| The Tax Publishers2021 TaxPub(DT) 1197 (Del-Trib) INCOME TAX ACT, 1961
Section 9(1)(i)
Assessee had accepted existence of PE in India, however, it was also not in dispute that as per transfer pricing report, RIPL, domestic subsidiary company, had already been remunerated at arm's length. Therefore, no further attribution of profit to PE, was warranted. Even otherwise, remuneration/commission paid to RIPL when deducted from the amounts of profit attributed to PE, no taxable income was left in the hands of the PE. Consequently, additions made by AO could not be sustained.
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Income deemed to accrue or arise in India - Business connection - PE already taxed -
Assessee, based at UK, was engaged into providing testing, services to its clients and providing assistance to its Indian customers in conducting feasibility analysis of its transmission systems designed for automobiles from its technical centers in UK. It filed return declaring 'Nil' 'income claiming that income earned by assessee was not taxable in India. AO held that assessee had a Permanent Establishment (PE) in India in the form of domestic subsidiary company, namely, Ricardo India Pvt. Ltd. (RIPL) and thereby computed the income of assessee by adopting the global profit ratio and applying the same to India-centric revenues to allegedly impute the India-centric profitability. AO attributed 50% of business profit to Indian PE and considered the same as taxable income of assessee in India to be taxed @ 40% plus applicable surcharge and education cess. Held: Undisputedly, assessee had accepted existence of PE in India, however, it was also not in dispute that as per transfer pricing report, RIPL, domestic subsidiary company, had already been remunerated at arm's length. Therefore, no further attribution of profit to PE, was warranted. Even otherwise, remuneration/commission paid to RIPL when deducted from the amounts of profit attributed to PE, no taxable income was left in the hands of the PE. Consequently, additions made by AO could not be sustained.
Followed:Director of Income Tax v. Galileo International Inc. (2009) 224 CTR 251 (Del-HC) : 2009 TaxPub(DT) 1488 (Del-HC) and Amadeus IT Group SA v. Asstt. DIT (International Taxation) ITA No.4906/Del/2010 (Del-Trib) dt. 26-10-2020 : 2020 TaxPub(DT) 4452 (Del-Trib).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10 to 2016-17
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