TaxTMI 
TaxTMI 
2019 (10) TMI 302
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.... with Section 144C(13) of the Act ('Assessment order'), in pursuance of the directions issued by the Dispute Resolution Panel - 1 ('Hon'ble DRP'), Mumbai. On the facts and in the circumstances of the case and in law, the learned AO based on the directions of Hon'ble DRP has: Wrong determination of the total taxable income of the Appellant 1. erred in determining the total income of the Appellant at Rs. 6,52,66,290/- as against 'Nil' income declared in the return of income filed by the Appellant for the subject AY; Non-taxability of the income earned by the Appellant as 'royalty' income 2. erred in holding that the income received by the Appellant From provision of software solutions to Celltick Mobile Media (India) Private Limited ('Celli.ick India') for onward distribution to third party customers in India is taxable in India as 'royalty' income under Section 9(1)(vi) of the Act; 3. erred in holding that the income received by the Appellant from provision of software solutions to Celltick India for onward distribution to third party customers in India is taxable in India as 'royalty' income under th....
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....without admitting) that the Appellant has a DAPE in India; 9. erred in attributing further income to the alleged DAPE, without appreciating the fact that the alleged DAPE has been compensated at an arm's length price; 10. erred in attributing 50 percent of the gross revenues of the Appellant as being attributable to the alleged DAPE in India, on an arbitrary and ad-hoc basis, without appreciating the fact that additional attribution of 50 percent of the gross receipts of the Appellant from Celltick India would tantamount to a total attribution of 75 percent of the gross revenues to the alleged DAPE in India; 11. erred in estimating the profits of the alleged DAPE of the Appellant at 40 percent of the gross revenues of the Appellant, on an arbitrary and ad-hoc basis without appreciating the global f inancial loss position of the Appellant for the subject year under consideration: Initiation of penalty proceedings under Section 271(1)(c) of the Act 12. erred in initiating penalty proceedings under Section 271(1)(c) of the Act, on the ground that the Appellant has concealed and furnished inaccurate particulars of its income. Each of the above ground is independent a....
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....essee during the year had earned income from provision of its software solutions to M/s Celltick Mobile Media (India) Pvt. Ltd. for onward distribution to third party customers in India. The A.O held a conviction that the amount received by the assessee from providing the software solutions to its third party customers in India constituted sale of copyright right, and not sale of a copyrighted article. Accordingly, the A.O concluded that the amount of Rs. 16,31,65,734/- that was received by the assessee from the provision of software solutions to the telecom operators in India was towards 'royalty' both as per the provisions of the I-T Act and the India-Israel tax treaty. Further, the A.O was of the view that M/s Celltick Mobile Media (India) Pvt. Ltd. was the dependant agent PE of the assessee in India. As such, the A.O being of the view that the assessee had generated the revenue from provision of software solutions to its third party customers in India with the joint efforts of its PE in India viz. M/s Celltick Mobile Media (India) Pvt. Ltd., thus, attributed 50% of the total receipts of the assessee to the said Indian PE. Further, in absence of any specific details, the A.O all....
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....on of its software solutions to M/s Celltick Mobile Media (India) Pvt. Ltd. for onward distribution to third party customers in India did not constitute 'royalty' under the India-Israel tax treaty; (ii) that, the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. ltd. was not working as a dependant agent PE of the assessee in India; and (iii) alternatively, as 50% of the receipts from the customers that was paid by the assessee to its Indian subsidiary viz. M/s Celltick Mobile Media (India) Pvt. Ltd., was reported by the latter as an international transaction within the meaning of Sec.92B, which on a reference to the TPO was accepted as being at 'arms length', therefore, no further income was attributable to the said Indian subsidiary. The ld. A.R further took us through the Distribution agreement between the assessee and M/s Celltick Mobile Media (India) Pvt. Ltd., as per which 50% of the gross amount received by the assessee from the customers which had contracted with M/s Celltick Mobile Media (India) Pvt. Ltd. was to be paid to the latter. It was averred by the ld. A.R that now when the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media ....
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..... D.R that the assessee had not shown any basis as per which the profitability and income attribution was to be estimated. In support of his aforesaid contention the ld. D.R took us through the relevant observations of the DRP. It was further averred by the ld. D.R that FAR analysis in the case of the Indian subsidiary viz. M/s Celltick Mobile Media (India) Pvt. Ltd. was not done by the TPO during the year under consideration. 8. The ld. A.R rebutted the contentions advanced by the counsel for the revenue. The ld. A.R further took us through the assessment order wherein Rule 10 was reproduced. Further, it was submitted by the ld. A.R, that a perusal of the 'APA' revealed that the revenue had accepted that the functions carried out by M/s Celltick Mobile Media (India) Pvt. Ltd. were to be remunerated at a specific percentage. Accordingly, it was submitted by him that as the assessee during the year under consideration i.e A.Y 2014-15 had shown income in excess of that as was worked out on the basis of the APA, therefore, no adverse inferences were liable to be drawn in its hands. It was submitted by the ld. A.R that he was confining his contention only as regards his alternative c....
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....hat the assessee had a PE in India. In sum and substance, it is the claim of the assessee that now when during the year the Indian subsidiary of the assessee viz. M/s Celltick Mobile Media (India) Pvt. ltd. as in A.Y. 2012-13 was remunerated by the assessee on a sharing of the amounts realised from its ultimate customers on 50:50 basis, therefore, in the absence of any change in the FAR analysis and the overall functions of the Indian subsidiary viz. M/s CElltick Mobile Media (India) Pvt. Ltd which remained the same, it could safely be concluded that the profit attributed to the Indian subsidiary viz. M/s Celltick Mobile Media (India) Pvt. Ltd. during the year under consideration duly satisfied the 'arms length' principle. We find that the issue that where the attribution of profits to the Indian subsidiary of the assessee i.e M/s Celltick Mobile Media (India) Pvt. ltd. was found to be adequate and justified on the basis of the transfer pricing analysis, then, no further income could be attributed to it is squarely covered by the order of the Tribunal in the assesses own case for A.Y 2012-13. The Tribunal while disposing off the appeal of the assessee for A.Y. 2012-13, had observed....
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....assessment made in the case of the Indian subsidiary. In that case too, in the case of the Indian subsidiary, the transaction with the foreign assessee was accepted to be at an arm's length price. Accordingly, it was held by the Hon'ble Supreme Court that the 'arm's length principle' stood satisfied and, therefore, no further profits could be attributable even if there existed a PE of the foreign assessee in India. In our considered opinion, the manner in which the proposition has been applied by the Hon'ble Supreme Court in the case of E-Funds IT Solution Inc. (supra) is clearly attracted in the present case too. In the present case also, the transactions of the assessee with its Indian subsidiary, i.e. Celltick India, have been found to be at an arm's length price by the income-tax authorities in the case of the Indian subsidiary, i.e. Celltick India for the instant assessment year. 8. In view of the aforesaid discussion, in our view, since the appropriate 'arm's length principle' has been satisfied in the present case, nothing more would be left to be taxable in India by attributing any further income to the PE of the assessee in India. Therefore, the point raised by ....