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TMI Blog2022 (1) TMI 1465X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Appellant has a 'Permanent Establishment' ("PE") in India. 1 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, it has no PE in India and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is erroneous, misconceived and not in accordance with law. 1 : 3 The Appellant submits that the Assessing Officer/the Dispute Resolution Panel has erred in arriving at various unwarranted and erroneous conclusions unsupported by any relevant material to hold that the Appellant had a PE in India. Further he also failed to consider the contrary material and evidence adduced by the Appellant. 1 : 4 The Appellant submits that the Assessing Officer/the Dispute Resolution Panel's stand that the Appellant has a PE in India be struck down. Without prejudice to the foregoing: 2 : 0 Re.: Attribution: 2 : 1 The Assessing Officer/the Dispute Resolution Panel has erred in holding that 50% of the receipts are attributable to the alleged PE of the Appellant in India. 2 : 2 The Appellant submits that considering the facts and circumstances of its case and the law prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1136/Mum/2015,851/Mum/2016, 2295/Mum/2017, 7040/Mum/2017, 6380/Mum/2018 & 7741/Mum/2019 for A.Yrs. 2010-11 to 2016-17 dated 03/05/2021. The operative portion of the said order is hereby reproduced hereunder for the sake of convenience:- 2. "Shri J.D. Mistry, Sr. Advocate appearing on behalf of the assessee submitted that in all these bench of appeals the assessee has raised identical grounds, except for the appeal for assessment year 2010-11wherein the assessee has inter-alia challenged validity of reassessment and other grounds consequential to the addition made. The ld.Counsel for the assessee submitted that the primary issue assailed in all the appeals by the assessee is that the Assessing Officer and the Dispute Resolution Panel have erred in holding that the assesse is having "Permanent Establishment" (PE) in India. If this issue is decided in favour of the assessee, the other alternate grounds viz. Attribution of Profit and Estimation of Gross Profit, raised without prejudice to the primary ground would become academic. Sh. Mistry submitted that the assessee/appellant is a group company of Gemmological Institute of America Inc., USA (in short "GIA-US"). In the case of G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has rendered diamond grading services to its Associated Enterprise (AE) in India ie. GIA India Laboratories Pvt. Ltd. During the course of assessment proceedings the Assessing Officer formed an opinion that the assessee"s AE i.e. GIA India Lab. Pvt. Ltd. has all essential components of having PE of the assessee. We observe that in holding Indian AE as PE of the assessee, the Assessing Officer has placed extensive reliance on the assessment order for AY 2011-12 in the case of GIA-US. The Assessing Officer in draft assessment order has verbatim quoted afore said assessment order. In fact, the Assessing Officer has not given independent findings and has merely adopted the findings given in the assessment order for AY 2011-12 in the case of GIA- US stating similarity of facts. 5. We find that the DRP in para 3.3 of the Directions has reiterated the fact that the assessee"s case and that of GIA-US were found to be very similar. The DRP followed the Directions of DRP in assessee"s case for AY 2011-12 and 2012-13. We observe that in AY 2011-12 and 2012-13, the Assessing Officer has again relied on the assessment order for AY 2011-12 in the case of GIA-US. The DRP after con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not have the requisite expertise or technology or capacity for carrying out the grading services; further, the aforesaid arrangement has also been accepted as a mere rendering of grading services by the Transfer Pricing Officer both in the case of GIA India Lab and the assessee company. In this background, we may now proceed to decide as to whether the Indian Subsidiary GIA India Lab can be construed as a PE under any of the aspects contained in Article 5 of India-USA DTAA. 10. Firstly, we may examine whether GIA India Ltd. can be constituted as a fixed place PE of the assessee in terms of Article 5(1) of the India- USA DTAA. As per Article 5(1) of the Indo-USA DTAA, a fixed place PE arises when the foreign entity has a fixed place in India through which its business is wholly or partly carried on. In this context, the learned Counsel pointed out that a similar situation has been considered by the Hon'ble High Court of Delhi in the case of EFunds IT Solutions (supra), which has been upheld by the Hon'ble Supreme Court. In that case, it has been held that a subsidiary cannot be regarded as a 'fixed place PE' of the parent company on the ground of a close associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any and GIA India Lab. In terms of Article 5(6) of the India USA DTAA, it is provided that the mere fact that a company has controlling interest in the othercompanydoesnot by itself construe the other company to be its PE. Accordingly, the assessee company is not having a 'fixed place' PE in India. 12. In terms of Article 5 (1) of the India - USA DTAA, a service PE arises on the furnishing of services in India by the assessee company through employees or other personnel, but only if: activities of that nature continue in India for a period or periods aggregating to more than 90 days within any twelve-month period; or the services are performed within India for a related enterprise. Hence, a service PE is triggered if the services (other than included services as defined in Article 12 'Royalties and Fees for Included Services') are rendered by the assessee company through employees or other personnel and activities of that nature continue in India for a period or periods aggregating to more than 90 days within any twelve-month period; or the services are performed within India for a related enterprise. The assessee company renders 'grading services' and &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmentary, a person will be regarded as an independent agent (i.e. it will not constitute a PE of the enterprise on whose behalf it acts) only if: -He is independent of the enterprise both legally and economically, and -He acts in the ordinary course of his business when acting on behalf of the enterprise. In other words, Article 5(5) of the India- USA DTAA stipulates the following conditions which are required to be satisfied in order that an agent may be said to be an independent agent, i.e., -That he should be an agent of independent status; that, he should be acting in the ordinary course of his business; and, that his activities should not be devoted wholly or almost wholly on behalf of the foreign enterprise for whom he is acting as agent. 15. GIA India Lab is an independent/separate legal entity in India which is engaged in rendering of grading services. Further, considering the functions and the risks assumed by GIA India Lab vis-à-vis its business activities in India (as has been recorded in the transfer pricing study report - which functional and risk analysis has been accepted by the Transfer Pricing Officer both in the case of GIA India Lab and in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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