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TMI Blog2024 (9) TMI 1515X X X X Extracts X X X X X X X X Extracts X X X X ..... ct the re-opening u/s. 148 of the Act was in excess of jurisdiction and is also otherwise bad in law. 1:3 The Appellant submits that the proceedings u/s. 148 of the Act were not in accordance with law and consequently ought to be struck down. Without prejudice to the foregoing: 2:0 Re.: Holding that the Appellant has a 'Permanent Establishment' ("PE") in India:: 2:1 The Assessing Officer/the Dispute Resolution Panel has erred in holding that the Appellant has a 'Permanent Establishment' ("PE") in India. 2:2 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. 2:3 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. 2:4 The Appellant submits that the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case was reopened u/s 148, as the assessee had earned total business receipts of Rs. 24,30,33,620/-, out of which 50% was held to be attributable to the assessee's PE in India. After applying the profit ratio of 20.31%, the amount of Rs. 2,46,80,065/- was held to be total business income chargeable to tax. The final assessment was made at an income of Rs. 2,46,80,065/-, pursuant to the directions of the Hon'ble DRP. 4. We have heard the rival submissions. At the outset, it was pointed out by the Ld. AR that the facts and issues involved on this case are identical as in the case of M/s. Gemological Institute of America Inc. 5. The first ground relates to validity of reassessment proceedings. Ld. AR has submitted that this ground is not being pressed at this point of time. Accordingly, this ground is being left open. 6. Ground No. 2, 3 & 4 : Ground No. 2 relates to holding that the assessee has a permanent establishment [P.E.] in India, ground No. 3 relates to the question of attribution of profits whereas ground No. 4 relates estimation of gross profit attributable to the assessee. 6.1 It has been pointed out by the Ld. AR that these issues are covered by the order of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2015 for assessment year 2010-11 decided on 21/06/2019after examining the facts of the case and Article -5 of India USDTAA held, that GLA-US is not having any PE or agency PE in India. The ld. Counsel for the assessee asserted that the facts and the nature of transaction in the present case are identical. The Assessing Officer while passing the draft assessment order has ditto the assessment order in the case of GLA-US for AY 2011-12. The Assessing Officer has verbatim adopted the findings of assessment order for AY 2011-12 in the case of GIA-US. The Id. Counsel further pointed that the Dispute Resolution Panel (DRP) has also observed that the facts in the case of assessee and that of GLA-USare similar. Now, that it is an established position that the facts in the case of assessee and GLA-US are similar, the case of assessee is squarely covered by the order of Tribunal in the case of GIA-US in ITA 1138/Mum/2015 (supra). Therefore, the assessment order is liable to set aside on the sole ground that the assessee is not having any PE in India. The Id. Counsel for the assessee contended that if ground No.2 of appeal i.e. Whether the assessee is having PE in India, is decided in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected objections of the assessee and confirmed the addition proposed in draft assessment order. In other words, in the case of present assessee no independent observations and findings have been recorded either by the Assessing Officer or by the DRP. The basis for holding Indian AE as PE of the assessee is the assessment order for AY 2011-12 in the case of GIA-US. 6. The Co-ordinate Bench of Tribunal in the case of Gemmological Institute of America Inc. vs. Additional CIT(supra), after threadbare examining business model of the assessee and the provision of Article - 5 of India-US DTAA held that GIA India Lab.Pvt. Ltd. is not PE of GLA-US in India. For the sake of completeness relevant extract of the findings of Tribunal are reproduced herein under:- "9. We have carefully considered the rival submissions, perused the relevant material, including the orders of the lower authorities as well as the case laws referred at the time of hearing. Notably, the controversy before us primarily revolves around as to whether or not the subsidiary of the assessee company i.e., GIA India Lab can be construed as its PE in India. The income-tax authorities have invoked section 9 of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Indian subsidiary (eFund India) for its earnings or assignment or sub-contract of contracts to e- Fund India or e-Fund India being reimbursed on a certain cost plus basis or saving / reduction in cost by transferring business or back office operations to the Indian subsidiary or the manner and mode of the payment of royalty transactions or e-Fund India providing support for carrying on core activities being performed by the taxpayer or associated transactions, cannot be the basis to construe the Indian subsidiary as PE of the foreign tax payer. Further, before the Hon'ble Delhi High Court, the Department had contended that the foreign company had a joint venture or partnership with Indian subsidiary as the businesses of the assessee company and the Indian subsidiary were inter-linked and closely connected (which is also contended in the case of the assessee before us) and therefore the Indian subsidiary was regarded as PE of foreign company in India. The aforesaid argument of the Revenue was repelled since the conditions under Article 5 of the DTAA were not met and it has been held that PE cannot be established merely because of transactions between associated enterprises or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of GIA India Lab and therefore, no service PE is created in India in terms of India- US DTAA. The Supreme Court has affirmed the decision of the Delhi High Court in EFunds (supra) wherein it has been held that two employees deputed to e-Fund India fund India did not create a service PE as the entire salary cost was borne by e-fund India and they were working under control and supervision of e-fund India. In the facts of the instant case, since the said services are rendered outside India and none of the employees/ personnel of the assessee company has visited India and therefore, service PE is not triggered in the case of the assessee company. 13. In terms of Article 5(4) of the India-US/DTAA, an agency PE is created where a person-other than an agent of an independent status to whom paragraph 5 applies - is acting in India on behalf of an enterprise of the USA, that enterprise shall be deemed to have a permanent establishment in India, if: (a) he has and habitually exercises in India an authority to conclude on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 3 which, if exercised through a fixed place of business, would not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany for grading purposes (as has been recorded in the Transfer Pricing Study Report). Hence, GIA India Lab is not acting in India on behalf of the assessee company. Further, GIA India Lab is not having any authority to conclude contracts and has neither concluded any contracts on behalf of the assessee company nor has it secured any orders for the assessee company in India. Thus, GIA India Lab cannot be regarded as 'agency PE' of the assessee company in India." [Emphasised by us) 7. We find that Article -5 of India-US DTAA and Article -5 of India - Thailand DTAA have almost similar clause. Both sides are unanimous in stating that the nature of transactions and terms and conditions of transactions between assessee and Indian AE in both the cases are similar. The Revenue has not brought on record any distinguishing factor in the present set of appeals before us. Therefore, the findings given by the Co- ordinate Bench of Tribunal while adjudicating the appeal in the case of assessee's group concern GIA-US would mutatis mutandis apply to present appeal. Respectfully following the order of Co-ordinate Bench, we hold that GLA India Laboratories Pvt. Ltd. is not agency P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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