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2015 (5) TMI 760 - ITAT MUMBAI

2015 (5) TMI 760 - ITAT MUMBAI - TMI - Permanent establishment (PE) of the assessee in India - whether receipts on account of advisory services and guarantee commission had to be assessed in India? - Whether particular articles of the Agreement of the Avoidance of Double Taxation between India and Netherlands were applicable or not? - Held that:- We find that Rabo India [RI] had made payment to the assessee for providing advisory services to it and under the head guarantee commission,that RI was .....

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a fixed of business through which the business of the enterprise was wholly or partly carried on. Thus it is clear that the asessee was not having fixed place of business in India. FAA had rightly held that provisions of said Articles i.e.5(1)were not applicable. - Decided in favour of assesse.

Whether particular articles of the Agreement of the Avoidance of Double Taxation between India and Netherlands were applicable or not? - None of the receipts comprising in total amount of S .....

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unction actually he had performed,is not known. Similarly, the circumstances in which guarantee commission was paid by RI to the asessee are not discussed by the FAA.The circumstances,under which RI for approached the asessee which entitled it to get roughly one third of the commission,are not known.In short,the appeal has been decided by discussing the principles governing DTAA and not mentioning as to how those principles were applicable to the facts of the case.In our opinion,the matter needs .....

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g the orders dt.15.05.2006,31.01.2007 & 29.03.2010 of the CIT(A)-XXXI, Mumbai, Assessing Officer(AO) has raised following Grounds of Appeal: ITA No. 4632/Mum/2006-AY-2002-03 1."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the assessee company does not have any PE in India within the meaning of Article 5(1),5(2) and 5(3) and Article 5(5)". 2."On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ha .....

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(A) has erred in holding that the business profits of the assessee company are not taxable in India in the absence of any PE in India within the meaning of Article 5 of DTAA". The appellant prays that the order of the Ld. CIT(A) on the above grounds set aside and that of the AO restored. The appellant craves leave to amend or later any ground or add a new ground which may be necessary. ITA No. 3633/Mum/2007-AY-2003-04 1.On the facts and in the circumstances of the case and in law, the ld. C .....

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h may be necessary. ITA No. 5056/Mum/2010-AY-2005-06 1. Whether on the facts and the circumstances of the case and in law the CIT(A) erred in holding that the assessee did not have a Permanent Establishment in India. 2. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 2.Assessee,an Association of Persons (AOP),is .....

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,194/- ITA/4632/Mum/2006-AY-2002-03 The first two grounds of appeal are about permanent establishment (PE) of the assessee in India within the meaning of Article 5(1), 5(2), 5(3) & 5(5) of the Article.Next two grounds are about taxability of ₹ 1.30 Crores.The issue of PE has also been raised in these grounds. 2.The AO,while completing the assessment order held that receipts on account of advisory services and guarantee commission had to be assessed in India. The facts of the case are t .....

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g transaction structure etc.The fees was determined to be 32.5%(Rs.15.39 lakhs) of the fee which RI would receive from RPG.Similarly,Milan Brach of the asessee provided identical type of services to RI in the matters of Pioneers Investment management Inc.and Investment trust of India.Such services were rendered in connection with the sale of the entire share holding in Pioneer capital ITIAMC Ltd. For the said services,the assessee received fees, amounting to ₹ 5.34 Lakhs. As stated earlier .....

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77; 4.37 Lakhs was received from RI.It was also found that Utreche(Netherlands) Branch of the assessee had allocated 1 Million US$, on 11.02.2000,to RI in favour of M/s Banner Pharma Caps (India) Pvt. Ltd.,in the form of working capital facility and the guarrantee/indemnity fee.On 22.02.2000 the same branch of the assesseee allocated further 1 Million US$ to RI for the same client and for the same facility.On both the occasions guarantee/indemnity fee was mentioned at 5/8 of the margin received. .....

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not furnished the copy of the agreement with regard to the transaction which led to the recovery of storage charges by RI on behalf of Singapore Branch of the assessee. Considering the above facts,the AO held that the assessee was in practice of using of good offices of RI for conducting its own business,that in all the cases the activity of RI was basically linked with the business operation of the assessee, that on the face it might appear that RI had entered into a business agreement and in t .....

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s completely intertwined and was dependent on the business of the assesseee,that the contracts/agreements entered into by RI were basically for the purpose of extending business operations of the assessee into India, that the documents indicated that for every transaction RI fell back upon the assessee for completion of the assignments.Finally,the AO held that wholistic view of the facts proved that RI constituted PE of the asessee in India under Article 5(5)of the DTAA,that the argument of the .....

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7; 1.30 Crores(19.30lakhs+4.37lakhs+20.74 lakhs +85.04 lakhs+73,809/-)i.e.at ₹ 1.04 Crores.The AO further held that the asessee was engaged in financial sector and especially engaged in providing credit facility and advisory services,that 30% of the above (Rs.31.25lakhs)was to be taken to be profits of the asessee from its Indian operations. 3.Aggrieved by the order of the AO,the asessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was argued that the assesse .....

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any stock of any goods/ merchandise of the assessee,that it did not secure orders on behalf of the assessee,that it was economically and legally independent,that it was acting in ordinary course of its business and was not dependent on the assessee, that during the year under appeal RI had income from various sources amounting to ₹ 1386.73 Millions, that the assessee had received professional income and guarantee commission amounting to ₹ 20.74 Lakhs and 23.68 Lakhs respectively fro .....

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idiary RI would not be agent of the assessee, that the assessee had not nominated any Director on the Board of RI, that the DTAA did not provide for any service PE. It was further argued that the payment of ₹ 85.04 Lakhs was actually reimbursements, that the assessee s branch in Singapore had won a case in litigation, that Rabo Singapore had authorised RI to collect payment on its behalf from Debt Recovery Appellate Tribunal(DRAT)and to remit it to Rabo Singapore,that the income was wrongl .....

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or branch or any place of business/management in India, that there was nothing on record to show that assessee was covered by the provisions of Article 5(2) of the DTAA,that the AO had held that assessee had an agency PE in India and that RI constituted a PE of the assessee under Article 5(5) of the DTAA,that the AO had arrived at the conclusion that RI would fall back upon the assessee for the completion of assignments procured by it i.e. RI. The FAA analysed the advisory agreements entered in .....

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uarantee commission agreements entered into by RI and held that perusal of the agreements between the assessee and RI proved that RI had not acted agent of the assessee, that loan was advanced by RI, that to safeguards its own financial interests RI had entered into an agreement with the assessee requiring it to stand as guarantor on payment of guarantee commission,that RI had not at all acted as agent of the assessee, that deputing of an expatriate Director by the assessee to RI did not make an .....

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on as part of the income of the assessee.He further held that the business profits of the assessee were not taxable in India in view of Article 7(1) of the DTAA,that the AO had held that entire receipt were in nature of business income, that in the absence of a PE in India, if any, business income was arising to the assessee in India no such business profit were taxable in IndiaFinally, the FAA allowed the appeal filed by the assessee. 4.Before us,Departmental Representative(DR)argued that the a .....

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isions of Article 5(1)were not applicable,that RI was taking help of the assessee but the assessee was not taking any help of RI in carrying out its business ,that RPG or other parties had made payment to RI and RI in turn had paid some amount to the assessee, that all the work done by the assessee were performed outside India,that there was no work office of the assessee in India,that no personnel of the assessee was working in India. 5.We have heard the rival submissions and perused the materi .....

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ecord to prove that provisions of Article5(1)of the Agreement are applicable.Article 5(1) stipulates that PE for the purpose of convention meant a fixed of business through which the business of the enterprise was wholly or partly carried on.From the facts available on record,it is clear that the asessee was not having fixed place of business in India.Therefore,in our opinion the FAA had rightly held that provisions of said Articles i.e.5(1)were not applicable. Now,we would take the other issues .....

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pendent status or was merely working on behalf of the asessee,as alleged by the AO. In absence of such basic material facts,it is not possible to come to a conclusion as to whether the asessee had PE in India or not. There is no material available on record to prove as to whether RI had significant independent activities on its own or not.The FAA,while allowing the appeal has dealt with the DTAA and held that provisions of Article 5 (1)5(2)of DTAA of Indo-Netherland were not applicable.But,he ha .....

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