ELENTEE CO. LTD.,KOREA V. DCIT,INTERNATIONAL TAXATION, NOIDA

SA 91/DEL/2025

AI Insights

The case involves Elentee Co. Ltd., a South Korean company, appealing against the Deputy Commissioner of Income Tax, International Taxation, Noida, concerning the assessment year 2022-23. The primary dispute revolves around the addition of Rs. 2,14,94,417 made by the AO, which was attributed to the assessee's Permanent Establishment (PE) in India and taxed at 10% instead of the correct rate of 40% as per the assessment order. The assessee contended that it does not have a PE in India and that the income from offshore supplies should not be taxable in India. The Tribunal considered the prima facie case presented by the assessee and decided to stay the recovery of the outstanding demand while allowing the appeal to be heard on its merits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471949 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY KUMAR
• Assessee Lawyers: HIMANSHU S. SINHA; PRASHANT MEHARCHANDANI
• Keywords: TDS; Rectification of order; Application of stay
• Section: 143(3); 154; 143(1)

Judgement Text

"1 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘D’: NEW DELHI) BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER SA No.: 91/Del/2025 Arising Out of ITA No.: 972/Del/2025 (Assessment Year: 2022-23) Elentee Co. Ltd., 37 Samsung – RO 268 Beon-Gil YEONGTONG-GU, GYEONGGI DO Republic of Korea. v. Deputy Commissioner of Income Tax, International Taxation, Noida. PAN No: AAFCE 6530 P APPELLANT RESPONDENT Assesseeby : Shri Himanshu S. Sinha, Adv., & Shri Prashant Meharchandani, Adv. Revenue by : Shri Sanjay Kumar, Sr. DR Date of Hearing : 28.02.2025 Date of Pronouncement : 28.02.2025 ORDER PER RAMIT KOCHAR, AM: This stay application SA no. 91/Del/2025, arising out of ITA no. 972/Del/2025 for A.Y. 2022-23,has been filed by the assessee seeking stay on recovery of outstanding demand towards income tax including cess and surcharge and interest thereon, amounting to Rs. 2 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 2 30,97,730/- raised by the Assessing Officer vide notice of demand u/s 156 of the Income-tax Act, 1961 (“the Act”) ,as well computation sheet dated 20.01.2025 , bearing DIN &Notice No. ITBA/AST/S/156/2024- 25/1072326765(1) and DIN & Document No. ITBA/AST/S/622/2024- 25/1072326738(1) respectively. The final assessment order was passed by the learned AO u/s 143(3) read with Section 144C(13) , dated 20.01.2025 assessing income of the assessee at Rs. 42,25,18,095/- as against returned income of Rs. 40,10,23,678/-. 2. At the outset it is the say of the learned counsel for the assessee that the assessee is a company incorporated as per the laws of Republic of Korea and is tax-resident of Korea. It is claimed by the learned counsel for the assessee that the assessee is developing, manufacturing and exporting electronic goods, such as battery packs for mobile phones, personal digital assistants, notebook personal computers, camcorders etc..The ld. Counsel for the assessee submitted that for the impugned assessment year 2022-23, the assesseehad filed return of income declaring income of Rs. 40,10,23,678/-,and the addition of Rs. 2,14,94,417/- was made by the Assessing Officer by observing that the assessee has a PE in India. It is the say of ld. Counsel for the assessee , without prejudice and without admitting its liability, that the AO ought to have brought to tax the said addition of Rs. 2,14,94,417/- @ 40% plus applicable surcharge and cess, as is mentioned by the AO itself in the assessment order,but while drawing the computation sheet ,the AO 3 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 3 brought to tax the additions so made of Rs. 2,14,94,417/- @ 10% income-tax plus surcharge and cess.It was submitted that the assessee has challenged the addition so made by the AO. It was also brought to the notice of the Bench by ld. Counsel for the assesseethat the correct demand outstanding to be payable by the assessee, without prejudice, which ought to have beenraised by the AO against the assessee consequent to the assessment so framed, ought to havebeen Rs. 1,25,33,447/-(subject to verification by the AO). It was claimed by ld. Counsel for the assesseethat the assessee is not carrying out any business activity in India and does not have any PE in India in terms of Article 5 of India-Korea Double Taxation Avoidance Agreement. It was submitted by ld. Counsel for the assesse that the assessee has undertaken offshore supply of raw materials and capital goods and rendered technical services to its India Associated Enterprises (“AEs”). It was further submitted that the assessee has declared income of Rs. 40,10,23,678/-and income-tax was deducted at source of Rs. 3,94,19,388/-. The AO has made addition of Rs. 2,14,94,417/- vide assessment order dated 20.1.2025 passed by the AO u/s 143(3) read with Section 144C(13) of the Act. The AO has attributed profits @ 1.05% of Rs. 2,04,70,87,360/-wrt supplies made by the assessee to its AE in India, based on the finding that the assessee has PE in India. It was contended before the Bench that the assessee does not have any PE in India for which challenge has been raised in the grounds of appeal filed with the Tribunal. Further, it was stated that the assessee has made offshore supplies ,and hence no 4 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 4 income attributable to such offshore supplies can be brought to tax in India in the absence of any PE in India. It was submitted by ld. Counsel for the assessee that these are matters of adjudication before the Tribunal which will be decided on merits by the Tribunal, and presently there is a refund due to the assessee to the tune of Rs. 53,16,510/- for A.Y. 2020-21 which is determined by learned CPC, Income tax department, Bengaluru ,vide rectification order u/s 154 dated 16.03.2022 vide serial No. 9144937220(Communication No. CPC/ 2021/U6/220963205). It was submitted that prima facie assessee has a good case as the addition so made by the AO is not likely to be sustained, and keeping in view the provisions of section 254(2A), 20% of the outstanding demand towards income-tax including cess and surcharge and interest thereof, as crystallized against the assesseeby the AO may be adjusted from the refund due to the assessee for A.Y. 2020-21 , and the recovery of the balance outstanding demand towards income-tax and interest thereon may be stayed. 3. The learned Sr. DR submitted that the assessee be asked to deposit the entire outstanding demand which is payable towards income tax including cess and surcharge and interest thereon(after crystallisation) in pursuance to assessment order dated 20.01.2025 passed by the AO, and in case stay is to be granted by the Tribunal then the assessee be asked to deposit at least 20% of the total demand 5 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 5 of income tax including cess and surcharge and interest due thereon(after crystallisation by the AO). 4. We have considered the contentions of both the parties, and perused the material on record. We observe that the assessee filed return of income declaring income of Rs. Rs. 40,10,23,678/-. There was income-tax deducted at source of Rs. 3,94,19,388/-. The said TDS was adjusted against the income-tax including surcharge and cess as was determined to be payable u/s 143(1) .The assessee is a company incorporated under the laws of South Korea ,and is engaged in designing, developing and manufacturing and electronic goods, such as battery packs for mobile phones, personal digital assistants, notebook, personal computers, camcorders, protection circuit modules, remote controllers and rear board assemblies. We have observed that, out of income declared of Rs.40,10,23,678/- ,the assessee has claimed to have declared income of Rs. 38,51,99,392/- as FTS and Royalty , and further declared income of Rs. 1,58,24,286/- as interest as per Section 194LC(1) read with Section115A(1)(a)(iia) under the head ‘Income from other sources’. The AO has made the additions of Rs.2,14,94,417/- being 1.05% of Rs. 2,04,70,87,360/-being supplies made by the assesseeto its AE in India, on the ground that the assesseehas PE in India. The AO had brought to tax profits attributable to its PE in India arising from sales made by the assesseeto its AE in India. The AO while passing the assessment 6 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 6 order has stated that the aforesaid addition of Rs. 2,14,94,417/- will be brought to tax @ 40% plus surcharge and cess, but vide issuing demand notice u/s 156 and the computation sheet dated 20.1.2025, the AO has brought to tax the aforesaid income @ 10% plus applicable surcharge and cess , while income brought to tax by the AO during assessment proceedings of Rs. 2,14,94,417/- ought to have been charged to tax at @ 40% plus applicable surcharge and cess, as is stated by the AO itself in assessment order. The assessee is disputing that it has any PE in India. The assessee has also claimed that it has made offshore supplies, and in the absence of PE in India, no income attributable to such offshore supplies can be brought to tax. This is the subject matter of appeal before the Tribunal. The assessee has raised legal challenge as well challenge on merits to the additions made by the AO , vide as many as 15 grounds of appeal raised before ITAT .The AO is directed to crystallize the correct demand towards income tax including surcharge and cess and interest thereon. The assessee has claimed that the amended demand accordingly would be Rs. 1,25,33,447/- to be payable by the assessee towards income-tax including surcharge and cess and interest thereon( which is of course subject to verification by the AO), while the present outstanding demand stated to be outstanding for recovery towards income-tax including cess and surcharge and interest thereon, is Rs. 30,97,730/- . The assessee has also refund due of Rs. 53,16,510/- for assessment year 2020-21, as is claimed by ld. Counsel for the assessee. The 7 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 7 assessee has made out a prima-facie case for grant of partial stay on recovery of outstanding demand. After crystallization of correct demand towards income tax including cess and surcharge as well interest thereon by the AO, the AO shall adjust the refund due to the assessee for A.Y. 2020-21 by recovering/adjusting of 20% of the demand so raised by the AO after crystallization ,and the balance outstanding demand towards income-tax, surcharge and cess including interest thereon, shall be stayed from recovery for a period of 180 days or till the disposal of the appeal which-ever is earlier. While granting the aforesaid stay on recovery of outstanding demand, we have observed ,without commenting on the merits of the issue , that theassessee has claimed that it has no PE in India and further that the assessee had made offshore sales to the Indian AE. These matters are factual matters and requires investigation of facts. The ITAT being the last fact finding authority, and such exercise shall be taken up at the time of adjudication of appeal .Further, that the assessee will fully co-operate in speedy disposal of the appeal by ITAT, and the assessee will not seek any un- necessary adjournments before the Tribunal in the appellate proceedings in ITA No. 972/Del/2025. On breach of aforesaid conditions, the stay shall stand vacated . The appeal of the assessee in ITA no. 972/Del/2025 for assessment year 2022-23shall now come up for hearing before “D’ Bench, Delhi on 16.04.2025. The terms of stay of demand were announced by Division Bench during the course of hearing of stay application in open Court. We once 8 SA no. 91/Del/2025 (In ITA no. 972/Del/2025) A.Y. 2022-23 8 again clarify that we have not commented on the merits of the issues arising in the appeal. We order accordingly. 5. In the result, Stay Application is allowed in the manner as indicated above. Order pronounced in the open courton28th February, 2025. Sd/- Sd/- (MAHAVIR SINGH) (RAMIT KOCHAR) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 04/03/2025. "