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2016 (2) TMI 705 - AT - Income TaxExistence of P.E. in India - nature of power of attorney - whether the liaison office (L.O.) of the assessee constitutes Permanent Establishment (P.E.) of the assessee in India? - Held that:- A plain reading of the clauses in the power of attorney takes us to a conclusion that the powers given therein are L.O. specific. No doubt the AO can investigate, call for evidences and come to a conclusion where any income earning activity has been carried out by the L.O. so as to construe it as fixed P.E. but, in our view it is beyond the jurisdiction of the AO to adjudicate and conclude that the assessee has filed false declarations before the RBI. At best, he can bring his findings to the notice of the RBI which may consider the same in accordance with law. The RBI has not found any violation of conditions laid down by it while permitting the assessee to have an L.O. In such circumstances, no adverse inference can be drawn. Having come to conclusion that prima facie a reading of the power of attorney does not demonstrate that the employees of the assessee at the L.O. are authorised to do core business activity or to sign and execute contracts etc., we now examine whether the AO has brought out any documentary evidences in support of his contention that the assessee has a P.E. in India. The assessee has furnished before the AO as well as before the DRP numerous documents, in support of his contention that all purchase orders would be raised directly by the Indian Customers on the Head Office of the assessee and that the Head Office had directly send quotations/invoices to its Indian customers and that these were signed and executed directly by the head office, without any involvement whatsoever by the LO in India. The AO has not given any adverse finding on the evidences filed before him nor did he point out from the evidences filed, as to why the claim of the assessee is not acceptable. There is no adverse comment by the D.R. on these voluminous evidences filed before us by the assessee to demonstrate that it does not have a P.E. in India. The AO has also not brought on record any material, other than his interpretation of the terms of the power of attorney, to demonstrate that the L.O. is carrying on core business activity warranting his conclusion that the assessee has a P.E. in India. Thus neither the documents produced by the assessee are rebutted by the Revenue, nor the Revenue has brought on record any evidence in support of its contention.Thus we have to necessarily hold that the Revenue could not demonstrate that the assessee has a P.E. in India. - Decided in favour of assessee
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