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TMI Blog2020 (11) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... L.G. Philips Display Korea Co.Ltd. (in short "LG Philips Korea"), Revenue is in appeal against order of Dispute Resolution Panel (in short "DRP") dated 02.12.2013 relating to Assessment Years 2005-06 & 2006-07 and the assessee has filed cross-objections against the same; assessee has also filed appeals against order of CIT(A), dated 30.11.2018 relating to Assessment Years 2007- 08 & 2009-10 respectively. 2. This bunch of appeals relating to connected assessee on similar issue were heard together and are being disposed off by this consolidated order for the sake of convenience. In order to adjudicate the issue, we take up the appeal of the assessee, PT LP Indonesia relating to Assessment Year 2004-05 first. ITA No.1845/Del/2014 [Assessee's appeal] Assessment Year 2004-05 3. The preliminary issue which is raised is against the re-opening of assessment u/s 147 of the Act and whether the non-resident entities had Permanent Establishment (in short "PE") in India and if the PE existed what would be the income attributable to such alleged PE. 4. Briefly in the facts of the case, TDS survey u/s 133A of the Act was conducted at the premises of L.G. Electronics India Pvt. Ltd. (in short ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de order dated 19.11.2012. Relying on the decision of Hon'ble Supreme Court in CIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., 291 ITR 500 (SC) and other decisions, the Assessing Officer observed that at the time of issue of notice u/s 148 of the Act, the Assessing Officer is not required to establish that there is escapement of income; mere bonafide reasons to believe that there is escapement of income is sufficient for issue of notice u/s 148 of the Act. The objection of the assessee, on the other hand, was that the reasons do not reflect any tenable or sustainable basis for concluding that any income chargeable to tax had escaped assessment in the hands of the assessee. The Assessing Officer was of the view that the conditions for assuming jurisdiction u/s 147 of the Act are fully satisfied and the initiation of re-assessment proceedings in the case u/s 148 of the Act was lawful. The Assessing Officer also observed that the jurisdiction of persons being non-resident including foreign companies was based on having PE or having business connection or having any source of income accruing or arising or deemed to be accruing or arising in the areas within Indian territories. He conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. Next plank of the decision was on the concept of fixed place of business under Article 5(1) of DTAA between India and Indonesia. As the assessee i.e. PTLP Indonesia was subsidiary of L.G.Korea and the expatriate employees of L.G.Korea were working in India, it was observed by the Assessing Officer that the assessee not only represented L.G.Korea but also worked for its other affiliates and subsidiaries. It was thus observed that the assessee had a fixed place of business in the office of LGEIL. The plea of the assessee regarding attribution of nil profits to the PE was on the ground that international transactions were held to be at Arm's Length Price (in short "ALP") by the TPO in his order dated 30.10.2008 and therefore, no adjustment is to be made. In this regard, reliance was placed on Article 7(2) of the Indo Indonesia DTAA and Circular No.5 dated 28.09.2004 issued by the CBDT and the judgement of the Hon'ble Supreme Court in DIT, International Taxation vs Morgan Stanley & Co.Inc [2007] 292 ITR 416 (SC) which stipulates that Article 7(2) of the Indo-US DTAA, which is similar to Article 7 of Indo-Indonesia DTAA. The Assessing Officer in this regard noted that certain transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08 & 2009-10, dismissed the appeals of the assessee on the technical ground that the PAN quoted in the Memo of appeal was not that of assessee but of authorized signatory. The assessee is in appeal before us against the order of CIT(A) in Assessment Years 2007-08 & 2009-10. 9. The Ld.AR for the assessee pointed out that the present appeals are filed in the case of PTLP Indonesia relating to Assessment Years 2004-05 to 2006-07 on similar issues. He challenged the reassessment proceedings as completed u/s 147/148 of the Act and raised the issue as to whether such reassessment proceedings could be initiated against the non-resident entities, where there was no transaction between the selected non-resident entities and LGEIL though the pointed out that there were certain transactions between L.G. Korea, the parent company and LGEIL. In respect of L.G. Philips Korea, it was pointed out that the issue raised by way of cross-objection is also against the reassessment proceedings initiated u/s 147/148 of the Act. 10. The Ld.AR for the assessee pointed out on first analysis, L.G.Korea has been held to have PE in India in LGEIL. He further pointed out that TPO passed the order in case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced reliance on the decision of Hon'ble Supreme Court in ADIT vs Honda Motors Co.Ltd. (supra) [2019] 108 taxmann.com 300 (SC), judgement dated 18.07.2019 for the proposition that once arm's length principle has been followed, there can be no further profit attributable to person even if it has PE in India. It was thus held that re-assessment notice issued to assessee on the allegation that it had PE in India, considering the facts that arm's length price procedure was followed, the Hon'ble Supreme Court held that the notice could not be sustained. The Revenue filed review petition against the said order of the Hon'ble Supreme Court which was dismissed on the ground that there was no error apparent on face of record warranting re-consideration of the order passed. 11. The Ld.DR for the Revenue in reply stated that in the case of LGEIL, it has been held that other than L.G.Korea, no other affiliates had PE in India; hence no need to deduct tax at source. He then referred to the decision of Delhi Tribunal in GE Energy Parts Inc. vs ADIT in ITA No.671/Del/2011 order dated 27.01.2017 copy of which is filed, which talks of group PE. As far as PT.LP Display Indonesia is concerned, he sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/2017, judgement dated 23.11.2017 wherein it was held as under:- "Leave granted. In view of the fact that the Dispute Resolution Panel has found that there is no permanent establishment in India, the judgement of the High Court is set aside and the appeals are allowed accordingly." 14. This proposition was also followed in the Civil Appeal No(S). 781 of 2018 & Ors. in the case of L.G. Group Companies, judgement dated 16.01.2018 under which all the SLPs filed by the AEs including the SLP filed by the assessee for Assessment Year 2007-08 were allowed, on the basis of finding of the DRP that the AEs do not have PE in India. It was noted by the Hon'ble Apex Court that where the DRP has found that there is no PE in India, consequently the Assessing Officer was directed to pass orders dropping the proceedings. Hence, bunch of appeals were allowed by the Hon'ble Supreme Court (Supra). 15. Consequent thereto, Vide lead order in SLP in (C) No(s).24455/2014 and other connected SLPs, judgement dated 16.01.2018, it was held as under:- 5. "In the aforesaid matters, the Dispute Resolution Panel (DRP) has found that there is no permanent establishment (PE) in India. Consequently, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings falls as in the hands of LGEIL by the order dated 04.09.2018, the CIT(A) has given a finding that none of the AEs apart from L.G.Korea had PE in India for Assessment Years 2005-06 to 2010-11. Copy of the said order is placed at pages 39 to 105 of the Convenience Paperbook. In these circumstances and applying the ratio laid down by the Hon'ble Supreme Court in L.G.Group of companies dated 16.01.2018 & Honda Motors Co.Ltd.(supra) dated 14.03.2018, wherein it has been held that since, the DRP has given the finding that the AEs of LGEIL i.e. assessee before us do not have PE in India; the basis for initiating the re-assessment proceedings fail and the same are held to be infructuous. 19. We may further refer to the order of DRP relating to Assessment Year 2007-08 dated 11.12.2015 wherein it has been held as under:- "9.1. .............The contention of the assessee is that none of the expatriate came to India from assessee's company on secondment basis to work in LG India. Further, no personnel from assessee's company came to LG India on short term or long term basis for providing any technical services. During the course of survey proceedings carried out in premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere held to be at arm's length price, even if there was PE in India, no profit could be attributed to it. It was held as under:- 3. In the judgement of this Court dated 24.10.2017 in Asstt. DIT vs E-funds IT Solutions Inc. [2017] 86 taxmann.com 240/251 Taxman 280/399 ITR 34 (SC) and connected matters, it has been held that once arm's length principle has been satisfied, there can be no further profit attributable to a person even if it has a permanent establishment in India. 4. Since, the impugned notice for the reassessment is based only on the allegation that the appellant(s) has permanent establishment in India, the notice cannot be sustained once arm's length price procedure has been followed. 5. Accordingly, the impugned order(s) is set aside and the appeals are allowed." 21. The assessee before us referred to the following orders of the TPO/s passed in the case of LGEIL for Assessment Years 2004-05 to 2007-08 and 2009-10, which are placed at pages 247 to 403 as under; Annexure No. Particulars Page No. 11. Copy of TPO order dated 20.12.2006 in the case of LGIL for Assessment Year 2004-05 247-279 12. Copy of TPO order dated 20.12.2008 in the case of LGIL for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee under section 147 of the Act do not survive. Accordingly, the Cross objection No.2 raised by the assessee in Assessment Years 2005-06 & 2006-07 is allowed. consequent thereto the other cross objections raised by the assessee become academic in nature. Further the appeal of the Revenue are dismissed as we have held that reassessment proceedings to be invalid. 25. Now, coming to the appeals of assessee for Assessment Years 2007-08 & 2009-10 which are dismissed by the CIT(A) on the technical ground that the PAN quoted in the Memo of appeal was not that of the assessee but that of the Authorized signatory. The Hon'ble Supreme Court in CIT vs Ashoka Engg.Co. [1992] 194 ITR 645 (SC) has held as under:- "But it is an equally well settled preposition of law that, if there is a provision conferring right of appeal, it should be read in a reasonable, practical and liberal manner." 26. Applying the said ratio laid down by the Hon'ble Supreme Court(supra), we find that there is no merit in the summary disposal of the appeals by CIT(A). In any case, the assessee raised both issue on merits and re-opening of assessment u/s 147 of the Act before us. We have already decided the said is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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