TaxTMI 
TaxTMI 
2026 (9) TMI 1160
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....ld to be chargeable to tax in India as fees for technical services under the Income-tax Act as well as the applicable Double Taxation Avoidance Agreement. 2. The Assessee has raised the following grounds of appeal: 1. On the facts, and circumstances of the case & in law, the order passed by Learned Commissioner of Income-tax (Appeals)-12, Bengaluru, ('Ld. CIT(A)') under section 250 of the Income-tax Act, 1961 ('the Act') confirming the adjustment of INR 3,94,78,124 made by Ld. Assessing Officer ('A0') is bad in law and thus, liable to be quashed. 2. On the facts and circumstances of the case & in law, the Ld. CIT(A) has grossly erred in confirming the conclusion of the Ld.AO about taxability of income in India for an extraneous reason of alleged Service PE while the Ld. AO tacitly accepted that there is no PE during assessment proceedings. 3. On the facts and circumstances of the case & in law, and without prejudice to the preceding grounds the Learned CIT(A) has grossly erred in concluding on alleged service PE without deliberating on whether at all and what amount of income can be attributed to the alleged PE especially in the light of Ar....
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....s selected for scrutiny and notice under section 143(2) of the Act was issued. 5. During assessment proceedings, the Assessing Officer asked the assessee to show cause why Rs. 39,478,124 received from its Indian associated enterprises, Kohler Power India Private Limited and Kohler India Corporation Private Limited, and not offered to tax in India, should not be taxed as royalty or fees for technical services under the Act. The assessee submitted that it had incurred expenses on behalf of its Indian associated enterprises and cross-charged those expenses on a cost-to-cost basis without any profit element. It stated that the reimbursements mainly related to insurance costs, business promotion expenses, legal and professional charges, travel, and similar expenses, and that no amount was received in excess of the expenses incurred. Accordingly, it contended that no income accrued to it in India and that the reimbursements were not taxable in its hands as royalty or fees for technical services. The assessee relied on several judicial precedents, including decisions of the Hon'ble Supreme Court, holding that reimbursement of expenses is not taxable in the hands of the recipient. The a....
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....ned CIT(A) rejected the assessee's contention that a service permanent establishment could arise only if employees or other personnel were stationed in India. Referring to Article 5(1)(l), he held that there was no such requirement in that clause and that the assessee's contention appeared to arise from the phrase "activities of that nature continue within that State." He therefore concluded that the managerial services were rendered through a service permanent service establishment and were taxable under Article 7 of the DTAA as well as under the Income-tax Act. Since the DTAA did not provide any benefit over the domestic law, he confirmed the addition made by the Assessing Officer. 8. Aggrieved by the appellate order, the assessee preferred the present appeal before the Tribunal. The learned authorized representative, Shri Sumeet Khurana, Chartered Accountant, filed a factual paper book comprising 337 pages in two volumes, written submissions running into 38 pages, and a case-law paper book comprising 550 pages. The learned authorized representative submitted that the fact that these are the pure cost of investment which was demonstrated with the help of back to back invoices ....
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....dered from outside India and the provision of service permanent establishment could be invoked only when while furnishing of services through employees other personnel. He further referred to that article and submitted that in order to constitute a permanent establishment of the non-resident in India under article 5 (2) (L) it needs to be cumulatively satisfied about the furnishing or performance of the services within India through employees or other personnel and when such activities continue for a period of more than 90 days within a 12-month period to an associated enterprises. He submits that none of the condition are satisfied in this case because there is no furnishing or performance of the services because it is a case of reimbursement. He further stated that there is nobody within India of the assessee and further there are no employees of personnel of the assessee which performed any such services to its associated enterprises and therefore there is no reason to hold that such activities continue for a period of more than 90 days within a year. Accordingly, he submitted that the addition made by the learned that assessing officer and confirmed by the learned CIT - A on di....
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....us DCIT 28 SOT 98 and the decision of the honourable Delhi High Court in case of DCIT versus E funds IT solutions (2014) 364 ITR 256. 13. Dr. Divya K J, the learned Commissioner of Income Tax, relied on the orders of the Assessing Officer and the learned CIT(A). He submitted that the impugned receipts had been examined in detail by the learned CIT(A) in paragraph 5 of the appellate order, where reasons were recorded for holding that the receipts were chargeable to tax under the Income-tax Act and that the assessee was not entitled to any benefit under the Double Taxation Avoidance Agreement. 14. We have carefully considered the rival contentions and perused the orders of the lower authorities. The assessee was reimbursed for advertisement expenses incurred in connection with participation by architects, nominated by various group companies including the Indian associated enterprises, in Kohler Group events relating to kitchen and bath products. These events included trade shows covering different aspects of the assessee's business. The assessee initially incurred the hotel accommodation and other related costs of the participating Indian architects, settled the payments with ....