TaxTMI 
TaxTMI 
2024 (7) TMI 1329
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....nced. As for convenience on behalf of the assessee, a composite chart with summary of grounds raised by the appellant in the respective appeal has been provided and we consider it relevant to reproduce the same:- Ground taken by the appellant in relation to Ground No. taken by the appellant in AY 2010-11 AY 2013-14 AY 2014-15 AY 2015-16 General in nature 1 and 1.1 1 and 1.1 1 and 1.1 1 and 1.1 Issue of PE in India 2, 2.1 2, 2.1, 3, 4, 5, 5.1, 7 2, 2.1, 3, 4, 5, 5.1, 6, 8 2, 2.1, 3, 4, 5. 6. 6.1, 6.2, 7, 9 Erroneous taxation of offshore supplies 3 6 7 8 FTS is not liable to tax in absence of FTS article under India- Thailand DTAA 4 7 8 9 Transfer pricing adjustment 5, 5.1, 5.2, 5.3, 6, 6.1, 6.2, 7, 8, 10, 13 N.A. N.A. N.A. Double taxation of FTS receipts 9 N.A. N.A. N.A. Attribution of income to activities of appellant in India - 8 and 8.1 9, 10, 10 1 10, 11, 10.1 Application of incorrect profit ratio N.A. 9 N.A. N.A. Erroneous levy of interest under section 234A, 234B and 234C 11 10 (in relation to 234B interest) 11 and 11.1 N.A. ....
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.... Adjustments as per final order passed by Ld. AO (Amount in INR) Offshore supplies and FTS receipts as undertaken between Indian entities and HTAS 40,81,59,614 40,81,59,614 Attribution Ratio 100% 25% Global Profit Rate 25% 2.43% Corporate Tax Adjustment 10,20,39,903 [i.e. 4081,59,614*100% *25%] 24,79,570 [i.e. 40,81,59,614*25%*2.43%] B. Transfer Pricing Adjustment (a) On account of FTS receipts of HTAS 73,56,736 73,56,736 (b) On account of Offshore supplies made by HTAS 464,02,851 NIL Total Adjustments/Additions 15,57,99,490 98,36,306 7. The assessee is in appeal raising following grounds:- "1. That on the facts & in the circumstances of the case and in law, the orders passed by the Assessing Officer (AO)/Transfer Pricing Officer (TPO)/Dispute Resolution Panel (DRP) to the extent prejudicial to the interest of the appellant, are bad in law and void ab-initio. 1.1 That on the facts and circumstances of the case and in law, the AO/TPO/DRP has erred in passing the subject orders based on surmises, conjectures and irrelevant assumptions. Without prejudice 2. That the AO/DRP grossly ....
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....ional transaction relating to Technical Supervision Fees. 6.1 That the TPO/DRP has grossly erred in arriving/sustaining the adhoc set of comparable companies without adhering to the requirement of law i.e. scientific basis and standardized procedure for selecting the comparable companies. 6.2 That the TPO/DRP erred in taking/sustaining Indian companies with different functional profile as comparable to benchmark the international transactions entered by the Appellant. 7. That the AO/TPO/DRP grossly erred in law in making the adjustment in respect of the international transactions of the assessee when such transactions had already been benchmarked and found at arm's length basis in the transfer pricing assessments of the Indian AE's. 8. That the AO/TPO/DRP grossly erred in law in not appreciating that the Function, Asset and Risk analysis had already been examined in respect of these transactions in the assessments of the Indian AE's and hence there arose no question of allocating any further income to the Indian tax jurisdiction in respect of these transactions. 9. That the AO/DRP grossly erred in law in making double additio....
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....inst the order of the CIT(A) and the relevant ground taken by the Revenue was as follows: "5 (c)(i) On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in reducing the addition from Rs. 16,23,90,27,016/- to Rs. 11,53,51,80,104/- made by AO u/s 40(a)(i) of the IT Act, thereby allowing ground No.6&7 of assessee's appeal by holding that there is no Permanent Establishment (PE) of 18 parties ignoring the fact that sale of goods by these 18 parties has been made in India to the assessee and therefore income arising as a result of the sale of taxable in India." 11. Ld. AR pointed out that the present assessee appellant is included in the list of 18 entities. It was pointed that Tribunal has adjudicated the ground as follows: "13.1. There is no dispute of the fact that out of 18 non-resident associate companies to whom payments have been made, it was held that 16 associated enterprises do not have a P.E. in India. The D. R. P. in the case of Asia Honda Thailand for the A. Y. 2009- 10 has held that the Non-resident company had no P.E. in India. Revenue has not filed an appeal on this finding of the D.R.P. Hence, we have to reverse the fin....
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....ence of expatriates of HMJ does not constitute a PE in India in the form of HCIL as they are carrying the business of HCIL only. The following relevant extract of the AAR order (F.No. AAR/1100/2011/973) is relied by Ld. AR: ".. .33. For the reasons above, we are of the considered opinion that no business of the applicant was conducted through the expatriate employees working with the subsidiary HSCI in India. As the condition of carrying on of the business of the enterprise is not fulfilled, it cannot be held that the applicant had a PE under Article 5(1) of DTAA. even if it had a fixed place of business in the form of expatriate employees. " 15. It was submitted that during the course of assessment proceedings, detail of supervisors who visited India during AY 2010-11 were filed before the Ld. AO, which are also relied here as Annexure 2 of Paper-book 2. It is submitted that the total supervisory visits to India (i.e., visits to HCIL) during AY 2010-11 is less than the threshold prescribed under Article 5(3)(a) of India-Thailand DTAA. Further, the above supervisors were not the employees of the Appellant and there were no employee visits to India during the subject yea....
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....n this regard, reliance is placed on the judgement in Ishikawajma Harima Heavy Industries Ltd. v. Director of Income-tax, Mumbai (288 ITR 408) wherein the Hon'ble Supreme Court has held that only such part of the income as is attributable to operations carried out in India is taxable in India. It was submitted that Hon'ble Apex Court further held that where all parts of transaction i.e., the transfer of property in goods as well as payments thereof, are carried on outside the Indian soil, such transactions cannot be taxed in India. Ld. Sr. Counsel submitted that in the case of asseesee appellant meets the tests laid down by the Hon'ble Apex Court and hence, the receipts attributable to supply of parts from outside India are not chargeable to tax in India in the hands of the Appellant. 17.1 In regard to this ground, as we appreciate the orders of the ld. tax authorities below, it comes up that the offshore-supplies are not taxable in India as the title and risk got transferred outside India. Further, the offer was accepted outside India and contracts got concluded outside India. 18. The Ld. Sr. Counsel submitted that without prejudice to the above contention of the assessee th....
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....fered to tax the receipts in the nature of fee for technical services (FTS) amounting to Rs. 4,74,73,450 subject to tax @ 10%. Accordingly, the tax amounting Rs. 50,36,458 was paid by the Assessee on such receipts. In the given case, since there is no FTS clause in the India-Thailand DTAA, therefore, as HTAS does not have a PE in India, the subject FTS receipts should not be taxable in India. 22. DRP has considered the contentions raised by the assessee and found no force in contention of the assessee that FTS is not taxable when there is no FTS clause in DTAA. DRP observed, "It is a matter of common understanding that fee for technical services is sub set of broader set of business income. When contracting states do not want to give separate treatment to FTS, these receipts become taxable as business receipts only." 23. We find substance in the observations of the DRP, but is relevant is that Section 9 of the Act enumerates certain incomes to be deemed to accrue or arise in India and Section 9(1)(vii) of the Act provides under what conditions FTS income shall be considered to accrue or arise in India. Explanation 2 to Section 9(1)(vii) of the Act gives definition of FTS and ....