Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

The Deputy Director of Income Tax (International Taxation) – 4 (1) , Mumbai Versus M/s Lubrizol Corporation USA, C/o Ford, Rhodes, Parks & Co.

2016 (7) TMI 698 - ITAT MUMBAI

PE in India - Indo-US Treaty - addition made being a profit margin of 5% of the sale made by the assessee in India - Held that:- As decided in assessee's own case for the assessment years 2004-05, 2005-06 & 2008- 09 the assessee did not have PE in India in the year’s under consideration in terms of Article 5(1),5(2),5(4) and 5(5) of the India-US treaty and the additions made by the AO to the income of the assessee being a profit margin of 5% on the sales made by the assessee were ordered to be d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase of non-resident - Decided in favour of assessee - I.T.A. No. 1247 / Mum/ 2014 - Dated:- 13-7-2016 - Shri Amit Shukla, Judicial Member And Shri Ramit Kochar, Accountant Member For the Revenue : Shri Narendra Kumar,CIT DR For the Assessee : Shri Aliasger Rampurawala & Shri Forum Mehta ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the Revenue, being ITA No. 1247/Mum/2014, is directed against the directions dated 23-12-2013 passed by Dispute Resolution Panel - II, Mumbai (h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

read as under:- (1) Whether, on the facts and circumstances of the case and in law the Hon'ble DRP is correct in holding that the assessee did not have PE in India in the A.Y's. 2004-05, 2005-06 and 2008-09 in term of Article 5(1), 5(2), 5(4) & 5(5) of the Indo-USA Treaty and the addition made by the AO being the profit margin of 5% of the sale made by the assessee is not sustainable. (2) Whether on the facts and under the circumstances of the case, the Hon'ble DRP was correct in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase are that in the instant case draft assessment order dated 21.03.2013 was passed by the AO u/s 144C(1) r.w.s. 143(3) of the Act. The assessee filed objections against the draft assessment order with DRP-II,Mumbai. The DRP-II,Mumbai issued directions vide order dated 23rd December, 2013 u/s 144C(5) of the Act, and thereafter assessment order dated 10.01.2014 u/s 144C(13) read with Section 143(3) of the Act was passed by the AO in accordance with the directions given by the DRP- II,Mumbai. 4. T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Lubrizol India Pvt. Ltd. (in short LIL ). LIL is manufacturing various products in India under the License and Technology Transfer Agreement dated 1st April, 2007. The assessee is being paid a consideration for provision of technical services and for the rights in manufacturing technology, formulation technology and the patent rights. A total technical fee of ₹ 218,104,101/- has been paid during the year which has been offered for taxation as royalty by the assessee in the return of income .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

made by the assessee in India are as under:- Sales to LIL USD 10,837,412 Sales to others USD 5,309,639 USD 16,147,051 The assessee was asked to explain as to why the profits made by it on sale of products in India should not be taxed in India as assessee is having PE in the form of M/s LIL. In reply, the assessee submitted that it does not have any address in India and under Article 5(4) of the Indo-US treaty also , LIL cannot be treated as agency PE since LIL does not have authority to conclude .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Tribunal has held that the assessee does not have PE in India and is not taxable for sales which have been made from outside India. However, the Revenue filed appeal before the Hon ble Bombay High Court against the afore-stated decisions of the Tribunal which was pending for adjudication by the Hon ble Bombay High Court , and hence the submission of the assessee was not considered by the AO in its draft assessment order dated 21.03.2013 passed u/s 144C(1) r.w.s. 143(3) of the Act. The A.O. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t orders for products for delivery in the territory. LIL is required to make efforts to promote the sale and distribution and to create demand for assessee s products. The solicitation in marketing of products shall be at the will and complete discretion of the LIL, thus the assessee cannot sell any product in India without LIL being involved. The LIL will send quotations directly to the customers and will keep the assessee informed of such quotation. The assessee will send invoices directly to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eement - Metal working Products which deals with marketing of metal working products dated 1st January, 2002. Another agreement has also been entered into between the assessee and LIL and the terms and conditions were same as for the earlier agreement except that for better services to the customers , LIL has been made responsible to purchase these products on its own account from the assessee and to resale such products to customers in India. It was also observed by the A.O. that so far as mark .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

les representation agreement dated 01.04.2000. LIL is not only promoting the products of the assessee but also involved in procurement of orders and its responsibility and involvement continues up to the stage of sale as it is to be kept informed about all development related to the sale. LIL has also maintained stocks of various products made by the assessee and the A.O. held that LIL is PE of the assessee under the Article 5(1), 5(2) and 5(4) of Indo-US DTAA. The assessee submitted in response .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. While the production is taking place outside India, still the risk undertaken by the assessee in sales and marketing of the products in India exists, hence, assessee s profits for the same is taxable in India. Further , as per Article 7(1) of Indo-US DTAA, profit arising on sales done in India even directly by the assessee of the same or similar products as done by the LIL will also be taxable in India due to operation of force of attraction rule. LIL is held to be PE of the assessee in India, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e AO estimated assessee s profit in India @ 5% for sales made in India and brought to tax income of ₹ 4,07,95,524/- vide draft assessment orders dated 21.03.2013 passed u/s 144C(1) r.w.s. 143(3) of the Act. 5. Aggrieved with the draft assessment order u/s 144C(1) r.w.s. 143(3) dated 21st March, 2013 passed by the AO, the assessee filed objections with the DRP and the DRP issued the directions u/s 144C(5) of the Act vide orders dated 23rd December, 2013 and allowed the objections of the ass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dia. It is having its own marketing network for sale of various products manufactured by it in India. The total sales of LIPL are ₹ 408.84 crores and commission received from the assessee is 0.756 crores which constitutes only 0.18% of the sales. The assessee also sold products to Indian customers for which LIPL rendered certain services. The assessee sold the products directly to the Indian customers. Contract of sale is concluded once the purchase order is accepted by the assessee in USA .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee. The final decision regarding price, terms and conditions is taken by the assessee. The assessee has no operation in respect of manufacture or sale of product carried out in India. Sales are made by the assessee to LIPL on principal to principal basis. The assessee also does not have a right to use LIPL premises. Having regard to all these facts of the case, we are of the view that the learned counsel has demonstrated by (sic) the assessee does not have a PE in India. For this conclusi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gn non resident would not by itself render him to be considered as an agency PE and pro tanto part of the profits of the non- resident is liable to be taxed in India." This has been followed for AY 2004-05, 2005-06 & 2008-09. Respectfully following the same as facts are identical for the relevant AY it is held that assessee did not have PE in India in terms of Article 5(1) and 5(5) of India-US Tax Treaty and hence addition of ₹ 4,07,95,524 made by AO is deleted. This objection is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n 143(3) of the Act , the Revenue is in appeal before the Tribunal. 8. The learned CIT D.R. relied upon the draft assessment orders dated 21.02.2013 passed by the A.O. u/s. 144C(1) r.w.s. 143(3) of the Act, and submitted that the department has not accepted decision of the Tribunal in ITA No. 6443 to 6445/Mum/2012 vide orders dated 18th January, 2013 for assessment year 2004-05, 2005-06 and 2008-09 , and also decision of the Tribunal in ITA No. 7420/Mum/2010 vide orders dated 3rd June, 2011 for .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reaty whereby additions made by the AO were deleted and the additions to the income made by the A.O. being a profit margin of 5% on the sales made by the assessee in India was held to be not sustainable in the absence of assessee s PE in India and the Tribunal deleted the same, and the matter is squarely covered by the afore-stated Tribunal order s in assessee s own case in the instant assessment year under appeal . 9. The ld. Counsel for the assessee, at the outset, submitted that the matter is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons to the income made by the A.O. being a profit margin of 5% on the sales made by the assessee in India was held to be not sustainable in the absence of assessee s PE in India and the Tribunal deleted the same. The Tribunal order in ITA No. 7420/Mum/2000 for assessment year 2006-07 vide orders dated 03-06-2011 is reproduced below:- This appeal filed by the Assessee is directed against the order of (IT)-Range-4, Mumbai, passed on 01/10/2010 for the assessment year 2005-06 wherein the assessee h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cts and in the circumstances of the case and in law, the learned ADIT has erred in concluding that Lubrizol India Pvt. Ltd. (LIPL) is a virtual projection of the appellant in India. 3. On the facts and in the circumstances of the case and in law, the learned ADIT has erred in concluding that the appellant has a fixed place PE under Article 5(1) and 5(2) of the Tax Treaty in Indian when the appellant does not have any place in India at its control or disposal from which business is carried on. 4. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is, which has been accepted in the transfer pricing assessment of both the appellant and LIPL, and b) LIPL is liable to tax on the commission income derived from the appellant, which extinguishes the tax liability of the appellant principal. 6. On the facts and in the circumstances of the case and in law, the learned ADIT has erred in taxing the profits of ₹ 1,79,64,063 on sales to LIPL by applying force of attraction rule under Article 7(1) of the Tax Treaty without appreciating the fact .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

able in India without considering the profit attribution principles under IT act and the Tax Treaty. 8. On the facts and in the circumstances of the case and in law, the learned ADIT has erred in levying interest of ₹ 52,73,244 u/s 234B of the Act despite the fact that the appellant was not liable to discharge any advance tax, since it is a non-resident whose entire income is tax deductible at source. 9. On the facts and in the circumstances of the case and in law, the learned ADIT has err .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

A Double Taxation Avoidance Agreement (India-US Treaty). During the year under consideration, the assessee filed its return of income on November 6, 2006 declaring total income of ₹ 14,48,32,150/-. The AO referred the matter to the Transfer Pricing Officer (TPO) u/s 92CA of the Act for computation of arms' length price of the international transactions entered into by the assessee with its Associated Enterprises (AE), namely, Lubrizol India Pvt. Ltd. (LIPL). The arms' length value .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt establishment of the assessee being a virtual projection of the assessee in India. The AO also concluded that LIPL is a PE of the assessee in India in terms of Article 5(1), 5(2), and 5(4) of the India-US Treaty. The AO was of the opinion that since the assessee had assumed all the risks in respect of the sales made to India, as such the profits arising from such sales had to be taxed in India. 4. The assessee filed its objections before the Dispute Resolution Panel-Il, Mumbai (DRP) against t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee is that the assessee is a tax resident of USA and is neither having any fixed place of business In India nor any business connection in India. The learned counsel for the assessee contended that the AO has wrongly interpreted Article 5(1), 5(2) and 5(4) of the India-US Treaty. It is submitted that LIPL is a joint venture of India Oil Corporation and the assessee, both owning 50% and therefore, the assessee has no controlling ownership in LIPL. It is further submitted that during the year unde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ia by alleging that the assessee had a PE in India under Article 5 of the India-US Treaty. It is submitted that on such sales made by the assessee to LIPL and third parties, the AO has computed a profit margin of 5% and made an addition of ₹ 2,29,26,152/- to the income of the assessee. 6. It is submitted that as per Article 7 of the India-US Treaty, the assesee would be taxable in India only if the assessee has a PE in India and the taxability shall be limited to the extent of profits whic .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s through Article 5 of the treaty, which is reproduced below:- "Article 5 - Permanent Establishment 1. For the purposes of this convention, the term 'permanent establishment' means a fixed place of business through which the business of an enterprise is wholly or partly carried on. 2. The term 'permanent establishment' includes especially: (a) a place of management (b) a branch (c) an office (d) a factory (e) a workshop (f) a mine, an oil or gas well, a quarry, or any other .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n, installation or assembly project or supervisory activities (together with other such sites, projects or activities, if any) continue for a period of more than 120 days in any twelve months period, (l) the furnishing of services, other than included services as defined in Article 12 (royalties and fees for included services) within a contracting state by an enterprise through employees or other personnel, but only if (i) activities of that nature continue within that State for a period or peri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

longing to the enterprise; b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display, or occasional delivery; c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise. d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise; e) the maintenance of a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

anent establishment in the first mentioned state, if a) he has an habitually exercises in the first-mentioned state an authority to conclude on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 3 which, if exercised through a fixed place of business, would not make that fixed place of business a permanent establishment under the provisions of that paragraph; b) he has no such authority but he has no such authority but habitually maintains in the first-me .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

merely because it carries on business in that other state through a broker, general commission agent, or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business. However, hence the activities of such an agent are devoted wholly or almost wholly on behalf of that, enterprises and the transactions between the agent and the enterprise are not made under arms' length conditions, he shall not be considered an agent of independent st .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

clusive Sales Representation Agreement entered into between the assessee and LIPL, which along with the amendment thereto is placed at page nos. 1 to 14 of the paper book. The relevant clauses relied upon by him are reproduced below: "3. Services to be rendered by LIPL With respect to all areas in the territory except in India, the service to be rendered by LIPL under this agreement shall include the following (collectively the 'services') i) to keep informed of business opportuniti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l. Prices and terms of sale are subject to change by Lubrizol at any time upon notice to LIPL. LIPL shall have no authority to change or fix the prices or rates in any manner other than as notified by Lubrizol in accordance with the terms of this agreement. 7. Procedure for placing orders Customers will place orders for the purchase of the products directly with Lubrizol. It is anticipated customers will open confirmed irrevocable letters of credit directly with Lubrizol for the purchase of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

all be entitled to solicit orders for the products in accordance with the terms of this agreement. All orders received by LIPL shall be forward to Lubrizol for acceptance or rejection and LIPL shall have no authority to accept for or on behalf of, Lubrizol any order placed on Lubrizol, Lubrizol may reject or cancel any order for any reason whatsoever. 8. Consideration 8.1 During the continuance of this agreement, Lubrizol agrees to pay LIPL a commission on all shipments of products resulting fro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

from any claim or demand made upon LIPL by any customer or any other persons whatsoever on account of the above. LIPL shall assist Lubrizol in any such manner by obtaining any reporting factual matters and positions of customers. 9.2 To supply LIPL with information, particulars and data necessary to enable LIPL to satisfactory comply with its _. obligations under this agreement. 9.3 Not to hold LIPL responsible in any manner whatsoever for payment of any tax payable by Lubrizol by reason of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the assessee has relied upon the following precedents in support of the case of the assessee: 1. Ericsson Radio Systems AB Vs. DCIT, 96 TTJ l(Del)(SB) 2. Western Union Financial Services Inc Vs. ADIT, 101 TTJ 56(Del). 3. Visakhapatnam Port Trust, 144 ITR 146 (A.P.) 9. By referring the above case laws, the learned counsel for the assessee has submitted that i) the assessee had no presence or fixed place whatsoever in India, ii) no portion of LIPL's premises was under the assessee's contr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r Article 5(1) of the India-US treaty. It is submitted that an independent agent is said to be one who is both legally and economically independent of its principal, for which other aspects of independence include:- i) extent of obligations which the agent' has vis -a-vis the principal; ii) extent of detailed instructions and comprehensive control of principal; iii) sharing of entrepreneurial risks; iv) reliance on the special skill and knowledge of the agent by the principal; and v) number .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to bind the principal vis-a-vis customers on the following conditions:- i) It is sufficient if the agent has the authority to negotiate all parties of the contract in the manner that IS binding on the principal, even if someone else performs the formality of actual spinning abroad ii) Contracts must relate to the enterprise's business proper iii) There must be certain degree of frequency or regularity in conclusion of contracts by the agent on behalf of the principal. 11. In view of the abo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oducts on its own account. Such business represented substantial portion of the revenues of LIPL (own sales of ₹ 408 crores approx vis-a-vis commission income of ₹ 0.76 crores received from the assessee). The manufacturing business of LIPL was an independent activity and was carried on its own account Accordingly, in the instant case, not all the sales related activities of LIPL were done only for the assessee. It is engaged in the sales and marketing activities of products manufactu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

13 of the Exclusive Sales Representation Agreement - Lubrizol and Clause 13 of the Sales and Marketing agreement - Metal working products. In view of the above facts, it is submitted that the conditions mentioned at point nos. 2,3, & 4 referred in the protocol for the purpose of determining 'securing orders' were not satisfied, hence, the LIPL did not 'secure orders' on behalf of the assessee and so did not satisfy the test for it to be regarded as a dependent agent PE under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hese operations could only be such amount as an independent enterprise carrying on similar activity would have earned from the assessee on an arms' length basis. The learned counsel drew our attention to the transfer pricing order of LIPL dated October 27, 2009 and Form 3CB of LIPL for the subject assessment year to state that the commission income earned by LIL from the assessee has been held to be at arm's length price and hence, no further assessment of income should be made in the ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

PE of the assessee in India under any of the clauses of Article 5 of the India-US treaty and hence, the AO was not justified in attributing profit in respect of sales made by the assessee. It is, therefore, prayed that the assessment made by the AO is not justified on facts and hence, the income so assessed be ordered to be deleted. 15. The learned DR, on the other hand, has strongly relied upon the order of the AO and drew our attention to various clauses of the agreement between the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

keep assessee informed about the business opportunities particularly of tenders and competitive bids from customers. The Id. D.R. further submitted that as per the agreement Para 13 (13.2) the Lubrizol India' Pvt. Ltd. shall use all samples, technical, business, financial and other information furnished by the assessee to LIPL which is identified, stamped and marked as confidential matter solely and exclusively for the purpose of providing the services pursuant to the agreement. The LIPL sha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Sec.9 (l)(i) of the Indian Income Tax Act 1961, the income of the assessee thus is taxable in India. The Id. D.R further submitted that the case of Dailmer Chrysler (supra) relied upon by the assessee has no application to the facts of the case in hand as in that case, it was held by the Ld. CIT (A) that assessee had no PE in India whereas in the present case, the AO has held that the assessee is having PE in India. In support of revenue's case, the 'learned DR has relied upon the follow .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessee such documents are binding on the assessee. Hence there is a fixed PE under Article 5(1) of the Treaty. (20 & 21 Paras of the Tribunal order). In the present case, the premises used by the LIPL the assessee does not bear any cost of such premises and does not have any control over such premises. The LIPL employees have no power to conclude contract on behalf of the assessee. The facts of the case in hand is entirely different, therefore, the above relied by the learned D.R has no a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rendering services to negotiate and secure orders in India (101,102 Paras of the Tribunal order). The payment received by the Indian agent (ANR) not yet arm's length (103,108 &111 of the Tribunal order). In the present case the total sales of LIPL 408.84 crores, commission received from the assessee was 0.76 crores only which constitute only 0.18% of the total sales. This shows that the LIPL has its own substantial business apart from revenue in the form of commission from the assessee. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of the assessee. 19. We have heard learned representatives of the parties, perused the relevant record and gone through the order of the AO as well as decisions cited. The issue to be adjudicated in this appeal is whether the AO is right in holding that the assessee has PE in India and thereby taxing the profits earned by the assessee in India. The assessee is a foreign company incorporated under the laws of United States of America and is engaged in the business of manufacture and sale of hig .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

actions entered into by the assessee with its Associated Enterprise (AE), namely, Lubrizol India Pvt. Ltd. (LIPL). The arm's length value of the international transactions entered into by the assessee with its AE were accepted by the TPO vide order dated 27, 2009 passed u/s 92CA(3) of the act and no adjustments were recommended by the TPO. Subsequently, a draft assessment order was issued by the AO u/s 144C(1) of the Act, proposing to make an addition of ₹ 2,29,26,152/- as attribution .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sales had to be taxed in India. Against the said draft order of AO, the assessee filed its objections before the Dispute Resolution Panel-II(DRP) and the DRP upheld the draft assessment order of the AO in its entirety by observing as under:- "1.14……….. it is clear that so far as marketing of products is concerned, LIPL is virtual projection of the assessee in India. It has got full rights and responsibilities in respect of marketing and sales. The provision of making or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

see has assumed all the risks. While the production is taking place outside India, still the risk undertaken by the assessee in sales and marketing of the products in India exists and assessee s profits for the same is to be taxed in India. 1.15 As per the AO, profits arising on sales done in India, even directly by the assessee of the same or similar products as done by LIPL will also be taxable in India due to operation of force of attraction rule LIPL, which is held to be PE of the assessee i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1.16 Thus, after careful consideration of facts of case, we are of the view that no interference in the action of the AO is required and the AO is directed to proceed as proposed in draft assessment order. 2. The AO shall give effect to the above directions as per provisions of section 144C(3) of the Act. " 20. Consequent to the said directions of the DRP, the AO passed final assessment order determining the income of the assessee at ₹ 16,77,58,302/ - as against the income returned by .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

It is submitted that LIPL is a joint venture of Indian Oil Corporation and the assessee, both owning 50%, therefore, the assessee had controlling ownership in LIPL. It is further submitted that during the year under consideration, the assesee did not carry out any business activities in India and it did not rrender any services in India or made any sales in India as all such sales were executed and completed outside India, the risk and title in such goods also passed to the customers outside In .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee which is not warranted. 22. The learned counsel took us through various Articles of India-US Treaty, which are mentioned above in the arguments of learned AR to establish that the assessee does not have PE in' India. After considering the relevant material and the relevant aspects, it is noted that the LIPL has carried out an independent business of manufacture of various products under technology transfer agreement with the assessee in India. It is having its own marketing network f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

direct payment from Indian customer, the assessee sends the products in the name of Indian customer with the invoices raised by the assessee directly on Indian customers. The LIPL assists the assessee in the direct sale of products to Indian customers and communicates information in relation to tenders and competitive bids from the customers. The LIPL does not have authority to negotiate the terms of the sale or conclude the contract on behalf of the assessee. The final decision regarding price .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mbai in the case of DDIT Vs. Daimler Chrysler AG, Germany, 39 SOT 418 wherein it was held that "there should be some definite activity of the PE to which profits can be attributed and merely acting for a non- resident principal would not by itself render an agent to be considered as PE for the purpose of allocating profits taxable in the hands of the principal. It is further held that merely calling a person as agent acting on behalf of foreign non-resident would not by itself render him to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ade by the assessee, is not sustainable. The said is therefore deleted and Ground Nos. 1 to 7 are allowed. The Tribunal has followed the afore-stated order of the Tribunal dated 03-06- 2011 in ITA no 7420/Mum/2010 while adjudicating the appeals on identical facts And circumstances for the assessment years 2004-05, 2005-06 & 2008- 09 in ITA No. 6443 to 6445/Mum/2012 vide orders dated 18th January, 2013 in assessee s own case and held that the assessee did not have PE in India in the year s un .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mp; 5(5) of the Indo-US Treaty and the addition of ₹ 40,795,524/- made by the A.O. being a profit margin of 5% of the sale made by the assessee in India is not sustainable and we affirm the directions dated 23.12.2013 passed by the DRP-II,Mumbai u/s 144C(5) of the Act which culminated into an assessment order dated 10.01.2014 passed by the AO u/s 144C(13) read with Section 143(3) of the Act. We order accordingly 10. The Revenue is also aggrieved by the decision of the DRP in holding that i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is also decided by the Tribunal in ITA No. 6443 to 6445/Mum/2012 for assessment years 2004-05, 2005-06 & 2008-09 vide orders dated 18th January, 2013 whereby it was held that interest is not leviable u/s 234B of the Act based on the facts and circumstances of the assessee s case. The relevant findings of the Tribunal are as under:- 15. Ground No. 7 is against the levy of interest u/s 234B of the Act. 16. At the time of hearing the ld. Counsel for the assessee submits that since the assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version