TMI Blog2019 (5) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... as been followed. The honourable Supreme court also noted that the counsel for the revenue stated that he does not have complete instructions. Therefore, the honourable court gave the liberty that if the revenue disputes the above factual position, it will be at the liberty to move this court. Even if, as per the revenue, the transaction are not at arm s-length, it is required to approach the honourable Supreme Court only. In view of this, all these appeals against the orders of the reassessment becomes infructuous as reassessment notices have been quashed by the honourable Supreme Court as per above order. - Decided in favour of assessee. - ITA No. 1744/Del/2017, ITA No. 6015, 6016, 6017/Del/2015 & 376/Del/2016 - - - Dated:- 10-5-2019 - Shri H.S.Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Shri kishore kunal Adv For the Revenue : Shri Sandeepkumar Mishra SR DR ORDER PER PRASHANT MAHARISHI, A. M. 1. ITA number 1744/del/2017 is filed by Honda motor Co Ltd for assessment year 2007 08 against the order of The deputy Commissioner of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ising therefrom could be brought to tax in India. 4.1 That the AO/DRP completely failed to appreciate that the international transactions relating to purchase of raw-materials of HCIL from the Appellant had been subjected to transfer pricing assessment wherein the value of said international transactions were found to be on arm's length basis. 4.2 That the AO/DRP completely failed to appreciate that in terms of Article 9 of DTAA once the international transactions between the Appellant and HCIL had been found to mean at arm's length basis, the Revenue was prohibited from allocating any further income of the Appellant to be taxed in India. 4.2 Without prejudice to the above grounds, that on the facts and circumstances of the case and in law, the AO/DRP erred in subjectively using a markup of 15.88 % on total costs for the purpose of determining the profits attributable to the activities of the Appellant in India alleging that selling of raw material, consumable spare parts, etc. has been carried in India when none of the selling operation is carried in India. 5.1. That the AO/DRP grossly erred in arbitrarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO/DRP has erred in upholding the validity of the re-assessment proceedings under section 147 of the act when initiation of proceedings did not satisfy necessary requisites contained in section 147 of the act and there being no reason to believe that any income chargeable to tax had escaped assessment. 2.1 That the order of AO/DRP is perverse being contrary to facts and circumstances of the case. Without prejudice 3. That the AO/DRP grossly erred in law and facts in alleging that the Appellant has a business connection and Permanent Establishment (PE) in India, basis the alleged facts and relationship of Honda Cars India Limited (HCIL) and Honda Motor Co. Ltd., Japan (HMJ). 3.1 That the AO/DRP erred in coming to the conclusion that the expatriate employees of Honda Motors, Japan constituted a Permanent Establishment under Article 5 of the Double Tax Avoidance Agreement between India and Thailand ('DTAA') given the complete absence of any expatriate employee of the Appellant in HCIL 4. That the AO/DRP erred in coming to the conclusion that HCIL is dependent upon the appellant for employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to appreciate that in terms of Article 9 of DTAA once the international transactions between the Appellant and HCIL had been found to mean at arm's length basis, the Revenue was prohibited from allocating any further income of the Appellant to be taxed in India. 8.2 Without prejudice to the above grounds, that on the facts and circumstances of the case and in law, the DRP has erred in attributing 25% of the total income to the activities of the appellant in India alleging that selling of spare parts carried in India when none of the selling operation is carried in India. 8.3 Without prejudice to the above grounds, the AO/ DRP has grossly erred in law and facts in rejecting the attribution study filed by the appellant. 9. Without prejudice to the above grounds, That AO / DRP has grossly erred in law and facts in holding that the Appellant has incurred research and development (R D) expense and applying the adjusted global profit ratio of 8.07% when as per global balance sheet operating profit ratio is 2.73% without appreciating that no R D activity has been undertaken by the Appellant. 9.1 That on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. 2.1 That the order of AO/DRP is perverse being contrary to facts and circumstances of the case. Without prejudice 3. That the AO/DRP grossly erred in law and facts in alleging that the Appellant has a business connection and Permanent Establishment (PE) in India, basis the alleged facts and relationship of Honda Cars India Limited (HCIL) and Honda Motor Co. Ltd., Japan (HMJ). 3.1 That the AO/DRP erred in coming to the conclusion that the expatriate employees of Honda Motors, Japan constituted a Permanent Establishment under Article 5 of the Double Tax Avoidance Agreement between India and Thailand ('DTAA') given the complete absence of any expatriate employee of the Appellant in HCIL 4. That the AO/DRP erred in coming to the conclusion that HCIL is dependent upon the appellant for employees, technology and economically when no employee has been seconded by the appellant to HCIL, no technology has been provided by the appellant to HCIL and HCIL has no economic dependence on appellant. 5. That the AO/DRP erred in coming to the conclusion that their existed a PE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Without prejudice to the above grounds, that on the facts and circumstances of the case and in law, the DRP has erred in attributing 25% of the total income to the activities of the appellant in India alleging that selling of spare parts carried in India when none of the selling operation is carried in India. 8.3 Without prejudice to the above grounds, the AO/ DRP has grossly erred in law and facts in rejecting the attribution study filed by the appellant. 9. Without prejudice to the above grounds, That AO / DRP has grossly erred in law and facts in holding that the Appellant has incurred research and development (R D) expense and applying the adjusted global profit ratio of 7.84% when as per global balance sheet operating profit ratio is 2.50% without appreciating that no R D activity has been undertaken by the Appellant. 9.1 That on the facts and circumstances of the case and in law, the Ld. AO has erred in holding that the appellant has incurred R D expense when being a trading entity, no R D activity has been undertaken by the appellant and no R D expense has been debited in the P L A/c. 10. That on the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manent Establishment (PE) in India, basis the alleged facts and relationship of Honda Cars India Limited (HCIL) and Honda Motor Co. Ltd., Japan (HMJ). 3.1 That the AO/DRP erred in coming to the conclusion that the expatriate employees of Honda Motors, Japan constituted a Permanent Establishment under Article 5 of the Double Tax Avoidance Agreement between India and Thailand ('DTAA') given the complete absence of any expatriate employee of the Appellant in HCIL 4. That the AO/DRP erred in coming to the conclusion that HCIL is dependent upon the appellant for employees, technology and economically when no employee has been seconded by the appellant to HCIL, no technology has been provided by the appellant to HCIL and HCIL has no economic dependence on appellant. 5. That the AO/DRP erred in coming to the conclusion that their existed a PE of the Appellant in India while relying on the statements of expatriate employees of Honda Cars India Ltd. ( HCIL ) which were inadmissible evidence in terms of the judgment of the Hon'ble Supreme Court in S. Qadar Khan Sons (254 CTR 228) 5.1 That the AO/DRP erred in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried in India. 8.3 Without prejudice to the above grounds, the AO/ DRP has grossly erred in law and facts in rejecting the attribution study filed by the appellant. 9. Without prejudice to the above grounds, That AO / DRP has grossly erred in law and facts in holding that the Appellant has incurred research and development (R D) expense and applying the adjusted global profit ratio of 8.07% when as per global balance sheet operating profit ratio is 2.73% without appreciating that no R D activity has been undertaken by the Appellant. 9.1 That on the facts and circumstances of the case and in law, the Ld. AO has erred in holding that the appellant has incurred R D expense when being a trading entity, no R D activity has been undertaken by the appellant and no R D expense has been debited in the P L A/c. 10. That on the facts and circumstances of the case and in law, the Ld. AO has erred in increasing the global operating profit ratio by 5.34% (on the basis of global accounts) when there is no R D expense incurred by the appellant. 11. That the AO/DRP has grossly erred in law and facts in directing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyees, technology and economically when no employee has been seconded by the appellant to HCIL, no technology has been provided by the appellant to HCIL and HCIL has no economic dependence on appellant. 5. That the AO/DRP erred in coming to the conclusion that their existed a PE of the Appellant in India while relying on the statements of expatriate employees of Honda Cars India Ltd. ( HCIL ) which were inadmissible evidence in terms of the judgment of the Hon'ble Supreme Court in S. Qadar Khan Sons (254 CTR 228) 5.1 That the AO/DRP erred in coming to the conclusion that expatriate employees working in Honda Cars India Ltd were working on behalf of the Appellant and as such controlled the day-to-day functioning of HCIL in terms of technology, economic and other control when no employee was seconded by the appellant to HCIL. 5.2 That the AO/DRP completely failed to appreciate that even assuming control of non-resident company over the resident company does not in itself create a Permanent Establishment of the non-resident in terms of Article 5(6) of the Double Tax Avoidance Agreement between India and Thailand ('DTAA' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant has incurred R D expense when being a trading entity, no R D activity has been undertaken by the appellant and no R D expense has been debited in the P L A/c. 10. That on the facts and circumstances of the case and in law, the Ld. AO has erred in increasing the global operating profit ratio by 5.35% (on the basis of global accounts), on account of R D and amortization expenses. 11. That the AO/ DRP has grossly erred in law and facts in directing the levy of interest under sections 234B and 234C of the Act without appreciating that the appellant is a non-resident and tax is deductible from the income of the appellant. 12. That the AO/ DRP has grossly erred in law and facts in levying interest under section 234A of the Act. 13. That the AO/ DRP has grossly erred in law and facts in directing the levy of interest under section 234D of the Act without appreciating that no refund was granted to the appellant. 14. That the AO/DRP has grossly erred in law and facts in initiating the penalty section 271(l)(c) of the Act and alleging that the Appellant has concealed the true and correct part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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