2026 (1) TMI 461

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....r referred to as 'the Act'), for Assessment Year 2022-23. 2. Shri Sachit Jolly, Sr. Advocate appearing on behalf of the assessee at the outset submitted that he is not pressing ground of appeal no. 2 & 3 assailing validity of the assessment order on the ground of limitation. In light of the statement made by ld. Counsel for the assessee at Bar, ground no. 2 & 3 of appeal are dismissed as not pressed. 3. The ld. Counsel submitted that the solitary issue in the present appeal for consideration of the Bench is taxability of receipts received in respect of off shore supply of goods and standard software on erroneous presumption by the AO that the assessee has a Permanent Establishment (PE) in India under the India-UK Double Taxation Avoid....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....able in India. The AO in an arbitrary and unjustified manner attributed 38.28% of the operating profit margin to the Indian PE. 5. The ld. Counsel submitted that in AY 2013-14, the assessee was part of General Electric Group and subsequently it was acquired by Baker Hughes Group. In assessment order for AY 2013-14 similar finding with regard to assessee having deemed PE in India was returned by the AO and 1% of profit from off shore supply of equipment was attributed to the Indian PE. The assessee did not contest in AY 2013-14 purely with a view to avoid protracted litigation and to buy peace with the Income Tax Department. However, in the impugned assessment year factual matrix has changed since AY 2013-14 as there has been change in th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ent order, we find that the AO has merely assumed that the assessee has deemed PE in India as per Article 5 of India-UK DTAA. No reasoning whatsoever has been given by the AO to come to a conclusion that the assessee has PE India. Article 5 of India-UK DTAA sets out certain conditions to hold that the foreign entity has PE in India. No effort has been made by the AO to examine whether the conditions set out in Article 5 of India-UK DTAA are satisfied before coming to the conclusion that the assessee has deemed PE in India. Moreover, the AO has not identified or named the entity which according to him is PE/deemed PE of assessee. Thus, in light of our above observation, we hold that the AO has failed to discharge its onus in proving PE of as....