Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2010 (1) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (1) TMI 55 - AT - Income TaxIncome accrued in India - business connection in India u/s 9 - Profits attributable to the foreign enterprises PE in India - profits of the assessee were estimated at an ad hoc rate of 20 per cent of the total advertisement revenue attributed to India - whether the ld CIT(A) has correctly assessed the assessee's profits attributable to the foreign enterprises PE in India @ 10 per cent of the gross revenue receipts from India - AO held that the income of the assessee company from the advertisement revenues accrued or arose in India u/s. 9(1). It was held that BWIPL constituted a business connection of the assessee as well as a PE under art. 5(4)(a) and art. 5 (4)(c) of the DTAA between India and the UK. The profits of the assessee were estimated at an ad hoc rate of 20 per cent of the total advertisement revenue attributed to India. HELD THAT:- Where the transaction was held to be at arm's length, the ruling of the AAR was correct in principle, provided that an associated enterprise, which also constituted a PE, was remunerated on arm's length basis, taking into account all the risks-taking functions of multinational enterprises and that in such a case, nothing further would be left to attribute to the PE. Assessee has also sought to place reliance on the decision of SET Satellite (Singapore) Pte. Ltd. vs. Dy. Director of IT (International Taxation)[2008 (8) TMI 96 - BOMBAY HIGH COURT] wherein as commission of 15 per cent of gross advertisement revenue paid by SET Singapore, the foreign company, to its agent, SET India, which agent was held to constitute SET Singapore's dependent agent PE, was held to represent price computed at arm's length. The facts in the present case are found to be at parity with those present in SET Satellite. As such, we hold that SET Satellite has rightly been relied on behalf of the assessee and that it is directly applicable to the assessee's case. It is seen that CBDT Circular No. 765, extended Circular No. 742. As per CBDT Circular No. 742, it was needed to be established, for the applicability of the circular, that the assessee or a non-resident foreign telecasting company and that it did not have a branch office or a PE or did not maintain country-wise accounts of its operations. The circular would not apply in the event of any of the said conditions being not satisfied. All the conditions are not to be cumulatively satisfied so as to apply the circular. In the assessee's case, the assessee had filed before the AO its country accounts for India, wherein the total revenues and expenses of the assessee were allocated to its Indian activity. A copy thereof has been placed before us. Before the CIT(A), the assessee also filed its audited accounts containing allocation of revenues and expenses to its Indian activity. A copy thereof has also been furnished before us. The ld CIT(A) remanded these to the AO. Therefore, evidently, CBDT Circular No. 742 does not apply. Apropos reliance on the TPO's order in BWIPL, it does not make a difference if the order of the TPO in that case was that of a dependent agent. The TPO had accepted that the transaction was at arm's length price. It was observed that almost everyone in the assessee's line of business was charging the same rate of commission on the sale of airtime on TV channels or FM channels. In view of the above, the case made out by the assessee is found to be justified. Its grievance is thus accepted.
|