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2022 (12) TMI 1396 - ITAT DELHIIncome deemed to accrue or arise in India - agency PE - both the authorities treated the assessee as DAPE [Dependent Agent Permanent Establishment] - nature of the business activities carried out by the assessee and subsidiary of the assessee viz. Krones India Pvt. Ltd. (“KIPL”) - HELD THAT:- For an enterprise to be considered as habitually securing orders wholly or almost wholly for the other enterprise, it is essential that the enterprise frequently accepts orders on behalf of the other enterprise or habitually represents to persons offering to buy goods or merchandise that acceptance of an order by such enterprise constitutes the agreement of the other enterprise to supply goods or merchandise under the terms and conditions specified in the order and further the other enterprise takes actions that give purchasers the basis for a reasonable belief that such person has authority to bind the other enterprise. We are of the considered view that KIPL is only undertaking marketing enterprise and contracts are finalized by the assessee and signed by the assessee outside India. Therefore, KIPL cannot be said to be habitually securing and concluding order on behalf of the assessee. KIPL maintains stock inventory and economically dependent on the assessee - The agreement with KIPL is effective from 2007 and we are in Assessment Year 2011-12 which means that no adverse view has been taken by the Revenue in the past and we have been told by the ld. counsel for the assessee that no adverse view has been taken by the Revenue after the present assessment. Though the AO has heavily relied upon the TP Study Report of KIPL, but has not brought any evidence on record that KIPL has habitually secured orders for the assessee. None of the customers have been examined by the Assessing Officer though the customers from India include renowned organizations like Nestle, Coco Cola, Pepsico etc. Considering all we are of the considered view that the observations made in the TP Study Report of KIPL regarding scope of its business activities do not result in holding KIPL as DAPE of the assessee and further, since KIPL has been remunerated by the assessee for commission activities on arm’s length basis, no further attribution is required in lieu of law laid down by the Hon'ble Supreme Court in the case of Morgan Stanley [2007 (7) TMI 201 - SUPREME COURT] We, accordingly, hold that pursuant to the specific exclusion of independent agent under Article 5(5) of the DTAA, the case o the assessee falls outside the scope of PE. We, accordingly, direct the Assessing Officer to delete the impugned addition. Appeal of the assessee is allowed.
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