TMI Blog2012 (10) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... , no income shall be deemed to accrue or arise in India through or from operations which are confined to purchase of goods in India for the purpose of export. Tribunal in assessee’s own case for the assessment years 2004-05 and 2005-06 held that the L.O. of the assessee was performing the activities of assorting of diamonds, checking of the right quality of diamonds and price negotiation as per the instructions and specification of the assessee. These activities of the LO is only part of the purchasing process of the diamonds and did not bring any physical or qualitative change in the goods purchased. Even otherwise, the function of the LO are prior to purchase of the diamonds and not subsequent to the purchases. Therefore, no quality ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipals, M/s M. Fabrikant Sons Inc., USA. In reply, the assessee filed written submission which has been summarized by the A.O. in the assessment order as under (Para 3) : (i) There is no business connection and no income can be said to arise/accrue to the Liaison Office. (ii) Liaison Office does not constitute Permanent Establishment. (iii) The Liaison Office only carried out the activity of coordinating purchases for the assessee and purchase activities are outside the purview of section 9(1) and Article 7 of Double Taxation Avoidance Agreement between India and USA, does not applicable to the assessee. The A.O. after considering the assessee s objections, provisions of section 9(1), the decision of the Hon ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s Liaison Office cannot be considered as a Permanent Establishment in India and no profits can be attributed to the Permanent Establishment as no profit accrues or arises in India. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in directing the Assessing Officer to delete the entire addition of Rs. 12,50,82,741/-. 3. The appellant prays that the order of the Ld. CIT(A), Mumbai on the above grounds be set aside and the order of the Assessing Officer be restored. 5. At the time of hearing the ld. D.R. supports the order of the A.O. 6. On the other hand the ld. counsel for the assessee submits that the issue involved is squarely covered in favour of the assessee by the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of purchase of goods through LO and all the activities carried out by the LO are basic and preliminary requirement of the purchasing process/operation Selection of right goods and negotiation of price as per the instructions of the assessee are essential part of the purchasing activity. Thus, the case is fully covered by the clause (b) of explanation (1) to section 9(1)(i) of the Act. Further in view of the circular Nos. 23 and 163, the board has clarified as under : Circular No. 23 (5) NON-RESIDENT PERSON PURCHASING GOODS IN INDIA - A non-resident will not be liable to tax in India on any income attributable to operations confined to purchase of goods in India for export, even though the non-resident has an office or an agency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has happened is that a few transactions of purchases of raw materials have taken place in India and the manufacture and sale of goods have taken place outside India, the profits arising from such sales cannot be considered to have arisen out of a business connection in India. Where, however, there is a regular agency established in India for the purchase of the entire raw materials required for the purpose of manufacture and sale abroad and the agent is chosen by reason of his skill, reputation and experience in the line of trade, it can be said that there is a business connection in India so that a portion of the profits attributable to the purchase of raw materials in India can be apportioned under Explanation (a) to section 9(1)(ii) [T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any distinguishing feature brought on record by the Revenue, we respectfully following the decision of the co-ordinate Bench of the Tribunal (supra) uphold the order passed by the ld. CIT(A) in holding that the appellant s office in India cannot be considered as PE in India and no profits can be attributed to the PE, and, accordingly, the grounds raised by the Revenue are rejected. ITA 7514/Mum/2010 (By the assessee for A.Y.2007-08.) 10. The summarized ground taken by the assessee reads as under:- On the facts and circumstances of the case and law the Learned Assessing Officer ought to have held that the assessee s Liaison Office cannot be considered as a permanent establishment in India and no profit can be attributed to the per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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