TMI Blog2023 (9) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-19 and 2019-20. 2. The grounds raised by the assessee in both the appeals are more or less identical, except variation in amounts. Therefore, for the sake of brevity, we reproduce the grounds raised in ITA No.1929/Del/2022, which captures the core issue arising in both the appeals: 1.1 That on the facts and circumstance of the case and in law, the Ld. Assistant Commissioner of Income-tax, Circle i(i)(1), International Taxation, Delhi ( Ld. AO ) as well as the Hon'ble Dispute Resolution Panel I ( DRP ) erred in holding that the Appellant has a dependent agent permanent establishment ( DAPE ) in India in terms of Article 5(6) of the Double Taxation Avoidance Agreement between India and Ireland. 1.2 That the Ld. AO and Hon'ble DRP grossly erred in completely disregarding the fact that Adobe India is an independent entity. 1.3 That the Ld. AO and Hon'ble DRP grossly erred on the facts by concluding that Adobe Systems India Private Limited ( Adobe India ) is a DAPE of the Appellant and the agent is actively involved in sales and supply of software distributed by the Appellant, without appreciating that the sales and supply of software were done by indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration @40% (plus applicable surcharge and cess), as per the provisions of the Act, as opposed to applying the beneficial tax rate of io% provided under Article 11 of the India-Ireland Double Taxation Avoidance Agreement ( DTAA or Tax treaty ). 3.2 That the order passed by the Ld. AO is in contravention to the directions of the Hon'ble DRP wherein the Ld. AO had been directed to invoke the extant rules and regulations related to the Act with regard to this issue before completing the assessment proceeding and accordingly, the impugned order is bad in law. 4. That on the facts and in circumstances in law, the Ld. AO erred in not allowing credit of taxes deducted at source ( TDS ) amounting to INR 18,73,999/- whilst computing the tax payable by the Appellant. 5. On the facts and circumstances of the case and in law, the Ld. AO has grossly erred in including the interest granted under section 244A of the Act whilst computing the interest under section 234D of the Act on the amount of excess refund. 6. That on the facts and in circumstances in law, the Ld. AO erred in mechanically initiating proceedings under section 274 read with 270A of the Act. 3. Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in past assessment years. In this context, he drew our attention to two orders of the Tribunal. Proceeding further, he submitted, while deciding the appeals the Tribunal has held that once the transaction between the assessee and its related party in India is found to be at arm s length, no further profit attribution can be made to the PE in India. He submitted, in both the assessment years under dispute, the transactions between the assessee and the Adobe India, have been found to be at arm s length. Therefore, no further attribution of profit can be made to the alleged dependent agent PE in India. To demonstrate that the factual position relating to the disputed issues are identical to the past assessment years, learned counsel appearing for the assessee submitted a chart showing para-wise comparison between different assessment years. Thus, he submitted, the issue being squarely covered by the earlier decisions of the Tribunal, the additions may be deleted. 6. Learned Departmental Representative submitted, merely because the transaction between the assessee and its related party in India is found to be at arm s length, that cannot lead to a situation of not attributing p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction between the assessee and its Indian AE has been found to be at arm s length. In assessment year 2019- 20, no reference was made to the TPO, which effectively means, the Assessing Officer himself accepted the transactions between the assessee and the AE to be at arm s length. 10. Keeping in view the aforesaid factual scenario, if we examine the issue at hand, it can be seen that while deciding identical issue in assessment years 2004-05, 2006-07 and 2010-11 to 2015-16, the Tribunal in ITA Nos. 5024/Del/2017 and Ors., dated 27.07.2022 has held that when the transaction between the assessee and its Indian AE is found to be at arm s length, no further attribution of profit can be made to the dependent agent PE in India. While considering identical issue in assessee s own case for assessment year 2017-18, the Tribunal in ITA No.774/Del/222, dated 21.10.2022 followed its earlier decision and held as under: 9. Undisputedly, in the transfer pricing proceedings, the TPO, in order dated 18.02.2022, has observed that the international transaction between the assessee and the Indian AE are at arm s length and has not proposed any further adjustment, in so far as, it relates to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as is attributable to the PE in India. The quantum of taxable income is to be determined in accordance with the provisions of Act. All provisions of Act are applicable, including provisions relating to depreciation, investment losses, deductible expenses, carry forward and set-off losses, etc. However, deviations are made by DTAA in cases of royalty, interest etc. Such deviations are also made under the Act for example: Sections 44BB, 44BBA etc.). Under the impugned riding delivered by the AAR, remuneration to MSAS was justified by a transfer pricing analysis and, therefore, no further income could be attributed to the PE (MSAS). In other words, the said ruling equates an arm's length analysis (ALA) with attribution of profits. It holds that once a transfer pricing analysis is undertaken; there is no further need to attribute profits to a PE. The impugned ruling is correct in principle insofar as an associated enterprise, that also constitutes a PE, has been remunerated on an arm's length basis taking into account all the risk-taking functions of the enterprise. In such cases nothing further would be left to be attributed to the PE. The situation would be different if trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributed to it as the alleged PE of Adobe Ireland and that, accordingly, would automatically extinguish the need for attribution of any additional profits to the alleged PE. 13. In all these cases, it has found that the transactions have been found to be at Arm's Length by the Transfer Pricing Officer in the Transfer pricing order of the AE i.e. Adobe India. This is not disputed by the Revenue. In such a situation, the decision of the Hon'ble Apex Court as above applies on all fours in these cases. The Revenue has tried to distinguish the order of the Hon'ble Supreme Court decision by firstly referring by submitting that the Adobe India is performing functions which are wider in scope of the agreement entered with the assessee and in the TP study report of Adobe India. For this purpose, reliance has been placed on the order of the Ld. CIT(A) in this case for AY 2010-11. We find that the above submission by no stretch of imagination can be said to be distinguishing the decision of the Hon'ble Apex Court from being applicable from the facts of the present case. Very well understanding this proposition, the Revenue itself urged that without prejudice to the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer to attribute 35% of the total Revenue pertaining to India for this year. 15. Further, functions attributed to the Adobe India by the Revenue is also based upon the observations of the Ld. CIT(A) for Assessment Year 2010-11 primarily. The allegation of the Revenue is that the assessee was asked to produce dump of the emails correspondence between Adobe India and Adobe Ireland to deep dive to the activities so as to ascertain the clear cut facts to decide about PE. However, it was noted by the Ld. CIT(A) that after couple of months of gap, the assessee produced only sample certain e-mails. On the basis of these emails of few instances, the Ld. CIT(A) inferred that quotes offered by the distributors to channel partners are after discussion with Adobe India. The reasoning was that orders are delivered after seeking confirmation from Adobe India resources. Further, one of the emails is said to be demonstrating, the control and monitoring by Adobe India of distributors in meeting assigned targets. Basing upon such few e-mails, the Revenue has concluded that activities actually performed by Adobe India are wider in nature as against the activities pointed out in the contract a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng analysis. We find that as discussed by us hereinabove these submissions are not at all cogent enough to warrant a view that the transfer pricing analysing done in the case of Adobe India does not adequately reflects functions performed and the risk assumed by the enterprise. In such a situation as held by Hon'ble Apex Court as above, there is no need to attribute any further profit as all functions and risk have been considered in the computation of Arm's Length Price in the case of Adobe India. 17. As such, it follows that the finding of PE is also without cogent basis. Be that as it may issue of PE becomes academic and we are not engaging further into it. We have already found that functions performed by Adobe India are actually not different than the agreement and transfer pricing documentation. 10. There is no gainsaying that factually the issue stands on identical footing in relation to preceding assessment years, as, both the Assessing Officer and learned DRP have decided the issue following their earlier decisions. That being the case, respectfully following the decision of the coordinate Bench, as referred to above, we hold that the amount received by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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