TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 358
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....sued by the Hon'ble Panel are bad in law and liable to be quashed. 2. Permanent Establishment 2.1. The Hon'ble Panel erred in upholding the action of the Deputy Commissioner of Income Tax International Taxation, Circle - 2(1) ['the Learned Assessing officer' or 'the Ld. A01 in not appreciating the fact that during the FY relevant to AY 2016-17, SanDisk India Device Design Centre Private Limited ('SanDisk India') and the Appellant were not associated enterprises. 2.2. The Hon'ble Panel and the Ld. AO erred in facts in not appreciating that there were no marketing support services rendered by SanDisk India to the Appellant during AY 201617. 2.3. The Hon'ble Panel erred in facts and in law in upholding the action of the Ld. AO in concluding that SanDisk India constitutes Dependent Agency Permanent Establishment ('PE') of the Appellant in India. 2.4. The Ld. AO erred in not considering the fact that in the absence of any transactions between SanDisk India and the Appellant, the question of Dependent Agency PE does not arise. 3. Reimbursement of salaries paid to seconded employees treated as Fees for Technical service 3.1. The Ho....
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....case are as under: 2.1 The assessee is a NR and a leading developer, manufacturer and provider of data storage devices and solutions. It is submitted that, the assessee's portfolio includes three primary offerings: * Datacenter Devices and Solutions; * Client Devices; and * Client Solutions. It is also submitted that the assessee markets its products under the WD brand and sells its products through distribution, retail, and direct channels worldwide. 2.2 It is submitted that, on 12.05.2016, the assessee completed its acquisition of the SanDisk Group. SanDisk India Device Design Centre Pvt. Ltd. ('SanDisk India'), a company registered in India was held by SanDisk Corporation, USA. Pursuant to the acquisition of SanDisk Corporation, USA by the assessee, SanDisk India's ultimate holding company changed from SanDisk Corporation, USA to the assessee before us. The assessee and SanDisk thus became part of the same group from 12.05.2016 onwards. It is submitted that, prior to the acquisition, the assessee and SanDisk were not associated enterprises upto F.Y. 2015-16, relevant to assessment year under consideration. 2.3 The assessee submitted that, there was survey proceeding un....
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....erous evidences were gathered in this regard. The AO in the draft order as well as in remand report clearly brought out the facts of the case and abundantly established that Assessee Company is having DAPE in India in the form of San Disk India. Therefore, the Panel did not find any reason to interfere with the view taken by the AO. 5.1.6 Regarding profit allocation to the PE, the Panel is of the considered opinion that having concluded that SanDisk India is a PE of the assessee in India, considering that all Indian operations of the assessee arc connected with SanDisk India. The profit attribution is required to be made in the instant case. Further, the AO has relied on the case of Daikin Industries v ACIT (ITA No 1623 of 2015 New Delhi Income Tax Appellate Tribunal, May 28 2018) for attributing the profit to the PE of assessee. In the said judgment, ITAT Delhi had estimated profit at the rate of 10% relatable to direct sales and 30% of profits attributable to operations carried out by DAPE in India. Therefore, in view of the above judgment, the action of the AO for attributing profit to the PE of Assessee Company is justified. Thus, the Panel did not find any reason to interfer....
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....nsacted with the assessee during the relevant year under consideration. He referred to clauses 13 and 19 of Form 3CEB and submitted that, SanDisk India made payments to SanDisk LLC, USA and other SanDisk group concerns and not with assessee. He thus submitted that there is no question of treating the amount paid to SanDisk LLC, USA as fee for technical services in the hands of assessee. E) The Ld.AR referring to the TP study of assessee submitted that, it does not have any reference to SanDisk India and any intercompany services between assessee and SanDisk India which is beyond the scope of report for financial year 2015-16. He thus submitted that for financial year relevant to AY 2016-17, assessee and SanDisk India were not even associated enterprises. He submitted that SanDisk India was captive service provider engaged in rendering software development services and information technology enabled services and marketing support services only to its group companies being SanDisk LLC, USA group. This fact is verifiable from Form 3CEB filed by SanDisk India placed as pages 183-200 of the paper book. F) The Ld.AR submitted that survey proceedings took place at the premises of SanD....
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.... It is noted that the revenue proceeded on a fact that assessee transacted with SanDisk India even prior to the date of acquisition, which is unfounded and without any documentary support. 3.2 We have also perused in great detail the transfer pricing report, the financials of assessee as well as SanDisk India for assessment year 2016-17. It is noted that, no related party transaction is found to be existing between the assessee and SanDisk India. The transfer pricing study report of SanDisk India placed at page 201 with specific reference to page 205, reveals the transaction entered into between SanDisk India and SanDisk LLC, USA along with other group entities located in Israel, Malaysia, Ireland, Taiwan. 3.3 In respect of the transfer pricing documentation of assessee, we note that, the assessee undertakes recording of transaction having fiscal year January to December, and the reporting for fiscal year 2016 ended on 01.07.2016. For this reason, there is a mention of acquisition of SanDisk by the assessee at page 151 of the paper book. However, as under Income tax Act, it is always the financial year starting from 1st April ending on 31st March which is to be taken into conside....
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....74,966 Other Method (Refer to note below) 2 SanDisk LLC, USA 951, SanDisk Drive, Milpitas, California -95035, USA Reimbursement of expat salary expense 36,694,537 36,694,537 Other Method (Refer note 2 & 3 below) Total 123,669,503 123,669,503 We hold that the above addition in the hands of assessee for year under consideration as FTS in the case shear non-application of mind by the revenue authorities. 3.7 It is noted that, the authorities have tried to make out a business connection between assessee and SanDisk India for the year under consideration by concluding that the marketing support services rendered by SanDisk India constitutes an agency PE of assessee in India. However, the authorities failed to appreciate for assessment year 2016-17, as there has been no transaction in any manner whatsoever between assessee and SanDisk India, there is no question of creation of an agency PE of assessee in India through SanDisk India. The revenue has miserably failed to establish by way of any documentary evidence that for A.Y. 2016-17, SanDisk India was acting on behalf of assessee in India in order to constitute a deemed permanent establishment....