AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 14
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....and Ireland. 1.2 That the Ld. A.O and Hon'ble DRP grossly erred in completely disregarding the fact that Adobe India is an independent entity. 1.3 That the Ld. A.O and Hon'ble DRP grossly erred on the facts by concluding that Adobe India is dependent agent PE of the Appellant and the agent is actively involved in sales and supply of software distributed by the Appellant, without appreciating that the sales and supply of software were done by independent third-party distributors. 1.4 That the Ld. A.O and Hon'ble DRP grossly erred in law in holding Adobe India to be dependent agent PE of the Appellant without bringing any documentary evidence on record to substantiate the above statement. 2.1 That on the facts and circumstances of the case and in law, the Ld. A.O erred in attributing a sum of INR 1,04,22,80,978/- as business profits to the alleged DAPE of the Appellant in India. 2.2 Without prejudice to the above grounds, the Ld. A.O and Hon'ble DRP failed to appreciate that attribution of profits to the PE is a transfer pricing issue and grossly erred on facts and in law in disregarding established judicial pronouncement in India on the issue that once an arm's length pric....
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....In the return of income filed for the impugned assessment year, the assessee offered income of Rs.12,36,13,520, being in the nature of fee for technical services (FTS). However, couple of other receipts from software supply and automated services were not offered to tax in India as the assessee claimed that they are not taxable in India. 5. In course of assessment proceedings, the Assessing Officer, while examining the aforesaid claim of the assessee, found that while dealing with identical nature of receipts in earlier years, it was held that the assessee has a dependent agent PE and fixed place PE in India in the form of an Indian Subsidiary viz. Adobe Sytem India Pvt. Ltd., which provides marketing support services to the assessee. Thus, following the approach adopted in the earlier assessment years, the Assessing Officer concluded that Adobe India is a dependent agent/fixed place PE of the assessee in India. Therefore, he held that the receipts from software supply and automated services, being attributable to the PE, is taxable in India. Accordingly, he brought them to tax at the hands of the assessee. Though, the assessee raised objections before learned DRP against the draf....
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....tributable to a PE in India (MSAS) is concerned on the basis of arm's length principle Article 7(2) is relevant. According to the AAR where there is an international transaction under which a non- resident compensates a PE at arm's length price, no further profits would be attributable in India. In this connection, the AAR has relied upon Circular No. 23 of 1969 issued by CBDT as well as Circular No. 5 of 2004 also issued by CBDT. [Para 29] Article 7 of the U.N. Model Convention inter alia provides that only that portion of business profits is taxable in the source country which is attributable to the PE. It specifies how such business profits should be ascertained. Under the said Article, a PE is treated as if it is an independent enterprise (profit centre) dehors the head office and which deals with the head office at arm's length. Therefore, its profits are determined on the basis as if it is an independent enterprise. The profits of the PE are determined on the basis of what an independent enterprise under similar circumstances might be expected to derive on its own. Article 7(2) of the U.N. Model Convention advocates the arm's length approach for attribution of....
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....nt sans the concept of separate entity approach as provided in article 7 of India Ireland DTAA to distinguish between PE and parent entity (HO). That if the international transactions between India AE and HO have been accepted at an arm's length by TPO, it does not automatically mean that FAR of DAPE stands subsumed in the same. That it is important to distinguish between the benchmarking analysis for the transactions between HO and associated enterprise (AE) vis-avis that of HO and its PE. That it may be important to make a distinction between the FAR of the parent entity (Head Office (HO) in Ireland) and AR of the DAPE (India). Further, it is also important to note that FAR of the DAPE is distinct from FAR of the associate enterprise (AE) in India. That so, practically, it is a interplay of FAR amongst three entities i.e. parent entity (HO) in Ireland, DAPE in India and Associated Entity (AE) in India. 12. We find the above view of the Ld. CIT(A) is not sustainable in the light of the decision of the Hon'ble Supreme Court as above in the case of DIT vs Morgain Stanley & Co.(supra). To the same effect is the order of the ADIT v. EFunds IT Solution Inc.[2017] 399 ITR 34(S....
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.... the functions as assigned by Adobe Ireland has the right to use the intangible asset in the form of "brand, trademark and logo" but there is cost paid for the same to the assessee. Further he observed that there is persistent risk of violation of copyright of software product and unauthorized use of copies of the software product in Indian market. In this regard, he has referred to case against the particular person filed by Adobe Systems, Inc. & Ors. The Ld. CIT(A) hypothesized that Adobe Systems, Inc. & Ors. would come to know about the instances of infringement of copyright only through the local presence of Adobe India Resources. The Ld.CIT(A) further opined that the function of the India AE of identification of potential customers and continuous engagement of registered customers goes into development of market of intangibles and no compensation has been made to the Indian AE for all such functions to develop market intangible asset. From this, the ld. CIT(A) opines that Adobe India is responsible for protecting, development & maintenance of the intangible assets (copyright, brand, patent & confidential data of customers) of Adobe group in India. Further, the Ld. CIT(A) opine....
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.... two way process. So when everything was found in order in Adobe India T.P. Adjustment, hence, it cannot be said that Revenue did not have complete access to all the e-mails between Adobe India and Adobe Ireland. The Ld. CIT(A) is also of view that the assets client list gives rise to in intangible assets has also no basis. No cogent case has been made out that Adobe India was provided with right to any intangible asset belonging to the assessee i.e. Adobe Ireland. The issue raised by the Ld.CIT(A) by relying upon legal dispute infringement of copy right in India being looked after by Adobe India/Adobe Ireland is also without any basis as it is Adobe USA, the IP owner which handles the legal matters relating to infringement of brand, copy right matters and other related actions to be undertaken in all jurisdiction in which the Adobe operates including India. Adobe USA is authorised in monitoring to Indian operations and their legal counsels handles the matters there from. 16. As regards the risk recoverable from distributors, the hypothesis that the risk is borne by Adobe India has also no basis. The documents clearly show that the collection from the customers is managed by the ....