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2025 (1) TMI 1412

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....cumstances of the case, and in law, that Assessee Company has existence of Dependent Agent PE (DAPE) in India/Fixed Place PE in India as per Article 7 of India Ireland DTAA? iii) Whether the Ld. ITAT erred in not adjudicating the existence of DAPE of the Assessee in the form of Adobe Systems India Pvt. Ltd. as well as fixed place PE as per Article 7 of the India Ireland DTAA, without controverting the findings of the Assessing Officer, clearly pointing to existence of PE in the present case? iv) Whether on the facts and circumstances of the case and in law, the Ld. ITAT erred in not appreciating the findings of Ld. CIT(A) that the facts of the case indicate a Double Irish Model of corporate structuring aimed at tax avoidance?" 2. The details of the appeals before us are reproduced in a tabular form hereinbelow: Item Nos. as per Cause List ITA No. AY 8 474/2023 2013-14 9 476/2023 2012-13 10 477/2023 2011-12 11 478/2023 2014-15 12 479/2023 2010-11 13 480/2023 2007-08 14 481/2023 2015-16 15 753/2023 2017-18 16 771/2023 2019-20 17 774/2023 2018-19 18 415/2024 2016-17 3. On hearing Mr. Bhatia, learned counsel who appears in support of these appe....

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.... these civil appeals. xxxx xxxx xxxx 34. Article 7 of the UN Model Convention inter alia provides that only that portion of business profits is taxable in the source country which is attributable to PE. It specifies how such business profits should be ascertained. Under the said article, a PE is treated as if it is an independent enterprise (profit centre) dehors the head office and which deals with the head office at arm's length. Therefore, its profits are determined on the basis as if it is an independent enterprise. The profits of the PE are determined on the basis of what an independent enterprise under similar circumstances might be expected to derive on its own. Article 7(2) of the UN Model Convention advocates the arm's length approach for attribution of profits to a PE. 35. The object behind enactment of transfer pricing regulations is to prevent shifting of profits outside India. Under Article 7(2) not all profits of MSCo would be taxable in India but only those which have economic nexus with PE in India. A foreign enterprise is liable to be taxed in India on so much of its business profit as is attributable to the PE in India. The quantum of taxable income ....

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....ched to matters which had not formed subject matter of examination in the Transfer Pricing Report, the Tribunal on facts has found that the said conclusions were wholly unjustified and were merely assumptions made by the appellants and were not founded on any material or evidence which formed part of the record. 10. This becomes manifest from a reading of the following paragraphs forming part of the judgment handed down by the Tribunal and which is impugned before us: "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....

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....st in India but there is no compensation made for such functions. Keeping the above in view, the Ld. CIT(A) held that Adobe India is dependent PE of the assessee company and in order to compensate for the FAR assigned to DAPE, he has no reason to defer from the view of the Assessing Officer 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 e-mails 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 e-mails is said to be....

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....of imaginary motives by a few e-mails, the Ld. CIT(A) and therefore the Revenue is contending that the functions performed by Adobe India are much wider than the that as per the agreement and the transfer pricing 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." 11. Quite apart from the exhaustive analysis of the issue by the Tribunal, we are constrained to note that the appellant had woefully failed to make good its contention that certain aspects or facets of the functioning of the Associate Enterprise [AE] did not form part of the Transfer Pricing Analysis. That only leaves us to examine the last question that Mr. Bhatia posed for our consideration and related to certain observations rendered by the CIT(A) referring to the Double ....