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2020 (7) TMI 595 - ITAT DELHIExistence of PE - addition on account of salary reimbursement cost treated as fee for technical services - royalty income was offered to tax in India on the basis of tax rates prescribed in DTAA between India and Singapore i.e. @ 10% - AO was of the view that the person employed by the assessee, working under the Indian entity, were seconded to India; the salary of the said person was reimbursed by the Indian entity and hence taxable in the hands of the assessee. HELD THAT:- The evidences need to be seen in their entirety as the burden of proving that the foreign assessee has a PE in India and consequently it has to be taxed on the business generated by such PE is initially on the Revenue. Such is the proposition laid down by Hon’ble Supreme Court in ADIT vs E-funds IT Solutions Inc. [2017 (10) TMI 1011 - SUPREME COURT] In such a scenario, the question of taxability of service PE in India of the assessee company is answered in the negative. The evidences have also been gone into by the CIT(A), who has given detailed finding. DR for the Revenue has failed to controvert the said finding of the CIT(A). In the absence of the same, it cannot be said that the assessee had service PE in India. Another aspect which is to be kept in mind for the taxability of service PE is that the expenses of salary cost needs to be deducted from the business income generated by the PE in India, which in the present case would be NIL. There will be no income attributable to the PE. We find no merit in the stand of the Revenue in this regard. Taxability in the hands of the assessee company i.e. income arising on account of deputation of Mr. Vinod Mahboobani and whether the same constitute service PE - We find no merit in the stand of the Assessing Officer in this regard, i.e. existence of service PE and provision of technical services; the same cannot co-exist. In any case under Article 12 of DTAA, the clause of “make available” needs to be fulfilled to hold existence of PE for technical services. In the absence of fulfillment of “make available” clause, it is not possible to hold that there is taxability of FTS under Article 12 of the DTAA. We find no merit in the stand of the Assessing Officer in treating the reimbursement received by the assessee company from YRIPL on account of salary payment as FTS. We have already held in the paras above that Mr. Vinod Mahboobani was working as an employee of YRIPL and not as an employee of the assessee company. The reimbursement of salary had no element of income and was not taxable. In any case since Mr. Vinod Mahboobani had already paid taxes in India on the aforesaid salary, the same amount being taxed as FTS in the hands of the assessee company, would amount to double taxation. Upholding the order of the CIT(A), we dismiss the ground of appeal raised by the Revenue. Attribution of business income to the alleged PE of the assessee company in India - AO has failed to establish his case and where none of the conditions specified in Article 5(8) of the DTAA have been satisfied, then it cannot be said that the assessee had any DAPE in India. In any case, the marketing activities undertaken by the YRMPL were on behalf of the YRIPL and its franchisees and in the absence of any link whatsoever with the business of the assessee company, there is no merit in attribution of contribution made by the Independent third-party franchisees, to constitute PE of the assessee company in India. Assessee has no PE in India and no business undertaken in India, hence no fixed place PE also. - Decided in favour of assessee.
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