TaxTMI 
TaxTMI 
2025 (11) TMI 97
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....ief facts of the case: The assessee M/s NCR Global Solutions Limited ("GSL") filed its return of income for AY 2022-23 on 28.11.2022 declaring income at Rs. 26,42.33,590/- which was offered to tax at special rate @ 10%. claiming benefit of provisions of DTAA between India and Ireland. The case was selected for scrutiny under CASS and accordingly, notices u/s 143(2) of the Income Tax Act, 1961 dated 31.05.2023 was issued and duly served upon the assessee electronically. Further, notice u/s 142(1) of the income Tax Act, 1961 dated 21.11.2023 was issued along with a detailed questionnaire through e- proceeding portal and served upon the assessee. In response to the said notices, the assessee furnished its reply time to time through e-proceedings portal of the Income Tax department portal. 3. During the year, the assessee was a tax resident of Ireland and was the principal distributor and licensor for software and hardware products and related support services. The AO noted that during the year the assessee sold NCR software and hardware products and related support services through its Affiliates and in India, GSL had appointed M/s NCR Corporation India Pvt Ltd. (CIPL) as its non-e....
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.... embedded software made by distributors qualify as "royalty" under the Act, as well as the India-Ireland Tax Treaty. 3.2 The AO after considering the submissions of the assessee noted that the assessee had received income from sale of software of Rs. 71,70,73,839/- and from sale of goods of Rs. 64,34,36,236/-. 3.3 Thereafter, the AO analyzed the term 'Permanent Establishment' as per the provisions of Article 5 of India -Ireland Treaty and the relied upon the finding of the decision of the Hon'ble Apex Court in the case of Formula One World Championship (Civil Appeal Nos.- 3849 to 3851 of 2017 and on OECD Commentary on Model Tax Convention and held that the assessee GSL through CIPL was procuring orders, executing sells to the Indian purchasers / parties which could not be done without any place of business in India and accordingly held that the assessee has a fixed place PE in India in terms of Article 5(1) of India- Ireland Treaty. 3.4 Further, the AO after discussing about the concept of Dependent Agency Permanent Establishment (DAPE) observed that the present case CIPL works mainly or wholly on behalf of the non-resident assessee, and therefore, the assessee has an agen....
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....ther directed that if, however, further appeal has been filed, and the issue has not yet attained finality, in order to keep the issue alive, the proposed variation made by the AO deserves to be upheld. The relevant directions of DRP in para no. 6 of its order are reproduced as under: "6. Directions of DRP: (i) The Panel has carefully considered the written submissions filed by the assessee and the DAO passed by the assessing officer. (ii) The Panel has noted that this is a legacy issue. This case came up before the Panel for AYs 2018-19, 2019-20, 2020-21 & AY 2021-22 for which directions have already been issued. The grounds of appeal filed by the assessee are almost similar to the grounds filed for AY 2021-22. (iii) As has been stated above the factual matrix of the case for the year under consideration is almost similar to AY 2021-22, in which the DRP has affirmed DAO passed by the AO. The assessee has submitted the Hon'ble Delhi High Court has passed the favorable order in assessee's own case for A.Y. 2018-19 and 2019-20 and the Hon'ble ITAT has also passed the favorable order in assessee's own case for AY 2020-21 and 2021-22. Bas....
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.... Hon'ble DRP has directed that the stance of the Revenue in case of the orders of the Hon'ble ITAT/Hon'ble High Court in favour of the assessee be elaborated upon and the addition be sustained accordingly. In this case, for AYs 2018-19 & 2019-20, the Revenue is in the process of filing SLP before the Hon'ble Supreme Court against the order of the Hon'ble High Court. For AY 2020-21, the Revenue has filed further appeal before the Hon'ble High Court and for AY 2021-22, the Revenue is in the process of filing further appeal before the Hon'ble High Court Hence, it is clear that the Revenue has not accepted the decision of the appellate authorities in this case. Therefore, based on the above discussion the income of the assessee is computed as below: Computation of income of PE Particulars Amount End user License fee for software product Rs. 71,70,73.839/- Export of Goods Rs. 54,34,36,236/- Gross revenue Rs. 136,05,10,075/- profit @ 35% Rs. 47,61,78,526/- Profit attributable to PE in India taxable as Business income (70% of Business income) Rs. 33,33,24,968/- 6. Aggrieved by the said order, the assessee is in ap....
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....f PE and further perpetuated such error by attributing income on imaginary and baseless presumptions. 4.3 Impugned order erred in confirming existence of a Fixed place of business in India through NCR Corporation India Private Limited ("NCR India"), an independent legal entity conducting its own business, without indicating any basis and by overlooking material placed on record by the Appellant. 5. In alleging without any basis that NCR India is acting as an agent on behalf of the Appellant and concluding that it is constitutes agency PE of Appellant. 5.1. Presumptions that NCR India works mainly or wholly on behalf of the Appellant and that NCR India has authority to conclude contracts on behalf of the Appellant and NCR India habitually secures orders in India, mainly or wholly for the Appellant and is executing sales to India purchasers parties for and on behalf of the Appellant are totally baseless and incorrect 52 Impugned order failed in not appreciating that Appellant merely seits goods and software to NCR India on principal-to-principal basis and that NCR India is engaged in manufacturing of ATMs for its own business and alleging existence of PE ....
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.... at any time before or at the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide on the appeal in accordance with law." 7. During the course of hearing before us, the Ld. AR submitted that the issue in this appeal was covered by a series of decision by the Co-ordinate Bench of Tribunal and Hon'ble Delhi High Court as per the following citations, in assessee's own case: (i) NCR Global Solutions Ltd. vs. DCIT, in ITA No.- 1756 & 1776/Del/2022 for A.Y. 2018-19 & 2019-20, order dated 10.04.2023 of Co-ordinate Bench, (page no. 103-123 of the Paper Book) (ii) NCR Global solution Ltd. vs. DCIT, in ITA No.- 381/Del/2023, for A.Y. 2020-21, order dated 06.12.2023 of Co-ordinate Bench, (page no. 124-138 of the Paper Book) (iii) NCR Global solution Ltd. vs. DCIT, in ITA No.- 3230/Del/2023, for A.Y. 2021-22, order dated 25.07.2024 of Co-ordinate Bench, (page no. 159-172 of the Paper Book) (iv) Commissioner of Income Tax International Taxation-2, New Delhi vs. NCR Global Solutions Ltd., in ITA No.- 410/2024, order dated 02.08.2024 of Hon'ble Delhi High Court (pg. no. 173-176 of Paper Book) (v) CIT vs. NCR Global Solut....
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....e or otherwise of PE and decided the issue in favour of the assessee by holding that assessee does not have a PE in India through its non exclusive dealer CIPL. The relevant extract of the said order of the Tribunal at sr. no. (vi) as above in para no. 3 to 10 are reproduced as under: "3. Be that as it may, as discussed above, the basic issue arising in these appeals is in relation to existence or otherwise of a PE of the assessee in India. Briefly, the facts relating to this issue are, the assessee is a non-resident corporate entity and is a resident of Ireland. As stated, the assessee is the principal distributor and licensor for software and hardware products and also related support services. It is further stated that assessee sells NCR software and hardware products and related support services through its affiliates. So far as India is concerned, assessee has appointed M/s NCR Corporation India Pvt. Ltd. (CIPL) as its non-exclusive distributor in exchange for payments for NCR's distribution activities. For the assessment years under dispute, the assessee had filed its return of income declaring certain items of income and offered them to tax at special rate of 10....
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.... the Assessing Officer and learned DRP. 8. Having considered rival submissions and perused materials on record. we find, while deciding identical issue in assessee's own case in assessment year 2021-22, the Tribunal, in order dated 26th July, 2024 in ITA No.3230/Del/2023, while deciding the issue as to whether CIPL can be held as a dependent agent PE of the assessee, has held as under:- 15. As we appreciate the matter on record, the important piece of evidence is the distribution agreement executed between the assessee and NCR India made available at pages 49-63 of the paper book. This agreement defines in the preamble that: "WHEREAS, GSL develops, manufactures, markets, installs, licenses and services business information processing equipment software and related products and-desires that such equipment and software be sold to customers in the Territory: WHEREAS, Distributor conducts sales and service activities in the Territory; and WHEREAS, GSL and Distributor desire to have Distributor act as distributor of GSL's Hardware and licensee of GSL's Software in the Territory:" 16. The agreement further provides that ....
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....tion and management of the Distributor. a. Expenses. Distributor shall be solely responsible for its own expenses and employees and agents and shall provide at its own expense, such office space and facilities, and hire and train such personnel, as may be required to effectively carry out its obligations pursuant to this Agreement. Distributor agrees that it shall incur no expense chargeable to NCR except as may be authorized in advance. remises and Staff. Distributor agrees to maintain properly equipped and located premises with suitable fixtures and a competent staff of marketing personnel dedicated to the promotion and sale of products. Distributor shall employ trained. competent technicians, field engineers, programmers, analyst and other maintenance personnel to service all Hardware and Software within the Territory." 19. Then, section 11.1 of this agreement defines the relationship of the parties as follows:- "11.1 Relationship of Parties. Distributor is an independent purchaser of Hardware and licensee of Software. During the term of this Agreement, the relationship of the Parties is and shall remain that of independent contractors. Distributor sha....
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....onclude that authorities below have fallen in error to hold the existence of assessee's PE in India in the form of CIPL. In the result, the grounds are sustained and the appeal filed by the Assessee is allowed." 9. Factual position in the impugned assessment years being identical. respectfully following the decision of the Coordinate Bench, as noted above. we are inclined to hold that CIPL cannot be treated as a dependent agent PE of the assessee in India. Grounds raised by the assessee in this regard are allowed. 10. In the result, both the appeals of the assessee are allowed as indicated above." 10. The present cases are identical to the facts in the case of the assessee for A.Ys. 2018-19, 2019-20, 2020-21 & 2021-22, and therefore, in the view of above cited decisions, we hold that the assessee does not have PE in India, through it nonexclusive distributor CIPL and also cannot be treated as dependent agent PE of the assessee in India. The Ld. CIT(DR) has also not brought any contrary facts or any favourable decision in its support. Accordingly, we delete the addition of Rs. 33,33,24,968/- made by the AO and allow the ground nos. 4 to 6 of the appeal. Acco....