TaxTMI 
TaxTMI 
2023 (9) TMI 1015
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....tional Taxation, Delhi ("Ld. AO") as well as the Hon'ble Dispute Resolution Panel - I ("DRP") erred in holding that the Appellant has a dependent agent permanent establishment ("DAPE") in India in terms of Article 5(6) of the Double Taxation Avoidance Agreement between India and Ireland. 1.2 That the Ld. AO and Hon'ble DRP grossly erred in completely disregarding the fact that Adobe India is an independent entity. 1.3 That the Ld. AO and Hon'ble DRP grossly erred on the facts by concluding that Adobe Systems India Private Limited ("Adobe India") is a DAPE 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. AO and Hon'ble DRP erred in law in holding Adobe India to be a DAPE 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. AO erred in attributing a sum of INR 99,14,46,264/- as business profits to the alleged DAPE of the ....
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....directed to invoke the extant rules and regulations related to the Act with regard to this issue before completing the assessment proceeding and accordingly, the impugned order is bad in law. 4. That on the facts and in circumstances in law, the Ld. AO erred in not allowing credit of taxes deducted at source ("TDS") amounting to INR 18,73,999/- whilst computing the tax payable by the Appellant. 5. On the facts and circumstances of the case and in law, the Ld. AO has grossly erred in including the interest granted under section 244A of the Act whilst computing the interest under section 234D of the Act on the amount of excess refund. 6. That on the facts and in circumstances in law, the Ld. AO erred in mechanically initiating proceedings under section 274 read with 270A of the Act. 3. Briefly the facts are, the assessee is a non-resident corporate entity incorporated in Ireland and a tax resident of Ireland. As stated by the Assessing Officer, the assessee is a wholly owned subsidiary of Adobe System, USA and is engaged in licensing of software in India through distributors to the end users. The software licensed by assessee are intellectual property of....
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.... He submitted, in both the assessment years under dispute, the transactions between the assessee and the Adobe India, have been found to be at arm's length. Therefore, no further attribution of profit can be made to the alleged dependent agent PE in India. To demonstrate that the factual position relating to the disputed issues are identical to the past assessment years, learned counsel appearing for the assessee submitted a chart showing para-wise comparison between different assessment years. Thus, he submitted, the issue being squarely covered by the earlier decisions of the Tribunal, the additions may be deleted. 6. Learned Departmental Representative submitted, merely because the transaction between the assessee and its related party in India is found to be at arm's length, that cannot lead to a situation of not attributing profit to the PE. In this context, he relied upon a decision of the Hon'ble Allahabad High Court in case of Principal Officer, LG Electronics Inc. Vs. ADIT in Civil Misc. Writ Petition (Tax) No.1366 of 2012, judgment dated 5th August, 2014. Without prejudice, he submitted, in case the assessee has a fixed place PE in India in the form of Adobe India, the....
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....e issue at hand, it can be seen that while deciding identical issue in assessment years 2004-05, 2006-07 and 2010-11 to 2015-16, the Tribunal in ITA Nos. 5024/Del/2017 and Ors., dated 27.07.2022 has held that when the transaction between the assessee and its Indian AE is found to be at arm's length, no further attribution of profit can be made to the dependent agent PE in India. While considering identical issue in assessee's own case for assessment year 2017-18, the Tribunal in ITA No.774/Del/222, dated 21.10.2022 followed its earlier decision and held as under: "9. Undisputedly, in the transfer pricing proceedings, the TPO, in order dated 18.02.2022, has observed that the international transaction between the assessee and the Indian AE are at arm's length and has not proposed any further adjustment, in so far as, it relates to transaction of business support services. Therefore, the question which arises for consideration is, whether in such a scenario, still, profit can be attributed to the PE in India. As we find, while deciding identical issue in assessee's own case in preceding assessment years, the Tribunal in the order, referred to above, has held as under: ....
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....f royalty, interest etc. Such deviations are also made under the Act for example: Sections 44BB, 44BBA etc.). Under the impugned riding delivered by the AAR, remuneration to MSAS was justified by a transfer pricing analysis and, therefore, no further income could be attributed to the PE (MSAS). In other words, the said ruling equates an arm's length analysis (ALA) with attribution of profits. It holds that once a transfer pricing analysis is undertaken; there is no further need to attribute profits to a PE. The impugned ruling is correct in principle insofar as an associated enterprise, that also constitutes a PE, has been remunerated on an arm's length basis taking into account all the risk-taking functions of the enterprise. In such cases nothing further would be left to be attributed to the PE. The situation would be different if transfer pricing analysis does not adequately reflect the functions performed and the risks assumed by the enterprise. In such a situation, there would be a need to attribute profits to the PE for those functions/risks that have not been considered. Therefore, in each case the data placed by the taxpayer has to be examined as to whether the tran....
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....cing order of the AE i.e. Adobe India. This is not disputed by the Revenue. In such a situation, the decision of the Hon'ble Apex Court as above applies on all fours in these cases. The Revenue has tried to distinguish the order of the Hon'ble Supreme Court decision by firstly referring by submitting that the Adobe India is performing functions which are wider in scope of the agreement entered with the assessee and in the TP study report of Adobe India. For this purpose, reliance has been placed on the order of the Ld. CIT(A) in this case for AY 2010-11. We find that the above submission by no stretch of imagination can be said to be distinguishing the decision of the Hon'ble Apex Court from being applicable from the facts of the present case. Very well understanding this proposition, the Revenue itself urged that without prejudice to the above, the judicial decision of the attribution of profit by applying FAR analysis has not been accepted by the Indian Government and the profit has to be determined by apply of provisions of DTAA r.w.s.10A of the Income Tax Rules, 1962. In view of the above, we are of the opinion that the decision of the Hon'ble Apex Court as abov....
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.... of the emails correspondence between Adobe India and Adobe Ireland to deep dive to the activities so as to ascertain the clear cut facts to decide about PE. However, it was noted by the Ld. CIT(A) that after couple of months of gap, the assessee produced only sample certain e-mails. On the basis of these emails of few instances, the Ld. CIT(A) inferred that quotes offered by the distributors to channel partners are after discussion with Adobe India. The reasoning was that orders are delivered after seeking confirmation from Adobe India resources. Further, one of the emails is said to be demonstrating, the control and monitoring by Adobe India of distributors in meeting assigned targets. Basing upon such few e-mails, the Revenue has concluded that activities actually performed by Adobe India are wider in nature as against the activities pointed out in the contract and transfer pricing report. We find that the above observations have been cogently rebutted by the ld. counsel for the assessee. As regards the few e-mails that have been referred they are only also marked to the Adobe India personnel which has been said to be done only for the sake of keeping the Adobe India in the loop....
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....ble Apex Court as above, there is no need to attribute any further profit as all functions and risk have been considered in the computation of Arm's Length Price in the case of Adobe India. 17. As such, it follows that the finding of PE is also without cogent basis. Be that as it may issue of PE becomes academic and we are not engaging further into it. We have already found that functions performed by Adobe India are actually not different than the agreement and transfer pricing documentation." 10. There is no gainsaying that factually the issue stands on identical footing in relation to preceding assessment years, as, both the Assessing Officer and learned DRP have decided the issue following their earlier decisions. That being the case, respectfully following the decision of the coordinate Bench, as referred to above, we hold that the amount received by the assessee from supply of software and automated services, are not taxable in India. The Assessing Officer is directed to delete the additions. 11. As discussed earlier, the factual position in the impugned assessment years are identical to past assessment years wherein the Tribunal has decided the issue....