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2018 (2) TMI 1767
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....y 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. 33,61,54,184/-). 2.2 The learned CIT(A) erred in calculating the income liable to tax of Rs. 3,36,15,419/- on presumptive basis by estimatin....
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....o 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) while determining the arm's length interest rate erred in not appreciating the business and economic circumstances prevailing at the time of providing the interest free loan of Rs. 12,41,80,420/- by the appellant to ADSIL in the proper perspective. 5.3 3 ....
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....ution 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 System ( for short „CRS‟). The primary business of the assessee is to make airline reservations for and on behalf of the participating airlines by using the CRS. The participating airlines provide the necessary information, which is displayed to the travel agents throughout the world so that they could guide their customers to make the necessary requests fo....
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....s, 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 ticket image from the Abacus host, which either would be printed by the printer in his office or issued manually to the customer. It was submitted by the assessee that it did not have a PE in India, for the reason, viz. (i). there was no contractual relationship between the assessee and the customer who makes the payment to the airline through the travel agent, as the ....
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....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 assessee, observed that such activities through a Node and agent would constitute a PE under the DTAA. The A.O in the backdrop of his aforesaid deliberations concluded that the assessee had a PE in terms of Article 5 of the India-Singapore treaty. 7. That during the course of the assessment proceedings the assessee revised the amount of the gross receipts from the airl....
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....1,54,184/- 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 service charges were the expenses incurred for accessing the CRS. It was submitted by the assessee that the connectivity globally provided by SITA was billed to the assessee, which in turn had raised the bills on its Indian NMC, viz. ADSIL for its share in the expense. In respect of the other expenses the assessee submitted that the same included courier charges, travel related expenses, marketing and consulting fees an....
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....ace 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 of Sec. 115A. 10. The A.O during the course of the assessment proceedings further observed that the assessee had given USD denominated ECB loan to its wholly owned subsidiary company in India, viz. ADSIL. It was observed by the A.O that the interest on the said loan was waived by the assessee for the year under consideration. That on a reference to the TPO the aforesaid interest free loan was treated as an internati....
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....he 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 from the Indian operations and not against the income estimated by the A.O at 10% of the total revenues. The CIT(A) observed that the DRP in the case of the assessee for the subsequent years i.e A.Ys 2006-07 to 2010-11 had held that the estimation of the income of the assessee at 10% of total revenues would take care of all the deductions. The CIT(A) held a conviction that once the income of the assessee was estimated at a ....
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....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 available to the assessee. The CIT(A) on the basis of his aforesaid observations declined the benefit of Article11 of the India-Singapore tax treaty and held that the interest on Income-tax refund for the said reason was liable to be taxed @20% as per Section 115JA of the Act. 16. The CIT(A) further deliberated on the transfer pricing adjustment of Rs. 1,30,38,994/- made by the A.O/TPO by treating the interest free loan advanced ....
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....ing 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 filed by the revenue against the aforesaid order of the Tribunal was dismissed by the Hon‟ble High Court of Delhi in CIT Vs. Galileo International Inc. (2011) 336 ITR 264 (Del) by observing that the determination of the income was in accordance with the CBDT Circular No. 23, dated 23rd July, 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). Per cont....
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....s 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 revenue as attributable to the operations carried out in India was already based on a FAR analysis, therefore, no purpose would be served by restoring the matter to the A.O. The ld. A.R strongly objected to the contentions raised by the revenue on the ground that the ld. D.R was trying to set up a new case before the Tribunal, which was not permissible in the eyes of law. The ld. A.R in support of his aforesaid contention that the parties....
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....d 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/- (supra) was in the nature of reimbursement of expenses, submitted that the assessee had not considered the same as an international transaction in its Transfer Pricing Study Report (for short „TPSR‟) in Form 3CEB, and the said claim of the assessee was not dislodged by the TPO. Alternatively, it was submitted by the ld.A.R that keeping in view the principle laid down by the Tribunal in the assesses own case for A.Y 2004-05, the taxability in relation to reimbursement of expenses should be the same as the income of the PE from the CRS activities. The ld. A.R subm....
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....st 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 free loan was given by the assessee to its Indian NMC, viz. ADSIL, with a view to financially strengthen the said company and in order to facilitate it to garner more customers in the Indian market, which in turn would had benefited the business of the assessee, therefore, no transfer pricing adjustment was called for in respect of the said loan transaction. The ld. A.R though initially submitted that as the assessee had not charged any specified price on the aforesaid loan, therefore, no transfer pricing adjustment could have been made in its hands, but thereafter, submi....
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....td. (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 under the automatic route such interest should be based on LIBOR. It was thus the contention of the ld. A.R that if the assessee could not have charged interest from a non-AE on Indian PLR, therefore, it could not be expected to charge such interest from its AE, viz. ADSIL. The ld. A.R further averred that in case a transfer pricing adjustment in respect of the ECB loan was to be carried out, then the interest income on the said loan could safely be held as an income which would be entitled to be set off against the commission paid by the assessee to ADSIL. Per contra, the ld. D.R in support of his conten....
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....r 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 assessee had raised a ground of appeal assailing the observations of the DRP that the assessee had a PE in India in terms of Article 5(1) and 5(8) of the India-Singapore DTAA, but however, during the course of the hearing of the appeal no contention was advanced by the ld. A.R to support his aforesaid claim. We thus following the orders passed by the coordinate benches of the Tribunal in the assesses own case in A.Ys 1999-2000 to 2004-05, uphold the order of the DRP that the assessee had a business connection/PE in India. The Ground of appeal No. 1 raised by the assessee before us is dismissed. 22. We no....
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....suade 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 assessee which could be brought to tax in India. We find that such observations were recorded by the Tribunal while disposing of the appeals of the assessee for A.Y 1999-2000 (ITA No. 3903/Mum/2006), A.Y 2001-02 (ITA No.4789/Mum/2007) and A.Y 2002-03 (ITA No. 4790/Mum/2007) vide its consolidate order dated 20.08.2010. We find that the aforesaid orders had thereafter been followed by the Tribunal while disposing of the appeal of the assessee for A.Y 2000-01 (ITA No. 346/Mum/2007) and A.Y 2003-04 (ITA No.1756/Mum/2007), vide its order dated 20.05.2011. We further find that the Tribunal while disposing of the appeal ....
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....n‟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 High Court following its order passed in the earlier years in the case of the assessee, had in the backdrop of the Principle of consistency reversed the order of the Tribunal which had set aside the matter to the file of the A.O for fresh determination of the income attributable to the CSR operations carried out by the assessee in India. We thus in the terms of our aforesaid observations and following the view taken by the coordinate bench of the Tribunal in the assesses own case for the preceding years, therefore, conclude that 15% of the gross receipts pertaining to India bookings shall be the income attrib....
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....espite 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 of the ld. A.R that now when the CIT(A) in line with the orders of the A.O and DRP in the case of the assessee for the subsequent years had observed that 10% of the aforesaid amount was to be brought to tax as the business income of the assessee, therefore, the same would be entitled for set off against the commission payment made by the assessee to its NMC, viz. ADSIL. The ld. A.R had submitted before us that if the amount of Rs. 20,54,947/- was taken as the business income of the assessee, still there would be no income chargeable to tax in the hands of the assessee, because the amount of marketing fees paid by the assessee to ADSIL o....
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....e 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). We thus uphold the order of the CIT(A) in context of the issue under consideration. The Ground of appeal No. 4 raised by the assessee is dismissed. 26. We now advert to the contention of the assessee that the CIT(A) had erred in upholding the transfer pricing adjustment in respect of USD denominated interest free ECB loan which was advanced by the assessee to its wholly owned subsidiary company in India, viz. ADSIL. We find that the interest free loan which was advanced by the assessee to its NMC, viz. ADSIL, was treated by the revenue as an international transaction whose arms length interest was worked out by applying the Indian PLR of ....
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....e 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. (supra), therefore, it would not be permitted on the part of the revenue to take a different view, as against the one which had been allowed to attain finality. We find that it was on the basis of the aforesaid observations that the Hon‟ble High Court had declined to entertain the appeal filed by the revenue. We thus are of the considered view that the contention of the ld. D.R that the Hon‟ble High Court had observed that the ALP in respect of interest on the loans advanced to AE‟s is to be determined on the basis of rate of interest being charged in the country where the loans is received/consumed is absolutely misconcei....
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.... 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). The Tribunal by taking support of the aforesaid judgment of the High Court of Delhi had concluded that the application of the State Bank of India PLR of 11.75% for determining the ALP of the interest on loan advanced in USD by the assessee to its AE, could not be approved. We have deliberated on the issue under consideration and finding ourselves to be in agreement with the view taken in the aforesaid judicial pronouncements, are thus of the considered view that the ALP of the interest on the loans advanced by the assessee to its subsidiary company, viz. ADSIL was to be determined on LIBOR and not as per the Indian PLR rate so adopted by th....
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....ngapore 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. 2.5 The learned DDIT erred in observing that the appellant carries out 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 6 T he le arne d DD IT e rre d in o bs e rv in g th a t ADS IL se cu re s bus ine ss f or the appellant by entering into subscription agreement with the travel agents and this activity is habitually, wholly and exclusively perf ormed by ADSIL f or the appellant. The learned DDIT further erred in holding that ADSIL constitutes agency PE in terms of Article 8(c) and 9 of India-Singapore DTAA. 2.7 The learned DDIT erred in observing that ADSIL is dependent on the a....
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....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 adjustment of Rs. 1,30,00,000/- u/s 92CA(4) of the Act, in respect of the international transaction entered into by the appellant during the year ended 31 March 2006. 6.2 The learned DDIT 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 theinterest free loan of Rs. 12,66,62,900/- by the appellant to the Associated Enterprise. 6.3 The learned DDIT erred in not appreciating / considering that in respect of the aforesaid adjustment of Rs. 1,30,00,000/- to the total income of the appellant (representing alleged arm's length interest on the interest-free loan granted by the appellant to its associated enterprise - Abacus Distribution Systems India Private Limited) corresponding deduction in tax assess....
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.....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 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 6 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; (iv). applicability of Article 24 of India-Singapore DTAA and interest income; and (v). transfer pricing adjustment of the interest on loan advanced to ASDIL. We are of the considered view that as the said issues had been adjudicated by us while disposing of the Grounds of appeal No(s) 1 to 5 of the assessee for A.Y 2005-06, viz. ITA No.4882/Mum/2015, therefore, the view therein 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 6 raised by the assessee in the present appeal ....
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....oresaid 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 being general in nature are dismissed as not pressed. 36. The appeal of the assessee is partly allowed in terms of our aforesaid observations. ITA No. 8479/Mum/2011 AY: 2007-08 35. We shall now take up the appeal of the assessee for A.Y. 2007- 08. 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 dated 11 October 2011 (received on 17 October 2011) 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 learned DDIT erred in assessing the to tal inco me of the appellant at Rs. 8,81,87,359/-. 2. Business connection I permanent establishment in India 2.1 The learned DDIT erred in holding that the appellant had a business connection in India in terms of th....
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....ting 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. 87,33,945/-). 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 transfer pricing adjustment of Rs. 1,43,70,292/- under section 92CA(4), in respect of the international transaction entered into by the appellant during the year ended 3 1 March 2007. 6.2 The learned DDIT 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. 12,40,95,790 /- by the appellant to ADSIL. 6.3 The learned DDIT erred in not appre....
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....eal." 37. The Ground of appeal No. 1 raised by the assessee wherein the assessee had assailed the income assessed by the A.O at Rs. 8,81,87,359/-, being general in nature is dismissed as not pressed. The Ld. A.R adverting to the Grounds of appeal No(s).2 to 6, submitted that the issues and the facts remained the same as were raised by way of 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 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 6 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; (iv). applicability of Article 24 of India-Singapore DTAA and interest income; and (v). 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 5 of the assessee for A.Y 2005-06, viz. ITA No.4882/Mum/2015, therefore, ....
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....fication of the interest under Sec. 234D 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. 41. The Grounds of appeal No(s). 10 and11 being general in nature are dismissed as not pressed. 42. The appeal of the assessee is partly allowed in terms of our aforesaid observations. ITA No. 7400/Mum/2012 AY: 2008-09 43. We shall now take up the appeal of the assessee for A.Y. 2008- 09. 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 dated 26 September 2012 (received on 17 October 2012) passed by the Additional Director of Income-tax, (International Taxation) - 1, Mumbai (ADIT') for the aforesaid assessment year on the following among other grounds: 1. The learned ADIT erred in assessing the total income of the appellant at Rs. 9,80,54,487. 2. Business connection / permanent establishment in India 2.1 1 T he le arne d AD....
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.... Reimbursement of expenses 4.1 The learned ADIT erred in holding that the expenses reimbursed by ADSIL amounting to Rs. 5,33,50,529/- are part of business income of the appellant and thereby taxing 10% of the said amount (i.e. Rs. 53,35,053/-). 4.2 The learned ADIT 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. 4.3 The learned ADIT erred in observing that the appellant has not filed any vouchers or account statements related to reimbursement of expenses. 4.4 The learned ADIT / Dispute Resolution Panel erred in not accepting additional evidence with respect to reimbursement of expenses. 5. Applicability of Article 24 of India-Singapore DTAA The learned ADIT 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 ADIT erred in making a transfer pricing adjustment of Rs. 1,43,28,727/- under section 92CA(4), in respect of the internationa....
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....n 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 sections 234B and 234C for delayed payment of tax does not arise. 8.3 The learned ADIT erred in not following the judgment of the Bombay High Court in appellants own case for levy of interest under section 234B. 8. Each one of the above grounds of appeal is without prejudice to the other. 10. The appellant reserves the right to amend, alter or add to the grounds of appeal. 44. The Ground of appeal No. 1 raised by the assessee wherein the assessee had assailed the income assessed by the A.O at Rs. 8,81,87,359/-, being general in nature is dismissed as not pressed. The Ld. A.R adverting to the Grounds of appeal No(s).2 to 6, submitted that the issues and the facts remained the same as were raised by way of 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 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 6 raised by the assessee ....
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..../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. That as the levy of interest under Sec. 234C would be consequential to giving effect to our order by the A.O, therefore, he is directed accordingly. The Ground of appeal No. 8 is allowed in terms of our aforesaid observations. 47. The Grounds of appeal No(s). 9 and 10 being general in nature are dismissed as not pressed. 48. The appeal of the assessee is partly allowed in terms of our aforesaid observations. ITA No. 2120/Mum/2014 AY: 2009-10 49. We shall now advert to the appeal of the assessee for A.Y. 2009- 10. 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 dated 22 January 2014 (received on 3 February 2014) passed by the Assistant Director of Income-tax, ( International Taxation) - 1(1), Mumbai ('ADIT') f or the aforesaid assessment year on the following among other grounds: 1. The learned ADIT erred in assessing the total income of the appellant at Rs. 13,51....
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.... has withdrawn Circular no. 23 dated 23 July 1969 vide Circular no. 7/2009 dated 29 October 2009. 3.4 The learned ADIT / 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'). It is submitted that while deciding the issue on attribution of income, ITAT has not relied on Rule 10. 3.5 The learned ADIT / DRP erred in observing that if any deduction of commission can he claimed by the appellant, it can only be claimed against the revenue of Rs. 1,07,48,41,423/- from Indian operations and not against the income estimated by the ADIT at 10% of total revenue. 3.6 The learned ADIT / DRP erred in not following 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 ADIT erred in holding that the expenses reimbursed by ADSIL amounting to Rs. 8,38,76,045/- are part of business income of the appellant and the....
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....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. 5.8 Without prejudice to the above grounds, the appellant states that the learned ADIT erred in law by using prime lending rate instead of LIBOR for determining the arms length interest amount. 5. Short credit of TDS The learned ADTT erred in granting TDS credit for Rs. 93,65,712/- as against claim of Rs. 1,51,53,660/- in the return of income, leading to a short credit of TDS of Rs. 57,87,948/-. 1. Levy of interest under section 234B 7.1 The learned ADI[ erred in levying interest Rs. 2,76,60,550 under section 234B. 7.2 The learned ADIT 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 23413 for delayed payment of tax does not arise. 7.3 The learned ADIT erred in not following the judgment of the Bombay High Court in appellants ow....
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....rt credit of TDS of Rs. 57,87,948/-. 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. 6 was not pressed by him. We thus in the backdrop of the concession of the ld.A.R dismiss the Ground of appeal No. 6 as not pressed. 52. The assessee further by way of Ground of appeal No. 7 had assailed the levy of interest of Rs. 2,76,60,550/- 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. 7 raised by the assessee before us in the present appeal. The Ground of appeal No. 7 is allowed in terms of our aforesaid observations. 53. The assessee had by way of Ground of appeal No. 8 claimed that the A.O had e....
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.... in holding that the appellant has a fixed place of business in India. 2.4 The learned ADIT erred in holding that the appellant maintains telecommunication network in India through which messages are transmitted. 2.5 The learned DCIT erred in observing that the appellant carries out its activities of Computerized Reservation System (CRS) through the Abacus Country Node located in India which is under the management and control of the appellant. 2.6 The le arned DCIT erre d in observ ing that ADSIL secures business f or the appellant by entering into subscription agreement with the travel agents and this activity is habitually, wholly and exclusively performed by ADSIL f or the appellant. The learned DCIT further erred in holding that ADSIL constitutes agency PE in terms of India-Singapore DTAA. 2.7 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. 72,95,63,237/- as income attributable to the PE in India and computing the income liable to tax ....
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....art 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. 5. Transfer pricing adjustment 5.1 The learned DCIT erred in making a transfer pricing adjustment of Rs. 1,54,09,713/- under section 92CA(4), in respect of the international transaction entered into by the appellant during the year ended 31 March 2010. 5.2 The learned DCIT while determining the arm's length interest rate erred in not appreciating the business and economic circumstances prevailing at the time of providing the interest free loan of Rs. 12,88,91,940/- by the appellant to ADSIL in the proper perspective. 5.3 The learned DCIT erred in not appreciating / considering that in respect of the adjustment of Rs. 1,54,09,713/- 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 er....
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....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 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 term....
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....15) passed by the Deputy Commissioner of Income-tax, (International Taxation) - 1(1)(1), Mumbai [DCIT] for the aforesaid assessment year on the following among other grounds: 1. The le arned DCIT erre d in assessing the to tal inco me of the appe llant at Rs. 8,96,95,213/-. 2. Business connection/permanent establishment in India 2.1 The learned DCIT erred in holding that the appellant had a business connection in India in terms of the Act and a permanent establishment [PE] in India in terms of the India-Singapore Double Taxation Avoidance Agreement [DTAA]. 2.2 The learned DCIT erred in holding that the appellant has a fixed place of business in India. 2.3 The learned DCIT erred in holding that the appellant maintains telecommunication network in India through which al l the messages are transmitted. 2.4 The learned DCIT erred in observing that the appellant carries out its activities of Computerized Reservation System [CRS] thro ugh the Abacus Country Node located in India which is under the management and control of the appellant. 2.5 The learned DCIT erred in observing that ADSIL secures business for the appellant by entering into subscription agreement with the tra....
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....66,599/-). 4.2 The learned DCIT erred in not appreciating that the reimbursement of expenses were towards expenses incurred by the appellant on airfare transaction charges, other expenses, and foreign travel and in the nature of pure reimbursement not having any element of income/service. 4.3 Without prejudice to the above, the learned DRP/DCIT erred in not following the decision of the ITAT in appellant's own case for AY 2004-05 wherein it is held 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. commission and marketing fees paid to ADSIL) is sufficient to absorb its income. 5. Transfer pricing adjustment 5.1 The learned DCIT erred in making a transfer pricing adjustment of Rs. 1,58,69,765/- under section 92CA(4), in respect of the international transaction entered into by the appellant during the year ended 31 March 2011. 5.2 The learned DCIT while determining the arm's length interest rate erred in not appreciating the business and economic circumstances prevailing at the time of providing the interest free loan of Rs. 12,88,91,940/- by the....
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.... levy of interest under section 234B of the Act. 10. Adjustment of refund and interest on refund 10.1 The learned DCIT erred in adjusting a sum of Rs. 1,88,84,449/- as refund already issued, without appreciating the fact that no such refund has been issued to the appellant. 10.2 The learned DCIT erred in adjusting a sum of Rs. 20,77,284/- as interest on refund already issued, without appreciating the f act that no such ref und or interes t thereon has not been issued to the appellant. 11. Levy of interest under section 234D 11.1 The learned DCIT erred in levying interest of Rs. 35,63,495/- under section 234D of the Act. 12. Each one of the above grounds of appeal is without prejudice to the other. 13. The appellant reserves the right to amend, alter or add to the grounds of appeal. 65. 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 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....
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....al No. 8 assailed the levy of interest of Rs. 3,78,374/- under Sec. 234A. However, at the time of hearing of the appeal it was submitted by the ld. A.R 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. 8 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. 8 as not pressed. 69. The assessee by way of Ground of appeal No. 9 had assailed the levy of interest of Rs. 1,07,83,659/- under Sec. 234B. However, at the time of hearing of the appeal it was submitted by the ld. A.R that as the A.O had vide his order passed under Sec. 154 of the Act, dated 20.03.2017 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. 70. The assessee had by way of Ground of appeal No. 10 claimed that the A.O had erred in adjusting a sum of Rs. 1,88,84,449/ as refund already issued, and a further amount of Rs. 20,77,284/- towards interest on refund, while for the fact was that no such r....