TaxTMI 
TaxTMI 
2024 (11) TMI 368
X X X X Extracts X X X X
X X X X Extracts X X X X
....2023 (hereafter the impugned order) passed by the Income Tax Appellate Tribunal (hereafter ITAT) in ITA No. 1084/Del/2022 in respect of the assessment year (AY) 2017-18. 2. The aforesaid appeal (ITA No. 1084/Del/2022 captioned Zebra Technologies Asia Pacific Pet. Ltd. v. Commissioner of Income Tax (International Taxation)-3, Delhi,) was preferred by the respondent (hereafter assessee) before the learned ITAT, assailing the order dated 25.03.2022 passed by the Commissioner of Income Tax (hereafter CIT) under Section 263 of the Act in respect of the AY 2017-18. 3. The assessee is a company which is incorporated under the laws of Singapore and is a tax resident of Singapore. The concerned authorities in Singapore had issued a Tax Residen....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., CTDIPL, to carry out repairs and maintenance services in India on behalf of the assessee. The assessment proceedings culminated by the AO in its assessment order dated 25.12.2019, whereby the income returned by the assessee was accepted. 6. The learned CIT initiated the proceedings under Section 263 of the Act by issuance of a Show Cause Notice dated 01.02.2022 (hereafter SCN). The said SCN is not on record. However, a copy of the same has been handed over to this Court. The same indicates that the learned CIT had concluded that the AO had not conducted the necessary inquiries and verified the facts for accepting the assessee's claim that its income was not chargeable to tax under the Act by virtue of the DTAA. The learned CIT noted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of USA is the ultimate parent company who is the owner of the Intellectual property (IP) of Zebra products. It interposed two wholly owned subsidiaries: one in Jersey and other in Singapore. It formed a wholly owned subsidiary Zebra jersey Holding I Ltd in Jersey which is a tax haven. Zebra Jersey in tum interposed a wholly owned Singapore subsidiary named Zebra Technologies Asia Pte, the assessee company. The assessee company sells the Zebra products and also provides services to customer-users in India. The marketing support in India is said to be provided by Zebra Technologies India Pvt. Ltd, a wholly owned subsidiary of the assessee company. 13.9 As discussed in preceding paragraphs, the assessee provides automated services t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e income could neither be taxed in India as FTS nor as the business income. As a result, the assessee avoids payment of any tax in India year after year. 13.11 The taxpayer not only avoid payment of taxes in India but also in other jurisdictions as well. This is explained as follows. The USA parent formed a wholly owned Subsidiary in Jersey. The IP assets are transferred to Jersey entity. The jersey entity in turn licenses the IP assets to Singapore entity. It has significant tax advantages. The Singapore entity is liable to pay license fee to Jersey entity. The license fee is a tax-deductible expense and therefore, this would reduce the tax liability for Singapore entity. The financial statements furnished during the proceedings r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ance and had entered into an agreement for the purposes of taking an advantage of the DTAA. 10. In the aforesaid context, the Revenue has projected several questions for consideration including the following question: "2.3 Whether on the facts and in the circumstances of the case, the Ld. ITAT has erred in not appreciating the fact that availing the treaty benefit is dependent upon the fact of each year and, therefore, passing an order by allowing the benefits of Indian-Singapore DTAA by following the order of earlier assessment year without making detailed enquiry to find out that the Assessee is involved in treaty shopping thereby making it ineligible to chain DTAA benefits which makes the assessment order erroneous being prej....