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2019 (3) TMI 563 - AT - Income TaxAccrual of income in India - Provision of the software solutions for onward distribution to third party customers in India - Compensation remaining with the Indian subsidiary - characterisation of income - attribution of income - PE in India - Royalty’ or ‘Fee for Technical Services’ or even as ‘Business profits’ - AO has characterised such receipts as ‘Royalty’ in the draft assessment order, whereas the DRP treated the same as ‘business profits’ in terms of Article 7 of India-Israel Tax Treaty - Non-existence of a Dependent Agent Permanent Establishment (‘DAPE') - India-Israel Tax Treaty - HELD THAT:- The appellant before us is a tax resident of Israel and in terms of the arrangement with its subsidiary in India, i.e. Celltick India, it is engaged in providing software solutions for onward distribution to third party customers in India. In terms of such arrangement effective from March, 2011, a copy of which has been placed it emerges that the price realised from the ultimate customer is shared between the assessee and its Indian subsidiary, i.e. Celltick India, on 50-50 basis. For the present, the issue relating to characterisation of income is not being contested by the assessee as it has sought to challenge the untenability of the addition only on the basis of the proposition that once ‘arm’s length principle’ has been satisfied qua the relevant transactions, there can be no further profits attributable to the assessee in India even if it has a PE in India. While canvassing such proposition, assessee also does not bring into question the stand of the Revenue that there is a PE of the assessee in India. The point sought to be made by the assessee is that the compensation remaining with the Indian subsidiary, i.e. Celltick India, is adequate and justified on the basis of the Transfer Pricing analysis, and the same has been so accepted by the income-tax authorities in the case of Celltick India for the very same assessment year. According to the assessee, no further income could be attributable to it on account of its PE in India. In our considered opinion, the proposition sought to be canvassed by the assessee has the approval of the Hon'ble Supreme Court in the case of Morgan Stanley & Co. [2007 (7) TMI 201 - SUPREME COURT] In view of the aforesaid discussion, in our view, since the appropriate ‘arm’s length principle’ has been satisfied in the present case, nothing more would be left to be taxable in India by attributing any further income to the PE of the assessee in India. - Decided in favour of assessee. Charging of interest u/s 234B - HELD THAT:- This aspect of the matter, in our view, also loses its substantiveness since we have already deleted the addition. Nevertheless, in view of the judgment in the case of DIT (IT) vs NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] since the income of the assessee is liable for deduction of tax at source, no interest for default of payment of advance tax is exigible. Thus, on this count too, assessee has to succeed with regard to levy of interest under Section 234B of the Act.
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