TaxTMI 
TaxTMI 
2023 (8) TMI 1587
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....Year 2017-18 is that reassessment proceedings is bad in law for non-issuance of notice under section 143(2) of the Act. However, during the course of hearing, the learned AR did not press for adjudication ground No. 2, hence the same is rejected. The effective grounds and the sub-grounds are with regard to the issue whether there is Permanent Establishment (PE) for the assessee in India and the attribution of profits. The ground relating to the above two issues concerning Assessment Year 2017-18 reads as follows: 2. Permanent Establishment 3.1. The Hon'ble Panel erred in upholding the action of the Assistant Commissioner of Income Tax International Taxation. Circle-2(1) ['the Learned Assessing officer' or 'the Ld. A01 in concluding that the marketing support services rendered by SanDisk India Device Design Centre Private Limited ('SanDisk India') constitutes an agency PE of the Appellant in India. 3.2. The Ld. AO erred in law and on facts in stating that there is a business connection in terms of Section 9(1)(i) of the Act without appreciating that Explanation 2 to Section 9(1)(i) of the Act has to be interpreted as a clarification and not an en....
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....ent Year 2017-18 are as follows: The assessee is a company incorporated in Ireland and is a tax resident of Ireland. The assessee has entered into a market research and support services agreement with San Disk India Device Design Centre Private Limited ('SanDisk India'), dated 18.12.2015 (with effect from 01.04.2015). Under the aforesaid agreement, SanDisk India assists the assessee in promoting its products by, inter alia, conducting market research, gathering data, and performing other support services. 5. A survey was conducted in the premises of SanDisk India on 16th and 17th of January, 2019. During the said survey, a number of documents and emails were verified and statements of employees of SanDisk India were recorded. This survey, according to the Revenue, revealed that the nature of activities performed by SanDisk India which were beyond what was prescribed under the aforesaid agreement. This led to a formation of belief by the Assessing Officer of the assessee that income chargeable to tax has escaped assessment for the year under consideration. A notice under section 148 of the Act was issued on 28.03.2019. The assessee filed a Nil return of income on 12.02.20....
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.... regard to the statements recorded of employees of SanDisk India, the learned AR submitted that such statements are in consonance with the permitted activities mentioned in the inter-company agreement. The learned AR took us through the statements made by each employee and mapped them to the various permitted activities under the agreement. In essence, it was submitted that the functions performed by SanDisk India as per the agreement are in line with the statements recorded of the employees. It was also submitted that SanDisk India earns a majority (90%) of its revenue from software development services and information technology enabled services rendered to its other associated enterprises. It was thus submitted that SanDisk India is legally and economically independent. The learned AR placed reliance on the decision in the case of Net App B.V v DCIT (2017) 78 taxmann.com 97 (Del) and in the case of Swiss Reinsurance company Ltd v DDIT [ITA No. 1667/Mum/2014, order dated 13-02-2015]. 8. The learned DR relied on the findings of the Assessing Officer in the final assessment order passed. The learned DR took us through various portions in the final assessment order highlightin....
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....g Officer in the final assessment order, at page 47, has recorded that SanDisk India does not procure goods, neither delivers them and nor collect the payments. This will eliminate the applicability of clause (b) of Explanation 2 also. 11. Therefore, at first appearance, it does not reveal that the activities of SanDisk India create a permanent establishment of the assessee in India. The Assessing Officer has extensively and exclusively relied on the statements recorded of employees of SanDisk India, during the course of survey. The Assessing Officer has drawn certain inferences from such statements to buttress his belief that SanDisk India is fully accountable for sales activities of the assessee in India. Apart from the above, there is no other cogent material brought on record to support his conclusion. On the contrary, the learned AR has sought to demonstrate that the statements of employees actually reflect the permitted activities under the agreement. The decision therefore hinges on determining whose inference of the statements recorded, seems more acceptable. In this regard, we deem it appropriate to extract certain excerpts from the statements recorded of various employee....
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.... highlights that the role of the aforementioned person is to interact with potential customers thereby helping the sales team achieve their targets. However, it is relevant to note the following question and its corresponding answer to get a better perspective. Q 10. How the pricing of the SanDisk products are done? Is there any negotiation process involved in effecting Sales. Ans. I am not aware about these things as these are taken care by Sales Team which is headed by Mr. Vivek Tyagi. Therefore, it becomes evident that the aforesaid employee is not aware of who actually negotiates and concludes a contract. Shri Jaganathan Chelliah, Director Marketing, SanDisk India Excerpt from Answer to Q.15-"As per my understanding the distributor's sales team engages with the interested customers and enters into a direct negotiation to finalize the sale or purchase." 12. On a perusal of all the above statements, it is clear that sales of the assessee in India are effected through its distributors. The sales and marketing team of SanDisk India engage in educating the customers about SanDisk products. Once a customer is interested in a product, the distributors of the assesse....
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....vities of the agents are subject to detailed instructions or comprehensive control. The only reason is that the company is managed by common directors. Further mere persuasive control is not enough. This sole fact in absence of other vital facts, which may depend on the facts of the each case, revenue should establish the comprehensive control over the entity. Further the income stream of the ICO itself suggests that its revenue is not wholly or substantially derived from the activities of the appellant but from other AEs also. It was submitted that 85% to 90 % of the revenue for the year of ICo is from IT/ ITEs services and not from marketing support services. Further the risk matrix of the Ico is also not brought on record by the Ld AO . Further, it is not the case of the revenue that ICO is performing wholly and exclusively for the assessee. Therefore, in absence of any evidence of economic and legal dependence of the agent the argument of revenue cannot be sustained. With respect to the purchase orders the Indian entity do not solicit or accept purchase orders on behalf of the appellant but the purchase orders raised on the appellant are through distributors. The receipt of ....