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JC Bamford Investments Rocester Versus Additional Director of Income Tax

2015 (5) TMI 607 - ITAT DELHI

Existence of Permanent Establishment (PE) in India or not - India UK DTAA - Held that:- All the requisite conditions for attracting the mandate of Article 5(2)(k) are satisfied inasmuch as (i) there is furnishing of services including managerial services; (ii) such services are other than those taxable under Article 13 (royalties and fees for technical services); (iii) such services are rendered out of India; (iv) such services are rendered by ‘other personnel’; and (v) such activities continued .....

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t:- As decided in assessee's own case [2014 (7) TMI 260 - ITAT DELHI] Tribunal in the earlier year has held that the total amount consisting Lumpsum Licence/Know-how Fees and also royalty was consideration for the transfer of IP rights simplicitor and also the service rendered by the employees of the second category - in so far as the question of royalty representing consideration for the transfer of IP rights simplicitor was concerned, the service PE representing the deputationists had no role .....

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issues are set aside and remitted back to the file of the AO for determining the income inconsonance with the direction given for the earlier years - Decided in favour of Assessee by way of remand.

Liability of interest u/s 234B did not arise as the assessee had included the amount of royalty and fees for technical services in its total income - Decided in favour of assessee. - ITA No. 6573/Del/2014, SA No. 401/Del/2014 - Dated:- 8-4-2015 - Sh. N. K. Saini And Sh. I. C. Sudhir JJ. Fo .....

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92,604/- which comprises of ₹ 68,032,550/- regular tax and ₹ 42,160,054/- interest. 2. First we will deal with the appeal of the assessee. Following grounds have been raised in this appeal: 1. The Learned Dispute Resolution Panel ( Ld. DRP ) and Learned Assessing Officer ( Ld. AO ) erred in following the order of AY 2009-10 without giving due consideration to the submissions of the assessee. 2. The Ld. DRP and Ld. AO erred in holding that assessee has a service Permanent Establishmen .....

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materially different purposes. - IPAA between JCB Excavators ( JCBE ) and JCB India Limited ( JCB India ) provides for employees sent by JCBE to JCB India on deputation (secondment) which is admittedly as per specific requirements of JCB India and not for services in relation to TTA or IPA. - Seconded employees sent as per arrangement under IPAA are employees of JCB India. 4. Without prejudice to Ground No.3, under the facts and circumstances of the case and under law, the Ld. DRP and Ld. AO ha .....

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not applying the desired computation mechanism for chargeability of Royalty income alleged to be covered under provisions of Article 7 of the DTAA between India and UL. The Ld. DRP and Ld. AO has failed to appreciate that: - Under Article7(1) read with Article 7(2) & 7(3) of the DTAA between India and UK, the entire Royalty received from India cannot be subjected to tax in India since no functions, assets and risks are associated with the alleged PE in India: - Royalty income alleged to be c .....

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6. Under the facts and circumstances of the case and in law, without prejudice to the above grounds, the Ld. DRP and ld. AO has failed to appreciate that the Indian company i.e. JCB India is a profitable company and as long as the same is earning profit at arm s length, no further attribution is possible even in case of an alleged PE. 7. Under the facts and circumstances of the case and in law, the Ld. DRP and Ld. AO erred in not following the Hon ble Income Tax Appellate Tribunal order in asse .....

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without prejudice to each other. That the appellant reserves its right to add, alter, amend or withdraw any ground of appeal either before or at the time of hearing of this appeal. 2. During the course of hearing, ground No. 7 was not pressed by stating that it is general in nature and Ground No. 9 is pre-maturely raised so these ground do not require any adjudication on our part. 3. Vide Ground Nos. 1 to 3 the issue agitated by the assessee is as to whether the assessee has Permanent Establishm .....

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ed against the assessee in the preceding year vide aforesaid referred to order dated 04.07.2014 wherein relevant findings have been given in para 4 which read as under: 4. We have heard the rival submissions and perused the relevant material on record. It is observed that in the earlier years, JCBE licensed intellectual property rights for manufacture of excavators under the brand name 3DX to JCBI. However, by virtue of new Agreement entered on 17.12.07 w.e.f. 01.04.07 amongst the assessee, JCBE .....

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r consideration before the Tribunal for assessment years 2006-07 and 2007-08. Vide its order for the AY 2006-07, the tribunal categorized employees of JCBE on deputation to India on assignment basis in the first category and those doing stewardship activities and inspection and testing in the second category. JCBI has been held to be constituting a service PE of JCBE in India because of the employees of the first category. The matter of the establishment of PE for the current year would have bec .....

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uring the year in question in the same way as they were doing in the past. This position was noticed by virtue of Clause (d) of the new Agreement and Clause 4.2 of this Agreement which clarifies that the delivery of technical documentation and making available of technical personnel as set out in earlier clauses III and IV of the Technology Agreement shall remain unaffected by this agreement and shall continue as rights and obligations between JCBE and JCBI under the Technology Agreement. The AO .....

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e practically the same which were taken for the earlier years. The tribunal has discussed and jettisoned such objections in its order for the A.Y. 2006-07. Under such circumstances and following the precedent, we hold that all the requisite conditions for attracting the mandate of Article 5(2)(k) are satisfied inasmuch as (i) there is furnishing of services including managerial services; (ii) such services are other than those taxable under Article 13 (royalties and fees for technical services); .....

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ssessee by holding that the services PE of the assessee is established in India. 6. Vide Ground Nos. 4 & 5 the issue relates to the royalty earned by the assessee and vide Ground No. 6 the issue relates to the earning of profit by the assessee at arm s length. As regard these issues the ld. Counsel for the assessee submitted that these are similar to the issues involved in the preceding year which had been decided by the ITAT in assessee s favour vide order dated 04.07.2014 in ITA No. 80/Del .....

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en given in para 5 which read as under: 5. The next major issue raised through various grounds is against the holding by the AO that the royalty earned by the assessee was effectively connected with the service PE of the assessee in India. We find that similar issue was there and has been elaborately discussed in the afore stated order of the tribunal for the earlier years. The tribunal has held that the total amount consisting Lumpsum Licence/Know-how Fees and also royalty as mentioned in para .....

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ith the service PE of the assessee in India. The amount of royalty and consideration for rendering of services by the employees of second category has been held to be not falling in para 6 of Article 13 and hence chargeable to tax as per para 2 of Article 13 of the DTAA. However, as regards the fees for technical services resulting from the rendering of services by the employees of the second category, the Tribunal has held that the same did not fall in para 6 of Article 13 and was, hence, charg .....

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rms of Article 7. As the facts for the instant year are admittedly similar to those of the preceding years on this issue, respectfully following the precedent for A.Y. 2006-07, we set aside the impugned order and send the matter back to the file of AO for determining income in consonance with the directions given for the earlier year. 9. So, respectfully following the aforesaid referred to order these issues are set aside and remitted back to the file of the AO for determining the income inconso .....

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