INCOME TAX ACT, 1961

Section 90

Double taxation relief - Assessee-Japanese company was allowed by RBI to open a Liaison Office (LO) at Bombay - Existence of Permanent Establishment in absence of any commercial activities on behalf of the head office -

Assessee was a company incorporated in Japan. It was allowed by RBI to open a Liaison Office (LO) at Bombay for liaison work with a condition that no business will be carried out by the company and no income will be earned by the company through the LO. Assessee filed a return of income, through its LO in Mumbai declaring nil income. Pursuant to a survey under section 133A in business premises of LO, AO alleged that examination of documents/books of account, implied that activities of LO at Bombay were not confined to liaison work only. Therefore, AO held that assessee was having a permanent establishment (PE) in India. Held: Documents impounded in the course of survey considered by AO did not relate to assessment year under consideration. On a perusal of the impounded documents, one does not find any clue to conclude that they establish the involvement of the LO at Bombay in carrying on any commercial activity on behalf of the head office. Further, Tribunal in assessee's own case on identical issue for assessment years 1996-97 to 1998-99 and 2007-08, decided the matter in favour of assessee. It could not be said that LO of Japanese company in India constituted PE in India within the meeting of article 5 of the DTAA, thus, no income of Japanese company could be taxed in India.

REFERRED : Nagase & Co. (ITA No. 1800/Mum/2007 & 115/Mum/2006, dated 12-1-2017) : 2017 TaxPub(DT) 320 (Mum-Trib) and Nagase & Co. [ITA Nos. 4654 & 4778/Mum/2010, dated 30-11-2017], Nagase & Co. [ITA Nos. 113 & 114/Mum/2006, 1798 & 1799/Mum/2007]

FAVOUR : In assessee's favour.

A.Y. : 2002-03

SUBSCRIBE FOR FULL CONTENT