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2018 (4) TMI 1964 - AT - Income TaxAccrual of income in India - PE in India - LO executing business or contracts independently with the customers in India - Whether the assessee’s LO in India constitutes a PE under Article 5 of the DTAA between India and Japan? - HELD THAT:- As following the parity of reasoning brought out by our co-ordinate Bench for Assessment Year 2007-08 in its order we may note that so far as the instant year is concerned, there is no evidence and material referred to by the income-tax authorities so as to establish in the instant year that the LO was executing business or contracts independently with the customers in India and, therefore, the plea of the assessee that the LO was carrying only support activities and was engaged in preparatory and auxiliary activities deserves to be affirmed and the LO could not be construed as a PE in India. There was no material to suggest that any action was taken by the RBI or whether any correspondence in this regard was at all made by the AO or not. Be that as it may, even before us, there is nothing to suggest that the RBI has found the activities of the LO as being noncompliant with the terms and conditions of its permission and, therefore, the said factual matrix strengthens the assertions of the assessee that the LO was performing activities which were permissible by the RBI, meaning thereby, that it was only performing support activities and engaged in only preparatory and auxiliary activities and not in the nature of a PE so as to impute any business connection in India. Thus, following the precedent as also the aforesaid discussion, in our view, it is irresistible to conclude that the assessee’s LO did not constitute a PE in India for the Assessment Year 2005-06. In this view of the matter, the Ground of appeal no. 1 raised by the assessee is allowed. Levy of interest u/s 234B - While completing the assessment, interest u/s 234B of the Act was levied by the Assessing Officer for default in payment of advance tax. It has been brought out that similar issue for Assessment Year 1998-99 was considered by our co-ordinate Bench in its order dated 12.01.2017 [2017 (1) TMI 1098 - ITAT MUMBAI] and decided in favour of the assessee following the ratio of the judgment in the case of NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT]. Following the aforesaid precedent, the plea of the assessee on this aspect is also upheld.
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