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TMI Blog2019 (5) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... there being no reason to believe that any income chargeable to tax and escaped assessment. Without prejudice 3. That the AO/DRP erred in concluding that the Appellant had a Permanent Establishment (PE) under Article 5 of the Indo-Japan DTAA given the fact that necessary "requisites of creating a PE under Article 5 of DTAA were lacking in the present case. 3.1 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 Khader Khan Son (254 CTR 228)(SC). 3.2 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. 3.3 That the AO/DRP completely failed to appreciate that in terms of Article 5(9) of the Double Tax Avoidance Agreement between India and Japan (DTAA) control of holding company over subsidiary does not in itself create a Permanent Establishment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to the fact that the Appellant believes that it does not constitute a PE in India, the Hon'ble DRP has grossly erred in law and in facts by subjecting to tax the mark-up as well as the "cost base" (comprising of salaries of expatriates) which has been used for the purpose of computing the profit attributable to the alleged PE of the Appellant in India. The tax in such case should have been restricted to the mark-up or profit element only, and the cost of base should not have been included 6. That the AO/DRP has grossly erred in law and facts in levying interest under section 234B of the Act. 7. That the AO/DRP has grossly erred in law and facts in initiating the penalty under section 271(l)(c) of the Act and alleging that the Appellant has concealed the true and correct particulars of its taxable income and furnished inaccurate particulars of its income." 2. Similarly ITA number 6015/Del/2015 for the Assessment Year 2004-05 is filed by HONDA TRADING ASIA COMPANY LIMITED against the order of THE DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE - Noida dated 31/08/2015 under section 147 read with section 143 (3), 144C (5) of the income tax act, 1961. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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'). 5.3 That the AO/DRP erred in law in selectively relying on the statement of expatriate employees and failed to appreciate the true intention of the statements which evidenced that the expatriates were working only for HCIL in India. 6. That the AO/DRP grossly erred in law and facts in taxing offshore supplies when Appellant does not have any business connection or PE in India and the supplies made by the Appellant to HCIL are concluded outside India (i.e. title and risk is transferred outside India). 7. That on the facts and circumstances of the case and in law, the Ld. AO has erred in holding that the functions performed by the appellant outside India are mainly manufacturing of spare parts and accessories when the appellant is not even involved in manufacturing activity. 8. 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 sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging that the Appellant has concealed the true and correct particulars of its taxable income and furnished inaccurate particulars of its income." 3. Similarly ITA number 6016/Del/2015 for the Assessment Year 2005-06 is filed by HONDA TRADING ASIA COMPANY LIMITED against the order of DEPUTY COMMISSIONER OF INCOME TAX, INTERNATIONAL TAXATION, CIRCLE - Noida dated 31/08/2015 under section 147 read with section 143 (3), 144C (5) of The Income Tax Act, 1961. The assessee has raised the following grounds of appeal in ITA No. 6016/Del/2015 for the Assessment Year 2005-06:- "1. That on the facts & in the circumstances of the case and in law, the orders passed by the Assessing Officer (AO) /Dispute Resolution Panel (DRP) to the extent prejudicial to the interest of the appellant, are bad in law and void ab-initio. 2. That the 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red outside India). 7. That on the facts and circumstances of the case and in law, the Ld. AO has erred in holding that the functions performed by the appellant outside India are mainly manufacturing of spare parts and accessories when the appellant is not even involved in manufacturing activity. 8. 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. 8.1 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. 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 operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer (AO) /Dispute Resolution Panel (DRP) to the extent prejudicial to the interest of the appellant, are bad in law and void ab-initio. 2. That the 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 facts and circumstances of the case and in law, the Ld. AO has erred in holding that the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio is 2.99%. 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 5.35% (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 Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X
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