TMI Blog2021 (10) TMI 1102X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO has accepted the international transactions at Arm's length and no adverse inference was drawn. We have also gone through the TP assessment order and find no adjustment. - ITA No. 1219/DEL/2017 - - - Dated:- 20-10-2021 - N.K. Billaiya, Member (A) And Amit Shukla, Member (J) For the Appellant : Poras Kaka, Sr. Adv. and Dinesh Chawla, Adv. For the Respondents : Gangadhar Panda, CIT-DR ORDER Per N.K. Billaiya, Accountant Member This appeal by the assessee is directed towards the order of the CIT(A)-42, New Delhi dated 30.12.2016 pertaining to A.Y. 2012-13. 2. Grievances of the assessee read as under: 1. That on facts and in law, the appellant denies its liability to be assessed under the Income-tax Act, 1961 ('the Act') and the assessment order made under section 143(3) of the Act is bad in law. 2. That on the facts and circumstances of the case and in law, Ld. CIT(A) erred in upholding the order of the Learned Assessing Officer ('Ld. AO') that the appellant has a business connection in the form of Star Sports India Private Limited ('SSIPL') (earlier known as ESPN Software India (P) Ltd.) (now merged with Star ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the laws of Mauritius and is engaged in the business of selling advertisement time and programme sponsorship from Mauritius in connection with the programming via non-standard television on ESPN, Star Sports and Start Cricket programming services. 4. During the year under consideration, the appellant has also entered into such services with respect to ESPN HD Channel. Its partners are worldwide Wickets Mauritius having 99.9 shares in profit and ESS Asian Networks Pte Ltd. New Tech Park, Singapore having 0.1% in the profit. 5. In Form No. 3CEB, gross receipts on sale of advertisement inventory have been shown at ₹ 344,40,06,771/-. Details of Associated Enterprise [AE] was given i.e. ESPN Software India Pvt. Ltd. from whom advertisement sales inventory cost amounting to ₹ 344,40,06,771/- were received. 6. A reference was made to the TPO u/s. 92CA(1) of the Act for computing arm's length price of the international transactions. The TPO, vide order dated 07.01.2016, accepted the value of international transactions and no adverse inference was drawn. 7. Assessment history of the appellant shows that for the past A.Ys., ESPN India has been held to be dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t without any success. 14. As mentioned elsewhere, the Assessing Officer and the ld. CIT(A) have proceeded on the findings given in Assessment Year 2011-12 wherein the quarrel travelled upto the Tribunal and the Tribunal in ITA No. 3760 and 4242/DEL/2016 for Assessment Years 2009-10 and 2011-12 has decided the quarrel as under: 12. We have heard the rival contentions and perused the record. The assessee is a partnership firm established under the laws of Mauritius on March 29, 2002. The assessee is engaged in the business of acquiring and allotting advertisement time ('Airtime') and programme sponsorship in connection with programming via non-standard television from Mauritius on ESPN, Star Sports and Star Cricket Programming services. The assessee had entered into agreement with ESPN Software India (P) Ltd., incorporated under the laws of India which was engaged in the business of acquiring the airtime from assessee and allotting it to various Indian advertisers and advertising agencies. The sale of airtime by the assessee to ESPN India is outside India. Further, the assessee has no office in India and/or any operations in India. The plea of the assessee before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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. 14. Similar proposition has been laid down by the Hon'ble Apex Court in Asstt. DIT vs. E-funds IT Solutions Inc. [2017] 86 taxmann.com 240/251 Taxman 280/399 ITR 34 (SC) as in Honda Motors Co. Ltd. vs. ADIT (Supra). The Hon'ble Supreme Court in DIT vs. Morgan Stanley and Co. (supra) have also held as under 33. To conclude, we hold that the AAR was right in ruling that MSAS would be a Service PE in India under Article 5(2)(1), though only on account of the services to be performed by the deputationists deployed by MSCo and not on account of stewardship activities. As regards income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DTAA and attributed 20% of the total advertisement revenue to India. The relevant extract of the decision is as under:- 16. When the aforesaid factual position is kept in mind, the judgment of the Bombay High Court in Set Satellite (Singapore) Pte. Ltd's. case (supra) is clearly attracted. In that case the High Court has held that if correct ALP is applied and paid, nothing further would be left to be taxed in the hands of the foreign enterprise. In the said case, Morgan Stanley Co. Inc.'s case (supra) as well as Circular No. 23 issued by the CBDT was taken into consideration. The Court was also pleased to record that the commission paid to the agent was 15% services performed by the Assessee's agent in India was in line with the existing industry standards in India at the prevalent time. Reliance was also placed on Para 3 of Circular No. 742 dated 02.5.1996 issued by the CBDT, which referred to the fact that the agent's commission from foreign telecasting companies is 15% or so of the gross sum, to contend that the CBDT itself had considered 15% as the normally accepted commission rate payable to agents of the telecasting companies. (emphasis applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, even the assessing officer did not find that such a PE existed. According to him, under Article 5(2)(1), it is necessary that the foreign enterprises must provide services to customers who are in India, which is not Revenue's case as all their customers exist only outside India. Further, according to the learned counsel, the entire personnel engaged in the Indian operations are employed only by the Indian company and the fact that the US companies may indirectly control such employees is only for purposes of protecting their own interest. Ultimately, there are four businesses that the assessees are engaged in, namely, ATM Management Services, Electronic Payment Management, Decision Support and Risk Management and Global Outsourcing and Professional Services. Since all these businesses are carried on outside India and the property through which these businesses are carried out, namely ATM networks, software solutions and other hardware networks and information technology infrastructure were all located outside India, the activities of e-Funds India are independent business activities on which, as has been noticed by the High Court, independent profits are made and incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of double taxation of income under this Act and under the corresponding law in force in that country, or (c) for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country, or investigation of cases of such evasion or avoidance, or (d) for recovery of income-tax under this Act and under the corresponding law in force in that country, and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement. (2) Where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. 7. xxx 8. xxx 9. xxx 10. xxx 11. xxx 12. Thus, it is clear that there must exist a fixed place of business in India, which is at the disposal of the US companies, through which they carry on their own business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian subsidiary, it would not by itself create a fixed place or location PE. The manner and mode of the payment of royalty or associated transactions is not a test which can be applied to determine, whether fixed place PE exists. 13. It further went on to hold that the ITAT's finding that the assessees were a joint venture or sort of partnership with the Indian subsidiary was wholly incorrect. Also, none of these arguments have been invoked by the Revenue and such a finding would, therefore, be perverse. After citing Klaus Vogel on Double Taxation Conventions, Arvid A. Skaar in Permanent Establishment: Erosion of a Tax Treaty Principle and Bollinger vs. Commissioner, 108 S.Ct. 1173, the High Court found against the Revenue, holding that there is no fixed place PE on the facts of the present case. We agree with the findings of the High Court in this regard. 14. Reliance placed by the Revenue on the United States Securities and Exchange Commission Form 10K Report, as has been correctly pointed out by the High Court, is also misplaced. It is clear that the report speaks of the e-Funds group of companies worldwide as a whole, which is evident not only from going throug ..... 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