TaxTMI 
TaxTMI 
2013 (1) TMI 870
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.... The return was filed declaring total income of Rs. 109,339,843/-. The A.O. observed that since profit earned by the assessee on sales made by the assessee to India is escaped assessment, hence, the A.O. after recording the reasons on 31-3-2011 has issued notice u/s 148 of the Act. In response, the assessee filed a letter along with return of income declaring the same total income i.e. Rs. 109,339,843/- and requested to provide reasons recorded for re-opening of the assessment. The A.O. issued noticed u/s 142(1) along with copy of reasons recorded for re-opening of the assessment and a detailed questionnaire. In reply, the assessee filed its objection regarding the reopening of the assessment. The A.O. after considering the same overruled the objection raised by the assessee. During the course of assessment proceeding the A.O. observed that the assessee has 50% shareholding with balance 50% being held by Indian Oil Corporation in Lubrizol India Pvt. Ltd. (LIL). LIL manufactures various products in India under License and Technology Transfer Agreement dtd. 1-4-2000. The assessee is being paid a consideration for provision of technical services and....
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....f assessee company in India and, therefore, it creates PE of assessee company in India, c.LIPL is involved in procurement of order and its responsibility and involvement continues upto the stage of sale as it is to be kept informed about all the developments related to sale, and d.LIPL has got full right and liabilities in respect of marketing and sales activities on behalf of the assessee. In the absence of further details available, the A.O. assumed the assessee's profit on sales made in India @ 5% which he worked at Rs. 121,974,712/- as against income shown by the assessee at Rs. 109,339,843/-.The assessee filed objection before the DRP. The DRP after relying on the decision in Aramex International Logistics Private Limited IN RE vs. Authority for Advance Rulings (Income Tax), New Delhi (2012) 251 CTR (AAR) 9 while agreeing with the views of the A.O. upheld the action of the A.O. Accordingly the A.O. completed the assessment at an income of Rs. 121,974,710/- vide order dtd. 27-09-2012 (supra). 3. Being aggrieved by the assessment order, the assessee is in appeal before us. 4. Ground No. 1 is against the assuming of jurisdiction u/s 147 of the Act. 5. At the time of....
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....Permanent Establishment (PE) in India. 9. At the time of hearing the ld. Counsel for the assessee submits that (a) the reassessment proceeding initiated only on the basis of finding of the assessment order for A.Y. 2006-07 (b) the assessment order for the current year is exactly the same as A.Y. 2006-07 (c) the A.O. did not follow the order of the Tribunal in assessee's own case (supra) for the reason that the Department has already preferred an appeal before the Hon'ble High Court (d) the DRP order is also similar to the A.Y. 2006-07 and (e)same agreements have been considered by the Tribunal in A.Y. 2006-07 are operative in the year under consideration. He, therefore, submits that the A.O. was not justified in holding that the assessee has PE in India, therefore, the addition made by the A.O. be deleted. 10. On the other hand, the ld. D.R. while relying on the order of the A.O. and DRP also relied on the decision in Aramex International Logistics Private limited IN RE (supra). 11. In the rejoinder, the ld. Counsel for the assessee submits that in view of the discussion made in paras 15,16 & 18 of the ruling of the AAR, the decision relied on by the Revenue authorities is....
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....ive support from the decision of ITAT, Mumbai in the case of DDIT Vs. Daimler Chrysler AG, Germany, 39 SOT 418 wherein it was held that "there should be some definite activity of the PE to which profits can be attributed and merely acting for a non-resident principal would not by itself render an agent to be considered as PE for the purpose of allocating profits taxable in the hands of the principal. It is further held that 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 the profits of the nonresident is liable to be taxed in India. 23. In view of the above discussion and following the ratio laid down by the ITAT, Mumbai in the case of Daimler Chrysler (supra), we hold that the assessee did not have PE in India in the year under consideration in terms of Article 5(1), 5(2), 5(4) & 5(5) of the Indo-US Treaty and the addition of Rs. 2,29,26,152/- made by the AO being a profit margin of 5% on the sales made by the assessee, is not sustainable. The said is therefore deleted and Ground Nos. 1 to 7 are allowed." 13. As regards the decision in Aramex International....
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....s 234B of the Act and accordingly the ground taken by the assessee is allowed. 19. Ground No. 8 is against the initiation of penalty u/s 271(1)(c) of the Act. 20. The ld. Counsel for the assessee submits that since the penalty proceeding are independent proceeding, the ground raised by the assessee is not pressed and accordingly we reject the ground taken by the assessee being pre-matured/not pressed. ITA No. 6444/Mum/2012 for A.Y. 2005-06 21. Ground No. 1 is against the initiation of proceeding u/s 147 of the Act. 22. At the time of hearing both the parties agreed that the facts of the present issue are similar to the facts of the case for the A.Y. 2004-05, therefore, the plea taken by them in that appeal be considered while deciding the above ground. 23. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that para 12 of the reasons recorded by the A.O. dtd. 31-3-2011 for reopening of the assessment reads as under:- "For A.Y. 2005-06 the return was processed u/s 143(1) and no regular assessment has been completed. The assessee had not furnished the details of ....
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....n record, we keeping in view the finding recorded in assesse's appeal for A.Y. 2004-05 in para 18 of this order, the interest u/s 234B is not leviable. With regard to the levy of interest u/s 234C of the Act the A.O. is directed to allow consequential relief to the assessee in view of our finding recorded in para 25 of this order. The grounds taken by the assessee are, therefore, partly allowed. 32. Ground No. 10 is against the initiation of penalty u/s 271(1)(c) of the Act. 33. The ld. counsel for the assessee submits that since the penalty proceeding are independent proceeding, the ground raised by the assessee is not pressed and accordingly we reject the ground taken by the assessee being pre-matured/not pressed. 34. Grounds No. 1 to 5 are against the confirmation of the A.O.'s finding that the assessee has PE in India. 35. Both the sides are in agreement that the facts and circumstances of these grounds are mutatis mutandis similar to those for A.Y. 2004-05 wherein it has been held that the assessee did not have PE in India. Following the view taken in paras 12 to 14 of this order, we delete the addition made by the A.O. in this regard a....