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2016 (1) TMI 302 - ITAT MUMBAI

2016 (1) TMI 302 - ITAT MUMBAI - TMI - Accrual of income in India - AO held that a part of the direct sales made in India by SJMHK and the assessee was attributable to the Indian Branch of SJMHK and accordingly taxable in India. The AO made an adhoc estimate of 20% of the direct sales made in India by SJMHK and the assessee and the same was attributed to the PE/business connection and taxed accordingly. - Computation of returned income on receipts related to services provided to both SJMH and SJ .....

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sion 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 PER BENCH: These three appeals by the assessee are directed against three separate orders of the Ld. CIT(A)-11, p .....

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e Commissioner of Income-tax (Appeals) ought to have held as such. 1 : 3 The Appellant submits that the impugned re-assessment proceedings u/s. 148 and the Order passed in pursuance thereof was not in accordance with law and consequently ought to be struck down as void ab-initio. Without prejudice to the foregoing: 2: 0 Re.: Ex-parte assessment: 2 : 1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer of passing an ex-parte assessment order. 2 : .....

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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 i .....

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considering the facts and circumstances of its case and the law prevailing on the subject 20% of sales made in India cannot be said to be its profits taxable in India and the stand taken by the Assessing Officer in respect thereof is erroneous, misconceived and illegal and the Commissioner of Income-tax (Appeals) ought to have held as such. 2.1. At the very outset , the Ld. Counsel for the assessee stated that the issues involved in all these appeals qua the facts are identical, therefore all t .....

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MHK")), which is also 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 .....

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ect sales quantum of both the Appellant and SJMHK in India. Further as the receipt of management fees fell within the transfer pricing provisions the matter was scrutinized by the Transfer Pricing Officer ("TPO") who by his Order dated 28 February 2005 (pg. No. 103 of the paperbook) held that the management fees received of ₹ 79,20,240/- for A.Y. 2002-03 for sales made by SJMI and SJMHK was at arm's length and no addition was called for. 3.2. Before proceeding further, it wou .....

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AO made an adhoc estimate of 20% of the direct sales made in India by SJMHK and the assessee and the same was attributed to the PE/business connection and taxed accordingly. 4. The assessee carried the matter before the Ld. CIT(A) and the CIT(A) vide his order dt. 31.12.2010 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. .....

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u/s. 148 of the Act to the assessee in respect of the amounts deleted by the Ld. CIT(A). The present appeals before us are in pursuance to this action of the AO. Coming back to the fate of SJMHK, in its case the appeals were decided by the Tribunal by a consolidate order dt. 13.5.2014 wherein the Tribunal has held that the TPO has accepted the gross profit rate of 8.81% declared by SJMHK, therefore profit of 20% attributed by the AO cannot be sustained. The Tribunal further held that the manage .....

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Tribunal dt. 13.5.2014 read with Miscellaneous application order dt. 14.10.2014. 7. We have heard the rival submissions at length and have carefully perused the orders of the Tribunal placed before us. We find force in the contention of the Ld. Senior Counsel. The issue relating to the estimation of gross profit stands covered in favour of the assessee and against the Revenue by the order of the Tribunal in ITA Nos. 2228/M/07, 1920/M/07, 4941/M/07, 6922/M/07 & 7193/M/07 dt. 13.5.2014 wherein .....

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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 have heard the arguments of either side and have perused the material placed before us. The fact which remains uncontroverted by the revenue authorities and the DR are that the assessee in the year under consideration was covered under the .....

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79,20,240/- (APB 7 & 12). 43. The AR further pointed out that the loss as determined and taken to the computation was returned in the return of income filed by the assessee (APB 7, 22 & 21) 44. We, therefore, are of the opinion, that all the requisite details were placed before the AO, along with the return on income, which based the computation of returned income on receipts related to services provided to both SJMH and SJMI. 8.1. Further Tribunal vide M.A Nos. 349 to 350/M/2014 dt. 14t .....

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