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2014 (4) TMI 976 - DELHI HIGH COURTJurisdiction for re-opening of notice u/s 148 of the Act - Assessee in default u/s 201(1) of the Act – Non-deduction of TDS u/s 195(2) of the Act - Whether any income arose or accrued to SEC through its PE in India in respect of the sales made in India – Held that:- The answer in our opinion should be in the negative, because even as per the revenue, as reflected in the order passed by the DRP in the reassessment proceedings of SEC, no income accrued to SEC in India - the DRP rejected the specific request made by that AO in his remand report that the assessee be treated as the PE of SEC and the income of SEC be computed on that basis - as regards attribution of income to the “fixed place PE”, a rough and ready basis would be to estimate 10% of the salary paid to the expat-employees of the assessee as the mark-up, as was done by the AO in the draft assessment order - The remuneration cost in respect of such employees seconded to the assessee amounted - this was taken as the base and a mark-up of 10% had been applied by the assessing officer and the income was taken - This was approved by the DRP in its order, the other claims made by the AO in the remand report were rejected. The basis of both the notices has been knocked out of existence by the DRP’s order in the reassessment proceedings of SEC for the same assessment year- On the date on which notices were issued to the petitioner u/s 148 and 201(1)/(1A), there was an uncontested finding by the revenue authorities in the case of SEC that SEC cannot be taxed in respect of the sales made in India through the assessee on the footing that the assessee is its PE - If no income arose to SEC on account of sales in India since the petitioner cannot be held to be its PE in India, two consequences follows that the payments made by the petitioner to SEC for the goods are not tax deductible u/s 195(2) and they were rightly allowed as deduction in the original assessment of the petitioner and the assessee cannot be treated as one in default u/s 201(1) and no interest can be charged u/s 201(1A - the notice u/s 201 is a verbatim reproduction of the remand report of the assessing officer in SEC’s case filed before the DRP – thus, both the notices u/s 148 and section 201(1)/(1A) of the Act set aside – Decided in favour of Assessee.
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