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2024 (1) TMI 943 - ITAT DELHIAccrual of income in India - FTS - DR submitted that Testing of any equipment is an expert and technical services - expense was merely by way of reimbursement of the lab test report expenses and assessee on its own had not added any value to the test reports given by another entity.- HELD THAT:- Copy of invoices from the concerned test laboratory was filed and report given by the concerned laboratory was provided and the reimbursement invoice of 1900EUR made available - DRP have fallen in error in considering the same to be in consultancy and professional services to the Indian associates. In spite of accepting that it was a reimbursement expense the DRP considered it to be substantially FTS in nature. We are of considered view that the assessee had not added any value to the laboratory report. Assessee had not played any role except for being a medium to procure a report from a laboratory having higher credibility. The same cannot at all be in the nature of FTS, as erroneously held by Tax authorites. Thus, we are inclined to decide the ground no. 1 in favour of the assessee. Existence of a PE - Determining income on presumptive basis attributable towards Permanent Establishment ("PE" ) - Tax authorities have found existence of fixed place PE on allegation that the assessee is procuring its Indian business of supplying goods and services to various customers in India through the use of Indian subsidiary and also provides it with necessary services and supervision. However to establish this, the AO has not brought on record any evidence but has drawn inference for the failure of assessee to provide necessary evidences to AO. The case of assessee is that assessee was not given sufficient time to file the relevant evidences. Tax Authorities below have fallen in error to hold the existence of a PE on the basis of the mere assumption that as assessee company has a subsidiary in India and therefore whatever sales in the form of export is made by it to Indian entities, same is assumed to be with indulgence of Indian subsidiary without substantiating as to how Indian subsidiary was privy to the purchases by other entities. There is substantial force in the arguments of Ld. AR that without examining the buyers how any inference could be drawn about the role of Indian subsidiary. Tax Authorities below have fallen in error in not appreciating the evidences in the form of bill of lading showing delivery outside India and also that the payments were made outside India. They have fallen in error to take note of the fact that the export to Indian counterparts was on principals to principal basis. Assessee company is not alleged to have any fixed place of business in the form of branch office/project office/ liaison office/ godown or warehouse or any other business site in India. No employee of the assessee company was found working in India. Thus, to hold a PE on basis of existence of a subsidiary of assessee in India cannot be sustained. We are accordingly inclined to hold that there was no PE of assessee in India and consequential attribution of the profit had no basis. The ground no. 3 to 5 and 7 to 10, are accordingly decided in favour of the assessee.
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