INCOME TAX ACT, 1961

Section 9(1)(i)

Income deemed to accrue or arise in India - Under section 9(1)(i) - Attribution of profit to PE in India - Transactions between assessee and its Indian AE found to be at arm's length

Assessee based at Ireland was engaged in licencing of software in India through distributors to the end-users. AO held that assessee has a dependent agent PE in Indian hence, income attributable to PE in India was taxable. Thus, AO taxed the revenue earned from supply of software and automated services by attributing to the alleged PE in India. Held: Transaction between assessee and its Indian AE was found to be at arm's legnth, as such no further attribution of profit could be made to the dependent agent PE in India.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2018-19 & 2019-20

IN THE ITAT, DELHI BENCH: D NEW DELHI

G.S. PANNU, PRESIDENT SAKTIJIT DEY, J.M.

Adobe Systems Software Ireland Ltd. v. ACIT

ITA Nos.1929 & 1930/Del/2022

A.Ys 2018-19 & 2019-20

28 February 2023

Appellant by: Kanchun Kaushal, FCA Rishabh Malhotra, AR

Respondent by: Gangadhar Panda, CIT(DR)

Saktijit Dey, J.M.

Captioned appeals by the assessee are against the final assessment orders passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (for short the Act) pertaining to assessment years 2018-19 and 2019-20.

2. The grounds raised by the assessee in both the appeals are more or less identical, except variation in amounts. Therefore, for the sake of brevity, we reproduce the grounds raised in ITA No.1929/Del/2022, which captures the core issue arising in both the appeals:

1.1 That on the facts and circumstance of the case and in law, the Learned Assistant Commissioner of Income-tax, Circle i(i)(1), International Taxation, Delhi ('learned assessing officer') as well as the Hon'ble Dispute Resolution Panel I ('DRP') erred in holding that the Appellant has a dependent agent permanent establishment ('DAPE') in India in terms of Article 5(6) of the Double Taxation Avoidance Agreement between India and Ireland.

1.2 That the learned assessing officer and Hon'ble DRP grossly erred in completely disregarding the fact that Adobe India is an independent entity.

1.3 That the learned assessing officer and Hon'ble DRP grossly erred on the facts by concluding that Adobe Systems India Private Limited ('Adobe India') is a DAPE of the Appellant and the agent is actively involved in sales and supply of software distributed by the Appellant, without appreciating that the sales and supply of software were done by independent third-party distributors.

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