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2017 (8) TMI 79 - DELHI HIGH COURTPermanent establishment of the assessee in India - Avoidance of Double Taxation between India and Japan - Held that:- the mere fact that the Manager of the Assessee stated that the books of accounts might be kept in a warehouse (which was unable to be shown by the Revenue to exist) or that some portion of the telephone expenses were attributable to the LO or that Mr. Ishibashi was managing both the LO as well as the PO was hardly sufficient to conclude the LO was being used to carry on the business of the enterprises. The basic factual foundation for holding a LO of the Assessee as its PE has not been laid by the Revenue in the present case. The fact that the Assessee was adhering to the conditions imposed by the RBI for running a LO, and the RBI had accepted the functioning of the Assessee’s LO for over three decades, points out to the fact that the Assessee has complied to the conditions, one of which was that it could not carry on any business or trading activity in the LO. While, it is a moot question whether this would be binding on the Revenue, it certainly increases the burden of the Revenue to show that notwithstanding the RBI permission continuing during the AYs in question, the Assessee’s LO should be construed to be a PE in terms of Articles 5 (1) and 5 (2) of the DTAA. The Court has undertaken the exercise of again examining the factual position since in the impugned order the ITAT has merely relied upon its order for an earlier AY. While the Court appreciates the contention put forth by the Revenue that the facts of each AY has to be separately considered, the Court finds that there is no ground made out to disturb the reasoned order of the CIT (A) for both the AYs. ITAT was correct in holding that the Assessee did not have a PE in India and was therefore exempt under the provisions of the DTAA between India and Japan. ITAT was right in holding that the offices of the Assessee and its activities during the AY in question could not be regarded as its PE in India and the income directly or indirectly attributable to the said offices was not taxable in India. Assessee does not have any PE in India and its income from business turnover/imports in India was exempt in view of DTAA between India and Japan. - Decided in favour of the Assessee and against the Revenue.
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