TaxTMI 
TaxTMI 
2026 (9) TMI 2043
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....Officer ('Ld. AO') is bad in law as it is not passed in conformity with the directions issued by the Hon'ble Dispute Resolution Panel ('Hon'ble DRP'), as per the provisions of section 144C(10) r.w.s. 144C(13) of the Income-tax Act, 1961 ('Act') and hence liable to be quashed. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of Appeal and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing." 3. Since the issue raised in his ground is a purely legal and jurisdictional issue, without requiring investigation into fresh facts, we are inclined to admit the ground for adjudication. The relevant facts for deciding the ground are, the assessee is a non-resident corporate entity and is a tax resident of United States of America (USA). As stated by the Assessing Officer, the assessee is engaged in manufacturing of high-performance chemicals for use in transportation and industrial lubricants. Besides, the assessee carries out research and development, testing, production of intermediates into finished products for sale and distribution. For the ass....
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.... to rectify the mistake in the assessment order as per section 154 of the Act. Taking note of the application filed by the assessee, the Assessing Officer, on 05.09.2023, passed a rectification order under section 154 of the Act, rectifying the mistake in the final assessment order by implementing the directions of learned DRP in respect of the quantum of reimbursement of expenses and the rate at which the ALP of guarantee commission has to be determined. 6. Before us, learned counsel appearing for the assessee submitted that in terms of section 144C(13) of the Act, the Assessing Officer has to pass the final assessment order in conformity with the directions of learned DRP. He submitted, it is a fact on record that in the final assessment order, the Assessing Officer has failed to implement the directions of learned DRP in its entirety. Therefore, the final assessment order is in complete violation of section 144C(13) of the Act. Hence, void ab initio. He submitted, the subsequent rectification order passed under section 154 of the Act cannot make good the jurisdictional error committed by the Assessing Officer and validate the final assessment order. He submitted, as per secti....
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.... 9. A reading of section 144C(13) of the Act as a whole and sub-sections (10) and (13) of section 144C, in particular, make it clear that the directions issued by DRP are binding on the Assessing Officer as he has to pass the final assessment order in conformity with such direction within one month from the end of the month in which the directions were received. However, on a careful reading of Section 144C as a whole, we have not found any bar or restriction imposed therein qua the applicability of Section 154 of the Act to the final assessment order. Similarly, on a reading Section 154 of the Act, we failed to locate any restriction/bar with regard to applicability of the provision to a final assessment order passed under Section 144C(13) of the Act. However, in our view, Section 154 of the Act can be invoked only in a situation where there is a rectifiable mistake apparent on the face of record. Meaning thereby, the mistake must be patent and obvious and does not require to be discovered or to be established through a process of debate/argument/reasoning. Further, sub-section 2 of Section 154 empowers the authority concerned to rectify a mistake apparent on the face of the reco....
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....r, the proposition laid down is that the final assessment order passed in violation of directions of learned DRP is null and void. There cannot be any quarrel with such proposition in view of the specific mandate of Section 144C(13) of the Act. However, in these decisions, the Bench did not the occasion to deal with the authority of the Assessing Officer in invoking the provisions of Section 154 of the Act to rectify the mistake apparent in the final assessment order. Hence, these decisions would be of no help to the assessee. Even, the decisions in case of Global One India Private Limited vs. DCIT and Basware Corporation India versus DCIT (supra), would be of no help to the assessee, as they are factually distinguishable. As discussed by the Bench in these decisions, though the Assessing Officer was fairly conscious of the specific directions of the DRP, since the TPO had not given effect to the directions of learned DRP, the Assessing Officer proceeded to pass the assessment order to avoid limitation. Thus, the Assessing Officer consciously and deliberately failed to implement the directions of learned DRP, which does not fall in the category of mistake apparent on the face of re....
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....15. Having held so, he proceeded to compute the profit attributable to the PE at 5% of the total sales made in India, including both the Indian subsidiary and others. In the process, he added an amount of Rs. 10,15,85,650/- to the income of the assessee. The additions so proposed in the draft assessment order was upheld by learned DRP while disposing of the objections of the assessee. 16. Before us, learned counsel appearing for the assessee submitted that the issue is squarely covered in favour of the assessee by the decisions of the ITAT in earlier assessment years, being Assessment Years 2004-05, 2005-06, 2006-07, 2008-09 and 2009-10. 17. Learned Departmental Representative (DR), though accepted that in earlier assessment years the issue was decided in favour of the assessee, however, he submitted, the Department has gone in further appeal before the Hon'ble High Court. 18. We have considered rival submissions and perused the materials on record. The issue arising for consideration is whether LIPL can be considered as a PE of the assessee in India in terms with Article 5 of the India-USA DTAA. On perusal of facts on record, we find that this is a legacy issue contin....
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....5,63,164/-representing reimbursement of expenses relating to travelling, visa, etc., paid to LIPL as against the erroneous conclusion by the Assessing Officer that assessee had received it. 22. Before us, learned counsel appearing for the assessee submitted that the amount received by the assessee is in the nature of simple and pure reimbursement of expenses, without any mark-up. Proceeding further, he submitted that the assessee has merely facilitated the provision of certain services by KPMG and some other parties to the Indian AEs. He submitted, the assessee merely acted as an intermediary. He submitted, KPMG raised invoices on the assessee and the assessee, in turn, raised invoices on the Indian AE. Thus, he submitted, transaction was on a back-to-back basis and whatever amount was paid by the assessee to KPMG was reimbursed by the Indian AE to the assessee. Hence, there is no profit element involved in the transaction and, hence, it cannot be treated as income of the assessee. 23. Without prejudice, learned counsel drew our attention to Article 12(4)(b) of the India-USA DTAA and submitted that the "make available" condition enshrined therein is not satisfied. Thus, he su....
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....e available" condition has been satisfied. The test to determine whether the service provider has made available technical knowledge, knowhow, skill etc. is, the service recipient must be in a position to independent by apply the technical knowledge knowhow, skill etc. without the assistance of service provider. This fact has not been established by the Department. Thus, in absence of any conclusive finding, either with regard to the nature of services rendered or the satisfaction of the "make available" condition, the reimbursement of cost, without any profit element embedded therein, cannot be treated as FIS under Article 12(4)(b) of India-US DTAA. Accordingly, the Assessing Officer is directed to delete the addition. 27. In Ground No. 6 of the concise grounds, the assessee has contested the determination of ALP of corporate guarantee commission at 0.5%. As could be seen from the facts on record, the assessee had provided corporate guarantee to its Indian AE. While the TPO determined the ALP of the guarantee commission at 1%, learned DRP, following certain judicial precedents, reduced it to 0.5%. 28. We have considered rival submissions and perused the materials on record. ....