TaxTMI 
TaxTMI 
2021 (10) TMI 1102
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....SPN Software India (P) Ltd.) (now merged with Star India Private Limited) and that the appellant is carrying on its business in India and earning its income from sources in India in terms of Section 9(1)(i) of the Act. 3. That on the facts and circumstances of the case and in law, Ld. CIT(A) grossly erred in upholding the order of the Ld. AO that appellant has a Fixed Place Permanent Establishment ('PE') in the form of SSIPL under the Double Taxation Avoidance Agreement entered between India and Mauritius ('DTAA'). 4. That on the facts and circumstances of the case and in law, Ld. CIT (A) grossly erred in upholding the order of the Ld. AO that the appellant has a dependent agent PE in the form of SSIPL under Article 5(4) and 5(5) of the DTAA without appreciating the fact that SSIPL is also engaged in distribution of channels in India under separate agreements with ESS Distribution (Mauritius) SNC et Compagnie ('ESSD'). 5. That without prejudice to the above grounds, the Ld. CIT(A) grossly erred in rejecting the contention of the appellant that where the purported PE is remunerated on an arm's length basis, no additional profits could be attributed ....
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....pendent agent PE and fixed place PE of the assessee. It was pointed out during the course of assessment proceedings for A.Y. 2005-06 and 2006-07 that there was considerable change in the activities as compared with the earlier years. 8. Vide order-sheet note dated 29.01.2016, the assessee was asked to provide whether there was any change in the business model/factual matrix of the assessee during the year under consideration vis-a-vis previous year i.e. 2011-12. 9. The assessee responded by stating that there is no change in the business model/factual matrix of the assessee during the year as compared to the preceding year. 10. Taking a leaf out of the assessment of A.Y. 2011-12, the Assessing Officer concluded "Therefore, keeping in view the facts and circumstances as above, since there is admittedly no change in the facts of the case, the assessment for this year is being completed on the same lines". This means that the Assessing Officer has concluded the assessment proceedings of the year under consideration on the same lines as it was done in A.Y. 2011-12. 11. In so far as the existence of fixed place PE is concerned, the findings of the Assessing Officer read as under: ....
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....at ESPN India purchased airtime from the assessee on Principal to Principal basis. The assessee claimed that the income arising from advertisement airtime is business income and in the absence of a PE of the assessee in India, the same is not taxable. The Assessing Officer relying upon the orders of Assessment Years 2003-04 and 2004-05 held the transaction to be principal to agent and not on Principal to Principal basis. Further, ESPN India was constituted to be dependent agent as per Article-5(4) and not an independent agent as defined by Article 5(5) of the India-Mauritius DTAA. The Assessing Officer attributed part of the gross profits to the PE. The CIT(A) also held that ESPN India constitutes PE under the India-Mauritius DTAA. However, he allowed partial relief to the assessee on the attribution of income to the DAPE in India. 13. The case of the assessee before us is that without prejudice to its contention on there being PE or dependent agent PE or not, when ESPN India is remunerated at arm's length basis then no further attribution of profits can be made in the hands of the assessee in India. The TPO in the order relating to Assessment Years 2009-10 and 2011-12 has he....
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....the Transactional Net Margin Method was the appropriate method for determination of the arm's length price in respect of transaction between MSCo and MSAS. We accept as correct the computation of the remuneration based on cost plus mark-up worked out at 29% on the operating costs of MSAS. This position is also accepted by the Assessing Officer in his order dated 29.12.06 (after the impugned ruling) and also by the transfer pricing officer vide order dated 22.9.06. As regards attribution nof further profits to the PE of MSCo where the connection, the department has also to examine whether the PE has obtained services from the multinational transaction between the two are held to/be at arm's length, we hold that the ruling is correct in principle provided that an associated enterprise (that also constitutes a PE) is remunerated on arm's length basis taking into account all the risk taking functions of the multinational enterprise. In such a case nothing further would be left to attribute to the PE. The situation would be different if the transfer pricing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a case, t....
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....sue raised before us and without deciding the issue of whether ESPN India constitutes PE of the assessee in India under DTAA between India and Mauritius on the principle that ESPN India was remunerated at arm's length by the assessee, which has been accepted by the Assessing Officer/TPO of ESPN India and also the assessee, then no further attribution of profits is to be made in the hands of the assessee. Similar proposition has also been laid down by the Tribunal in assessee's own case for Assessment Years 2003-04 and 2004-05. Accordingly, we hold so. Ground of appeal No. 5.1 is thus decided and other grounds of appeal become academic." 15. Though the co-ordinate bench has not touched upon the issue whether ESPN Star Sports constitutes PE of the assessee in India under DTAA between India and Mauritius, however, we find that the Hon'ble Supreme Court in the case of E-funds IT Solutions Inc. 399 ITR 34 had an occasion to consider the test for whether there is fixed place PE. The relevant extracts read as under: "5. As against this, Shri S. Ganesh, learned senior counsel for the respondents, has argued that the tests for whether there is a fixed place PE have now been s....
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....ed counsel, "agency PE" was never argued before the assessing officer and even before the ITAT. Therefore, no factual foundation for the same has been laid. Equally, according to the learned counsel, the settlement procedure availed for the assessment years in question cannot be said to be binding for subsequent years as they were without prejudice to the assessees' contention that they have no PE in India. He also relied upon the OECD Commentary, paragraph 3.6 in particular, to demonstrate that the so-called admissions made and relied upon by the three authorities below were correctly overturned by the High Court. Learned counsel also stated that the ground of adverse inference was never argued or put before any of the authorities below, and the only place that it could be found is in the assessment order for the year 2003-04, which order became non est as it was substituted by the agreement entered into between the parties ending in withdrawal of appeals before the CIT (Appeals). Thus, according to the learned counsel, the view of the High Court is absolutely correct and should not be interfered with. Learned counsel also argued that the cross-appeals of the Revenue were co....
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....tests, any fixed place of business has been put at the disposal of these companies. The assessing officer, CIT (Appeals) and the ITAT have essentially adopted a fundamentally erroneous approach in saying that they were contracting with a 100% subsidiary and were outsourcing business to such subsidiary, which resulted in the creation of a PE. The High Court has dealt with this aspect in some detail in which it held: "49. The Assessing Officer, Commissioner (Appeals) and the tribunal have primarily relied upon the close association between e-Fund India and the two assessees and applied functions performed, assets used and risk assumed, criteria to determine whether or not the assessee has fixed place of business. This is not a proper and appropriate test to determine location PE. The fixed place of business PE test is different. Therefore, the fact that e-Fund India provides various services to the assessee and was dependent for its earning upon the two assessees is not the relevant test to determine and decide location PE. The allegation that e-Fund India did not bear sufficient risk is irrelevant when deciding whether location PE exists. The fact that e-Fund India was reimbursed ....