TMI Blog2024 (2) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of DAPE was decided in favour of assessee by the Tribunal in AY 2018-19 and 2019-20, which admittedly is not covered in earlier years. Thus, we are inclined to set aside the order of the Ld. DRP with regard to examination of the question of existence of DAPE in the relevant assessment year. Resultantly the impugned final assessment order is set aside. The Ld. DRP, after giving an opportunity of hearing to the assessee, shall pass fresh order in regard to the issue of existence of DAPE and consequential directions be accordingly issued to the AO. - SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER For the Assessee : Shri Damodar Vaidya, Adv. For the Revenue : Shri Vijay B Vasanta, CIT DR ORDER PER SHRI ANUBHAV SHARMA, J.M. The Assessee has come in appeal against the order dated 30.10.2023, pertaining to AY 2021-22 whereby the assessment order u/s 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 passed by the ITO, Circle Int. Tax 1(1)(1), Delhi. 2. The assessee is in appeal raising following grounds: A) FIRST GROUND OF APPEAL 1. The Final Assessment Order passed u/s 143(3), read with Section 144C, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10(50) of the Act. G) SEVENTH GROUND OF APPEAL 10. The Ld. AO, both in facts and in law, in adding income of Rs. 33,86,83,526/- to the alleged DAPE, without appreciating the material on record that the Appellant incurred losses in AY 2021-22 globally. The Ld. AO ignored audited financial statements submitted by the Appellant substantiating that the Appellant incurred loss in AY 2021-22. 11. The Ld. AO erred, both in facts and in law, in invoking Rule 10(i), and not invoking Rule 10(ii), for estimating the profit of the alleged PE even after the Appellant made submissions to him and the audited financial statement for AY 2021-22. 12. The Appellant prays that the attribution of income or profit of Rs. 33,86,83,526/- is arbitrary and is liable to be rejected. H) EIGHTH GROUND OF APPEAL 13. The Ld. AO erred in not considering the order of the Transfer Pricing Officer (TPO) that all the transactions between AASPL and the Appellant had been determined at arm s length. Therefore, no further income could be attributed to the Appellant in view of the Article 7 of the DTAA between the USA and India. I) NINTH GROUNDS OF APPEAL 14. The Ld. AO erred, both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f receipt Amount of receipt Income offered to tax in India Software License fee 135,47,34,107/- Nil Rendering of services 12,09,19,901/- 12,09,19,901/- Interest Income 28,97,370/- 28,97,370/- Total 147,85,51,378/- 12,38,17,271/- 4.3 The AO proceeded to hold that the assessee has a PE in India and attributed 25% of receipts on account of the software license fees as attributable to the PE and consequently, taxable in India, The assessee has further objected to the attribution of profit in respect of the PE of the assessee in India. Having held the assessee to have a PE in India, the AO proceeded to attribute profits to the DAPE of the assessee by resorting to Rule 10 of the IT Rules. The assessee has not only denied the existence of the PE in India but also objected to the attribution of profit to the alleged PE stating that the basis of attribution of profit to the PE is arbitrary. It is submitted that the attributio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be working from the office of AAIPL. The employees of the assessee are operating from the offices of the Indian subsidiary of the assessee company Key components of work were performed by these senior functionaries of the assessee from premises of the subsidiary of the assessee in India. Many of the work performed by these executives of the assessee form a part of the core functions of the assessee. Thus a significant chunk of the core functioning of the assessee company is executed from the Indian premises. As observed by the AO in para 8 of the draft Assessment order, the employees of the assessee visited India regularly for almost the entire part of the year and operated from the fixed premises of assesses's Indian subsidiary. The employees of the assessee are not only using the premises of the subsidiary of the assessee in India but also execute important functions including core functions of the assessee through regular visits almost throughout the year. Thus the place of operation and the premises from where the activities of the employees were carried out satisfies permanency test, Disposal test, Duration test and the functional test. In the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from records if the decision of the Hon ble ITAT has been accepted by the revenue, follow the same. If however, the same has not been accepted by the revenue, and further appeal filed, Hon ble DRP upholds the decision of the AO. 31. Upon perusal of decision of Hon ble ITAT in assessee s own case for AY 2018-19 2019-20 has been perused carefully and noted that the Hon ble ITAT on the issue of PE of the assessee held that- Facts on record reveal that, though, many of the employees visited India, but there is no evidence to suggest that all of them used the premises of AASPL. Even assuming that all those employees used the premises of AASPL but there is no evidence to suggest that they used the premises for the activity relating to the sale of software. Undisputedly, the receipts, which are sought to be attributed to the PE are from sale of software licence, however; as could be seen from the facts on record, the transfer of licence takes place, once, the licence key is generated and made available to the licencee after execution of the contract. Insofar as the receipts from provision of services, undisputedly, the assessee has offered them to tax. Though, learned Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian premises. 33. Further observation of the Hon ble ITAT that Revenue has failed to establish on record through credible evidence that the assessee has a fixed placed PE in India is also not acceptable on merits as assessee also failed to produce the cogent supporting documents and evidences regarding the actual functions performed by these employees of the assessee company either during the course of assessment proceedings or during the appellate proceedings. 34. Without prejudice to the above, it is important to mention here that in the above paragraph of this order it was also held that AASPL is a Dependent Agent PE (DAPE) of the assessee company and Hon ble ITAT or assessee failed to substantiate such claim of the revenue. 35. In view of the above facts, it is held that the income of INR 33,86,83,526/- is taxable as business income as per Article 7 of India-USA DTAA and the provisions of the Income Tax Act, 1961. After considering facts and circumstances of the case and subject to above, total income of the assessee is computed as under: Particulars Amount (in INR) Total Taxable Income (as per the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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