mainfr....
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....o contract with the travel agents in India on behalf of the assessee. Accordingly, the ITAT concluded that the assessee had a PE in India. But such are not the facts and circumstances in the instant case the assessee did not exercise any control over the computer systems which were independently owned by agents and were not provided by the assessee. The activities of the agents were not wholly or almost wholly devoted on behalf of the assessee and that the agents were not 'dependent agents' of the assessee nor had they any authority to conclude contracts in India on behalf of Western Union .In the instant case before us, the contract is between the remitter abroad and the assessee and is entered into outside India. The agents are not party thereto. The agents merely carried out the concluding step in the arrangement embodied in the contract. In other words, the assessee undertakes outside India to transfer the money to India and it is only the payment part of the undertaking that is executed by the agents in India. The contract was already concluded outside India, the ITAT concluded in the AY 2001"-02. In view of the foregoing, especially when the Revenue have not even atte....