TaxTMI 
TaxTMI 
2026 (9) TMI 108
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....#39;Ld. AO') and Ld. Dispute Resolution Panel ('Ld. DRP') has erred in not completing the assessment proceedings as per time limit prescribed u/s. 153(1) read with section 153(4) of the Income Tax Act, 1961 ('the Act'), thereby making the assessment proceedings barred by limitation. 2. On the facts and in the circumstances of the case, the Ld. AO and Ld. DRP have erred in mechanically passing the final assessment order for AY 2023-24 by following the order for past year i.e. AY 2022-23, solely on the ground that there is no change in the factual matrix of Assessee, however they failed to consider and follow the binding decision of this Hon'ble ITAT passed in favour of the Assessee for AY 2022-23, wherein all similar allegations raised in captioned year too, were dismissed. 3. On the facts and in the circumstances of the case, the Ld. AO and Ld. DRP have erred in concluding that Assessee constitutes Fixed Place Permanent Establishment ('PE') in India under the Act as well as Article 5 of India-Japan Tax Treaty through its employees seconded to Indian Subsidiary Company i.e. Mitsui Kinzoku Components India Private Limited ('MKCI')....
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....a, the title to the goods have passed outside India, profits from such sales accrued/ arisen outside India and therefore, profits from such sales are not taxable in India. 5. On the facts and in the circumstances of the case, the Ld. AO and Ld. DRP (while placing reliance of final assessment order and DRP directions for AY 2022-23) has erred in holding that there is control of Assessee over operations of MKCI (starting from procurement of goods till selling of goods), and there has been an attempt of splitting of contract by Assessee to avoid establishment of PE in India and to avoid payment of legitimate taxes in India and abruptly applying the doctrine of 'Substance over form' at his whims and fancies, and without providing any logical reasoning. 6. On the facts and in the circumstances of the case, the Ld. AO and the Ld. DRP have erred in concluding that MKCI constitutes a Dependent Agent Permanent Establishment ("DAPE") of the Assessee in India under Article 5 of the India-Japan Tax Treaty. The authorities have failed to demonstrate how the statutory and treaty-prescribed conditions for constituting a dependent agent PE are satisfied. The impugned orde....
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....turing and sale of functional engineered materials and electronic materials, non-ferrous metal smelting, minerals resource development, precious metal recycling, raw material related businesses, etc. 4. The Assessee is having a subsidiary in India, Mitsui Kinzoku Components India Private Limited ('MKCI'), engaged in the business of manufacturing and selling catalytic convertors in India. The Assessee exports certain precious metal/ chemicals as offshore sales to MKCI India. For the purpose of manufacturing of catalytic convertors, MKCI imports precious metals/chemicals which are used as raw material, from Assessee which are used for manufacture of catalytic conventor in course of its business. The income from sale of such catalytic conventor is offered to tax by MKCI as their business income in India. 5. Briefly, the facts are that the Assessee filed its income tax return on 29 November 2023 declaring taxable income of INR 48,89,87,998 (received in form of royalty and fees for technical services from its Associated Enterprise in India). The taxable income of Assessee was offered to tax @10% as per India-Japan Double Taxation Avoidance Agreement ('DTAA'), there....
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....a due to seconded employees, since such seconded employees work under complete direction, control and supervision of MKCI only and the Assessee does not have any influence over seconded employees during the period of secondment. 10. Per contra, the ld DR relied on the orders of the AO and the DRP. 11. We have heard the rival submissions and have perused the materials on record. We find for a fact that the facts/circumstances of the instant year, in the case of the assessee, is identical to the facts/circumstances of the AY 2022-23, has not been rebutted by the Revenue. In such a factual matrix, we find that the issue of existence of fixed placed PE in India has been decided in favour of Assessee by Hon'ble ITAT in its own case for AY 2022-23 in ITA 1407/Del/2025 vide order dated 31.07.2025 (Pg 180 to Pg 185 of PB-V-1). The relevant extract of Hon'ble ITAT order for AY 2022-23 is reproduced below for ready reference: 7. Ld. Counsel for the assessee further drawn the attention to the Bench to the secondment employee's agreement, appointment letters given by the India entity to the seconded employee, letter of release given by the Assessee before transferrin....
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....assessee was neither having any control over the employees seconded by it to Indian entity nor the assessee was having any control over the asset/structures of the Indian entity and, therefore, in our view, there cannot be any fixed place PE of the assessee in India by virtue of supply of these secondment employees. [Emphasis supplied] 12. We further note that in terms of Article 7 of India-Japan DTAA, the business profits of an enterprise resident in Japan are taxable only in Japan, unless the enterprise carries on business in India through a PE situated therein. In the absence of any PE in India, Article 7(1) mandates that the business profits of Assessee are taxable only in Japan. In the instant case, the Hon'ble ITAT, vide its order dated 31.07.2025 for AY 2022-23, has held that Assessee does not have a PE in India. We are therefore of the considered view that in absence of any PE in India, no percentage of offshore supply of goods to MKCI, can be treated as business income arising to Assessee in India. Ground 2 to 5 and 7 are allowed. 13. That leaves us with the question of the ld AO/DRP treating MKCI as dependent agent PE of the assessee. On this issue the ld AR ....
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....onclude a contract on behalf of the non-resident taxpayer. PE could not said to have been constituted. (iv) The relationship between Assessee and its Indian subsidiary is strictly on a principal-to-principal basis, with no agency functions being performed by subsidiary on behalf of the Assessee. (v) Thus the allegation of Ld. AO that Assessee constitutes Dependent Agent PE, is unfounded and deserves to be quashed. 14. Per contra, the ld DR reiterated the contentions of the ld AO. 15. We have heard the rival submissions. We find that for holding MKCI as Dependent Agent PE of the assessee, the ld AO/DRP has heavily relied on the close linkages between the operations of the assessee with that of MKCI. The ld AO/DRP relies on the technical know-how, industrial and technical documentations provided by the assessee to MKCI and the control over the operations of MKCI, to hold that the MKCI is economically and functionally dependent on the assessee and therefore MKCI is considered as dependent agent of the assessee. 16. We find that the ld AO/DRP has not discussed as to how the control over the operations of MKCI, makes it a DAPE of the assessee. We find from the....