TMI Blog2016 (1) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... o be taxed in the hands of SJMI (the appellant) by virtue of having a Permanent Establishment in India or otherwise, the amount that can be taxed is Rs. Nil, as the Permanent Establishment has been compensated at arm’s length and has offered the said compensation for tax in India which satisfies any charge in view of inter alia the decision of the Supreme Court in the case of DIT Vs Morgan Stanley & Co. (2007 (7) TMI 201 - SUPREME Court) and the order of the TPO. Decided in favour of the assessee. - I.T.A. Nos.1978 to 1980/Mum/2011 - - - Dated:- 31-7-2015 - MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Appellant : Shri J.D. Mistry For The Respondent : Smt. Ramapriya Raghavan ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to have held as such. 2: 3 The Appellant submits that the impugned ex-parte assessment and the order passed pursuant thereto is bad in law and should be struck down. 3 : 0 Re.: Presence of a Permanent Establishment in India: 3 : 1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer in holding that the Appellant has a Permanent Establishment ('PE') in India. 3 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the Appellant has no PE in India and the stand taken by the Assessing Officer in this regard is erroneous, misconceived and not in accordance with law and the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o engaged in the same business. For many years, both SJMHK and SJMI were making direct sales to customers in India from their respective countries. Thereafter, the said SJMHK set-up a liaison office in India which was converted into a Branch Office with effect from 01 January 2000. 3.1. Even after setting up of the said Branch Office in India by SJMHK, both SJMI and SJMHK were making direct sales in India to some distributors / hospitals who insisted on dealing directly with them in view of inter alia their long standing relationship. Further the Indian Branch office of SJMHK received management fees which were offered for tax in the accounts of the Indian branch of SJMHK. These management fees were received as arm's length compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that two assessments i.e. of SJMHK and the assessee cannot be made in a single assessment order and hence deleted the addition made by the AO to the extent it related to the profit of SJMI attributable to the Indian PE. However, the addition to the extent it related to the profits attributable to the direct sales made in India by SJMHK was confirmed. 5. The Revenue and SJMHK preferred an appeal before the Tribunal. SJMHK challenged the action of the AO of attributing profits on account of direct sales made whereas the department challenges the order of the Ld. CIT(A) to the extent it held that profits attributable to direct sales made by SJMI cannot be taxes in the hands of the SJMHK. 5.1. The AO issued notice u/s. 148 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its order, the Tribunal held as under: We have heard the arguments and have perused the order of the Co-ordinate Bench in the case of the assessee for assessment years 1999-2000 2000-01, wherein the co-ordinate bench had accepted the estimate of gross profit attribution at 10% in place of 20%. We have also perused the TP report and the computation, wherein, the TPO has accepted the gross profit rate declared at 8.81%. In such a situation, acceptance of gross profit attribution of India Branch @ 20% does not inspire confidence . 8. The management fee is included in the receipts shown in the profit and loss account is accepted by the Tribunal at para-42 to 44 vide its order dated 13th May, 2014 which read as under: 42. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services provided to both SJMH and SJMI. 8.2. The Tribunal also confirms the observations of the Ld. CIT(A) incorporated by the Tribunal in its order at para-37 on page-9. The relevant part of the CIT(A) s observation reads as under: I hasten to add that the amount mentioned in the grounds of appeal at ₹ 79,20,240/- includes management fee for work done for the Hongkong company as well as for the US company. 8.3 Thus in view of the above mentioned finding it is held that even if any amount is to be taxed in the hands of SJMI (the appellant) by virtue of having a Permanent Establishment in India or otherwise, the amount that can be taxed is Rs. Nil, as the Permanent Establishment has been compensated at arm s length an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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