TaxTMI 
TaxTMI 
2017 (5) TMI 720
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....f the Dispute Resolution Panel (DRP). 2. Briefly stated, facts which are necessary for deciding the issue raised in the present appeal are, the assessee company, a tax resident of Singapore, entered into an agreement with Dimension Data India Limited (DDIL) to provide advisory services in the field of management, sales, marketing, finance and administration, human resources and information technology. For providing such services to DDIL, the assessee earned management fees of Rs. 22,56,91,365/- which the assessee did not offer as income in India. In course of assessment proceedings, relying upon various provisions of India-Singapore Double Tax Avoidance Agreement (DTAA) assessee contended that in absence of a Permanent Establishment (PE), ....
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....dia of the PE is taxable and not the entire management fees. It was further contended, as the assessee has earned profit of 10% on cost, allowance of expenditure at 10% is unjust. The DRP after considering the aforesaid submissions of the assessee though agreed on principle that the income only to the extent attributable to PE is taxable in India, however, held that in absence of any supporting evidences submitted by the assessee regarding activities of its employees in India and details regarding expenses incurred in relation to the fees charged, the entire fees received of Rs. 22.56 crores is attributable to the PE. The DRP further observed that the claim of the assessee that the fees received is on cost Plus 10% mark-up basis is merely s....
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.... to the alleged PE in India On the facts and in the circumstances of the case and in law, the learned Assessing Officer and the Honourable DRP erred in allowing an arbitrary deduction of only 10% as expenses and taxing 90% of the management fee as business income instead of taxing 10% thereof, ignoring the evidences provided in support of fact that the Appellant had earned only 10% mark-up on management fees. The Appellant prays that the learned Assessing Officer be directed to assess only 10% of the management fee to the extent the same is found to be attributable to the alleged PE in terms of Ground No 2 above. 4. Ground 4 - Levy of interest of INR 36,062,602 under Section 234B 4.1. On the facts and in the circumstances of the case a....
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....t @ 10.22% to Indian operation out of the total cost and computed mark-up of 10% on that. In this context, he referred to the details of expenditures incurred during the relevant previous year for the entire global operations at page 20 of the paper book. Ld.AR submitted, in view of the above facts the adhoc allowance of expenditure at 10% of the total fees received is arbitrary and contrary to the facts and material brought on record. He submitted that Tribunal while disposing of the assessee's Stay Application No.72/Mum/2016 in order dated 8.3.2016 has also appreciated these facts. He submitted, even the TPO, while passing the order under section 92CA on reference made by the AO has accepted that 10% mark-up was the maximum income earned ....
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....income was proper. 5. We have considered the rival contentions and material on record. Since the assessee gave up the issue relating to existence of PE in India as raised in ground no.1, we are proceeding on the footing that the assessee has PE in India. Having held so, the issue remains to be decided is what is the quantum of profit earned by the assessee and what income out of such profit is attributable to the PE in India. It is the contention of the AR that the assessee is remunerated at cost +(plus) mark-up of 10%. On perusal of the agreement dated 29.5.2001, the assessee and DDIL the aforesaid claim of the assessee appears to be correct. However, as perused from the assessment order and more particularly, the observations of the DRP ....
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.... it clear, in case of a business of which all operations are not carried out in India, only such part of the income as is reasonably attributable to the operations carried out in India shall be deemed to accrue or arise in India. Therefore, the income of the assessee has to be determined keeping in view the aforesaid legal principle. In view the aforesaid facts, since the assessee's contention with regard to the exact profit attributable to PE in India has not been properly analysed/examined, therefore, we are inclined to remit the issue to the file of the AO for fresh adjudication. It is open for the assessee to furnish all material/evidences to justify its claim that profit worked out as per the chart submitted before us is the income act....