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2021 (5) TMI 477
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....ing signed by the assessee's Indian associated enterprises, namely GIA India Laboratory Pvt Ltd, with the Central Board of Direct Taxes, in terms of which a part of the royalty received by the assessee company from its Indian AE had to refund to the Indian AE. As learned representatives fairly agree, the short question requiring our adjudication, on this point, is whether the amount so refunded by the assessee company to its Indian AE, in terms of the APA terms, can still be taxed in the hands of the assessee company as its income. As learned representatives fairly agree, that is the core issue requiring our adjudication, even though learned CIT(DR) puts it rather differently as whether, given the framework of law on transfer pricing, any such adjustment in royalty income can be allowed to the assessee as a result of an APA to which the assessee is not even a party. Whichever way one looks at it, the core issue really is whether or not the quantification of royalty income in the hands of the assessee will stand reduced by the refund granted by the assessee tin terms of the APA that the assessee's AE has entered into with the CBDT. Revenue is fiercely resisting this claim, for the r....
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....rtain issues with regard to the manner in which the said income is to be taxed as the stand of the authorities below has been that the assessee had a permanent establishment of the assessee in India, and the royalties so offered to tax, being attributable to such a permanent establishment, are liable to be taxed on a net basis under article 7 of the Indo US tax treaty. While we are not really concerned with the merits of that aspect of the matter as of now, suffice to note that, as a result of these disputes, the assessment of income is yet to reach finality. 5. In the meantime, GIA India reached out to the Central Board of Direct Taxes for an Advance Pricing Agreement (APA), under section 92CC, in respect of, inter alia, the above transactions. 0n 7th May 2018, the APA was finally entered into between the GIA India and the CBDT. This APA was for five consecutive previous years, namely financial period ended 31st March 2014, 2105, 2016,and 2017, it also covered, as a rollback period, four consecutive preceding previous years as well i.e., financial periods ended 31st March 2010, 2011,2012 and 2013. This agreement, under clause 12(a) thereof, was to "cease to be binding on parties,....
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....e to be included in the modified return in this respect has been included in Appendix IV to this agreement based on the information furnished by the applicant. 7. It was in this background that the 'year-wise working of the royalty payable and the adjustment amount based on the working given by the applicant' was set out in Appendix IV of the said APA, and the relevant portion of the working was as follows: The assessment year 2011-12 Sr. No. Particulars FYE March 2011 F 46.5:53.5 Split (including Management Fees and excluding Royalty) i) For India (C * % ) 426,669,616 426,669,616 ii) For US (C * % ) 490,899,451 490,899,451 G Royalty (%) H 1) As per the 46.5 : 53.5 Split [= F (ii)/A] 25.51% ii) Actual paid ( = D / A ) 35.62% Primary Adjustment i) Actual Royalty (= D) 685,346,239 685,346,239 ii) Royalty as per Split [= F (ii)] 490,899,451 490,899,451 Primary adjustment (H) = [(i) -(ii)] 194,446,788 &nbs....
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....) = [(i) -(ii)] 502,003,212 502,003,212 The assessment year 2015-16 Sr. No. Particulars FYE March 2015 F 46.5:53.5 Split (including Management Fees and excluding Royalty) i) For India (C * % ) 1,601,310,544 1,601,310,544 ii) For US (C * % ) 1,842,368,046 1,842,368,046 G Royalty (%) H 1) As per the 46.5 : 53.5 Split [= F (ii)/A] 35.28% ii) Actual paid ( = D / A ) 55.29% Primary Adjustment i) Actual Royalty (= D) 2,887,140,778 2,887,140,778 ii) Royalty as per Split [= F (ii)] 1,842,368,046 1,842,368,046 Primary adjustment (H) = [(i) -(ii)] 1,044,772,732 1,044,772,732 The assessment year 2016-17 Sr. No. Particulars FYE March 2016 F 46.5:53.5 Split (including Management Fees and excluding Royalty) i) For India (C * % ) 146,74,52,579 53,71,52,579 ii) For US (C * % ) 1,68,83,59,419 1,68,83,59,4....
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....,448 348,35,96,482 249,39,39,966 Total refund by the assessee to Indian AE, under the APA 586,67,93,216 9. The assessee now claims that the amounts so refunded by the assessee, to its AE in India- namely GIA-India, be reduced from the computation of its income from the royalties. So far as the assessment year 2017-18 is concerned, the claim for reduction in income has been accepted at the assessment level itself, and, in any event, we are not dealing with that assessment year in this bunch of appeals. In the first three assessment years before us, i.e., assessment years 2011-12, 2012-13, and 2013-14, this grievance is raised before us by way of additional grounds of appeal, and in the remaining assessment years, i.e., assessment years 2014-15, 2015,16 and 2016-17, this grievance was raised before the Dispute Resolution Panel. The Dispute Resolution Panel, however, rather summarily rejected the claim so made, and the brief observations made by the Dispute Resolution Panel in this regard, barring the necessary changes in the amount involved, are as follows: Discussions and Directions of the DRP: We have examined the claim of the assessee that the royal....
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....of this additional ground nevertheless. Learned senior counsel for the assessee once again prays, on merits, for admission of this ground of appeal. He submits that this additional grounds of appeal has arisen because of subsequent developments and could not have been, therefore, raised earlier, that it involves a substantial legal issue which goes to the foundational aspect of quantification of income, and that it deserves to be admitted by us, in the light of the well settled legal position- particularly as laid down by Hon'ble Supreme Court in the case of NTPC Vs CIT (229 ITR 383). It is submitted that the additional ground in question is raised bonafide. Learned CIT(DR) seriously oppose the admission of additional ground, and submits that quantification of the royalty income is as per the voluntary information furnished by the assessee in the return of income, and it cannot be revisited at this stage. It is also submitted that the relevant facts are not on record. He also submits that the case of the assessee prima facie lacks any merits. Learned CIT(DR), however, does submit that in the event of admitting additional grounds of appeal, he should ideally remit the matter to the ....
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....sessment year 2011-12, and, therefore, it has to relate back to that assessment year. The royalty income for the assessment year 2011-12, which can be taxed in the hands of the assessee, is only Rs. 49,08,99,451. It was contended that by virtue of the APA, the fundamentals of the transactions between GIA India Lab and the assessee had undergone a change with the approval of the CBDT and the royalty which is payable by GIA India Lab and the only amounts which are receivable by the assessee are Rs. 49,08,99,451. It was contended that income can be said to accrue to the assessee only when the assessee has an indefeasible right to receive the same, and that in view the APA between GIA India Lab and CBDT, the appellant has a right to receive only Rs. 49,08,99,451 and not Rs. 68,53,46,239. It is contended that what can be brought to tax is the real income of an assessee and not hypothetical and notional income. Reliance was placed on the decision of the Hon'ble Supreme Court in CIT vs. Bokaro Steel Ltd. (236 ITR 315) which refer to the decision in the case of Godhra Electricity Co. Ltd. vs. CIT (225 ITR 746). Reliance was also placed on the decision of the Bombay High Court in the case....
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....e effect of varying and altering the transaction and not varying the ALP of the transaction. Therefore, it is submitted that the corresponding benefit of an agreed amount ought to be given to the AE in case of APA. Our attention is invited to the decision of the Bangalore Bench of ITAT in the case of ACIT vs. EYGBS India Pvt. Ltd. [ITA No 2984/Bang/2018], a copy of which was placed before us, in which an APA was entered into whereby an upward ALP adjustment of Rs. 8,66,80,000 was made to the income received by the assessee, and it was held that the prohibition contained in the first proviso to section 92C(4) would have no application to a case of APA. Similarly, it is submitted that the prohibition contained in the second proviso would also not have any application in the case of APA. On the strength of these submissions, learned counsel submits that only the net amount, i.e. originally billed royalty amount- as reduced by the refunds in terms of the APA arrangement, should be brought to tax in the hands of the assessee. In other words, the amounts refunded by the assessee, as mandated by the terms of the APA with assessee's AE, should be excluded from the income taxable in the ha....
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....etermination of the arm's length price paid to another associated enterprise from which tax has been deducted or was deductible under the provisions of Chapter XVIIB, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm's length price in the case of first mentioned enterprise". The Ld AR has relied on the decision of the Hon'ble ITAT in the case of EYGBS to contend that section 92C(4) does not fetter the claim pursuant to the APA. It is submitted that facts in that case were different. It was a case of the same tax payer and not the other AE. Further, it was held that section 10AA does not restrict the claim and is worded widely to not be constrained by section 92C(4). It is humbly submitted that the reliance on this decision is misplaced in the facts of the assessee. 6. Your kind attention is drawn to section 92CE brought on the statute by the Finance Act 2017 w.e.f. 2018. This section which specifically deals with and permits the secondary adjustment, in Sec. 92CE(1)(iii) refers to the primary adjustment determined by the Advance Pricing Agreement entered into by the assessee u/s 92CC on or after 01.04.2017. In the prese....
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....are the subject matter of APA falls under section u/s 92CC. Thus the determination under APA are nothing but transfer pricing adjustments based on ALP. 8. It was open to the assessee to join as a party to APA which it chose not do so. The APA has no binding force on assessee GIA Inc. It is up to the assessee whether to remit any funds to the Indian Party to the APA, which is a voluntary act on its part, but this has no bearing on the claim for reduction of income in the return of income filed since the APA is not binding on the assessee. In fact, the APA in Appendix-II para 5.3, does recognized and envisage a situation where the applicant GIA India can chose not to raise any invoice on the assessee GIA Inc, in previous years, for receiving back of payment made by it. In this case, certain additional income has been offered for which the formula has been specified. This again shows that invoice is raised by GIA India on GIA Inc , if any, the acceptance by the assessee GIA Inc is a voluntary act. 9. Further, in para 5.4 of the Appendix-I it is stipulated that no downward adjustment is required if the payment actually made by GIA India is less than that required as per the APA a....
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.... primary adjustment to the transfer price is determined by an APA entered into by the assessee u/s. 92CC on or after 01 April 2017, the assessee shall make a secondary adjustment. Thus, the primary as well as the secondary adjustments are to be made in the case of the same assessee. In other words, if section 92CE were to be applied post 1st April 2018, the question of making any secondary adjustment could only arise in the hands of GIA India Lab and not in the hands of the assessee. A reading of sub-section (2) of section 92CE shows that the secondary adjustment, which is envisaged in section 92CE(3)(v) is where, as a result of the primary adjustment, there is an increase in total income of the assessee (GIA India Lab) and the excess money is not repatriated to India by its AE (i.e. GIA US) within the prescribed time, such excess is to be deemed to be an advance made by GIA India to GIA US and the interest on such advance is required to be computed in the prescribed manner. In the instant case, the excess money has been repatriated by GIA US to the GIA India Lab and therefore there can be no question of any secondary adjustment. 14. We were thus urged to uphold the plea of the ....
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....he associated receipts of royalties from GIA India. In the period relating to the assessment year 2011-12, for example, the assessee had received Rs. 68,53,46,239 as royalties from GIA India, but since the assessee was bonafide called upon to refund Rs. 19,44,46,788, the actual income of the assessee, on account of royalty received from GIA India, was only Rs. 49,08,99,451. Any part of royalty receipt, which had to be bonafide refunded to the payer of the royalty, cannot be taxed in the hands of the assessee as this money did not eventually belong to the assessee. It is also important to note that corresponding refund to the GIA-India has been shown as an income of the GIA-India, and offered to tax as such, by way of a modified return in consequence of the APA, as were the terms of critical assumption 5.1 reproduced earlier which required that the GIA India "shall raise an appropriate invoice on the AE to recover the aforesaid excess payment made and show the respective excess amounts as additional income in the modified return of the respective years". There was also a time limit granted to carry out this exercise inasmuch as under critical assumption 5.2, it was provided that "(f....
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....an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the powers of the AAC in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the ITO. The Court went on to further observe that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The AAC must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reason. The AAC should exercise his discretion in permitting or not permitting the assessee to raise additional ground in accordance with law and reason. The issue was again considered by the Apex Court in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 3832 . It was observed that the observations made in Jute Corpn. of Ind....
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.... in the quantum of royalty income is on account of this factor of actual reduction in income, and that is a reality- dehors the APA. Whether it happened on account of APA, or it was to happen otherwise, the fact remains that there is a reduction of royalty income in the hands of the assessee. And, if there is a reduction in royalty income, what should be brought to tax is only the actual, i.e., reduced, royalty income. Learned CIT(DR) has contended that since the claim of the assessee is in the nature of secondary adjustment since it pertains to the associated enterprise as a result of the primary adjustment, but proviso to sec. 92C(4) lays down the principle that "that where the total income of an associated enterprise is computed under this sub-section on the determination of the arm's length price paid to another associated enterprise from which tax has been deducted or was deductible under the provisions of Chapter XVIIB, the income of the other associated enterprise shall not be recomputed by reason of such determination of arm's length price in the case of first mentioned enterprise." In other words, according to the learned CIT(DR), merely because arm's length price of royal....
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.... therefore, necessary to briefly deal with the scope and impact of Section 92CE so far as the fact situation before us is concerned. 19. Section 92 CE, as introduced by the Finance Act 2017 w.e.f. 1st April 2018, provides that where a primary adjustment to transfer price has been made suo motu by the assessee in his return of income, made by the Assessing Officer has been accepted by the assessee, is determined by an advance pricing agreement entered into by the assessee under section 92CC, on or after the 1st day of April, 2017, is made as per the safe harbour rules framed under section 92CB; or is arising as a result of the resolution of an assessment by way of the mutual agreement procedure under an agreement entered into under section 90 or section 90A for the avoidance of double taxation, the assessee "shall" make a secondary adjustment. This provision, however, does not apply where primary adjustment does not exceed Rs. 1,00,00,000 or where primary adjustment is made in respect of an assessment year prior to the assessment year 2016-17. The way in which secondary adjustment works is like this. Where as a result of a primary adjustment to the transfer price, there is an incr....
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....scribed. 45.5 It is also further provided that such secondary adjustment shall not be carried out if, the amount of primary adjustment made in the case of an assessee in any previous year does not exceed one crore rupees or the primary adjustment is made in respect of an assessment year commencing on or before 1st April, 2016. 45.6 Applicability: This amendment takes effect from 1st April, 2018 and will, accordingly, apply from assessment year 2018-19 and subsequent years. [Emphasis, by underlining, supplied by us] 20. Quite clearly, Section 92CE is in the nature of an additional obligation on the assessee to either repatriate back to India the excess payment made (i.e. actual payment minus the arm's length price) or to pay additional income tax @ 18% thereon. The secondary adjustment under section 92CE is thus not in a vacuum but in the light of the corresponding obligation to either repatriate back that amount to India or pay additional income tax thereon. While proviso to Section 92CE(1) does clarify that the above provisions do not apply where primary adjustments are less than Rs. 1 crore or where primary adjustments are made in respect of an assessment year prior to 20....
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....tment' means "an adjustment in the books of account of the assessee and its associated enterprise to reflect that the actual allocation of profits between the assessee and its associated enterprise are consistent with the transfer price determined as a result of the primary adjustment, thereby removing the imbalance between a cash account and actual profit of the assessee." It is, therefore, not correct to say that when an APA requires an assessee to raise debit notes or invoices on its AE abroad, it is open to the AE abroad to ignore those invoices or debit notes and continue with computation of its income dehors these invoices or debit notes, because the said AE is not a party to the APA. The AE may not be party to the APA, yet the impact of the terms of the APA has to be taken note of when these terms affect the AE. That's a reality and cannot be wished away. We, therefore, reject this objection raised by the learned CIT(DR) as well. As for learned CIT(DR)'s observation that "the second proviso to section 92CE(1) stipulates that no refund of taxes paid could be claimed or allowed", which suggests that no refund of taxes paid could be claimed or allowed as a result of the seconda....
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....called into question. None of the objections taken by the DRP or raised by the learned CIT(DR), for the detailed reasons, set out above, really impresses us. 21. In view of the above discussions, as also bearing in mind the entirety of the case, we are of the considered view that, in principle, the claim of the assessee deserves to be accepted. However, as learned CIT(DR) rightly points out, factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. 22. Let us now pick up all the six appeals one by one and take up the grounds of appeal raised therein. 23. We, therefore, begin by taking up the ITA No. 386/Mum/2016, i.e. the appeal filed by the assessee for the assessment year 2011-12. By way of this appeal, the assessee appellant has challenged correctness of the order dated 16th December 2015, passed by the Assessing Officer under sec....
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....the coordinate bench, in assessee's own case for the immediately preceding assessment year i.e. 2010-11, wherein the coordinate bench has observed as follows: 9. We have carefully considered the rival submissions, perused the relevant material, including the orders of the lower authorities as well as the case laws referred at the time of hearing. Notably, the controversy before us primarily revolves around as to whether or not the subsidiary of the assessee company i.e., GIA India Lab can be construed as its PE in India. The income-tax authorities have invoked section 9 of the Act and/or Article 5 of the India-US Treaty in order to say that the assessee company has a PE in India. On the contrary, as per the assessee, the impugned receipts are in the nature of business profits, and in the absence of any PE in India, the same are not taxable in India. Factually speaking, it is evident that the on perusal of the agreements, the transaction of grading services between assessee company and GIA India Lab cannot be considered to be in the nature of a joint venture, since GIA India Lab has its own independent expertise but only due to its technology/capacity constraints, it forwards th....
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....partment had contended that the foreign company had a joint venture or partnership with Indian subsidiary as the businesses of the assessee company and the Indian subsidiary were inter-linked and closely connected (which is also contended in the case of the assessee before us) and therefore the Indian subsidiary was regarded as PE of foreign company in India. The aforesaid argument of the Revenue was repelled since the conditions under Article 5 of the DTAA were not met and it has been held that PE cannot be established merely because of transactions between associated enterprises or the principal sub-contracting or assigning the contract to the subsidiary. 11. Factually, in the case of the assessee company, there is no joint venture arrangement between the assessee company and GIA India Lab vis-à-vis gem grading services rendered by the assessee company to GIA India Lab since it is GIA India Lab who enters into agreement with the client and bears all the risks including credit risks, client facing risks, etc. Also, in terms of the agreement, GIA India Lab bears the risk of loss or damage to articles while in transit to and from the assessee company and also during the tim....
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.... triggered in the case of the assessee company. 13. In terms of Article 5(4) of the India - US/DTAA, an agency PE is created where a person-other than an agent of an independent status to whom paragraph 5 applies - is acting in India on behalf of an enterprise of the USA, that enterprise shall be deemed to have a permanent establishment in India, if: (a) he has and habitually exercises in India an authority to conclude on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 3 which, if exercised through a fixed place of business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph; (b) he has no such authority but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the enterprise, and some additional activities conducted in the State on behalf of the enterprise have contributed to the sale of the goods or merchandise ; or (c) he habitually secures orders in India wholly or almost wholly for the enterprise. 14. The definition excludes from the ambit of a PE any business activity carried out through a br....
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....er for assessment year 2009-10. It was explained that during the assessment proceedings for assessment year 2009-10, a similar query i.e. why GIA India Lab should not be construed as PE of the assessee company in India was raised, but after considering the detailed response furnished by assessee vide reply letter dated 02 November 2012, no addition whatsoever was made, which is evident from the Assessment Order (AY 2009-10) dated 26 March 2013. Thus, in this background it was all the more incumbent upon the Revenue in this year to discharge its onus as to why a different stand is being adopted, especially in the face of the fact that the nature and source of income in question remains the same. Therefore, on this aspect also, we are not inclined to uphold the stand of the assessing authority. 17. Before parting, we may also refer to the reliance placed by the Ld. DR on the judgment in the case of Formula One World Championship Ltd. (supra). In that case, the assessee was a U.K tax resident who obtained licence over all commercial rights in FIA Formula One World Championship. For this purpose, the assessee (foreign tax payer) entered into a contract with J.P. Sports (an Indian con....
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.... The Appellant submits that considering the facts and circumstances of its case and the1aw prevailing on the subject no part whatsoever of its receipts are attributable to India and the stand taken by the Assessing Officer/ the Dispute Resolution Panel in this regard is incorrect, illegal, arbitrary, baseless, not in accordance with law and hence ought to be struck down. 4:3 The Appellant submits that the arbitrary action of the Assessing Officer/ the Dispute Resolution Panel be struck down and the Assessing Officer be directed to accept the total income as returned. Without prejudice to the foregoing: 5:0 Re.: Estimation of gross profit: 5:1 The Assessing Officer / the Dispute Resolution Panel has erred in holding that the 8.57% of the receipts attributable to the alleged Indian operations ought to be considered as profits of the PE taxable in India. 5:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, even if it is held that the Appellant has a PE in India no further income can be taxed in India as the alleged PF has been remunerated at an Resolution Panel in respect thereof is incorrect, erroneous, mi....
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....the Income-tax Act, 1961 on the Appellant. 7:2 The Appellant submits that considering the facts and Circumstances of its case and the law prevailing on the subject no interest u/s. 254B is leviable and the stand taken by the Assessing Officer in this regard is misconceived, incorrect, erroneous and illegal. 7:3 The Appellant submits that the Assessing Officer be directed to delete the interest u/s. 234B so levied on it and to re-compute its tax liability accordingly 36. Learned representatives fairly agree that since the assessment year before us pertains to the period prior to insertion of Explanation to Section 209(1), with effect from 1st April 2012, the law stood at that point of time, irrespective of the actual deduction of tax at source, as long as the tax is deductible at source, the tax deductible will be reduced from the advance tax liability. That is what Hon'ble jurisdictional High Court has held in the case of DIT Vs NGC Network Asia LLC [(2009) 313 ITR 187 (Bom)]. The levy of interest under section 234B, on the facts of this case when tax withholding obligations under section 195 were clearly applicable in respect of any payment, having an element of income taxabl....
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.... verifications of factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, which have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. As for second additional ground of appeal, i.e. ground no. 9, this is rendered infructuous in the light of the findings earlier in the order that no part of the royalty income is to be treated as attributable to the PE, and taxed under section 44AD as such, as it has been held that there is no PE on the facts of this case. 40. Ground no. 8 is thus allowed for statistical purposes in the terms indicated above, and ground no. 9 is dismissed as infructuous. 41. In the result, the appeal for the assessment year 2011-12 is partly allowed in the terms indicated above. 42. We now take up the ITA No. 1836/Mum/17, i.e. appeal filed by the assessee for the assessment year 2012-13. By way of this appeal, the assessee appellant has challenged correctness of the orde....
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....nt year 2011-12 earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee's own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on these points. 46. Ground nos. 2 and 3 are thus allowed. 47. In ground nos. 4 and 5, the assessee has raised the following grievance: Without prejudice to the foregoing 4:0 Re.: Attribution 4:1 The Assessing Officer/ the Dispute Resolution Panel has erred in holding that 50% of Receipts are attributable to the alleged PE of the Appellant in India. 4:2 The Appellant submits that considering the facts and circumstances of its case and the1aw prevailing on the subject no part whatsoever of its receipts are attributable to India and the stand taken by the Assessing Officer/ the Dispute Resolution Pan....
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....particular the provisions of the India-USA DTAA, the Assessing Officer/ the Dispute Resolution Panel the "royalty" received by it during the year under consideration is not taxable u/s. 44DA of the Income-tax Act, 1961 and hence the stand taken by the Assessing Officer/ the Dispute Resolution Panel in respect thereof is incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 6:3 The Appellant submits that the Assessing Officer be directed to tax the "royalty" income in accordance with the provisions of section 9 (1) (vi) of the Income-tax Act, 1961 read to recompute its total income 51. Learned representatives agree that once we come to the conclusion that there is no PE or business connection on the facts of this case, as we have concluded dealing with preceding grounds of appeal, there will be no occasion of royalty being effectively connected with the PE or taxability of royalty under section 44DA. This issue is also, therefore, academic and infructuous in the present context. 52. Ground no. 6 is also thus dismissed. 53. In ground no. 7, the assessee has raised the following grievance: 7:0 Re: Credit for tax deducted at source amounting to Rs. 21....
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....uld be restricted to Rs. 56,48,03,982 in accordance with the APA 9:3 The Appellant submits that the Assessing officer be directed to consider the royalty income, if any, connected to the alleged PE, only at Rs. 56,48,03,982 and to re- compute its total income and tax thereon accordingly. 57. In view of the discussions earlier in the order, both the additional grounds of appeal are admitted for adjudication on merits, and in the lights of the discussions in paragraph 2-21 earlier in this order, this additional ground of appeal no. 8 decided in favour of the assessee, in principle, though the matter will go back to the Assessing Officer for verifications of factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, which have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. As for second additional ground of appeal, i.e. ground no. 9, this is rendered infructuous in the light of the finding....
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....e Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 63. While dealing with the assessment year 2011-12 and 2012-13 earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee's own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. W....
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....to deal with these issues on merits, and reject the same as infructuous. 67. Ground nos. 4 and 5 are thus dismissed as infructuous. 68. In ground no. 6, the assessee has raised the following grievance: 6:0 Re: Taxing the "royalty" received during the year u/s. 44DA of the Income Act, 1961: 6:1 The Assessing Officer the Dispute Resolution Panel has erred in holding that the royalty income is "effectively connected" with the alleged PE of the Appellant in India and is therefore taxable u/s. 44DA of the Income Tax Act, 1961. 6:2 The Appellant submits that considering the facts and circumstances of its case and law prevailing on the subject and in particular the provisions of the India-USA DTAA, the Assessing Officer/ the Dispute Resolution Panel the "royalty" received by it during the year under consideration is not taxable u/s. 44DA of the Income-tax Act, 1961 and hence the stand taken by the Assessing Officer/ the Dispute Resolution Panel in respect thereof is incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 6:3 The Appellant submits that the Assessing Officer be directed to tax the "royalty" income in accordance with the provisions of sect....
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....ly. 72. In view of the discussions earlier in the order, both the additional grounds of appeal are admitted for adjudication on merits, and in the lights of the discussions in paragraph 2-21 earlier in this order, this additional ground of appeal no.7 decided in favour of the assessee, in principle, though the matter will go back to the Assessing Officer for verifications of factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, which have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. As for second additional ground of appeal, i.e. ground no. 8, this is rendered infructuous in the light of the findings earlier in the order that no part of the royalty income is to be treated as attributable to the PE, and taxed under section 44AD as such, as it has been held that there is no PE on the facts of this case. 73. Ground no. 7 is thus allowed for statistical purposes in the terms indicated....
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....aterial to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 78. While dealing with the assessment year 2011-12 2012-13 and 2013-14 earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee's own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on these points. 79. Ground nos. 2 and 3 are thus allowed. 80. In ground nos. 4 and 5, the assessee has raised the following grievance: Without prejudice to the foregoing 4:0 Re.: Attribution 4:....
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....ome-tax Act, 1961 and hence the stand taken by the Assessing Officer/ the Dispute Resolution Panel in respect thereof is incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 84. Learned representatives agree that once we come to the conclusion that there is no PE or business connection on the facts of this case, as we have concluded dealing with preceding grounds of appeal, there will be no occasion of royalty being effectively connected with the PE or taxability of royalty under section 44DA. This issue is also, therefore, academic and infructuous in the present context. 85. Ground no. 6 is also thus dismissed. 86. In ground nos. 7 and 8, , the assessee has raised the following grievance: 7:0 Re: Taxation of royalty income at Rs. 1,06,93.35,468/- in terms of the Advanced Pricing Agreement f"APA"1 dated 07 May 2018 entered into by GIA India Laboratory Private Limited: 7:1 The Appellant submits that the amount taxable as royalty should be restricted to Rs. 1,06,93,35,468/- which is in accordance with the APA. 7:2 The Appellant submits that considering the facts and circumstances of its case, and the law prevailing on the subject, the amount of r....
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....result, the appeal for the assessment year 2014-15 is partly allowed in the terms indicated above. 92. We now take up the ITA No.7739/Mum/2019, i.e. appeal filed by the assessee for the assessment year 2015-16. By way of this appeal, the assessee appellant has challenged correctness of the order dated 18th October 2019, in the matter of assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2015-16. 93. Ground no. 1 is general in nature and does not call for any specific adjudication. 94. In ground nos. 2 and 3, the assessee has raised the following grievances: 2:0 Re: Holding that the Appellant has a 'Permanent Establishment' ("PE") in India: 2:1 The Assessing Officer / the Dispute Resolution Panel has erred in holding that the Appellant has a Permanent Establishment' ("PE) in India. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no PE in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 2:3 The Appellant submits that the Assessing Office....
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....f Receipts are attributable to the alleged PE of the Appellant in India. 4:2 The Appellant submits that considering the facts and circumstances of its case and the1aw prevailing on the subject no part whatsoever of its receipts are attributable to India and the stand taken by the Assessing Officer/ the Dispute Resolution Panel in this regard is incorrect, illegal, arbitrary, baseless, not in accordance with law and hence ought to be struck down. Without prejudice to the foregoing: 5:0 Re.: Estimation of gross profit: 5:1 The Assessing Officer / the Dispute Resolution Panel has erred in holding that the 20.31% of the receipts attributable to the alleged Indian operations ought to be considered as profits of the PE taxable in India. 5:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, even if it is held that the Appellant has a PE in India no further income can be taxed in India as the alleged PF has been remunerated at an Resolution Panel in respect thereof is incorrect, erroneous, misconceived and illegal and hence ought to be struck down. 98. Learned representatives fairly agree that in view of our con....
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....ordance with the APA dated 07 May 2018 entered into by GIA India Laboratory Private Limited. 101. In view of the discussions earlier- particularly in paragraph 2-21 earlier in this order, ground of appeal no.6 decided in favour of the assessee, in principle, though the matter will go back to the Assessing Officer for verifications of factual aspects with respect of these claims, i.e., with respect to verifications and quantum of actual refunds of royalties by the assessee, which have not been examined at any stage. We, therefore, deem it fit and proper to accept the claim of the assessee, in principle, but remit it back to the Assessing Officer for verification of factual elements embedded in the claim of the assessee. Ordered, accordingly. As for ground no. 7, this is rendered infructuous in the light of the findings earlier in the order that no part of the royalty income is to be treated as attributable to the PE, and taxed under section 44AD as such, as it has been held that there is no PE on the facts of this case. 102. Ground no.6 is thus allowed for statistical purposes in the terms indicated above, and ground no.7 is dismissed as infructuous. 103. In ground no. 8, the as....
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....accordance with law. 3:3 The Appellant submits that the Assessing Officer has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the appellant had business connection in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 3:4 The Appellant submits that the Assessing Officer's stand that the Appellant has business connection in India be struck down and he be directed to accept the total income as returned 109. While dealing with the assessment years 2011-12 2012-13, 2013-14, 2014-15 and 2015-16, earlier in this consolidated order, and respectfully following a coordinate bench decision in assessee's own case for the assessment year 2010-11, we have decided this issue in favour of the assessee and held that the assessee did not have any permanent establishment in India under article 5 of the Indo US tax treaty, or business connection India under section 9 of the Income Tax Act, 1961. The assessee succeeds on this issue. We see no reasons to take any other view of the matter than the view so taken by us above. We, therefore, uphold the plea of the assessee on th....
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....icted to Rs. 168,83,59,420 being the amount of royalty received for the year. 6:3 The Appellant submits that the Assessing Officer be directed to consider the royalty income on the basis of the actual income earned for the year and to recompute its total income and tax thereon accordingly. Without prejudice to the foregoing: 7:0 Re.: Taxing the "royalty" received during the year u/s. 44DA of the Incometax Act. 1961: 7:1 The Assessing Officer/ the Dispute Resolution Panel have erred in holding that the royalty income is "effectively connected" with the alleged PE of the Appellant in India and is therefore taxable u/s. 44DA of the Income-tax Act, 1961. 7:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject and in particular the provisions of the India-USA. DTAA, the Assessing Officer / the Dispute Resolution Panel the "royalty" received by it during the year under consideration is not taxable u/s. 44DA of the Income-tax Act, 1961 since it does not have any PE in India and hence the stand taken by the Assessing Officer/ the Dispute Resolution Panel in respect thereof js incorrect, erroneous, misconceived and....