TMI Blog2019 (9) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... ent establishment in India, from the limited perspective of the attribution of income to the alleged PE, it is being acceptable to the assessee that the taxable income of the assessee in India is directed to be determined at 10% (profit margin) of 50% of salary cost of expatriates in India during the relevant year. Says that the clarify, where the salary cost of expatriates in India during the relevant year is rupees hundred, the assessed income of the assessee will be computed at INR 5. It further says in the next paragraph that the aforesaid is without prejudice to the assessee s right to challenge existence of permanent establishment in India for the relevant year or any other years and other grounds raised by the assessee or its associated enterprise in India viz. LG Electronics India private limited in various other proceedings in India. Thus this letter has been accepted by the learned dispute resolution panel and straightway went on to attribute the profit to the permanent establishment. As per the letters of the assessee mentioned in the direction of the learned dispute resolution panel, the assessee has reserved its right to challenge the existence of the PE at vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manent establishment, then, the learned dispute resolution panel will decide the issue in accordance with the law considering the above admission. However, if it is found that there is no admission on this aspect, then to decide the issue of existence of the permanent establishment and consequent profit attribution thereto with respect to each of the assessment years. Needless to say, the learned Dispute Resolution Panel will afford reasonable opportunity of hearing to the assessee. The learned dispute resolution panel, then, will direct the learned assessing officer to pass the final assessment order incorporating its direction in accordance with the law. In absence of any admission about the existence of the PE by the assessee, all issues, with respect to the existence of the permanent establishment as well as the profit attribution thereto would be open before the learned dispute resolution panel. - Appeals filed by the assessee are allowed with above direction for statistical purposes. - ITA No. 4559/Del/2018, 4560/Del/2018, 4561/Del/2018, 1946/Del/2017, 6916/Del/2017, 5020/Del/2018, 5021/Del/2018, 3327/Del/2018, 5022/Del/2018 - - - Dated:- 2-9-2019 - SMT DIVA SINGH, JUDICI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 India - Korea DTAA given the fact that necessary requisites of creating a PE under Article 5 of DTAA were absent in the present case. 3.1 That the AO/DRP erred in making assessment on the assumption that their existed a PE of the Appellant in India solely relying on the statements of expatriate employees of LG Electronics India Private Ltd. (hereinafter referred to as LGIL ) which were inadmissible evidence in terms of the judgment of the Hon ble Supreme Court in S. Qadar Khan Sons (254 CTR 228) 3.3 That the AO/DRP erred in not appreciating the fact that the expatriate employees of LGIL were working for and furthering the business of LGIL and not that of the Appellant. 3.4 That the AO/DRP completely failed to appreciate that in terms of Article 5(7) of the Double Tax Avoidance Agreement between India and Korea( DTAA ) control of holding company over subsidiary does not in itself create a Permanent Establishment of the non-resident. 3.4. That the AO/DRP erred in law in selectively relying on the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and void ab- initio. 2. That the AO/DRP erred in upholding the validity of the reassessment 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 AO/DRP erred in upholding the validity of the reassessment proceedings under Section 147 of the Act even though all the transaction between LGIL and Assessee were held to be at arm s length by the Ld. Transfer Pricing Officer ( TPO ) and thus there could not be any escapement of income 2.2 That the AO/DRP has erred in initiating reassessment proceedings against the Appellant solely on the basis of statements of expatriate employees of LGIL recorded at the time of survey which were not even relevant for the assessment year under consideration. 2.3 That the AO/DRP has erred in sustaining the initiation of reassessment proceedings under section 147 of the Act in the absence of any live link or nexus between the information and the formation of the belief that income chargeable to tax had escaped assessment. Without prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the above grounds, in absence of a PE of the Appellant in India, or any activity carried out in India that AO / DRP grossly erred in attributing profits to India. 8. That on the facts and in the circumstances of the case, the orders passed by the Assessing Officer (AO) /Dispute Resolution Panel (DRP) are perverse and is based on surmises and conjectures. 9. 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. 10. That the AO/DRP has grossly erred in law and facts in levying interest under section 234A of the Act. 11. 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. 12. That the AO/DRP has grossly erred in law and facts in initiating the penalty under section 271(1)(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. 4. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in terms of Article 5(7) of the Double Tax Avoidance Agreement between India and Korea ( DTAA ) control of holding company over subsidiary does not in itself create a Permanent Establishment of the non-resident. 3.4 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 LGIL in India. 4. That the AO/ DRP has erred in not appreciating the fact that in terms of Article 10 of the DTAA, shifting of any profits arising to a non-resident is prohibited if the transactions between the two enterprises have met the arm s length test. In the present case all the transactions between the Appellant and LGIL have been subjected to transfer pricing proceedings and have been found to be at arm s length. 5. That without prejudice the AO/DRP also miserably failed to appreciate that the function to have been performed by the expatriates in the PE was the import of raw material/ finished goods and parts which function was already captured in the Transfer Pricing Assessment of the Indian Subsidiary' and hence there arose no occasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements in the absence of any material were not admissible in law to form any such belief. 2.5 That the AO/DRP has erred in initiating reassessment proceedings against the Appellant solely on the basis of statements of expatriate employees of LGIL recorded at the time of survey conducted in 2010 which were not even relevant for the AY 2007-08, which in the absence of any material are not admissible in law. 2.6 That the AO/DRP has erred in sustaining the initiation of reassessment proceedings under section 147 of the Act in the absence of any live link or nexus between the information and the formation of the belief that income chargeable to tax had escaped assessment. On the existence of Permanent Establishment 3. That the AO / DRP grossly erred in law in coming to the conclusion that the Indian subsidiary of the Appellant constituted a fixed place of business under Article 5(1) of the DTAA between India and Korea. 3.1 That the AO/DRP erred in concluding that the Appellant had a Permanent Establishment ( PE ) under Article 5 of the India - Korea DTAA given the fact that necessary requisites of creating a PE under Article 5 of DTAA were lacking in the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s approved by the Department of Industrial Policy and Promotion, Government of India) to allege a PE for the appellant in India. On Attribution 6. Without prejudice to the above grounds, in absence of a PE of the Appellant in India, or any activity carried out in India the AO/DRP grossly erred in attributing profits to India. General 7. That on the facts and in the circumstances of the case, the orders passed by the Assessing Officer (AO) /Dispute Resolution Panel (DRP) are perverse and are based on surmises and conjectures. 8. That the AO/DRP has grossly erred in law in levying interest under sections 234B/C of the Act without appreciating that the Appellant is a non-resident and in terms of section 209 there arose no liability of the Assessee to pay advance tax being deductible . 9. That the AO/DRP has grossly erred in law and facts in levying interest under section 234A of the Act. 10. 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. 11. That the AO/ DRP has grossly erred in law and facts withdrawing interest under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat income chargeable to tax had escaped assessment. On the existence of Permanent Establishment 3. That the AO / DRP grossly erred in law in coming to the conclusion that the Indian subsidiary of the Appellant constituted a fixed place of business under Article 5(1) of the DTAA between India and Korea. 3.1 That the AO/DRP erred in concluding that the Appellant had a Permanent Establishment ( PE ) under Article 5 of the India - Korea DTAA given the fact that necessary requisites of creating a PE under Article 5 of DTAA were lacking in the present case. 3.2 That the AO/ DRP grossly erred in law in allowing themselves to be influenced for the conclusion relating to existence of a PE merely on account of the alleged control of the Appellant over the Indian subsidiary. 3.3 That the AO / DRP completely failed to take note of Article 5(7) of the DTAA which prohibits the conclusion of a PE merely because of control of one company over and another. 3.4 That the AO/ DRP erred in placing relying on, selectively, the statements of the expatriate employees of the Indian subsidiary to demonstrate control of the Appellant over the Indian subsidiary. 3.5 That the AO/ DRP has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34B/C of the Act without appreciating that the Appellant is a non-resident and in terms of section 209 there arose no liability of the Assessee to pay advance tax being deductible . 9. That the AO/DRP has grossly erred in law and facts in levying interest under section 234A of the Act. 10. 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. 11. That the AO/DRP has grossly erred in law and facts in initiating the penalty under section 271(1)(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. 7. The assessee has raised the following grounds of appeal in ITA No. 5020/Del/2018 for the Assessment Year 2009-10:- 1. That on the facts and 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 erred in upholding the validity of the reassessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IL in India. 4. That the AO/ DRP has erred in not appreciating the fact that in terms of Article 10 of the DTAA, shifting of any profits arising to a non-resident is prohibited if the transactions between the two enterprises have met the arm s length test. In the present case all the transactions between the Appellant and LGIL have been subjected to transfer pricing proceedings and have been found to be at arm s length. 5. That without prejudice the AO/DRP also miserably failed to appreciate that the function to have been performed by the expatriates in the PE was the import of raw material/ finished goods and parts which function was already captured in the Transfer Pricing Assessment of the Indian Subsidiary and hence there arose no occasion to allocate any further profits to such PE. 6. That the AO/ DRP miserably failed to appreciate that the case of the Appellant is now completely covered by the Judgment of the Hon'ble Supreme Court in Civil Appeal No. 2833 of 2018 titled Honda Motor Company Ltd., Japan Vs. Asst. Director of Income Tax dated 14th March 2018. 7. Without prejudice to the above grounds, in absence of a PE of the Appellant in India, or any activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xus between the information and the formation of the belief that income chargeable to tax had 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 India - Korea DTAA given the fact that necessary requisites of creating a PE under Article 5 of DTAA were absent in the present case. 3.1 That the AO/DRP erred in making assessment on the assumption that their existed a PE of the Appellant in India solely relying on the statements of expatriate employees of LG Electronics India Private Ltd. (hereinafter referred to as LGIL ) which were inadmissible evidence in terms of the judgment of the Hon'ble Supreme Court in S. Qadar Khan Sons (254 CTR 228) 3.2 That the AO/DRP erred in not appreciating the fact that the expatriate employees of LGIL were working for and furthering the business of LGIL and not that of the Appellant. 3.3 That the AO/DRP completely failed to appreciate that in terms of Article 5(7) of the Double Tax Avoidance Agreement between India and Korea( DTAA ) control of holding company over subsidiary does not in itself create a Permanent Establishment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te particulars of its income. 9. The assessee has raised the following grounds of appeal in ITA No. 3327/Del/2018 for the Assessment Year 2013-14:- 1. That on the facts and 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. On the existence of Permanent Establishment 2. That the AO / DRP grossly erred in law in coming to the conclusion that the Indian subsidiary of the Appellant constituted a fixed place of business under Article 5(1) of the DTAA between India and Korea. 2.1 That the AO/DRP erred in concluding that the Appellant had a Permanent Establishment ( PE ) under Article 5 of the India - Korea DTAA given the fact that necessary requisites of creating a PE under Article 5 of DTAA were lacking in the present case. 2.2 That the AO / DRP grossly erred in law in allowing themselves to be influenced for the conclusion relating to existence of a PE merely on account of the alleged control of the Appellant over the Indian subsidiary. 2.3 That the AO/ DRP completely failed to take note of Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idiary and hence there arose no occasion to allocate any further profits to such PE. 2.13 That without prejudice the AO/ DRP has erred on facts and in law, in relying on the Foreign Collaboration Agreement entered between the appellant and LGIL (which was approved by the Department of Industrial Policy and Promotion, Government of India) to allege a PE for the appellant in India. On Attribution 3. Without prejudice to the above grounds, in absence of a PE of the Appellant in India, or any activity carried out in India the AO/DRP grossly erred in attributing profits to India. General 4. That the AO/DRP has erred in relying upon incorrect finding of facts in arriving at the conclusion that the Appellant has a PE in India. 5. That on the facts and in the circumstances of the case, the orders passed by the Assessing Officer (AO) /Dispute Resolution Panel (DRP) are perverse and are based on surmises and conjectures. 6. That the AO/DRP has grossly erred in law in levying interest under sections 234B/C of the Act without appreciating that the Appellant is a non-resident and in terms of section 209 there arose no liability of the Assessee to pay advance tax being dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of LGIL were working for and furthering the business of LGIL and not that of the Appellant 2.6 That the AO/DRP erred in making assessment on the assumption that there existed a PE of the Appellant in India solely relying on the statements of expatriate employees of LG Electronics India Private Ltd. ( hereinafter referred to as LGIL ) which were inadmissible evidence in terms of the settled position of law. 2.7 That the AO/DRP erred in coming to the conclusion that expatriate employees working in LGIL were working on behalf of the Appellant, ignoring the fact that the expatriate employees were employees of LGIL working under direct supervision and control of LGIL. 2.8 That the case of the Appellant is squarely covered by the order of this Hon ble Tribunal in Samsung Electronics Co. Ltd. Vs. DCIT [2018] 92 taxmann.com 171 (Delhi - Trib.). 3. That without prejudice to the above the conclusions of the AO / DRP are patently erroneous given that all transactions between the two companies were uninfluenced by their relationship and had met the Arm s Length Price test in terms of Transfer Pricing Assessment. 4. That without prejudice the AO / DRP also erred in ignoring the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Facts for AY 2007-08 shows that appellant is a Company incorporated under the laws of South Korea and is engaged in the business of manufacture and sale of refrigerators, washing machines, air conditioners and other household appliances. The Appellant has a wholly owned subsidiary (Indian AE) in India, viz., LG Electronics India Private Ltd. (hereinafter referred to as LG India ) and has entered into several transactions relating to sale of raw materials, finished goods, receipt of royalty income and fees for technical services. No tax was deducted by LG India, the payer, on off shore supplies since no portion of income arising from such supplies arose in India while applicable taxes were deducted on royalty and technical services receipts. The Appellant did not file any return for the relevant period, as according to assessee no portion of its income arose in India on account of off-shore supplies and since tax had already been deducted on other payments. In AY 2007-08, the Appellant had entered into the following transactions with its Indian subsidiary/ Associated Enterprise ( AE ), i.e., LG India: S. No. Nature of transaction Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of key officials recorded and materials impounded during the course of survey conducted under section 133A of the Act in premises of LG India on 24.06.2010, the AO had reasons to believe that the Appellant has a permanent establishment in India in terms of Article 5(1) of the India-Korea DTAA and that the Appellant also has a business connection in terms of section 9(1) of the Act. On the basis of these findings, it was alleged that profit arising in the transactions of sale of raw material, capital goods, finished goods etc. undertaken between the Appellant and LG India was attributable to the alleged PE of the Appellant and hence chargeable to tax in India. Aggrieved by the initiation of reassessment proceedings, the Appellant along with the other group companies filed writ petitions before the Hon ble Allahabad High Court challenging the validity of reassessment proceedings. The Hon ble Allahabad High Court vide order dated 23.02.2015 upheld the initiation of reassessment proceedings. Thereafter, the AO passed draft assessment order dated 28.03.2016 (Page 253) under section 144C/147/143(3) of the Act holding that the Appellant has a PE in India in form of LG India and propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits 4,07,47,766 Profit Margin 20% Total profits attributed to the India PE 81,49,553 15. Thus, the AO attributed an income of INR 81,49,553 in addition to the returned income as income allocable to the Appellant s PE in India. 16. Meanwhile Appellant along with the other group companies filed SLP s before the Hon ble Supreme Court but Appellant withdrew SLP filed challenging the validity of the reassessment proceedings with liberty to pursue statutory appellate remedy. The Hon ble apex Court vide order dated 16.01.2018 held as under: - 8. In these matters the DRP/Assessing Officer have come to the conclusion that the petitioner has a PE in India. However, the petitioner prays for permission to withdraw these five special leave petitions and to pursue the statutory remedy under the Income Tax Act, 1961. These special leave petitions are, accordingly, dismissed as withdrawn with liberty to the petitioner to pursue its statutory remedies. 9. It is also made clear that the Appellate Authority will examine the matter uninfluenced by any observation/finding of the High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit attribution at 20 % of profit margin of 50 % of salary cost of expatriates in India. 20. Now the assessee has challenged the order of the ld AO on existence of PE as well as the Profit attribution also. 21. Ld Authorised Representative, Shri Ajay Vora , Ld Senior Counsel , first took us to the concept of PE . He submitted that Article 7 of the DTAA deals with taxation of business profits and provides that business profits arising to a Korean enterprise would be liable to tax in India only if the Korean enterprise has a PE in India. In such a situation, so much of the profits as are attributable to the PE would be liable to tax in India. He referred to term PE as defined in Article 5(1) of the DTAA. He stated certain illustrations of a typical PE viz. a place of management, branch, office, premises used as a sales outlet etc. It is submitted that the essential characteristics of a fixed place PE for Article 5(1) as provided under the OECD Commentary are as follows: i. the existence of a place of business , i.e. a facility such as premises or in certain cases, machinery or equipment; ii. this place of business must be fixed , i.e. it must be established at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-281 of the case law paper book Vol. I relevant discussion @ pgs. 236-242, 257, 258 277; 3. ADIT vs. E-Funds IT Solutions : [2017] 399 ITR 34 (SC) placed @ pgs. 416-457 of the case law paper book Vol. II relevant discussion @ pgs. 434-441, 452-453. (Approving the decision of the Delhi High Court) On the basis of above legal grounds, he submitted that there is no fixed place available at the disposal of the Appellant at the premises of LEGIL in India (or any other place in India) nor is the alleged fixed place used to carry on any business of the Appellant in India, much less core business of the Appellant. 23. He submitted that LGEIL [ L G Electronics (India) private limited] is a separate and independent legal entity as it is a company incorporated in India under the provisions of the Companies Act, 1956. On 10th Mar 1997, the Appellant entered into a foreign collaboration agreement with LGEIL (Page No. 1188 of Paper book 3). The said company is a distinct legal entity which is carrying on business in its own name and is accountable for its turnover / profits. All business risks are vested in LGEIL with respect to the business carried on by that entity. LGEI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means required for the contract s execution from associated enterprises. The latter is particularly true for the hiring out of employees as temporary workers. If the parent company makes personnel available to the subsidiary for remuneration, than the activity of this hired labour is to be attributed to the subsidiary and does not constitute a permanent establishment of the parent doing the hiring-out. This is different, however, as well as, in cases of subcontracts if the parent assumes the economic risk of the contract s fulfillment in relation to the main customer. In this situation the parent company and the subsidiary have in fact established a company of which they are partners. This will lead to a permanent establishment for the partners if the general preconditions are fulfilled. 24. He further refereed to Paragraph 40 of the OECD Commentary on Article 5 provides that it is generally accepted that the existence of a subsidiary company does not by itself, constitute that subsidiary company as a permanent establishment of its parent company. This follows from the principle that for the purpose of taxation, such a company constitutes an independent legal entity. Even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y were core activities; Free of cost supply of intangibles by the foreign company(s) to the Indian subsidiary. 26. After showing us above legal position, he referred to the facts of the case and submitted that in the present case, it will be seen that LGEIL is a distinct and independent legal entity carrying on its independent business, as evident from the following: i. LGEIL purchases almost 67% of its raw material from third party vendors and is not dependent upon the Appellant for raw material and spares (pg 370). ii. The import of finished goods from the Appellant by LGEIL constitutes only 10% of its total sales (pg 389). iii. LGEIL manufactures products in India according to the technology / design and drawings provided by the Appellant and uses the brand name LG owned by the Appellant on the products manufactured, in terms of the Technology License Agreement, against payment of royalty. iv. LGEIL employs around 15000 personnel permanent and temporary, several key positions are held by Indian Nationals v. LGEIL has an indigenous R D facility, which is duly approved by the Government of India for undertaking research for new products / customization o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated in the appointment letter. Further, at the end of the tenure, the expatriate employee, in exercise of lien on employment with the Appellant, has the option to return to the Appellant Company the same, however, is a matter of individual choice and decision. From the aforesaid, it would be clear that during the period of deputation, LGEIL is both, the legal and economic employer of the expatriate employee(s) and it cannot be said that the Appellant company exercised control over the affairs of LGEIL through the expatriates employees seconded to LGEIL. E supported his arguments by the following judicial precedents. a) The Delhi bench of the Tribunal in the case of HCL Infosystems Limited vs. DCIT : [2002] 76 TTJ 505 having regard to the fact that the foreign technicians deputed by Hewlett-Packard to the assessee s joint venture in India - filed application with the Foreigners Regional Registration Office ( FRRO ) for taking employment in India, were holding employment visa, were given designation / position in the assessee company, were given duties and responsibilities as specified by the assessee, were reporting to the assessee s management and worked under assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the tenure of their secondment and have simultaneously is being released for the period in question by the Appellant. He submitted that the assessing officer erred in holding that the expatriate employees during the period of deputation to India continued to be employees of the Appellant Company and were carrying on business of the Appellant Company in India. 28. He further submitted that assessing officer has drawn adverse inference from selective reading of statement of the expatriate employees recorded during the course of survey at the premises of LGEIL on 24.6.2010. It is also pointed out that the assessing officer has ignored statements of some of the employees recorded in the course of survey, to the extent that the same did not support the alleged inference sought to be drawn by the assessing officer. He submitted that the inference sought to be drawn by the assessing officer from the ex-parte statements recorded during the course of survey that the Appellant had fixed place PE in India, is erroneous for reasons that there is No evidentiary value of submissions recorded during the course of the survey. He submitted that It is trite law that statement recorded during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is then shared with the product company which further develops the technology. This technology is imported by us in India. Statement of Mr. Yashovardhan Verma, (Page 668-669) Q.20 Who is responsible for deciding the marketing strategy of LG India? A. Product marketing strategy are decided by me with my team and my MD. LG Korea has no role. . . .. Q.21 What is the role of LG Inc.? A. Nothing Q.22 What is the role of LG Inc. Asia in it? A. Subsidiaries like LG India decide their own strategy specific to the market and are accountable for the results. Q.16 In what manner is the supervision and control done by LG Inc. over LG India? A. In the capacity of majority shareholder. Statement of Mr. H.D Rew, (Page 697), Question: How the rate of items to be procured be decided? A. We negotiate the price when vendors to get the competitive prices. Question: Who decide that the prices are competitive one? A. In some big items such as steel, Resin, I decide the price while in most of the case, HOD of the Procurement Team decide the rate. MD has not having any role in deciding the prices. Statement of Mr. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics and Indian consumer preferences. This is based on various consumer facing researches which we keep doing time and again. About selection of product- our choice is limited to the offering made as per the Menu Card and cannot chose any other besides that. Qn. Who decides the import of products for LG India and how is the pricing done? A. As per the PRM (product road map Menu Card) for India there are some products which are manufactured in India and some aspirational products cannot be manufactured because of either economies of scale or technology or some other reason. This is where I shortlist the models from the Menu Card. This involves pricing discussions also. The basis of pricing area as follows what is the price of competitors in the market, what is the amount of money a consumer is willing to pay for a particular model or a feature. This is where we get into discussion in finalizing the price at which we need to launch it. Statement of Mr. Vipin Gupta, (Page 719) Q. What are the various imports made by your factory give details? A. Generally we import the items where the local substitutes or technology is not available like semi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether probable candidates come for interview to India or not. Also whether the Indian directors visit Korean office for recruitment or not? Answer: The MD of LG India forwards the requirement of Korean candidates to HR at head quarter. Based upon that they propose the available candidate whose willingness is prechecked by them. From this list the candidates are interviewed either through VC or whenever senior person visits Korea they interview them. Statement of Mr. Chang Sil Lee, (Page 712) Qn. Where were you employed earlier and how did you get your employment in India? A. I was employed in corporate planning team in Korea. The corporate HR department in Korea informed me about the position in India. The India HR department corresponds with HR department of Korea and then I was informed about my selection by the HR department of LG Korea. I did not submit any resignation to my earlier employer i.e. LG Korea. It was a transfer of position from Korea to India which was informed to me by the HR department of LG Korea. Normally the term of deputation/transfer for foreign service expatriate is four years which can be extended or reduced in discussion with the MD of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es related their material quality and delivery, they visit India and discussed these with me and my team members. The meetings take place in our office. 31. With respect to the short term visits of expatriates who visited India came for purposes, he submitted that they visited for implementing the technology made available by the Appellant under the Technology License Agreement, meeting customers in India with respect to the goods imported by LGEIL from the Appellant and sold in India and for stewardship activities in the capacity of shareholder and owner of LG brand. Merely because no record is kept by the Appellant or LGEIL in respect of short term visits of employees of the Appellant, would not be a ground to infer that such employees carried on the business of the Appellant in India from a fixed place situated therein. 32. He therefore submitted that Appellant had no office / place of management in India so to constitute fixed place PE in India. Furthermore, even if it be assumed that there was such fixed place available to the Appellant (which is strongly disputed), it has not been shown by the Revenue that such alleged fixed place was available at the disposal of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g assessments of, both, the Appellant as well LGEIL, there can be no further attribution of profit to the alleged PE. For this proposition he relied up on Hon. Supreme Court s decision in the case of Morgan Stanley (292 ITR 416) , Director of Income Tax V. E-Funds IT Solution [2017 (399 ITR 34) (SC)] , order dated 14.03.2018 in CA no. 2833 of 2018 in the case of Honda Motor Company Japan. He submitted that arm s length principle as the primary basis for attributing profit to PE laid down by the Hon ble Supreme Court, has been extensively followed High Courts / benches of the Tribunal in the undernoted judicial precedents: SET Satellite (307 ITR 205) [Bombay High Court] BBC Worldwide (307 SOT 253) [Delhi ITAT] E-fund IT Solutions (364 ITR 256) [Delhi High Court], confirmed by Supreme Court Rolls Royce Plc (339 ITR 147) [Delhi High Court] Rolls Royce Singapore (347 ITR 192) [Delhi High Court] Hyundai Rotem Company (ITA No. 3300 to 3302/DEL/2009) [Delhi ITAT] Galileo International (114 TTJ 289) [Delhi ITAT] Ranbaxy Laboratories Limited (114 TTJ 1) [Delhi ITAT] iii. To support his above contention, Ld AR referred to observation of the OECD in Model Tax C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of PE by the assessee. He strongly objected to this. 35. Ld CIT DR submitted that assessment order and the DRP directions are emphatically relied upon and his submission is restricted only to specific aspects. On balance aspects, above orders and oral submissions are relied upon. 36. On the issue of statement of employees unreliable evidence he submitted that The assessee was repeatedly asked to furnish copies of all the agreements governing its association with LGEIPL (2007-08, PB-II, p.652). In this regard, the observations of the Hon ble Special Bench in the case of LGEIL in its order dt. 21/01/13, where in it is held that :- An agreement was entered between LGK and LGI on 10th March 1997, as per which both entered into a mutual foreign collaboration agreement. Thereafter a Technical assistance and royalty agreement was entered into between these two entities on 1-7-2001 by which LGI, in the capacity of a licensee, obtained a right to use the technical information, designs, drawings and industrial property rights for the manufacture, marketing, sale and services of the agreed products from the LGK i.e. the licensor. 37. However, this basic document defining the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explain the various process, which are being followed to conduct the business of SGEIL only and not to ascribe any criminality. It is not the case of the assessee that the statements cannot be used for the purpose of any proceedings under the IT Act. What is contended by the assessee and held by the decisions relied upon by it is that a statement on oath taken u/s 133A(3)(iii) has no evidentiary value. It is not the case of the assessee that the statements given by the employees are wrong or incorrect. What the assessee submits is that statements recorded during the course of survey have no evidentiary value. As has already been stated above, most of the statements relied upon by the AO have not been recorded u/s 133A but u/s 131 of the Act. Moreover and without prejudice to this, it can t be denied that it is information which has corroboratory value and which can be used for corroboration purpose for deciding any issue in favour or against the assessee. Reliance to this effect is placed in the decision of Hon ble ITAT, Ahmedabad in ITA.No.492/Ahd/2016 dt. 2.9.16 in the case of Sanjay N. Shah 39. He further referred to the argument of the ld AR placing heavy reliance on the dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for export of CTV (export commission) (p.527-534) Design Development Agreement (p. 535) - 15. Whether Technical services were provided to the Indian customer during the year? If yes, please submit the names of employees and other persons who visited India in this regard . Reply dt. 21.03.16- In this regard, we wish to submit that details of transactions entered by the assessee with LG India during the FY under consideration has been duly furnished vide our submissions dt.09.03.16 (p.634-636). Further, we wish to reiterate that the assessee has not executed any projects in India. Accordingly, the above details are not applicable to the assessee. (p.523) - 16. Please furnish the details of all expatriates whose remuneration is charged to the expenses in India who visited India during the year. Reply dt. 11.03.16- In this regard, we wish to submit before your goodself that the assessee does not have any business presence in India. Accordingly, the assessee is not required to maintain any books of accounts in India. Further, we wish to submit that the assessee has not claimed deduction for any expenses in its return filed for the subject AY. Accordingly, the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise. He referred to various statements of expat employees. M.B.Shin (PB-II,p.665-666) 1. Jan 2005.I was the head of marketing that is the official title given by HQ before I joined LGEIL in Jan 2005. I was working in Seol, South Korea with LGEK. I was looking after the overseas market globally. The HQ of LGEK decided to send me here as head of marketing of LGEIL. In 2007 the HQ in Korea promoted me as MD, LGEIL. ii. I sometime report to Woody Nam and sometime to CEO of the product companies, sometimes to global CEO iii. My salary is decided by HQ of LG Global in Korea. It is paid by LGEIL. H.C.Moon-(PB-II,p-672-673) 1. I am working here in the company at Grater Noida since January 2008. Prior to it I was working in this same company at Korea. I was transferred from the HQ to this place by the LGEK. ii. I visited South Korea for so many times, sometimes for official meeting and sometime for personal purposes. Generally, I have to attend the meetings in HQ at Seol, South Korea. Jae Gyu Cho-(PB-II,p.678) i. Before joining LGEIL I was with LGEK for 23 years and I was transferred to Indiaby LGEK by a letter issued by our HQ Seol, South K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout my selection by the HR department of LG Korea. I did not submit any resignation to my earlier employer i.e. LGEK. It was a transfer of position from Korea to India which was informed to me by HR department of LGEK. Normally the term of deputation for Foreign Service expatriate is four years which can be extended or reduced in discussion with the MD LGEIL and Global CEO through Global HR department of LGEK. After the completion of tenure in India, the next position is also decided by global CEO who informs us through corporate HR department of LGEK. ii. In my case no interview was taken by LGEIL. Generally in the case of FSE when MD comes for some meetings in Korea he may meet informally to the candidate coming to India. The LGEIL HR also did not interview me. iii. To sum up in the case of FSEs the MD of LGEIL discusses with corporate HR of LGEK and shortlisted candidate is informed by corporate HR about their postings to India. iv. I submit reports to MD LGEIL but financial statements and summary of results are sent to LGEK. The monthly closing and quarterly closing are sent to global CFO. v. No discussion of price takes place between LGEIL and LGEK or between LGEI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are decided in Korea and according to local insights changes are made in consensus with HQ subsidiary. c. LG Global has its own set of PRM (Product Road Map-Menu Card) which is for all the countries in which they have a subsidiary. We in LG India are introduced to this Menu Card, and offered a choice to select from these products(ONLY). Here we take our pick of the products based on the market dynamics and Indian customer preferences About selection of product our choice is limited to the offering made as per the Menu Card and cannot choose any other besides that.(PB-II,p.717) d. In the process of deciding the PRM for India, we do an extensive research of the market and consumers. This is where we get a team of expats who work very closely with us..(PB-II,p.717) e. As per the PRM for India there are some products which are manufactured in India .this is where I shortlist the models from the Menu card.(PB-II,p.717) Manufacturing Process- (PB-II,p.719) a. The process starts from the fact that global technology are available in Korea and they want to bring it to India b. The second step is survey of Indian market which is done by experts of Korea and expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent amendments. In the above backdrop, it is seen that LGEK reimburses certain expenses incurred by LGEIL. (PB-I, p.76 r.w.p.217,233 240) Depreciation during the year includes . ₹ 7711 thousand (previous year ₹ 8380 thousands) recovered from the holding company. (p. 217) Amounts stated in P L A/c are net of reimbursements made by Holding Co and fellow subsidiaries towards Salaries, Wages, Allowances Bonus, Rent, Power, Fuel Electricity, and Interest to Banks Others, Depreciation Amortization. As can be seen no such amount is payable by LGEK to LGEIL as per the terms of Art.21. Without prejudice to the above, even assuming without admitting that a part of expenses may be incurred for after sale warranty services, the same can be either in the nature of Spare Parts and Labor Cost expenses (PB-I, p.101, 102..). The assessee has not furnished the copies of agreements between LGEK LGEI for secondment of employees or the terms and conditions of secondment of employees either during assessment proceedings or before DRP. However, the fact that LGEK reimburses a part of other expenses like Rent , Depreciation , Power, fuel electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red.' - . a perusal of the above clauses indicates that it is only LGK which decides the rate of royalty to be paid by the assessee over the period. On such decision taken by LGK, the assessee is supposed to take necessary steps for obtaining the Govt. of India's approval, if any, required for payment of royalty. This clause was claimed to be proving that there is only one way traffic and there is no question of any mutual negotiations taking place to finalize any business decisions as happens between two independent entities. - Under this arrangement, it is only LGK, which takes the final call and that, has binding effect on the assessee. - Article 7 of this agreement, which allows the use of LG brand name and trademark. This clause provides in second Para that in case at any stage in future the licensor demands any royalty payment on this account, the licensee will take steps to get the Govt. of India's approval for payment of such royalty payment. It was stated that from this Article it was evident that the amount of royalty to be paid by LGI to LGK for use of its brand name falls in the exclusive domain of LGK. The assessee has no role at all to play in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director of the assessee company that it adopted the BOS in India as part of its global strategy. The details as referred to by the ld. DR reveal that the entire marketing strategy of LG group through advertising and promotion was decided globally. The assessee and other AEs of LGK in other countries were supposed to follow the overall strategy made by LGK. When the assessee subscribed to BOS of its foreign AE, it cannot be contended that all the decisions about the timing, areas and quantum of advertisement were taken by the assessee, as was contended by the ld. AR. In fact all such decisions are derivatives of the overall BOS formulated by LGK. Though the ld. AR repeatedly asserted empty handedly that advertisement in India was planned and executed by the assessee alone, but he not only failed to support his contention but also could not place on record any contrary evidence to indicate that either the BOS was not a strategy inter alia for advertising and marketing on a global level or the assessee did not adopt it. 12.4 LG Electronics Singapore Pte Ltd's (LGESL) marketing division is responsible for developing a range of marketing and sale strategy. Marketing fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties- 9.9. We do not find any force in this contention made on behalf of the assessee. If the unison or mutual agreement between two parties was to be deduced only from the terms of some formal agreement, then there was no need for the legislature to define transaction u/s 92F inter alia to mean an arrangement or understanding - (A) whether or not such arrangement, understanding or action is formal or in writing . The incorporation of the words whether or not before the words such arrangement, understanding or action is formal or in writing , is a clear pointer to the fact that the agreement between the two AEs can be formal or in writing on one hand or informal or oral on the other. When there is a formal or written agreement between two AEs, the answer to the question as to the existence of transaction becomes patent. If, however, there is an informal or an oral understanding, the existence of such agreement cannot be specifically found out because of it being not express. However, such an informal or oral agreement, which is latent, can be inferred from the attending facts and circumstances to make it patent. Such inference can be drawn from the conduct of the parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred by independent enterprises behaving in a commercially rational manner, which unearths the covert act of treating the AMP expenses incurred for the brand-building for and on behalf of the foreign AE, as also its own. What is relevant to consider is as to whether an independent enterprise behaving in a commercially rational manner would incur the expenses to the extent the assessee has incurred. If the answer to this question is in affirmative, then the transaction cannot be recharacterized. If, however, the answer is in negative, then the transaction needs to be probed further for determining as to whether its re-characterization is required. Such re-characterization can be done with the help of the ratio decidendi of this judgment itself, being, making a comparison with what' independent enterprises behaving in a commercially rational manner' would do, tied with the fact of the assessee also simultaneously advertising the brand of its foreign AE. 48. On the issue of PE he submitted that question of the existence of PE under Art-5(1) Office PE under Art-5(2) may be viewed from the above perspective of non-compliance by the assessee, statements of the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exclusively for that purpose. It is clarified that a place of business may also exist where no premises are available or required for carrying on the business of the enterprise and it simply has a certain amount of space at its disposal. Further, it is immaterial whether the premises, facilities or installations are owned or rented by or are otherwise at the disposal of the enterprise. A certain amount of space at the disposal of the enterprise which is used for business activities is sufficient to constitute a place of business. No formal legal right to use that place is required. Thus, where an enterprise illegally occupies a certain location where it carries on its business that would also constitute a PE. Some of the examples where premises are treated at the disposal of the enterprise and, therefore, constitute PE are: a place of business may thus be constituted by a pitch in a market place, or by a certain permanently used area in a customs depot (e.g. for the storage of dutiable goods). Again the place of business may be situated in the business facilities of another enterprise. This may be the case for instance where the foreign enterprise has at its constant disposal certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as places. Taking the issue further, I may add, that s why a computer terminal (as in the case of Galilio/Travelport) or a computer server (as in the case of or Areva T D AAR/876/2010) constitutes a PE whereas a Satellite transponder is not. Hon ble SC further elaborated this concept with reference to another competing enterprise. (para-37, FOWC) The question is whether at the disposal denotes an absolute legal right/control over a place /room/cabin/space or it connotes only the right to access and use such place. Once the Hon ble SC identified and clarified the dichotomy between the legalistic interpretation of the term Place as a (bundle of rights of ownership to the exclusion of others, use, transfer as allowed by law) as against the interpretation as per OECD/DTAA and the characterization of Place , (FOWC; Para-37 The OECD view can hardly be reconciled with the two court cases. ) it went on to analyze the concept of Disposal . It highlighted the differences of opinions/approach in the method of interpretation of the concept as adopted by OECD - a Liberal Subsidiary Approach (i.e. PE should be treated like subsidiaries) as against a more Stricter and legalistic approac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness to a more factual based approach, focusing on the ability of the enterprise to use a certain place for its activities. In 2003, the OECD incorporated the painter example in the commentary. According to that example, a painter who, for two years, spends three days a week in the large office building of his main client will constitute a PE. The presence of the painter in that office building where he is performing the most important functions of his business for the client will be enough to establish a PE. That example indeed shows a very broad understanding of the concept of permanent establishment as defined in Article-5(1). It no longer refers to a certain room or location over with the painter can exercise a minimum degree of power or at least can store his equipment. Instead, just the activities and presence at certain place over a sufficiently long period will be the decisive factor to create a PE. This expansion is further strengthened by another example provided, where a company engaged in paving a Road will constitute a PE. Following the OECD commentary, the words through which must be given broad interpretation in order to cover all business activities which are c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities being carried on there from. It can t be denied that LGEK had certain amount of space at its disposal and this place of business was situated in the business facilities of LGEIL. 56. He further submitted with respect to temporal aspect or the Permanency Test , it may not be out of context to highlight the fact that the temporal aspect of this concept has been largely diluted in view of the decision of Hon ble Supreme Court in the case of Formula One World Championships (Supra). While elaborating the concept, the Hon ble Supreme Court held- 41. .. The High Court was also conscious of the fact that such an access or right to access was not permanent in the sense of its being everlasting. However, having regard to the model of commercial transactions, such an access for a period up to six weeks at a time during the F-1 Championship season was sufficient for the purposes of Article 5(1) of DTAA. Further, as the tenure of RPC was five years, it meant that such an access for the period in question was of repetitive nature. The Hon ble Supreme Court once again reiterated the above by observing that 68 (iii) The appellants are trying to trivialize the issue by har ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, both the exclusive nature of the access and the period for which it is accessed, in the opinion of the Court, makes the presence of a kind contemplated under Article 5(1), i.e. it is fixed. In other words, the presence is neither ephemeral or fleeting, or sporadic. The fact that RPC-2011's tenure is of five years, meant that there was a repetition; furthermore, FOWC was entitled even in the event of a termination, to two years' payment of the assured consideration of US$ 40 million (Clause 24 of the RPC). Having regard to the OECD commentary and Klaus Vogel's commentary on the general principles applicable that as long as the presence is in a physically defined geographical area, permanence in such fixed place could be relative having regard to the nature of the business, it is hereby held that the circuit itself constituted a fixed place of business. 71) A stand at a trade fair, occupied regularly for three weeks a year, through which an enterprise obtained contracts for a significant part of its annual sales, was held to constitute a PE. Likewise, a temporary restaurant operated in a mirror tent at a Dutch flower show for a period of seven months was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continuity and repetitiveness of such short presence year after year. Accordingly, considering the permanency and frequency of such visits, the temporal aspect of the disposal test is also satisfied and the contention of the assessee in this regard is also deserves to be rejected. 58. On the issue of permanent establishments that whose business is carried out from that place , he submitted that Whether it can be said that the business of enterprise is being wholly or partly being carried on through such place. The term business is not fully or exhaustively defined; accordingly, it has the meaning that it has under the domestic law of the state applying the tax treaty, plus professional and independent services, as explicitly provided for in article 3(1)(h) of the OECD Model. This Hon ble Tribunal in the case of Qualcomm Incorporated (I.T.A. Nos.: 3701 and 3702/Del/2009, 5343/Del/2010 and 4608/Del/11) held that the term Business has a wider connotation and must be understood in that context. In that case, the Hon ble Tribunal had held that No doubt, manufacturing is an important part of business but the business per se is little more than manufacturing. Furthermore, as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upported by LGEK and expenses towards this are at times borne by LGEK. - M.B.Shin, MD, LGEIL (PB-II,p-662) We are LG and India is also LG. We use global logo of LG. We write only LG and not LG India. Mong Nam Jung, GM (R D) (PB-II, p.706) It reflects the perception of LGEIL in the eyes of expats. The researches are done jointly by local team and Korean team. Core technology are decided in Korea and according to local insights changes are made in consensus with HQ subsidiary.- Y.Verma, COO (PB-II, p.670) LG Global has its own set of PRM (Product Road Map-Menu Card) which is for all the countries in which they have a subsidiary. We in LG India are introduced to this Menu Card, and offered a choice to select from these products(ONLY). Here we take our pick of the products based on the market dynamics and Indian customer preferences About selection of product our choice is limited to the offering made as per the Menu Card and cannot choose any other besides that.- A.M. Kootiyat, AGM (PB-II,p.716) This further highlights the fact that it is LGEK which takes all decisions on the products to be offered and LGEIL can only make a choice from such offers by LGEK. Manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t paid is reimbursed. He submitted that these expats employees, and discuss with the members of the Indian subsidiaries and sometimes they also go to the market, sometimes they meet the customers, sometimes the common discussing the office, they go to the market and meet the customers because they are supplying finished goods in India and they have to ensure quality and consumer satisfaction. He further stated that there is a plant and machinery in respect of which depreciation is reimbursed. He further stated that capital employed for which interest paid and other business expenses are also reimbursed. He further submitted that the reimbursement of total cost did not include all these expenditure which are also not reported by the assessee is an international transactions. He further submitted that there is maintenance of inventory at the facilities. He further stated that 2nd and employees are carrying on the assessee s business in India. He further stated that the control over production process product development and research et cetera are also by of the assessee. He stated that control over sales, marketing policies and processes also of the assessee. Over and above the visit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court. For the aforesaid proposition reliance was placed by the CIT DR on para 8.9 of the Special Bench decision in the case of LG Electronics 140 ITD 41. He submitted that Hon apex Court while disposing of the SLP filed by the Appellant categorically observed that- 8. In these matters the DRP/Assessing Officer have come to the conclusion that the petitioner has a PE in India. However, the petitioner prays for permission to withdraw these five special leave petitions and to pursue the statutory remedy under the Income Tax Act, 1961. These special leave petitions are, accordingly, dismissed as withdrawn with liberty to the petitioner to pursue its statutory remedies. 9. It is also made clear that the Appellate Authority will examine the matter uninfluenced by any observation/ finding of the high court regarding the existence of a permanent establishment of the petitioner in India In that view of the matter, the finding of the Hon ble Allahabad High Court (while disposing of the Writ Petition) that the Appellant had PE in India had to be considered as non-est in terms of the apex Court direction to take independent decision in the matter regarding existence of PE of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - -vis LGEIL management. 65. In response to this he submitted that ex-patriate employees deputed by the Appellant to LGEIL become employees of LGEIL during the term of their secondment/ deputation, i.e., LGEIL was their legal and economic employer. The reading of the statements does not lead to the inference that the seconded employees continued to be employees of the Appellant and working for the business of the Appellant, during the period of their secondment. 66. On the issue of short visits of employees he submitted that merely because the Appellant has not been able to give details of the visit of short term expatriates, in absence of any documentation being maintained, it is sought to be inferred that the short term expatriates have a fixed place available in India and are visiting India for furtherance of the Appellant s business so as to constitute fixed place PE in India. He submitted that the short term expatriates visit India for technical support to be provided in terms of the technical license agreement, for visiting customers in India for products imported and sold in India, for undertaking market survey for new products and for shareholder activities. Thus In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the fact that the Indian assessee was manufacturing products using drawings and designs supplied by the foreign AE, using trademarks owned by the foreign AE on the products manufactured by it, paying royalty to the foreign AE for use of manufacturing drawings and designs and trademarks, importing raw material and components from the foreign AE which were used in the manufacture of finished goods and was, then exporting goods to permitted countries against payment of royalty. He submitted that though Hon Delhi High Court came to the conclusion that the Indian Company was carrying on the business as an independent enterprise; as an independent manufacture, the assessee bore all the risks associated with its products in India and abroad; the assessee planned and executed its own manufacturing strategy as considered necessary and appropriate; the stipulation in the license agreement that the technology would be used for sale of goods in designated jurisdiction or specified territory was not an unusual requirement. On that basis, the Delhi High Court ultimately concluded that the question of recharacterizing the Indian company as a contract manufacturer was unwarranted. Having regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same was duly benchmarked applying TNMM. Further the TPO had in the transfer pricing assessments of LGEIL accepted such reimbursement at arm s length (for assessment year 2007-08 and 2008-09). For the subsequent years, the TPO made adjustment on the ground that LGEIL should have received a mark-up for rendering such service to the customers of the Appellant. The stand taken by the TPO in the proceedings for LGEIL is in direct conflict with the proposition canvassed by the CIT DR. While the TPO had held that LGEIL had rendered service to the Appellant (for which a mark-up was to be received), in the submissions of the CIT DR the expenses incurred by LGEIL is for maintenance of a fixed place on behalf of the Appellant. The aforesaid will expose the fallacy in the arguments raised by the CIT DR for the first time before the Hon ble Tribunal. In that view of the matter, there is no merit in the submissions of the CIT DR that reimbursement of expenses, inter-alia towards rent, depreciation, and power and fuel point out to existence of fixed place PE in India. 69. On the issue of reliance on the decision of special bench of ITAT in assessee s own case, he submitted that The CIT DR h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 was to discharge the obligations under the said agreement and towards shareholder functions. The same cannot lead to the inference that the Appellant had fixed place PE in India in the form of premises of LGEIL. 71. On the issue of what constitutes core business according to the ld DR, in submissions of the CIT DR, Article 5 (1) of the DTAA refers to fixed place of business and there is no reference to core business . He submitted that OCED Commentary on Article 5(1) clearly states that the fixed place should be available to carry on its own business (emphasis supplied). As stated earlier, even if it is presumed that the Appellant had a fixed place in India, no business of the Appellant was being carried out through such fixed place. That apart, the Delhi High Court in the case of E-funds (supra) in paras 30 and 50 thereof referred to the core business of the foreign enterprise being carried out through the PE in the other Contracting State, to constitute fixed place PE in that other State. The CIT DR was therefore not correct in observing that there is no reference to core business in the DTAA. 72. On the attribution of Profit, he submitted that ld CIT DR has not disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso important to point out that the transfer pricing assessment in the case of both the Appellant and LGEIL were completed after the survey on 24.06.2010 when the TPO had the benefit of the findings in the survey. 76. He further submitted that decision of the coordinate bench in case of Samsung (Supra) binds the ITAT and there is no difference in the facts of the case and therefore same view needs to be taken. He referred to the statements of employees in that case as well as in this case in a tabular form as under :- Comparative chart showcasing similarity in Statements recorded during survey S.No. Samsung Electronics Co. Ltd. LG Electronics Inc., Korea 1. Statement of Sh. Kyoung Soo Kim s/o Shri Jong Suk Kim A. Please identify yourself? I am Kyoung Soo Kim s/o Jong Suk Kim aged 40 yrs, working with Samsung India Electronics as Deputy General Manager (Purchasing). B. Being the purchase incharge do you get any direction from Samsung electronics Korea regarding import of raw materials? Korean company gives me information on quality, delivery cost of raw materials. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when you are getting your salary in INR? I am more comfortable in calculating in US Dollars. E. For how much time have you been posted in India? It is not fixed. Normally I expect to stay for three to four years. F. Can you be replaced back to Samsung Korea, at your wish or would it be the decision of the head quarters to when to get you back? In two way agreement. G. What is the mode of communication with Samsung Korea? Over the phone email (intranet). H. You have the intranet systems installed with the corporation, where is the server of the intranet situated? I have no idea. Maybe, in Korea, or in Singapore. I. How often do you communicate with the head quarter in Samsung Korea? Normally daily. J. You communicate directly or through your GEO? It depends on issues. Something which may affect the business result seriously will be discussed with my boss, MD but in most cases of simple opinion exchange the communication is done without MD intervention. K. To whom do you generally communicate in Korea? Mr. Ryu, Vice President in Mobile Communication Division and many other persons. L. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Indian company for installation of the software. 3. Statement of Shri Anuj Pareek, Sr. Manager Accounts A. Please introduce yourself. Myself is Anuj Pareek, working in Samsung (SIEL) since July At present working in the capacity of Sr. Manager- Accounts. B. I am showing you the remittances of ₹ 9,63,134 dtd. 10/02/10 and ₹ 12,42,25,457 dtd.9/02/10 in which these payments have been made to M/s Samsung Electronics Corporation as reimbursement of expenses. C. How would you justify such payment without deduction of tax thereon? Question asked about ₹ 12,42,25,457 dtd. 09/02/10 was not made. Form 15CA was wrongly uploaded on the site and there is no provision to sever it or cancel it. Remittance of ₹ 9,63,13481 dtd. 9. Feb 10 was on also salary paid to the Expatriate employees, the said salary has been offered to tax by the employers in India. For administration conveyance part of the salary is paid to Samsung Korea which in turn paid to expatriate employees all in Korea. The part salary which is remitted outside India is of the individual expatriate and if it has to be-remitted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garding Bank Branch in which this amount has to be credited. Looks after by treasury department. J. The details available show that Debit note has been raised by SEC, Korea and their after payment is made from SIEL India. This implies the salaries are not paid to the employees of SIEL after the payment has been received from India but the salaries are paid as if such expats were their own employees and then a debit note in respect of such salaries is raised to SIEL India. What do you have to say. I cannot comment because I am not aware of the reason. Statement of Mr. H.C.Moon, Son of Mr. Myong Ki Moon A. Please give your identification? I am H.C. Moon and am working as Vice President in LG Electronics India Ltd. looking after the Finance Accounts of the Company at NOIDA. B-J. Since when you are working here and prior to it, where you were working and give the details of your educational qualification with salary being received presently and in the past? I am working here in the Company at Greater Noida since Jan 2008. Prior to it, I was working in this same company at Korea. I am MBA (Accounts Finance) from America. Presently I a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come to impart technical expertise to local engineers . Please elaborate on this. To impart technical details of new technology or products, expat engineers are required once the local engineers acquire requisite knowledge expertise the local support' is, handled by them. Some such supports also is arranged through tele conferencing. Statement of Sri Umesh Kumar Dhal, s/o A.R. Dhal A. Please give your identity? I am Umesh Kumar Dhal, working as Head (HR) of LG Electronics, Noida since November, 2008. B. Please explain the procedure of employment in LG Electronics India for both Indians as well as expatriates? Manpower plan for every year is finalized in consultation with functional head and Managing Director. The skills required is assessed based upon that the requirement whether Indian employees or Koreans required are taken out. The Indian requirements are fulfilled locally and wherever Koreans are required the requirement is communicated to Korea. A list of eligible and suitable employees is forwarded by Korea to us from where a suitable candidate is selected after interview on video conferencing. D. Whether the expatriate emp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B. Where had you been working before joining SIEL? I was worked in Mobile .. Division in Samsung Korea. C. You were working in the parent company before you joined SIEL? What was your designation in Samsung Korea? Yes, Director. D. Since when have you been associated with Samsung group? 1990 E. What are the duties assigned to you in SIEL? Managing F/A, A/R, Logistics, Taxation HR F. When you joined SIEL, was it your decision or you were simply posted to India? Own decision and MD's order HQ recommendation. G. How often do you communicate with the Head Quarter? What is the most common mode of communication? 2-4 times a week, internet and mobile phones. H. With whom do you generally communicate in headquarters at Korea for official purposes? Global support team and global Biz management. I. Please clarify what is global biz management. Manage all functions of specific product all over the world. J. Are there different GBMS for different products? Yes, Mobile-Mobile phones Video Display- TV, monitor. K. Do you regularly send reports to GBMS? How often are the report sent? No, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and global best practice by way of imparting training by sharing knowing and information of technology and best practices. G. Please explain how expenses are met with? Are they met by LGEIL or by the product company? Sometimes LGEIL pays, sometime product company depending on case to case, the details of which I am not aware of. H. Who controls and makes decision regarding imports? There is a sourcing team of the manufacturing unit which look after the import as well as local purchase. Imports are major three-CBU, raw material and components. Negotiation regarding the price of the same are taken care by resource and procurement team of LGEIL and they are expected to procure the same at the competitive prices. I. Who decides what technology should be imported? The LGEIL manufacturing departments directly discuss these issues with the product company if and when required. Market surveys are conducted by the sales and marketing and this information is then shared with the product company which further develops the technology. This technology is imported by us in India. 7. Statement of Mr. H.K. Seo, Vice Presid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... function from global market perspective they discuss with global subsidiaries for products, price trend, and market development, marketing function. But, as they are more globally dedicated functional organization, SIEL is communicating with HQ to develop the product and support marketing practice by collecting best practice of Samsung Global operation. G. What is gathered from your replies is that after market research of Indian Market coordination with GBM, a new product is developed in Korea. Later on this technology is transformed to SIEL for domestic production. Is it true? Yes. Market research is done two ways, a,) by SIEL alone b) by the request of SIEL together with GBM. As recent research, MWO, it is found that Indian consumers prefer more small oavity of MWO, and more black colour. This is done by Focus group Interview. As results it was sent to HQ and it is under progress of Development. Shri Yashovardhan Verma, COO, L.G. Electronics Pvt. Ltd. Incharge of Mobile division A. What department do you look after? I am looking after sales and marketing Adl. Products except Mobile B. Who is responsible for deciding the marketing st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after going through my records. Two Patents have been applied but not registered so far and one is under progress, out of these two. 8. Statement of Mr. Y.H. Cho, VP Sales -North Region in M/s Samsung India electronics (P.) Ltd. (SIEL) A. How did you carry product marketing as GBM GM in India? Discussion about, proper USP with each country subsidiary. We don't arrange direct marketing, which will be done by Subsidiary. GBM is focusing on developing special features for each market subsidiary. B. How do you get technical input to develop special features for Indian Market? SIEL sends each requirement of USP to GBM. We discuss on these Requirements with internal R D Department in GBM. C. This means that the technical input for a specific products specialization are provided by SIEL? Feature Requirements are requested by SIEL. D. What are your duties as Head of Sales, North Region in SIEL? Manage organization and Sales of SIEL products in Northern Region. E. How do you carry out such duties? We have each RM BMs execute our sales also get involved in Sales with them. F. Do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsibilities as Asia Regional President of LG Electronics Ltd., Korea? One of my duty as an Asia Regional President of LG Electronics, Korea is to liaison of the business activities of the company in different countries under my charge with HQ of the Company at Korea. In liaison work; I see mainly sales and marketing in the Region for which I am responsible. D. Ever since you took charge at your current post, how many times have you held meeting here in India? Approximately ten times in the period of 2 and half years. E. Can you tell us what exactly had in the today s meeting with your colleagues at G. Noida? First was the marketing strategy, second one was related with new business. What is this new business? I do not comment on this. In the area of marketing in sports events, specially cricket, what has been your input in determining the strategy of LGEIL? I remember I was recommended and I was Ok with it. What is your mode of communication between MD of LGEIL and you? Sometimes face to face, sometimes over phone and sometimes through email. F-G. When LG India is not paying you any amount, why are you looking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information and details provided by the Appellant and made no grievance of the alleged non-compliance of the notice / questionnaire dated 11.11.2014. II. Short term Expatriates detail D. With regard to the details of the short term expatriate employees, the Appellant submitted the details of the current year short term expatriate employees and the purpose for visiting India vide referring to pages 1195 of the paper book volume 3. Pages 1196 to 1224 of the said paper book was referred to show the email communication with the respect to communication between the employees of LG India and the Appellant to schedule such short term visit of the Appellant employees. The email communication clearly establishes the case of the Appellant that the purpose of visit of such short term employees is for technical support. E. With reference to the aforesaid contemporaneous documentation, it was submitted by the Appellant that information about the visit(s) of the short term expatriates of the appellant company was on the basis of exchange of e- mail correspondence on one-to-one basis between the travelling short term expatriate and his counterpart in the Indian company. No record of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it had already established that LG India is, both, the legal and economic employer of the expat employees seconded by the appellant. Relying upon the statements recorded during the survey and the legal and factual submissions (refer earlier note), it was reiterated that all the functions performed by the expat employees are for furthering the business cause of LG India and, therefore, the existence of PE of the Appellant in India was not established. I. Without prejudice, it was submitted that once the transaction has been adjudicated to be at arm s length, no further attribution can be made to the alleged PE. To support its contention the Appellant relied upon the judgment of Honda Motor Company, Japan [2018] 301 CTR 601 (SC), Asstt. DIT v. E-funds IT Solution Inc 399 ITR 34 (SC) DIT v. Morgan Stanley [2007] 292 ITR 416. J. It was further submitted that the Ld. TPO in the case of LG India had pursuant to the directions of DRP accepted the transactions pertaining to off shore supplies of spare parts raw material, etc., to be at arm s length. Copy of order passed by TPO giving effect to the directions of DRP (in the case of LG India) is at Page 807 of paper book volume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. The said judgment has been affirmed by the Supreme Court in CIT vs. Kelvinator of India 320 ITR 561 (SC). M. Further, in the hands of Appellant, too, the Department has found the said transactions to be at arm s length. Copy of the order of Ld. TPO is at page 254 of the paper book volume 1. It is important to note that the order passed by the TPO in the case of the Appellant is much after the conclusion of survey at the premises of LGIL and the preparation of the survey report. The allegation raised by the Department that the order passed by the TPO was without knowledge of the findings in the survey is, therefore, baseless and unsubstantiated. N. The Appellant also pointed out the order dated 30.01.2014 passed by the TPO in the case of LG India for AY 2010-11 at page 1256 of the paper book Volume 4 to buttress the point that the TPO had not made any addition with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order R. With regard to the submission of the Department that the decision of the Hon ble Allahabad High Court holding that further attribution to the PE was permissible despite the order of the TPO holding the transaction to be at arm s length, it was submitted that when the Hon ble Supreme Court directed that It is also made clear that the Appellate Authority will examine the matter uninfluenced by any observation/finding of the High Court regarding the existence of a permanent establishment of the petitioner in India , the aforesaid observations of the Hon ble Allahabad High Court have been negated / nullified. S. It would be appreciated that in terms of sequence, it has to be first established that the foreign company has a PE in India; thereafter, the question of attribution to the said PE would arise. In the present case, the Hon ble Supreme Court having directed that the appellate authority would decide the question of existence of PE uninfluenced by the observations of the Hon ble High Court, the finding of the Hon ble High Court to the effect that there could be further attribution to the PE, notwithstanding the order of the TPO accepting the international trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to comply with the obligation under the said agreement and not on behalf of the Appellant. Z. Clause 4 of the said agreement was also referred to show that it was obligatory upon LG India to maintain adequate facilities and organization in order to comply with the contractual duties. AA. Thereafter clause 7 at page 820 of the paper book volume 3 was referred to show that Appellant was to reimburse the amount of expenses of the Appellant along with certain markup to be decided by the parties from time to time. BB. Further it was pointed out that the said transaction was duly reported by LG India and pursuant to the directions of DRP, TPO had accepted the said transaction to be at arm s length. The said transaction was also duly reported by the Appellant at page 939 of the paper book vol 3. CC. To sum up, it was submitted that in view of the detailed submissions advanced the Appellant did not have any fixed place of business in India in form of LG India. It was further submitted that the assumption of the Department that the Appellant had conceded to the existence of PE by filing a letter on attribution as mentioned in DRP order is also misplaced, as the offer in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the honourable Delhi High Court in case of [2014] 364 ITR 336W (Del) CENTRICA INDIA OFFSHORE PVT. LTD. v. COMMISSIONER OF INCOME-TAX AND OTHERS specifically para no 36 of the order where in it is held as under :- 36. In this context, the decision of the Supreme Court in Morgan Stanley Co. Inc. (supra) offers support for the Authority's viewpoint, rather than the contrary stance. In that case, the Court considered various forms of PEs, agency, service etc, each of which contemplate a different characteristic and link between the deputed employee/organization and the parent. In the context with which we are presently concerned, the following observations are critical: 15. As regards the question of deputation, we are of the view that an employee of MSCO when deputed to MSAS does not become an employee of MSAS. A deputationist has a lien on his employment with MSCO. As long as the lien remains with the MSCO the said company retains control over the deputationist's terms and employment. It is important to note that where the activities of the multinational enterprise entails it being responsible for the work of deputationists and the employees continue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... del convention which states as under: [t]he situation is different if the employee works exclusively for the enterprise in the state of employment and was released for the period in question by the enterprise in this state of residence. On the facts of that case, it was held that this clearly and critically not done. In the facts of the Appellant s case, on the other hand, it is clearly evident that the expatriate employees are working exclusively for LGEIL during the tenure of their secondment and have simultaneously is being released for the period in question by the Appellant. The ratio of the decision in Centrica s case (supra) therefore, supports the submissions of the Appellant. 82. We have carefully considered the rival contention and perused the orders of the lower authorities. It is interesting to note that there are 9 appeals pending before us however the appeals for assessment year 2011-12 and 12-13 are not before us. This we are referring for the simple reason that in many of the orders of the learned dispute resolution panel there is a specific reference of the order of the learned dispute resolution panel for assessment year 2012 13. The only issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has business in India and not only business with India. 8. The visit of short-term expatriates is for the business motive of the parent only as has been discussed in detail in paras below. 9. The availability of fixed place for carrying out the business of the assessee is available to every long-term and short-term expatriate coming to India in the office factory premises of LGEIL. 10. The denial of the assessee to furnish the details of the visits made by short-term expatriates and the purposes of their visit indirectly reflect that they have come to India with the business motive and to enhance the business being carried out by the long-term expatriates seconded to India. 11. It has been clearly established below that the short-term expatriates are neither coming for shareholder s meet nor for technological purposes. 12. The assessee has not furnished any evidence with regard to the notice for shareholder s meeting, minutes circulated after shareholders meeting, number of shareholder s or other persons attending such meeting, reason why so frequent shareholder s meeting (as claimed by the assessee while furnishing the reason for visit for short-term expatriates) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stewardship activities in order to meet the contractual obligations in terms of Technical Assistance and Royalty Agreement with LGEIL. The discussion above clearly establishes that the type of control the parent company exercise over the Indian entity is such that it cannot be treated as that of a shareholder performing its stewardship activities. The Indian company is economically, technically and in term of human resources dependent on the assessee and is engaged in furthering the business interest of the parent company and the whole LG Group. The assessee s contention is, therefore, not acceptable. From the above discussion and keeping in view the whole business arrangements amongst the various entities of LG group, it has emerged that the seconded expatriates work for furthering the business interest of the whole LG group and the assessee is also an essential part of the same. Therefore, LGEIL constitutes permanent establishment of the assessee. The panel heard the Ld AR in this regard. The issue of the PE was discussed. The assessee has filed following letter to reach closure of the dispute conceding factual points in matter. Decembers, 2016 The Secretariat D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment. The Article provides for (i) Separate entity approach to the PE and (ii) arm s length price by use of the words engaged in the same or similar activities under the same or similar conditions The arm s length principle is regulated per Chapter-X of the Income Tax Act, 1961 and Income Tax Rules, 1962. PE has to be considered a separate and distinct entity different from its head office for attributing incomes there from. The definition of enterprise as in section 92F(iii) is to mean a person (including a permanent establishment of such person). This supports the above conclusion. Circular 14 (para 55.16) dated 12 December 2001 provides that transactions between foreign enterprise and its PE are subject to transfer pricing. Relevant extract provides as under: The definition of enterprise is broad and includes a permanent establishment, even though a PE is not a separate legal entity. Consequently, trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en India and respective foreign country; and, where the foreign enterprise has a business connection in India; or In the instant case, the Assessing officer had determined the income attributable to PE by applying Rule 10 instead of applying a prescribed method. Having regard to the Article 7(2) of India-Japan tax treaty (separate and distinct entity approach), the Assessing Officer must determine the ALP by invoking the' transfer pricing methodology prescribed under the Act. This position is also in line with the principle laid down by Apex Court in case of DIT vs Morgan Stanley Co. (292 ITR 416) and followed by Delhi High Court in case of Rolls Royce Singapore (P) Ltd. vs ADIT (202 Taxman 45). Rules 10B to Rule 10D flow directly from powers delegated under the provisions of the statute (sections 92C and 92B). Thus, basis above the income of the PE can be reasonably ascertained by imputing the costs in terms of salary paid to the employees of the AE and applying a reasonable markup on such costs to determine the income of the PE in Indian jurisdiction. The assessee has given written submissions in this regard, conceding this position. The factual history o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the learned dispute resolution panel and straightway went on to attribute the profit to the permanent establishment. 84. In the direction of the learned dispute resolution panel for assessment year 2008 09 there is also a reference to another letter submitted by the assessee dated 02/08/2017 which is placed at page number 14 of the order of the learned dispute resolution panel which states This is with reference to the captioned matter which was heard by the honourable panel on 26/07/2017. As mentioned by the assessee during the course of hearing, it is submitted that in respect of preceding year (i.e. Assessment Year 2007 08), the assessee has not appeal before the honourable income tax appellate tribunal (ITAT) against the quantum of attribution arrived at by the learned assessing officer (AO) in the final order of assessment year 2007 08 based on the direction of the honourable DRP. Further the assessee submits that the attribution made by the learned assessing officer in the draft order for the year under consideration (i.e. Assessment Year 2008 09) is in line with the order for the assessment year 2007 08. 85. Further for assessment year 2008 09, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to the extent that it will not be able to avail the benefit of the direction of the learned dispute resolution panel on the existence of the permanent establishment. In normal circumstances, as necessary facts are laid down before us, we would have decided the issue but the specific letters before the ld DRP, where DRP in its own understanding, rightly or wrongly, considered the concession by the assessee on this issue and has not directed the ld AO on its merit about the existence of PE. The Object of the incorporation of the provision of Dispute Resolution Panel is to resolve a dispute by directing the ld AO on a specific issue. If that right of the assessee is not allowed to be exercised, then it may cause irreparable damage to the assessee. 88. In view of above facts, we set aside all the appeals of the assessee back to the file of the learned dispute resolution panel with a direction to first ascertain the fact about the admission of the assessee with respect to acceptance of the assessee of the existence of the permanent establishment. If it is found that there is an admission on part of the assessee about the existence of the permanent establishment, then, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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