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TMI Blog2024 (7) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, a composite chart with summary of grounds raised by the appellant in the respective appeal has been provided and we consider it relevant to reproduce the same:- Ground taken by the appellant in relation to Ground No. taken by the appellant in AY 2010-11 AY 2013-14 AY 2014-15 AY 2015-16 General in nature 1 and 1.1 1 and 1.1 1 and 1.1 1 and 1.1 Issue of PE in India 2, 2.1 2, 2.1, 3, 4, 5, 5.1, 7 2, 2.1, 3, 4, 5, 5.1, 6, 8 2, 2.1, 3, 4, 5. 6. 6.1, 6.2, 7, 9 Erroneous taxation of offshore supplies 3 6 7 8 FTS is not liable to tax in absence of FTS article under India- Thailand DTAA 4 7 8 9 Transfer pricing adjustment 5, 5.1, 5.2, 5.3, 6, 6.1, 6.2, 7, 8, 10, 13 N.A. N.A. N.A. Double taxation of FTS receipts 9 N.A. N.A. N.A. Attribution of income to activities of appellant in India - 8 and 8.1 9, 10, 10 1 10, 11, 10.1 Application of incorrect profit ratio N.A. 9 N.A. N.A. Erroneous levy of interest under section 234A, 234B and 234C 11 10 (in relation to 234B interest) 11 and 11.1 N.A. Erroneous levy of interest under section 234D N.A. N.A. 11.1 N.A. Penalty initiated under section 271BA, 271AA, 271G 12 N.A. N.A. N.A. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.43% Corporate Tax Adjustment 10,20,39,903 [i.e. 4081,59,614*100% *25%] 24,79,570 [i.e. 40,81,59,614*25%*2.43%] B. Transfer Pricing Adjustment (a) On account of FTS receipts of HTAS 73,56,736 73,56,736 (b) On account of Offshore supplies made by HTAS 464,02,851 NIL Total Adjustments/Additions 15,57,99,490 98,36,306 7. The assessee is in appeal raising following grounds:- "1. That on the facts & in the circumstances of the case and in law, the orders passed by the Assessing Officer (AO)/Transfer Pricing Officer (TPO)/Dispute Resolution Panel (DRP) to the extent prejudicial to the interest of the appellant, are bad in law and void ab-initio. 1.1 That on the facts and circumstances of the case and in law, the AO/TPO/DRP has erred in passing the subject orders based on surmises, conjectures and irrelevant assumptions. Without prejudice 2. That the AO/DRP grossly erred in law and facts in alleging that the Appellant has a business connection and Permanent Establishment (PE) in India, basis the alleged facts and relationship of Honda Cars India Limited (HCIL) and Honda Motor Co., Ltd. Japan (HMJ). 2.1. That the AO/DRP grossly erred in law and facts in alleging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith different functional profile as comparable to benchmark the international transactions entered by the Appellant. 7. That the AO/TPO/DRP grossly erred in law in making the adjustment in respect of the international transactions of the assessee when such transactions had already been benchmarked and found at arm's length basis in the transfer pricing assessments of the Indian AE's. 8. That the AO/TPO/DRP grossly erred in law in not appreciating that the Function, Asset and Risk analysis had already been examined in respect of these transactions in the assessments of the Indian AE's and hence there arose no question of allocating any further income to the Indian tax jurisdiction in respect of these transactions. 9. That the AO/DRP grossly erred in law in making double addition in respect of FTS receipts of the Appellant. 10. That the AO/TPO/DRP also grossly erred in law in not appreciating that the provisions of Article 9 of the Double Taxation Avoidance Agreement (DTAA) between Indian and Thailand prohibits any further allocation of profits to the Indian taxing jurisdiction when the international transactions had already met the test of arm's length price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat sale of goods by these 18 parties has been made in India to the assessee and therefore income arising as a result of the sale of taxable in India." 11. Ld. AR pointed out that the present assessee appellant is included in the list of 18 entities. It was pointed that Tribunal has adjudicated the ground as follows: "13.1. There is no dispute of the fact that out of 18 non-resident associate companies to whom payments have been made, it was held that 16 associated enterprises do not have a P.E. in India. The D. R. P. in the case of Asia Honda Thailand for the A. Y. 2009- 10 has held that the Non-resident company had no P.E. in India. Revenue has not filed an appeal on this finding of the D.R.P. Hence, we have to reverse the finding of the Ld. CIT(A) that Asia Honda Thailand has a P.E. in India in this A.Y. Thus, we have to hold that, except in the case of Honda Motors Japan, payments made to all other 17 non-resident associate companies do not attract the provisions of S.195 and consequently 40(a)(i) of the Act, as no portion of the income of these companies arising from the supply of parts etc. was liable for tax in India." 12. Accordingly, it was submitted that the same view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the enterprise is not fulfilled, it cannot be held that the applicant had a PE under Article 5(1) of DTAA. even if it had a fixed place of business in the form of expatriate employees. " 15. It was submitted that during the course of assessment proceedings, detail of supervisors who visited India during AY 2010-11 were filed before the Ld. AO, which are also relied here as Annexure 2 of Paper-book 2. It is submitted that the total supervisory visits to India (i.e., visits to HCIL) during AY 2010-11 is less than the threshold prescribed under Article 5(3)(a) of India-Thailand DTAA. Further, the above supervisors were not the employees of the Appellant and there were no employee visits to India during the subject year. 15.1 Ld. DR has, however, relied the orders of the ld. tax authorities below. 16. After considering the submissions and the material before us, it is established that in the case of HCIL for AY 2009-10, the issue under consideration was if HCIL, which is a subsidiary of M/s Honda Motors Company Ltd., was required to deduct tax at source for payments made for purchase of raw material, components, etc. from non-resident companies and those non-resident companies bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Indian soil, such transactions cannot be taxed in India. Ld. Sr. Counsel submitted that in the case of asseesee appellant meets the tests laid down by the Hon'ble Apex Court and hence, the receipts attributable to supply of parts from outside India are not chargeable to tax in India in the hands of the Appellant. 17.1 In regard to this ground, as we appreciate the orders of the ld. tax authorities below, it comes up that the offshore-supplies are not taxable in India as the title and risk got transferred outside India. Further, the offer was accepted outside India and contracts got concluded outside India. 18. The Ld. Sr. Counsel submitted that without prejudice to the above contention of the assessee that HTAS is not having a PE in India, since the TPO has made, adjustment on the offshore supplies citing it to be arm's length, further addition by the Ld AO on similar offshore supplies lead to double taxation which is against the principle of taxation laws. Ld. Sr. Counsel further submitted that, even otherwise, offshore supplies are not taxable in India, for the purpose of attribution, reliance was placed on the judgment of Hon'ble Madras High Court in case of Annamalai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not taxable when there is no FTS clause in DTAA. DRP observed, "It is a matter of common understanding that fee for technical services is sub set of broader set of business income. When contracting states do not want to give separate treatment to FTS, these receipts become taxable as business receipts only." 23. We find substance in the observations of the DRP, but is relevant is that Section 9 of the Act enumerates certain incomes to be deemed to accrue or arise in India and Section 9(1)(vii) of the Act provides under what conditions FTS income shall be considered to accrue or arise in India. Explanation 2 to Section 9(1)(vii) of the Act gives definition of FTS and which provides that any service falls within the definition of FTS are either be in the nature of managerial services, technical services or consultancy services. Thus FTS is a species of business income with specific definition and components and in DTAA, are made taxable specifically. If not, then they are brought to tax, as business income and in that case, again the existence of PE in India is necessary, but which is not established in case of assessee. Accordingly, this ground is decided against the Revenue. 24 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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