TaxTMI 
TaxTMI 
2019 (5) TMI 1710
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....ofits of the PE in India. 2. At the outset, it would relevant to mention here that, in assessee's own case this Tribunal in the appeals for the assessment years 1997-98 to 2000-01; and assessment years 2002-03 and 2003-04, the issue of PE has been decided against the assesse and also the issue of attribution of profit, which matter had also travelled up to the Hon'ble Delhi High Court and by and large the order of the Tribunal has been upheld. However, before us the learned counsel for the assesse, Mr. Percival Billimoria submitted that not only the facts and circumstances have changed but also now there are judicial principles laid down by the Hon'ble Supreme Court on the concept of PE. Before we discussed the arguments put forth by both the parties it would be relevant to capture the background and brief facts of the case. 3. Rolls Royce Plc (herein referred to as assessee or RRPL), is a UK based company, which has a wholly owned subsidiary, Rolls Royce International Ltd., which in turn has another wholly owned subsidiary, Rolls Royce India Ltd. (herein referred to as RRIL). Both these subsidiaries are also incorporated in UK, There exists a service agreement between Rolls ....
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....ut is a core activity of marketing, negotiating, selling of the product. This is a virtual extension/projection of its customer facing business unit, who has the responsibility to sell the products belonging to the group. iii) RRIL acts like a sales office of RRPlc and its group companies. iv) RRIL and its employees work wholly and exclusively for the Rolls Royce Pic and the Group. v) RRIL and its employees are soliciting and receiving orders wholly and exclusively on behalf of the Rolls Royce Group. vi) Employees of Rolls Royce Group are also present in various locations in India and they report to the Director of RRIL in India. vii) RRIL and its employees are also service permanent establishment of Rolls Royce Plc and group. viii) The personnel functioning from the premises of RRIL are in fact employees of Rolls Royce Plc. This has been admitted by the M.D. Mr. Tim Jones, G.M., Mr. Ajit Thosar and documents like terms of employment of G.Ms." 4.1 Thus, it was concluded that office of RRIL in India was PE of RRPL under Article 5(2)(f) of India-UK DTAA and also under Article 5(2)(k). Accordingly, Assessing Officer computed the....
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....E of RRIL under MAP in terms of treaty. Thus, when the same activities evidenced by the same set of facts cannot give rise to two separate PEs, and if any attribution has been finalized from that particular PE, then no profit should be attributed once again in the hands of the assesse also. In sum and substances, the crux of his argument is that, firstly, RRPL cannot be said to have PE in India as it is purely making sale from outside India; Secondly, LO was never at disposal of RRPL for any of its activities or for its employees; thirdly, there is no DAPE in the form of LO; fourthly, without prejudice, same activities arising from same set of facts cannot give rise to 2 PEs, i.e., one PE of RRPL and then other PE for RRIL; and lastly, attribution of PE of RRIL has already attained finality under MAP resolution for the same assessment years, therefore, the same PE cannot be taxed again in the hands of RRPL. He also laid emphasis to demonstrate that the alleged PE of RRPL has been considered PE of RRIL by the department from the orders of the Ld. CIT(A) in the case RRIL, who has independently recorded a finding of PE of RRIL in India, based on the same activities, relying on the sam....
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....hat same cannot be accepted, because it was never the case of the Revenue that RRIL and RRPL are same or one entity and the attribution of profit of RRIL has nothing to do with RRIL. The facts and finding recorded by the Tribunal in the case of the assessee for attribution of profit of PE, has been highlighted by him in the following manner: "A. Taxation in the hands of RRPIc - ITAT order dt.26/10/07 for RRPIc [p.76-10S of PB-2 for A.Y. 2004- 05] * The Support services requested by Rolls-Royce International [RRIL] & performed by Rolls Royce India Ltd. [RRIL]. [para-19, p.91] * The activity of this fixed place is a core activity of marketing, negotiating, selling of the product belonging to the group. [p.102] * 35% of Global Profits in respect of sales effected in India attributed to PE [i.e. marketing activities only; p.105] ITAT order dt.30/01/09 for RRPIc [MA][p. 106-114 of PB-2 for A.Y. 2004-05] * Claim by assessee - Since agent of the assessee namely RRIL is remunerated in terms of agreement with it, and the AO/TPO has also attributed profit to the PE in the form of dependent agent, namely RRIL, no further income is....
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....t enterprise. For the functions performed by the assessee directly and also the risk assumed by the non- resident in India, no remuneration is payable to the agent in India. The services rendered by agent in India is much more than expected of it in terms of the agreement and obviously for which the agent is not remunerated. Therefore, even in terms of Hon'ble Supreme Court's decision in such, a case there would be need to attribute profits to the P.E. for those functions/risks that have not been considered. In the order, the Tribunal have also considered that the P.E. in India is not only because of the dependent agent's presence in India but also because of fixed place as per Article 5(1) and also in terms of Article 5(4)(c) of the Treaty. The extinguishment as propounded as per Circular 23 of 1969 or as held by the Hon'ble Supreme Court in Morgan Stanley & Co. Inc. (supra) will apply only where the profit attributable to the non-resident is only to the extent of remuneration payable by the non-resident to the agent. Therefore, the assessment in the present case will not extinguish and the income will be computed on the basis of finding given in Para 24 of the ord....
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....C, para16; p.122] RRIL has the responsibility to sell the products belonging to the group. [HC, para16; p.122] RRIL acts like a sales office of RRPlc & its group companies. [HC, para16; p.122] RRIL and its employees work for RRPIc& the Group. [HC, para16; p.122] RRIL solicit & receive orders on behalf of RR Group. [HC, para16; p.122] Employees of RR Group are present and report to RRIL. [HC, para16; p.122] RRIL is compensated on the basis of agreement between RRIL & RRlnt. [TPO, p. 2 of PB-2 for A.Y. 2004-05] TP adjustment in respect of international transactions with RRlnt. [TPO, p. 2 of PB-2 for A.Y. 2004-05] As can be seen, RRIL "provides commercial information service and marketing support service to Rolls Royce International Ltd." It is the functions carried on by RRIL vis-a-vis its service agreement with RRlntl which was the subject matter of TP adjustments. RRIL was never subjected to taxation w.r.t. any services it had provided to the assessee RRPlc." 9. In so far as the pleadings of the Ld. Counsel for the assessee that attribution of profit stands settled by MAP in the case of RRIL, he submitted MA....
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.... Supreme Court as informed by the Ld. Counsel, therefore, as a matter of judicial precedence, we cannot take a different view and decide the issue a fresh taking any other view. Another set of argument placed by the ld. counsel before us is that the PE of assessee was in fact liaison office of RRIL in India, which is separately assessed to tax in India and its profit and taxability now has attained finality in the form of agreement under MAP. It was also submitted that notwithstanding whether there is any independent PE of assessee in India or not, but the same activities arising from the same set of facts as alleged by the Revenue cannot give rise to two PEs, i.e., one PE for the assesse and another PE for RRIL. To canvass this point the ld. counsel has drawn our attention to the various findings of ld. CIT(A) in the case of RRIL and remand report of AO as contained in the appellate order dated 15.02.2009. He has pointed out that in the said order the ld. CIT(A) has relied upon same contents of report of survey conducted at the LO office of RRIL and exactly the same material has again been used in the case of the assessee also; and therefore, for the same activity there cannot be ....
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.... same activity, profit attribution has been agreed upon in MAP, therefore, no separate attribution can be made in the hands of the assesse, we are unable to accept the contention of the ld. Counsel, because there is huge difference between the activities of RRIL and RRPL. Though, same set of material and documents have led the revenue for holding LO as PE of RRIL and also of RRPL. But, if there is no interlacing of activities of two entities, then activity of one entity cannot result into PE of another entity, because to establish a PE the business carried out by a foreign entity alone should be taken into consideration. Here in this case if it has been found by the Tribunal that independently also the activity of assessee was somehow linked with LO, therefore, no interference can be made and since this issue has been decided against the assesse we do not find any reason to go into further deep analysis and form a different view, because there is no material change in facts and circumstances. RRIL activities was carrying out sales and marketing in India for RR International and nothing has been produced before us to show that these activities were also assessed as business PE on a ....