TaxTMI 
TaxTMI 
2018 (2) TMI 1767
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....volved in the aforementioned appeals, therefore, the same are being taken up and disposed of together by way of a consolidate order. We shall first take up the appeal of the assessee for A.Y 2005-06. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal: "The appellant objects to the order dated 30 March 2015 passed by the Commissioner of Income- tax (Appeals) - 55, Mumbai ['CIT(A)'] for the af oresaid assessment year inter-alia on the following grounds: 1. Business connection / permanent establishment ('PE') in India 1.1 The learned CIT(A) has erred in holding that the appellant had a PE in India in terms of Articles 5(1) and 5(8) of the India- Singapore Double Taxation Avoidance Agreement ('DTAA'). 2. Income attributable to PE 2.1 The learned CIT(A) erred in confirming the action of assessing officer ('AO') of treating a sum of Rs. 33,61,54,184/- (gross receipts of Rs. 43,11,16,273/- less marketing services fees of Rs. 9,49,62,089/-) as income attributable to the PE in India and computing the income liable to tax in India as Rs. 3,36,15,419/- (10% of Rs. 33,6....
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....t ing that even if the reimbursement is considered as part of business income, there should not be any income chargeable to tax since the expenditure paid by the appellant (i.e. marketing services fees paid to ADS IL) is sufficient to absorb its income. 3.5 Without prejudice to the above, the learned CIT(A) erred in not following the decision of the ITAT in appellant's own case for AY 2004- 05. 4. Applicability of Article 24 of India-Singapore tax treaty ('DTAA') and Interest income 4.1 The learned CIT(A) erred in upholding the order of the AO to the effect that the benefit of Article 24 of the DTAA is not available to the appellant. 4.2 The learned CIT(A) er red in holding that tax should be levied oi l income of Rs. 3,95,453/- @ 20% by applying the provisions of section l15A of the Act instead of 15% as per DTAA. 5. Transfer pricing adjustment on advances 5.1 The learned CIT(A) erred in confirming a transfer pricing adjustment of Rs. 1,30,38,944/- under section 92CA(4), in respect of the international transaction entered into by the appellant during the year ended 31 March 2005. 5.2 The learned CIT(A) whil....
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....ve grounds of appeal is without prejudice to the other. 7.2 The appellant reserves the right to amend, alter or add to the grounds of appeal. 2. The revenue on the other hand assailing the order of the CIT(A) had raised the following grounds of appeal before us: "1. While holding that the amount received from M/s Abacus Distribution System India Limited in the form of line charge, installation charges, service charges and other charges are not in the nature of reimbursement of expenses, whether ld. CIT(A) has erred in failing to expressly direct the Assessing Officer to tax the said receipts as business income as was done by his predecessor in the assessee‟s own case for A.Y. 2004-05. 2. The appellant prays that the order of the CIT(A) be set aside on the above grounds and that of the assessing officer be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 3. Briefly stated, the facts of the case are that the assessee is a company resident of Singapore engaged in the business of promotion, development, operation, marketing and maintenance of a Computerized Reservation Syste....
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.... was no contractual or business relationship between the assessee and the customer who made the payment to the airlines through the travel agent, which resulted to generation of revenue in the hands of the airlines and not of the assessee. The assessee in order to fortify its aforesaid contention elaborated before the A.O the sequence of events involved in its business, viz. (i).the travel agents for raising of a query or requesting for a booking used the equipment owned and provided by ADSIL; (ii). the message was transmitted through the MTNL lines to Societe Internationale Telecommunications Aeronautiques (for short „SITA‟) network in all the cities, from where it was transmitted via SITA network to Abacus host in USA; (iii). that on receiving the message the airlines computer would be consulted by the Abacus host for the latest position on seat availability, and if a seat would be available the booking is confirmed by the Abacus host computer and is conveyed to the travel agent in India; (iv). the travel agent on receiving the message of confirmed booking from Abacus through the same communication channels which were used for its outgoing message, would receive the t....
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....hat as ADSIL was securing business for the assessee by entering into subscription agreements with the travel agents and the said activity was habitually, wholly and exclusively performed by ADSIL for the assessee, therefore, it could safely be concluded that ADSIL constituted an Agency PE of the assessee in terms of Article 8(c) and 9 of the India-Singapore DTAA. The A.O fortified his aforesaid conviction by taking support of the fact that the inquiries made from Air India Ltd revealed that ADSIL which did not have any agreement with the airlines, provided services and assistance to Air India to resolve problems relating to connectivity reservation system, accounting and billing, which thus proved that ADSIL was carrying on the activities of the assessee in India. The A.O further observed that the fact that the assessee had advanced interest free loans to ADSIL to boost its own business in India proved to the hilt that ADSIL was not an independent agent. The A.O further observed that the ITAT, Delhi in the case of M/s Galileo International Inc. Vs. DCIT (2009) 116 ITD 1 (Del) and Amadeus Global Travel Distribution Vs. DCIT (2008) 113 TTJ 767 (Del) which had been relied upon by the ....
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....esaid conviction rejected the explanation of the assessee and took the commission paid by the assessee to ADSIL at Rs. 9,49,62,089/-. The A.O in the backdrop of his aforesaid observations worked out the net receipts of the assessee in India, as under: Gross receipts: Less: Marketing Expenses Rs.43,11,16,273/- (Paid to ADSIL) (-): Rs. 9,49,62,089/- Balance : Rs.33,61,54,184/- The income attributable to the PE was estimated by the A.O at 10% of the aforesaid amount at Rs. 3,36,15,419/-. 8. The A.O further during the course of the assessment proceedings observed that the assessee had received certain payments from ADSIL, as under:- Line charges Rs.12,032,811/- Installation charges Rs. 424,493/- Service charges Rs. 4,100,034/- Other expenses Rs. 3,992,027/- Total Rs.20,549,465/- The assessee submitted that the aforesaid amounts were in the nature of reimbursement of expenses which were incurred by it on behalf of ADSIL. The assessee explaining the nature of the expenses submitted that the line charges and services charges were incurred for providing the connectivity to the travel agents, while for the servi....
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....rest income of Rs. 3,95,463/- earned by the assessee under Sec. 244A of the Act, the A.O had himself analysed the issue and had granted the benefit of India-Singapore tax treaty to the assessee (as tax of Rs. 59,318/- was deducted at source @15%). The A.O observing that the aforesaid plea of the assessee was not accepted by the CIT(A) in the assesses own case for A.Y 2004-05, therefore, called upon the assessee to place on record evidence as regards remittance of amount to Singapore. However, as the assessee failed to place on record evidence regarding remittances of the amounts received from its Indian operations to Singapore, as required under the treaty, nor could prove that the said receipts had been offered to tax in Singapore on accrual basis, therefore, the A.O being of the view that as the assessee had failed to satisfy the conditions specified in Article 24 of DTAA, concluded that the benefit of the treaty could not be granted to it. The A.O on the basis of his aforesaid observations also subjected the interest income of Rs. 3,95,453/- earned by the assessee under Sec. 244A of the Income-tax Act, 1962, to tax @ 40% instead of 15% as per DTAA/20% by applying the provisions ....
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....in India as per law. The CIT(A) observed that the said issue was also decided by the coordinate benches of the Tribunal in the assesses own case in the earlier years and the estimation of 10% of overall revenues from India operations as per Rule 10 of the Income tax Rules, 1962 as the income of the assessee was upheld by the Tribunal. Rather, the CIT(A) observed that the Tribunal had in the earlier years held that 15% of the gross receipts pertaining to the India bookings shall be the income attributable to the India operations of the assessee. The CIT(A) observed that in the case of the assessee for the subsequent years the decision of the DRP on the aforesaid issue was also against the assessee. The CIT(A) in the backdrop of his aforesaid observations upheld the estimation of income of the PE of the assessee by the A.O. 13. The CIT(A) adverting to the contention of the assessee that the A.O had erred in working out the amount of fees received by the assessee from the airlines and the commission paid to its NMC in India, viz. ADSIL, observed that if any deduction of the commission paid to NMC was to be claimed by the assessee, the same could only be allowed against the revenues....
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....were by way of reimbursement of expenses by ADSIL. However, the CIT(A) following the order passed by the Tribunal in the assesses own case for A.Y 2004-05, concluded that the aforesaid amounts so received by the assessee from ADSIL could not be characterised as „fees for technical services‟. The CIT(A) following the order passed by the DRP in the case of the assessee for A.Y‟s 2006-07 to 2010-11 wherein only 10% of the reimbursement expenses were brought to tax in the hands of the assessee, followed the same and held that 10% of the aforementioned amount was liable to be taxed as the business income of the assessee during the year under consideration. 15. The CIT(A) adverting to the contention of the assessee that the A.O had wrongly brought the income of the assessee to tax under the Act and not as per the India-Singapore treaty, observed that the said issue was decided against the assessee by the Tribunal in its case for A.Y 2004-05. The CIT(A) further observed that as the condition of actual remittance of income for triggering the provisions of Article 24 had not been satisfied by the assessee, therefore, the benefit of Article 24 of the DTAA would not be av....
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....ng to India bookings to its NMC, viz. ADSIL by way of commission, which were higher than the income attributable to India, therefore, there was no further income attributable to India on which tax would be payable by the assessee. The ld. A.R submitted that as the facts involved in the case of the assessee for the year under consideration, viz. A.Y 2005-06 remained the same as were involved in the earlier year years, therefore, keeping in view the principle of consistency as had been emphasised by the Hon‟ble Supreme Court in the case of Radhasoami Satsang Vs. CIT (1992) 193 ITR 321 (SC) and Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT 394 ITR 449 (SC), a different view on the basis of the same facts could not be sustained. The ld. A.R relying on the order of the coordinate bench of the Tribunal, viz. ITAT, Delhi in the case of Galileo International Inc. Vs. DCIT (2009) 116 ITD 1 (Del) for A.Ys 1995-96 to 1998-1999, submitted that the Tribunal in the aforementioned case after carrying out a FAR analysis in the said case had observed that the income attributable to the CRS operations carried out in India could fairly be taken at 15%. The ld. A.R submitted that the appeal fil....
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....le to the operations carried out by the assessee in India. The ld. D.R on the basis of the aforesaid facts submitted that it could safely be concluded that the ALP at 15% of the revenue in respect of the years falling in the era of pre-TP regulations in India cannot be applied to the present case of the assessee for A.Y 2005-06. The ld.D.R submitted that the very fact that the assessee had suffered a loss in respect of its transactions with the PE in itself proved that the assessee had not charged the price at arms length. On the basis of the aforesaid contentions it was vehemently submitted by the ld. D.R that the comparison of the functions performed, assets used and risk assumed by the assessee and its PE, viz. ADSIL was indispensably required for working out the income of the assessee attributable to the operations carried out in India. The ld. D.R in the backdrop of his aforesaid submissions averred that the issue in all fairness was required to be set aside to the A.O/TPO in order to facilitate determination of the ALP of the aforesaid international transactions. The ld. A.R rebutting the aforesaid contentions of the revenue, submitted that as the determination of 15% of reve....
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....e from ADSIL, submitted that the same was purely in the nature of reimbursement of expenses and had wrongly been assessed by the A.O as „fees for technical services‟ (for short „FTS‟). The ld. A.R submitted that though the CIT(A) had vacated the observation of the A.O and held that the aforesaid amounts were not liable to be brought to tax as FTS, but however, had erred in not accepting the contention of the assessee that they were the amounts received by the assessee from ADSIL by way of reimbursement of its share of expenses which were incurred by the assessee on its behalf. The ld. A.R to fortify his contention that the aforesaid amounts received by the assessee were by way of reimbursement of expenses, submitted that neither any services were provided by the assessee to ADSIL, nor any mark up in respect of the aforesaid amounts was charged by the assessee. The ld. A.R. submitted that the assessee in order to substantiate his aforesaid contention had furnished with the CIT(A) additional evidence under Rule 46A, but however, the same was not admitted by him. The ld.A.R. in order to support his contention that the aforesaid amount of Rs. 2,05,49,465/- (supr....
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....f the assessee. It was submitted by the ld. D.R that in all fairness the matter may be set aside to the A.O for making necessary verifications as regards the nature of the receipts. 18. The ld. Authorized Representative taking up the issue as regards the denial of the benefit of Article 11 of the India-Singapore Tax Treaty and subjecting the interest on Income Tax refund to tax under Sec. 115A of the Act, fairly conceded that the issue had been decided against the assessee by the Tribunal in A.Y 2004-05, for the reason that supporting evidence to prove that the interest on refund was remitted/received in Singapore was not submitted by the assessee. Per contra, the ld. D.R submitted that the issue may be adjudicated in the backdrop of the observations recorded by the Tribunal in the assesses own case for A.Y 2004-05. 19. The ld. A.R further adverted to the issue pertaining to the treating of the interest free loan given by the assessee to its WOS company in India, viz. ADSIL, as an international transaction and determining of the arms length interest in respect of such loan based on Indian PLR of 10.50% at Rs. 1,30,38,994/-. It was submitted by the ld. A.R that as the interest....
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....en any finding on the issue pertaining to the rate of interest that was to be applied. The ld. A.R submitted that as a matter of fact, a finding on the issue as regards the rate of interest to be applied was given by the Hon‟ble High Court of Bombay in the case of CIT Vs. V.F.S Global Services Pvt. Ltd. [(ITA No. 336 of 2015, dated 19.07.2017)(Bom)], wherein following its earlier judgment in Tata Autocomp System Ltd. (supra) the High Court had upheld the transfer pricing adjustment based on LIBOR. The ld. A.R submitted that a perusal of the ITAT‟s order in the case of Tata Autocomp System Ltd. (supra) and Tech Mahindra Ltd. (supra) clearly supported the contention of the assessee that the transfer pricing adjustment should be based on LIBOR/ EURIBOR and not PLR. The ld. A.R submitted that if a transfer pricing adjustment was to be made in respect of the interest on the aforesaid loan transaction, the same had to be in conformity with the rate of interest which the assessee could have charged if the ECB loan would have been advanced by it in India to a Non-AE. The ld. A.R to drive home his aforesaid contention relied on the RBI Circular dated 31.01.2004, as per which und....
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.... when a duty is cast on the payer to deduct tax at source, then on a failure of the payer to do so no interest can be imposed on the payee under Sec. 234B. It was thus submitted by the ld. A.R that as the facts involved in the case of the assessee remained the same as were there in its case for A.Y 2003-04, therefore, on the failure on the part of the payer to deduct tax at source, no interest under Sec. 234B was leviable in the hands of the assessee. Per Contra, the ld. D.R did not controvert the aforesaid contention advanced by the ld. A.R before us. 21. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the contention of the ld.A.R that the assessee had no Permanent Establishment (PE) in India. We find that the issue as to whether the assessee had a PE in India, or not, had been deliberated upon by the Tribunal in the assesses own case for A.Ys 1999-2000 to 2004-05. The Tribunal in the aforementioned appeals upholding the orders of the lower authorities had concluded that the assessee was having business connection and PE in India. We find that though the....
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....esaid contentions had submitted that the issue was required to be set aside to the A.O/TPO for fair determination of the income of the assessee attributable to its PE in India. We have given a thoughtful consideration to the contentions of the authorized representatives for both the parties. We though would fairly concede that the contention raised by the ld. D.R in his attempt to seek a FAR analysis for fair determination of the income of the assessee attributable to its PE in India at the first blush appeared to be very convincing, but however, after deliberating on the same at length, we are unable to persuade ourselves to accept the same. We find that as averred by the ld. A.R the coordinate bench of the Tribunal in the assesses own case for A.Ys 1999-2000 to 2004-05 had consistently held that only 15% of the gross receipts of the assessee could be attributed as accruing or arising to the PE in India. We further find that the Tribunal in the aforementioned cases had also observed that as the assessee had incurred expenditure @ 25% of gross receipts on account of payment of commission to its NMC in India, viz. ADSIL, therefore, there remained no income in the hands of the assess....
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....e gross receipts of the assessee as its income attributable to India operations was also taken by the Tribunal in the assesses own case for A.Ys 2002-03 to 2004-05, which pertained to the period subsequent to the introduction of the Transfer pricing provisions. We further find that the High Court of Delhi while dismissing the appeal of the revenue in the case of CIT Vs. Galileo International Inc. (2011) (336 ITR 264), had observed that the determination of the income of the PE from the CRS activities in the said case was in conformity with the CBDT Circular No. 23, dated 23.07.1969 and the judgment of the Hon‟ble Supreme Court in the case of DIT Vs. Morgan Stanley & Co. Inc. (2007) 292 ITR 416 (SC). We thus find ourselves persuaded to be in agreement with the contention of the ld. A.R that since the determination of 15% of the gross receipts as attributable to the CSR operations carried out by the assessee in India is already based on a FAR analysis, therefore, no purpose would be served by restoring the matter to the file of the A.O. We may at this stage also observe that in the case of Galileo Nederland BV (2014) 367 ITR 319 (Del), wherein similar facts were involved, the H....
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....rnished with the CIT(A) additional evidence under Rule 46A of the Income Tax Rule, 1963, in its attempt to fortify its claim that the aforesaid receipts were in the nature of reimbursement of expenses by ADSIL. However, the CIT(A) being of the view that the assessee despite being afforded sufficient opportunity by the A.O had failed to substantiate its aforesaid contention and place on record the aforementioned documentary evidence, therefore, it could not be permitted to furnish the same by way of additional evidence before him. We have deliberated on the facts and are persuaded to be in agreement with the CIT(A) that as the assessee despite having been afforded sufficient opportunity by the A.O, had however failed to furnish the said documentary evidence to substantiate its contention during the course of the assessment proceedings, therefore, it could not be permitted to undo the said lapse in the garb of filing of additional evidence before the first appellate authority. We thus finding no infirmity in the aforesaid observations of the CIT(A), therefore, uphold the declining of the admission of the additional evidence by him. We however find substantial force in the contention ....
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....nabove are of the considered view that 10% of the amount claimed by the assessee to have been received from ADSIL by way of reimbursement of expenses is to be assessed as „business income‟, which would be entitled for set off against the amount of commission paid by the assessee to ADSIL. The Ground of appeal No.1 raised by the revenue is dismissed. 25. We shall now advert to the contention of the assessee that the CIT(A) had erred in holding that tax should be levied on interest income of Rs. 3,95,453/- @ 20% by applying the provisions of Sec. 115A of the Act, instead of 15% as per DTAA. We are of the considered view that the CIT(A) had arrived at the aforesaid observations relying on the order passed by the Tribunal in the assesses own case for A.Y 2004-05, viz. ITA No. 1045/Mum/2008, dated 31.05.2013, and thus denying the benefit of Article 11 of the India-Singapore Tax Treaty had held that the interest on Income tax refund was liable to be brought to tax under Sec. 115A of the Act. We are of the considered view that as the issue and the facts involved in the present appeal remain the same, therefore, no infirmity emerges from the aforesaid findings of the CIT(A).....
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....are unable to persuade ourselves to be in agreement with the contention of the ld. D.R that the Hon‟ble High Court of Bombay in the case of CIT Vs. Tata Autocomp Systems ltd. (2015) 374 ITR 516 (Bom) had concluded that ALP in the case of loans advanced to AE was to be determined on the basis of rate of interest being charged in the country where the loan is received/consumed. We have perused the judgment of the Hon‟ble High Court of Bombay in the case of Tata Autocomp Systems Ltd. (supra) and find that the Hon‟ble High Court had as a matter of fact dismissed the appeal of the revenue, for the reason that as the Tribunal while passing the impugned order in the case of Tata Autocomp Systems Ltd. Vs. ACIT (2012) (21 taxmann.com6) (Mum) had followed the view taken by the coordinate benches of the Tribunal in the case of V.V.F Ltd. Vs. Dy. CIT (ITA No. 673/Mum/2006) and Dy. CIT Vs. Tech Mahindra Ltd. (2011) 12 taxmann.ocm 132 (Mum), however, neither of the said orders were further assailed by the revenue. Thus, the High Court taking cognizance of the fact that the revenue had accepted the decision of the Tribunal in the case of V.V.F. Ltd. (supra) and Tech Mahindra Ltd....
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....t of such international transactions, the domestic bank rate would not be a sound basis and rather internationally accepted LIBOR rate would be the proper basis for benchmarking the ALP interest rate in respect of the said transactions. We further find that the Hon‟ble High Court of Delhi in the case of Commissioner of Income Tax-1 Vs. M/s Cotton Naturals (I) Pvt. Ltd. (ITA No. 233/Mum/2014, dated 27.03.2015) had observed that the interest rate applicable should be that of the currency concerned in which the loan has to be repaid. The Hon‟ble High Court had disagreed with the view that the interest rates were to be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. It was further observed by the High Court that the currency in which the loan is to be repaid normally determined the rate of interest. The aforesaid judgment of the Hon‟ble High Court of Delhi in the case of M/s Cotton Naturals (I) Pvt. Ltd. (supra) had thereafter been followed by a coordinate bench of the Tribunal in the case of M/s Firestar International Pvt. Ltd. Vs. ACIT, Mumbai (ITA No. 488/Mum/2015, dated 31.07.2015)....
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....e order under section 143(3) r.w.s.144C(13) of the Income-tax Act, 1961 dated 23 August 2010 (received on 30 August 2010) passed by the Deputy Director of Income -tax, (International Taxation) - 1(1), Mumbai ('DDIT') f or the aforesaid assessment year on the following among other grounds: 1. The le arned DDIT erre d in assessing the to tal inco me of the appe llant at Rs. 69,217,625/-. 2. Business connection/permanent establishment in India 2.1 The learned DDIT erred in holding that the appellant had a business connection in India in terms of the Income-tax Act, 1961 and a permanent establishment ('PE') in India in terms of the India- Singapore Double Taxation Avoidance Agreement ('DTAA'). 2.2 The learned DDIT erred in holding that Abacus Distribution Systems (India) Pvt. Ltd. ('ADSIL') f unctions under the direct control of its principal namely the appellant. 2.3 The learned DDIT erred in holding that the appellant has a fixed place of business in India. 2.4 The learned DDIIT erred in holding that the appellant maintains telecommunication network in India through which messages are transmitted. ....
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....thdrawn Circular no. 23 dated 23 July 1969 vide Circular no. 7/2009 dated 29 October 2009. 3.7 Without prejudice to the above, it is submitted that the appellant is not liable to tax in India as remuneration paid to ADSIL consumed the entire income and there was no further income chargeable to tax in India. 4. Reimbursement of expenses 4.1 The learned DDIT er red in holding the expenses reimbursed by ADSIL amounting to Rs. 2,93,20,127/- as forming part of business income of the appellant and taxing 10% of the said amount (i.e. Rs. 29,32,012/-). 4.2 The learned DDIT erred in not appreciating that the expenses reimbursed by ADSIL were towards expenses incurred by the appellant on line charges, service charges and other expenses and the same were in the nature of pure reimbursement not having any element of income / service. 5. Applicability of Article 24 of India Singapore DTAA The learned DDIT erred in not accepting the contention of the appellant that the provisions of Article 24 of India-Singapore DTAA are not triggered. 6. Transfer pricing adjustment 6.1 The learned DDIT erred in making a transf er pricing ad....
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....ntire tax should have been deducted at source) and the question of levy of interest under section 234B for delayed payment of tax does not arise. 9. Levy of interest under section 234D The learned DDIT erred in levying interest under section 234D of Rs. 36,08,313/-. 10. Each one of the above grounds of appeal is without prejudice to the other. 11. The appellant reserves the right to amend, alter or add to the grounds of appeal. 31. The ld. A.R taking cognizance of the fact that certain common issues were involved in the appeals of the assessee for the A.Ys 2005- 06 to 2011-12, therefore, for the sake of ready reference had placed on record a „Chart‟ revealing the said common issues. The Ground of appeal No. 1 raised by the assessee wherein the assessee had assailed the income assessed by the A.O at Rs. 8,96,95,213/-, being general in nature is dismissed as not pressed. The Ld. A.R submitted that the issues and the facts involved in Grounds of appeal No(s). 2 to 6 were the same as were involved in the Grounds of appeal No(s). 1 to 5 in the appeal of the assessee for A.Y 2005-06, viz. ITA No. 4882/Mum/2015.The aforesaid factual posit....
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....nterest under Sec. 234B had been adjudicated by us in the aforementioned appeal of the assessee for A.Y 2005-06, viz. ITA 4882/Mum/2015, therefore, our directions passed while disposing of the aforesaid Ground of appeal No. 6 in the case of the assessee for A.Y. 2005-06, viz. ITA 4882/Mum/2015 shall to the said extent apply mutatis mutandis for disposing of the Ground of appeal No. 8 raised by the assessee before us in the present appeal. The Ground of appeal No. 8 is allowed in terms of our aforesaid observations. 34. The assessee had by way of ground of appeal No. 9 challenged the levy of interest of Rs. 36,08,313/- by the A.O under Sec. 234D. The ld. A.R had during the course of hearing of the appeal not assailed the validity or pointed out any mistake on the part of the A.O in charging interest under Sec. 234D. We are of the considered view that as the quantification of the same would be consequential to giving effect to our aforesaid order, therefore, the A.O shall while giving appeal effect to our order give the necessary effect to the same. The Ground of appeal No. 9 raised by the assessee is allowed for statistical purposes. 35. The Grounds of appeal No(s). 10 and11 b....
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....hat ADS IL is not an independent agent. 3. Income attributable to PE 3.1 The le arned DDIT erred in tre ating a sum of Rs. 65.08, 31,222 /- as attributable to the PE in India and computing the income liable to tax in India as Rs. 6,50,83,122/- (10% of Rs. 65,08,31,222/-). 3.2 The learned DDIT erred in calculating the income of the appellant on presumption basis by estimating the profit margin of the appellant as 10% of the receipts attributable to Indian operations of Rs. 65,08,31,222/- and treating a sum of Rs. 6,50,83,122/- as the income of the appellant. 3.3 The learned DDIT erred in not deducting the commission paid to ADSIL of Rs. 16,55,41,921/-, in the attribution of income on the basis that the income is estimated as per Rule 10 of the Income-tax Rules and in light of the fact that the CBDT has withdrawn Circular no. 23 dated 23 July 1969 vide Circular no. 7/2009 dated 29 October 2009. 4. Reimbursement of expenses 4.1 The learned DDIT erred in holding that the expenses reimbursed by ADSIL amounting to Rs. 8,73,39,453/- are part of business income of the appellant and thereby taxing 10% of the said amount (i.e. Rs. 87,33,9....
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....nting TDS credit for Rs. 3,07,55,351/ as against claim of Rs. 3,11,76,668/- in the return of income, leading to a short credit of TDS of Rs. 4,211,317/-. 8. Levy of interest under section 234B 8.1 The learned DDIT erred in levying interest under section 234B of Rs. 33,68,532/-. 8.2 The learned DDIT erred in not appreciating that in case a view is taken that the income earned by it is liable to tax in India, appropriate tax should have been deducted at source by the persons who paid the income. Accordingly, no advance tax was payable by the appellant (entire tax should have been deducted at source) and the question of levy of interest under section 234B for delayed payment of tax does not arise. 8.3 The learned DDIT erred in not following the judgment of the Bombay High Court in appellants own ease for levy of interest under section 234B. 9. Levy of interest under section 234D The learned DDIT erred in levying interest under section 234D of Rs. 55,11,360/-. 10. Each one of the above grounds of appeal is without prejudice to the other. 11. The appellant reserves the right to amend, alter or add to the grounds of ....
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.... a liberty to fortify its aforesaid claim before the A.O. The Ground of appeal No. 7 is allowed for statistical purposes. 39. The assessee further by way of ground of appeal No. 8 had assailed the levy of interest of Rs. 33,68,532/- by the A.O under Sec. 234B. We are of the considered view that as the issue as regards levy of interest under Sec. 234B had been adjudicated by us in the aforementioned appeal of the assessee for A.Y 2005-06, viz. ITA 4882/Mum/2015, therefore, our directions passed while disposing of the aforesaid Ground of appeal No. 6 in the case of the assessee for A.Y. 2005-06, viz. ITA 4882/Mum/2015 shall to the said extent apply mutatis mutandis for disposing of the Ground of appeal No. 8 raised by the assessee before us in the present appeal. The Ground of appeal No. 8 is allowed in terms of our aforesaid observations. 40. The assessee had by way of Ground of appeal No. 9 challenged the levy of interest of Rs. 55,11,360/- by the A.O under Sec. 234D. The ld. A.R had during the course of hearing of the appeal not assailed the validity or pointed out any mistake on the part of the A.O in charging interest under Sec. 234D. We are of the considered view that ....
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....olly and exclusively performed by ADSIL for the appellant. The learned ADIT further erred in holding that ADSIL constitutes agency PE in terms of Articles 8(c) and 9 of India-Singapore DTAA. 2.7 7 The le arned ADIT erre d in observ ing that ADSIL is depe ndent on the appellant for its financial existence and is performing only activities for the appellant and that ADSIL is not an independent agent. 3. Income attributable to PE 3.1 The learned ADIT erred in treating a sum of Rs. 78,39,07,065/- as income attributable to the PE in India and computing the Income liable to tax in India as Rs. 7,83,90,707/- (10% of Rs. 78,39,07,065/-). 3.2 The learned ADIT erred in calculating the income of the appel lant on presumptive basis by estimating the profit margin of the appellant as 10% of the receipts attributable to Indian operations of Rs. 78,39,07,065/- and treating a sum of Rs. 7,83,90,707/- as the income of the appellant. 3.3 The learned ADIT erred in not deducting the commission paid to ADSIL of Rs. 19,12,99,288/-, in the attribution of income on the basis that the income is estimated as per Rule 10 of the Income-tax Rules and in light of the....
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....ue by granting of interest free loan by the appellant to ADSIL. 6.6 The learned ADIT erred by not considering the fact that if the appellant had charged interest instead of the loan being interest free there would be loss to Revenue of India considering the deductibility of the interest expense in the hands of the borrower (i.e. ADSIL) and low withholding tax in respect of interest due to the appellant. 6.7 The learned ADIT erred in not considering the fact that there is no intention of shifting of profits from India and in fact there is benefit to the ADSIL, an Indian entity, in form of interest free loan. 6.8 Without prejudice to the above grounds, the appellant states that the learned ADIT erred in law by using prime lending rate inste ad of LIBOR f or determining the arms length interest amount. 7. Short credit of TDS The learned ADIT erred in granting TDS credit for Rs. 76,84,496 /- as against claim of Rs. 1,89,84,993/- in the return of income, leading to a short credit of T D S o f Rs. 1,13,00,497/- Levy of interest under section 234B and 234C 8.1 The learned ADIT erred in....
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....esaid observations. 45. The assessee had further by way of Ground of appeal No. 7 claimed that the DDIT(IT)-1(1), Mumbai, while passing the order under Sec. 143(3) r.w.s 144C(13) had by allowing credit of TDS of Rs. 76,84,496/- against claim of Rs. 1,89,84,993/- raised by the assessee in its return of income, erred in giving short credit of TDS of Rs. 1,13,00,497/-. We though find that neither any such objection of the assessee as regards short credit of TDS is borne from the records, nor the ld. A.R had drawn our attention to any such material in support of his aforesaid contention, however, in all fairness direct to A.O consider the said claim of the assessee at the time of giving appeal effect to our order. Needless to say, the A.O while giving effect to our aforesaid direction shall afford an opportunity to the assessee who shall be at a liberty to fortify its aforesaid claim before the A.O. The Ground of appeal No. 7 is allowed for statistical purposes. 46. The assessee further by way of ground of appeal No. 8 assailed the levy of interest of Rs. 1,82,10,913/- under Sec. 234B and Rs, 61,741/- under Sec. 234C. We are of the considered view that as the issue as regards lev....
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.... its activities of Computerized Reservation System (CRS) through the Abacus Country Node located in India and is under the management and control of the appellant. 2.6 The learned ADIT erred in observing that ADSIL secures business for the appellant by entering into subscription agreement with the travel agents and this activity is habitually, wholly and exclusively performed by ADSIL for the appellant. The learned ADIT further erred in holding that ADSIL constitutes agency PE in terms of India-Singapore DTAA. 2.7 The learned ADIT erred in observing that ADSIL is dependent on the appellant for its financial existence and is performing only activities for the appellant and that ADS IL is not an independent agent. 3. Income attributable to PE 3.1 The learned ADIT erred in treating a sum of Rs. 1,07,48,41,423/- as income attributable to the PE in India and computing the income liable to tax in India as Rs. 10,74,84,142/- (10% of Rs. 1,07,48,41,423/-). 3.2 The learned ADIT erred in calculating the income of the appellant on presumptive basis by estimating the prof it margin of the appellant as 10% of the receipts attributable to Indian opera....
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.... (i.e. commission and marketing fees paid to ADSIL) is sufficient to absorb its income. 5. Transfer pricing adjustment 5.1 The learned ADIT erred in making a transfer pricing adjustment of Rs.l,92,36,738/- under section 92CA(4), in respect of the international transaction entered into by the appellant during the year ended 3 1 March 2009. 5.2 The learned ADIT erred in determining the arms length interest rate erred in not appreciating in the proper perspective the Business and Economic circumstances prevailing at the time of providing the interest free loan of Rs. 14,57,32.860/- by the appellant to ADSIL. 5.3 The learned ADIT erred in not appreciating / considering that in respect of the adjustment of Rs. 1,92,36,738/- to the total income of the appellant representing alleged arm's length interest on the interest-free loan granted by the appellant to ADSIL no corresponding deduction is claimed by ADSIL in its tax return or assessments, and accordingly amounts to double taxation of the same income. 5.4 The learned ADIT erred by not allowing corresponding deduction of the interest free loan granted by the appellant in the hands of ADS ....
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....by the assessee wherein the assessee had assailed the income assessed by the A.O at Rs. 13,51,08,490/- being general in nature is dismissed as not pressed. The Ld. A.R adverting to the Grounds of appeal No(s).2 to 5, submitted that the issues and the facts remained the same as were raised by way of Grounds of appeal No(s). 1 to 3 and Ground of appeal No. 5 in the appeal of the assessee for A.Y 2005-06, viz. ITA No. 4882 /Mum/2015. The aforesaid factual position so canvassed before us had not been rebutted by the ld. D.R. We have perused the Grounds of appeal No(s). 2 to 5 raised by the assessee in the present appeal and find that the same pertain to the issues viz. (i). existence of the PE/Business connection of the assessee in India; (ii). attribution of income to PE; (iii). reimbursement of expenses; and (iv). transfer pricing adjustment of the interest on loan advanced to ASDIL. We are of the considered view that as the aforesaid issues had been adjudicated by us while disposing of the Grounds of appeal No(s) 1 to 3 and Ground of appeal No. 5 of the assessee for A.Y 2005-06, viz. ITA No.4882/Mum/2015, therefore, the view taken by us while disposing of the aforesaid respective....
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.....O had erred in levying an interest of Rs. 12,84,568/- under Sec. 234D. However, the ld. A.R during the course of hearing of the appeal submitted that as the A.O had vide his order passed under Sec. 154 of the Act, dated 15.02.2016 rectified the aforesaid mistake, therefore, the Ground of appeal No. 9 was not being pressed by him. We thus in the backdrop of the concession of the ld. A.R dismiss the Ground of appeal No. 9 as not pressed. 55. The Grounds of appeal No(s). 10 and11 being general in nature are dismissed as not pressed. 56. The appeal of the assessee is partly allowed in terms of our aforesaid observations. ITA No. 1704/Mum/2015 AY: 2010-11 57. We shall now take up the appeal of the assessee for A.Y. 2010- 11. The assessee assailing the order of the CIT(A) had raised the following grounds of appeal before us: "The appellant objects to the order under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 ('the Act') dated 21 January 2015 (received on 23 January 2015) passed by the Deputy Commissioner of Income -tax, (International Taxation) - 1(1)(1), Mumbai ('DC1T') for the aforesaid assessment year on the following among othe....
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....s. 23,18,65,271/- paid to ADSIL in the attribution of income. 3.4 The learned Dispute Resolution Panel ( 'DRP' ) erred in observing that the estimation of 10% of overall revenues from Indian operations as per Rule 10 of Income-tax Rules, 1962 as income of appellant has been upheld by Income-tax Appellate Tribunal ('ITAT') without appreciating that while deciding the issue on attribution of income, ITAT has not relied on Rule 10. 3.5 The learned DCIT / DRP erred in observing that if any deduction of commission and marketing service fees paid to ADSIL can be claimed by the appellant, it can only be claimed against the revenue of Rs. 72,95,63,237/- from Indian operations and not against the income estimated by the DCIT at 10% of total revenue. 3.6 The learned DCIT / DRP erred in not fol lowing the ITAT decision in the appellant's own case for earlier years and Delhi High Court judgment in the case of Galileo International Inc. (336 ITR 264) despite of no change in facts. 4. Reimbursement of expenses 4.1 The learned DCIT erred in holding that the expenses reimbursed by ADSIL amounting to Rs. 4,81,21,706/- are part of busi....
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....rrower (i.e. ADSIL) and low withholding tax in respect of interest due to the appellant. 5.6 Without prejudice to the above grounds, the learned DCIT erred in law by using prime lending rate instead of LIBOR for determining the arm's length interest amount. 5.7 The learned DCIT erred in applying the rate of 40% on the interest income as against the rate prescribed in section 115A of the Act. 5.8 Without prejudice to the above, the learned DRP / DCIT erred in not appreciating that even if the interest income is considered as part of business income, there should not be any income chargeable to tax since the expenditure paid by the appellant (i.e. commission and marketing fees paid to ADSIL) is sufficient to absorb its income and accordingly there will be no loss to the revenue. 6. Levy of interest under section 234B 6.1 The learned DCIT erred in levying interest Rs. 32,63,312/- under section 234B of the Act. 6.2 The learned DRP erred in not adjudicating the objection raised by the appellant on the issue of levy of interest under 234B of the Act. 6.3 The learned DCIT erred in not following the judgment of the Bombay H....
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....forementioned appeal of the assessee for A.Y 2005-06, viz. ITA 4882/Mum/2015, therefore, our directions passed while disposing of the aforesaid Ground of appeal No. 6 in the case of the assessee for A.Y. 2005-06, viz. ITA 4882/Mum/2015 shall to the said extent apply mutatis mutandis for disposing of the Ground of appeal No. 6 raised by the assessee before us in the present appeal. The Ground of appeal No. 6 is allowed in terms of our aforesaid observations. 60. The assessee had by way of Ground of appeal No. 7 claimed that the A.O had erred in adjusting a sum of Rs. 1,33,77,108/- as refund already issued, while for the fact was that no such refund was issued to the assessee. However, the ld. A.R during the course of hearing of the appeal submitted that as the A.O had vide his order passed under Sec. 154 of the Act, dated 15.02.2016 rectified the aforesaid mistake, therefore, the Ground of appeal No. 7 was not being pressed by him. We thus in the backdrop of the concession of the ld. A.R dismiss the Ground of appeal No. 7 as not pressed. 61. The assessee had by way of Ground of appeal No. 8 claimed that the A.O had erred in levying an interest of Rs. 41,46,232/- under Sec. 234....
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....dia-Singapore DTAA. 2.6 The learned DCIT erred in observing that ADSIL is dependent on the appellant for its financial existence and is performing only activities for the appellant and that ADSIL is not an independent agent. 3. Income attributable to PE 3.1 The learned DCIT erred in treating a sum of Rs. 71,21,87,876/- as income attributable to the PE in India and computing the income liable to tax in India as Rs. 7,12,18,788/- (10% of Rs. 71,21,87,876/-). 3.2 The learned DCIT erred in calculating the income of the appellant on presumptive basis by estimating the profit margin of the appellant as 10% of the receipts from Indian operations of Rs. 71,21,87,876/- and treating a sum of Rs. 7,12,18,788/- as the taxable income of the appellant. 3.3 The learned DCIT erred in not deducting the commission of Rs. 17,12,53,651/- and marketing service fee of Rs. 33,84,80,960/- paid to ADSIL in the attribution of income. 3.4 The learned Dispute Resolution Panel [DRP] erred in observing that the estimation of 10% of overall revenues from Indian operations as per Rule 10 of Income -tax Rules, 1962 as income of appellant has been upheld by Inco....
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....ing that in respect of the adjustment of Rs. 1,58,69,765/- to the total income of the appellant representing alleged arm's length interest on the interest-free loan granted by the appellant to ADSIL, no corresponding deduction is allowed to ADSIL in its tax return or assessments, and accordingly amounts to double taxation of the same income. 5.4 Without prejudice to the above, the learned DCIT erred by not al lowing corresponding deduction of the interest free loan granted by the appellant in the hands of ADSIL. 5.5 The learned DCIT erred by not considering the f act that if the appellant had charged interest instead of the loan being interest free there would be loss to revenue of India, considering the deductibility of the interest expense in the hands of the borrower (i.e. ADSIL) and low withholding tax in respect of interest due to the appellant. 5.6 Without prejudice to the above grounds, the learned DCIT erred in law by using prime lending rate instead of LIBOR for determining the arm's length interest amount. 5.7 The learned DCIT erred in applying the rate of 40% on the interest income as against the rate prescribed in section 115A....
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....ppeal No(s). 1 to 3 and Ground of appeal No. 5 in the appeal of the assessee for A.Y 2005-06, viz. ITA No. 4882 /Mum/2015. The aforesaid factual position so canvassed before us had not been rebutted by the ld. D.R. We have perused the Grounds of appeal No(s). 2 to 5 raised by the assessee in the present appeal and find that the same pertain to the issues viz. (i). existence of the PE/Business connection of the assessee in India; (ii). attribution of income to PE; (iii). reimbursement of expenses; and (iv). transfer pricing adjustment of the interest on loan advanced to ASDIL. We are of the considered view that as the aforesaid issues had been adjudicated by us while disposing of the Grounds of appeal No(s) 1 to 3 and Ground of appeal No. 5 of the assessee for A.Y 2005-06, viz. ITA No.4882/Mum/2015, therefore, the view taken by us while disposing of the aforesaid respective grounds of appeal shall apply mutatis mutandis for the adjudication of the Grounds of appeal No(s). 2 to 5 raised by the assessee in the present appeal before us. The Grounds of appeal No(s). 2 to 5 of the present appeal are thus disposed of in terms of our aforesaid observations. 66. The assessee by way of Gr....