ASIAN HONDA MOTOR CO. LTD.,THAILAND V. DEPUTY COMMISSIONER OF INCOME TAX, DDIT/ADIT (INTERNATIONAL TAXATION), NOIDA, NOIDA

ITA 711/DEL/2025

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The case involves Asian Honda Motor Co. Ltd., a non-resident company incorporated in Thailand, which appealed against the order of the Deputy Commissioner of Income Tax (International Tax), Noida. The dispute centered on the taxability of service receipts amounting to Rs. 10,84,21,790/- received from Honda Motorcycle and Scooter India (HMSI) for services rendered during the 'Asia Road Championship ASB1000 Class 2020'. The primary legal issue was whether these receipts should be taxed as 'Other Income' under Article 22 of the India-Thailand Double Taxation Avoidance Agreement (DTAA) or as 'Business Profits' under Article 7, in the absence of a Permanent Establishment (PE) in India. The DRP upheld the Assessing Officer's decision, categorizing the income under Article 22. The Tribunal, however, found that certain relevant documents were not considered by the DRP and thus remitted the matter back for fresh evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 705934 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2022-2023
• Laws Referred To: Income Tax Act, 1961, India-Thailand Double Taxation Avoidance Agreement
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY B VASANTA
• Assessee Lawyers: KAMAL SAWHNEY; NIKHIL AGARWAL
• Keywords: Business income; Opportunity of being heard; Additional evidence; Double taxation relief; Permanent establishment
• Section: 143(3); 133(6)

Judgement Text

"P a g e | 1 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER & SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No.711/Del/2025 (Assessment Year: 2022-23) Asian Honda Motor Co. Ltd., No.14, Sarasin Building, Surasak Road, Khwaeng, Silom Khet Bangrak, Bangkok Metropolis, Thailand, 10500 Vs. DCIT, DDIT/ADIT (International Tax) Room No. 602, 6th Floor, Aayakar Bhawan, A-2D, Sector 24, Gautam Budh Nagar, Noida, Uttar Pradesh – 201307 \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No: AAICA2531P Appellant .. Respondent Appellant by : Sh. Kamal Sawhney, Adv & Sh. Nikhil Agarwal, Adv. Respondent by : Sh. Vijay B Vasanta, CIT, DR Date of Hearing 16.04.2025 Date of Pronouncement 04.07.2025 O R D E R PER MADHUMITA ROY, JM: The instant appeal filed at the behest of the assessee is directed against the order dated 08.01.2025 passed by the Learned Deputy Commissioner of Income Tax, DDIT/ADIT (IN Tax.) Noida (in short 'AO') under Section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') pursuant to directions dated 21.12.2024 of the Learned P a g e | 2 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) Dispute Resolution Panel-2 (hereinafter referred to as “DRP”) under Section 144C(5) for Assessment Year 2012-13. 2. Brief Facts, leading to instant appeal are that, the assessee is a non-resident company and is incorporated under the laws of Thailand is engaged in the business of sale of cars, spare parts etc. It is responsible for exporting of Honda motorcycle, automobiles, power products and components manufactured in Thailand to over 80 countries around the world. The appellant during the course of proceedings before lower authorities vide its reply dated 10.12.2023 has submitted that it has received certain payments in the nature of service receipts amounting to Rs.12,30,804/- and in the absence of FTS article in India- Thailand DTAA, such income is taxable as business profits; however in the absence Permanent Establishment (PE) the same would not be taxable in India. However, during the course of assessment proceedings itself notice was issued upon M/s Honda Motorcycle and Scooter India (hereinafter referred to as “HMSI”) on 09.01.2014 and in response thereto, HMSI submitted that payment of Rs.10,84,21,790/- has been made to the appellant company as FTS during year under consideration. Further HMSI has also submitted copy of agreement (addendum) made between appellant and HMSI. HMSI organized “Asia Road Championship ASB1000 Class 2020” and an agreement was made between appellant and HMSI, wherein appellant company rendered certain services to HMSI. The appellant has provided the details of agreement made between appellant and HMSI in accordance with said agreement, and remarks column it has been stated that the payment of Rs. 10,84,21,790/- was made to P a g e | 3 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) the appellant in respect of certain services viz, infrastructure fee related to IT Services, software service and licence fees etc. The case of the assessee is that the these services have been rendered by it to HMSI in the course of its business and services being rendered are part of it’s business objectives and in the absence of Fees for Technical Services (FTS) clause in INDIA- Thailand Double Taxation Avoidance Agreement (hereinafter referred to as “DTAA”), these services being rendered by it are not taxable as FTS. The Learned Assessing Officer being not satisfied with the replies of the appellant proceeded to hold that the services rendered by the appellant to HMSI does not fall under the business income and same was added as other income as explained in the Article 22 of the DTAA in Draft Order dated 31.03.2024 u/s 144C(1) of the Act. 2.1 On receipt and being aggrieved by the aforesaid draft order under Section 144C(1) of the Act, appellant filed his objections before DRP. DRP after considering the nature of services rendered, considers it appropriate to cover services rendered by appellant to HMSI under Article 22 of the DTAA, as according to DRP, the services are not directly connected to the activities in which the appellant operates. According to DRP services rendered by the appellant to HMSI including services relating to sponsorship and third party teammate software are not directly connected to the assessee company and thus upheld the action of the AO in taxing the receipts under Article 22 of the DTAA. Directions of Ld. DRP, for the ready reference is reproduced hereunder: P a g e | 4 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) 5. Directions of DRP: (i) The Panel has carefully considered written submissions filed by the assessee and DAO passed by the AO. The assessee has challenged that action of the AO in holding that service receipts amounting to INR 10,84,21,790 are liable to be taxed as per Article 22 \"Other Income\" of India- Thailand Double Taxation Avoidance Agreement ('DTAA) without appreciating that in the absence of FTS clause in India- Thailand DTAA, service receipts would fall under Article 7 relating to business profits and in the absence of Permanent Establishment ('PE') of the assessee in India, such receipts are not chargeable to tax in the hands of the assessee. The other ground of objections are linked to above mentioned ground and therefore, taken-up together. (ii) The Panel has carefully perused the DAO of the AO and the arguments put forth by the assessee. The Panel has duly considered the agreements and documents filed by the assessee with respect to the services rendered by the assessee to Honda Motorcycle and Scooter India Private Limited. (iii) On perusal of the agreements to identify the nature of the transactions, it is noticed that certain relevant portions of the agreements specifically the annexures defining the services rendered under the agreements namely, Service Agreement of Infrastructure Services, Web EDI System Maintenance Agreement, etc. were not forming part of the Paper Book submitted by the assessee. (iv) Also considering tire nature of the services rendered, the Panel considers it appropriate to cover such services under Article 22 of the DTAA between India and Thailand, as the services are not directly connected to the activities in which the assessee operates. As the services mentioned in the above Para and the other services relating to sponsorship and third party teammate software are not directly connected to the assessee company, the Panel is inclined to treat the receipts of the assessee company in question as being covered under Article 22 of the DTAA. (v) Accordingly, the AO’s decision to tax the service receipts under Article 22 of the DTAA between India and Thailand is appropriate in view of the right to tax the income in P a g e | 5 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) India. Hence, the action of the AO in taxing the receipts under Article 22 of the India-Thailand DTAA is upheld by the Panel and the grounds of objections no. 1, 2.1 & 2.2 are disposed-off accordingly. (vi) Ground of objections number 3 & 4 are related to initiation of penalty proceeding u/s 270A of the Act, this ground is premature, hence rejected. 2.2 Thus Learned AO, in view of the fact that the learned DRP has not found any infirmity in the draft order, has added the amount of Rs. 10,84,21,790/- under head “other income” as explained in the Article 22 of the treaty. 3. Being aggrieved by the aforesaid order, the appellant has preferred the appeal before us. We have heard the rival submissions made by the respected parties and have also perused the available materials on record. 3.1 Ground 1 is general in nature and thus, no order needs to be passed. 3.2 Ground 2 to 2.1, The issue for our consideration is whether the services receipts amounting to Rs. 10,84,21,790/- received by appellant for rendering services to HMSI are taxable as “Other Income” in accordance with Article 22 of DTAA or, in absence of FTS clauses in DTAA, services receipts falls under Article 7 of DTAA “Business Profits” and in the absence of Permanent Establishment (hereinafter referred to as “PE”) of the appellant in India, whether chargeable to tax in the hands of appellant? P a g e | 6 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) 3.3 Appellant is engaged in the business of sale of cars, spare parts etc. and is also responsible for exporting of Honda motorcycle, automobiles, power products and components manufactured in Thailand to over 80 countries around the world. During the year under consideration though the appellant has submitted that, it has received payments aggregating to Rs.12,30,804/-, however, HMSI to whom appellant rendered services, in response to notice issued u/s 133(6) of the Act, has confirmed that, the payment of Rs. 10,84,21,790/- has been made by to appellant company and even the appellant has not disputed the same. 3.4 HMSI also submitted the copy of agreement (addendum) made between appellant and HMSI. It is evident from the written submissions made by the appellant before the DRP that the appellant has rendered certain services to HMSI, which as held by the Learned Assessing Officer and upheld by Learned DRP, are not directly connected to the business activities of the assessee company. 3.5 In this context, we would like to note that the directions given by the DRP speaks of non-production of certain relevant portion of the agreement, specifically the annexure defining the services rendered under the agreements namely the service agreement of infrastructure services, Web EDI system maintenance agreement, etc. before the said forum as it is appearing at page 6 of paragraph 5 of the said order. We further note that no ground of appeal has been raised by the appellant challenging the observations of non-filing of relevant documents P a g e | 7 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) before the Learned DRP neither such application for admission of additional evidences is forthcoming from the appellant before us. 4. Having regard to this particular aspect of the matter, we are of the considered opinion that the Ld. DRP should revisit the issue upon examining the documents which were not placed before it as it is found to be germane to the issue involved in the matter. We, with the aforesaid observation disposing of the appeal by remitting the issue to the file of the DRP for reconsideration of the same afresh upon considering the relevant documents which are said to be missing in the papers/records filed by the assessee before it. The appellant is directed to submit all the details as indicated hereinabove before the Ld. DRP forthwith for consideration of the same afresh. The Learned DRP is further directed to finalise the issue within a period of eight months from the date of passing of this order by us are affording an opportunity of being heard to the appellant and upon considering the evidences as indicated hereinabove as further directed to be placed by the appellant before it and any other evidence which the appellant may choose to file at the time of hearing of the matter. The Learned DRP is directed to pass the order strictly in accordance with law. In the result, the grounds 2 to 2.1 are allowed for statistical purposes. Ground 2.2 5. Having regard to the observations made by us on the main issue involved in the matter, this ground raised by the appellant P a g e | 8 ITA No.711/Del/2025 Asian Honda Motor Co. Ltd. (AY: 2022-23) is found to have no relevance for fresh adjudication as the same is an alternate plea taken by the appellant. Thus, this ground of appeal fails. 6. Ground Nos. 3 and 4 are consequential and no order, thus, needs to be passed. 7. In the result appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on 04.07.2025 Sd/- (Naveen Chandra) Sd/- (Madhumita Roy) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 04.07.2025 Rohit, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "