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TMI Blog2023 (4) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,94,51,775/- on account of non-deduction of TDS, u/s 40(a) (i) of the Income Tax Act 1961 (the Act) by ignoring findings of the fact recorded by the AO that Mitsui Japan being a non-resident, tax is payable by it in India on income attributable to India PE. Mitsui India should have deducted an amount of Rs. 11,42,58,505/- (40% of Rs. 28,56,46,263/-) as final tax payment of non-resident by way of TDS on its receipts, out of the payments of Rs. 16,94,51,775/- it made to Mitsui Japan? 3. Whether on facts and in circumstances of the case, the Ld. CIT(A) is legally justified in deleting the disallowance of Rs. 16,94,51,775/- on account of non-deduction of TDS, u/s 40(a) (i) of the Act by ignoring the fact that Mitsui India is a Dependent Agent PE of Mitsui Japan, the same was also held by the AO of Mitsui Japan in the his order dated 22.02.2012. This fact has also been confirmed by the CIT(A) in his order dated 29.05.2015 wherein it is stated that "Respectfully following the order of my predecessor CIT(A) for immediate preceding year 2008-09, I hold that the action of the AO to the extent of holding Mitsui India Pvt. Ltd. as DAPE is upheld? 3. Brief facts of the case are that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that no income is liable to be attributed in India even if MIPL is considered to be Dependent Agent PE in India. On this issue the learned CIT-DR though stated that though in view of the TPO order under Section 92CA (3) holding the transactions between the assessee and the MIPL at arm's length, addition may not be sustainable, yet argued that MIPL be considered as Dependent Agent PE In India in terms of Article 5(7) of DTAA between India and Japan. It was contended by the learned CIT-DR on the basis of the allegation levied by the Assessing Officer in the assessment order that MIPL habitually secures order for the assessee in India and MIL is economically dependent on the assessee as major revenue of MIPL is from the assessee company. Accordingly, it has to be examined whether MIPL can be considered to be a Dependent Agent of the assessee company. In this regard it may be relevant to refer to Article 5(7) of DTAA between India and Japan, which reads as under :- Notwithstanding the provisions of paragraphs 1 and 2) where a person--other than an agent of an independent status to whom paragraph 8 applies--is acting in a Contracting State on behalf of an enterprise of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer does not appear to be correct. As per the agreement which has been quoted by the Assessing Officer in the assessment order, MIPL is supposed to put best effort to collect information with regard to Instant Noodle project etc. to make the best effort to find the best candidate, to attend/take care of the visitor from Japan, to make the best effort to analyze the feasibility report. None of these clauses can be interpreted to mean that MIPL is securing orders. On the basis of this clause the Assessing Officer was wrong in assuming that MIL is securing orders. The Assessing Officer has not brought any other material to substantiate his allegation that may demonstrate that MIL has secured orders for the assessee. It is to be noted that this clause (c) uses the word 'habitually secures orders. Thus, there has to be procurement of orders habitually. As against this the assessee's contention has been that MIPL is only providing support services and it is not securing order on behalf of assessee company. It may be relevant to further mention that the expression 'has' shall mean a legal existence. Whereas 'habitually secures orders' shall mean a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cipal's instructions and be regarded as being Dependent Agent. This contention of the learned CIT-DR again ignores the basic requirement ie. fulfilling one of the three conditions. It is also important to note that the DTAA provide for treating a person as Dependent Agent. The DIA A has to be strictly interpreted. The DTAA having prescribed the conditions, no further conditions can be read. What learned CIT-DR is canvassing will mean adding new condition in the DTAA. Further, it may be relevant to note that as per Para 9 of this Article 5 in DTAA, it has been specifically provided that if a company in the contracting state is controlled by a company in the other contracting state that itself shall not itself constitute either of company a permanent establishment of the other. Thus, the fact that MIPL is controlled by the assessee company shall not mean that MIPL is a PE of the assessee company. 4.4 Our view gets supported by the judgment of Honorable Delhi High Court in the case of Director of Income Tax And Others Versus M/S E Funds IT Solutions and Others 364 ITR 256 Delhi 4.5 In view of the above, We hold that MIPL is not a Dependent Agent PE of the assessee." 5. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. Ltd. (ITA No.4764/Del/2016 & CO No.363/Del/2016) ix. ACIT (International Taxation) vs Mitsui & Co. Ltd. (ITA No.5901/Del/2016 & CO No.28/Del/2017) 8. It may be gainful to refer the order of the Hon'ble Delhi High Court in ITA No.321/Del/2018 vide order dated 31.01.2023 in this regard as under:- "1. This appeal concerns Assessment Year (AY) 2009-2010, and is directed against the order dated 04.01.2022 passed by the Income Tax Appellate Tribunal [in short "Tribunal"]. 2. The appellant/revenue has proposed the following questions of law. "A. Whether on the facts and circumstance of the case and in law, the Ld. ITAT erred in holding that the amount received to assessee on account of off-shore supplies in respect of Teesta and Purulia projects are not taxable under the provisions of Section 44BBB of the Act? B. Whether on the facts and circumstance of the case and in law, the Ld. ITAT erred in holding that the Liaison Office of the assessee did not constitute a Permanent Establishment, liable to tax in India when the said office was clearly a fixed place and the activities carried out could not be said to be pre-paratory or auxiliary in nature? C. Whether on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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