ASST CIT 1(3)(1), MUMBAI V. RABO INDIA FINANCE LTD, MUMBAI

ITA 119/MUM/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3619 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 08-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NISHANT SAMAIYA
• Keywords: Loose papers; Permanent establishment
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 119 / MUM . /2006 ( ASSESSMENT YEAR : 20 02 03 ) NAGASE AND COMPANY LTD. C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWERS NARIMAN POINT, MUMBAI 400 021 PAN AABCN2879G . APPELLANT V/S ASSTT. DIRECTOR OF INCOME TAX (I.T) CIRCL E 3 ( 2 ), MUMBAI . RESPONDENT ITA NO. 368/MUM./2006 ( ASSESSMENT YEAR : 2002 03 ) ASSTT. DIRECTOR OF INCOME TAX (I.T) CIRCLE 3(2), MUMBAI . APPELLANT V/S NAGASE AND COMPANY LTD. C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWERS NARIMAN POINT, MUMBAI 400 021 PAN AABCN2879G . RESPONDENT 2 NAGASE AND COMPANY LTD. ITA NO. 1804/MUM./2007 ( ASSESSMENT YEAR : 2002 03 ) NAGASE AND COMPANY LTD. C/O S.R. BATLIBOI & CO. 18 TH FLOOR EXPRESS TOWERS NARIMAN POINT, MUMBAI 400 021 PAN AABCN2879G . APPELLANT V/S ASSTT. DIRECTOR OF INCOME TAX (I.T) CIRCLE 3(2), MUMBAI . RESPONDENT ASSESSEE BY : SHRI NITESH JOSHI REVENUE BY : SHRI NISHANT SAMAIYA DATE OF HEARING 2 7 . 1 1 .201 8 DATE OF ORDER 22.02.2019 O R D E R PER SAKTIJIT DEY, J.M. THIS BUNCH OF THREE APPEALS CONSIST OF A SET OF CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARISING OUT OF A CONSOLIDATED ORDER DATED 31 ST OCTOBER 2005, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XXXIII, MUMBAI, DISPOSING OFF THE APPEAL S FILED BY THE ASSESSEE FOR ASSESSMENT YEAR S 1996 97 TO 2002 03. HOWEVER, THE PRESENT APPEALS ARE FOR THE ASSESSMENT YEAR 2002 03. BESIDES THE ABOVE, THERE IS ONE MORE APPEAL BY THE ASSESSEE BEING ITA NO.1804/MUM./2007, ARISING OUT OF THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AGAINST THE ORDER GIVING APPEAL EFFECT BY THE ASSESSING OFFICER FOR 3 NAGASE AND COMPANY LTD. ASSESSMENT YEAR 2002 03. SINCE THE ISSUES RAISED IN ALL THESE APPEALS ARE INTER CONNECTED AND FOR THE SAME ASSESSMENT YEAR , FOR THE SAKE OF CONVENIENCE ALL THESE APPEALS WERE CLUBBED AND DISPOSED OFF FOR THE SAKE OF CONVENIENCE BY WAY OF THIS CONSOLIDATED ORDER. ITA NO.119/MUM./2006 ASSESSEES APPEAL 2 . IN THIS APPEAL, THE ASSESSEE HAS RAISED EIGHT GROUNDS. GROUNDS NO.1, 2 AND 3, ARE ON THE ISSUE OF EXISTENCE OF A PERMANENT ESTABLISHMENT (P E) IN INDIA. WHEREAS, GROUNDS NO.4 TO 7, ARE ON THE ISSUE OF ATTRIBUTION OF PROF IT TO THE PE AND GROUND NO.8, IS ON THE ISSUE OF RATE OF TAX APPLICABLE TO THE ASSESSEE. THUS, THE PRIMARY ISSUE WHICH NEEDS TO BE DECIDED A T THE OUTSET IS THE ISSUE RELATING TO EX ISTENCE OF PE AS RAISED IN GROUNDS NO.1, 2 AND 3. 3 . BRIEF FACTS ARE, THE ASSE SSEE IS A COMPANY INCORPORATED IN JAPAN HVING ITS HEAD OFFICE AT SINIMACHI, 1 CHOME, NISHIKU, OSAKA, JAPAN. AS STATED BY THE ASSESSING OFFICER , THE COMPANY WAS ALLOWED BY THE RESERVE B ANK OF INDIA TO OPEN A LIAISON O FFICE (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 . FURTHER, ALL THE 4 NAGASE AND COMPANY LTD. EXPENSES OF THE LO WERE BORNE OUT OF REMITTANCES RECEIVED FROM JAPAN. THE ASSESSEE FILED A RETURN OF INCOME ON 7 TH JANUARY 2003, THROUGH ITS LO IN MUMBAI DECLARING NIL INCOME. THE AFORESAID RETURN OF INCOME WAS FILED BY THE ASSESSEE IN FORM NO.2C AS PER THE 1/6 CRITERIA REQUIREMENTS PRESCRIBES UNDER THE PROVISO TO SECTION 131(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) REGARDING MANDATORY FILING OF TAX RETURNS. IN COURSE OF THE ASSESSMENT PROCEEDINGS, WHILE JUSTIFYING THE NIL INCOME DECLARED THE ASSE SSEE SUBMITTED THAT SINCE THE LO IN BOMBAY NEITHER HAS EARNED ANY INCOME NOR ANY INCOME HAS ACCRUED DURING THE RELEVANT PREVIOUS YEAR , THERE IS NO INCOME CHARGEABLE TO TAX IN INDIA. HOWEVER, THE ASSESSING OFFICER OBSERVED THAT A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED IN THE BUSINES S PREMISES OF THE LO ON 6 TH FEBRUARY 2003. DURING THE SURVEY ACTION, ON EXAMINATION OF DOCUMENTS / BOOKS OF ACCOUNT IT WAS FOUND THAT THE ACTIVITIES OF THE LO AT BOMBAY ARE NO T CONFINED TO LIAISON WORK ONLY. T HEREFORE , BEING OF THE OPINION, THAT THE ASSESSEE IS HAVING A PE IN INDIA, THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO FURNISH A RETURN OF INCOME IN FORM NO.1 ALONG WITH TAX AUDIT REPORT. IN ANNEXURE A OF THE SAID RETURN OF INCOME, THE ASSESSEE EXPLAINED IN DETAIL WHY THE LO A T MUMBAI CANNOT BE TREATED AS P E. THE SUBMISSION S OF THE ASSES SEE IN THIS REGARD AS SUMMARIZED IN PARA 2 OF THE 5 NAGASE AND COMPANY LTD. ASSESSMENT ORDER ARE AS UNDER: ANNEXURE A 1. BOMBAY LIAISON OFFICE OF NAGASE AND CO. LTD. IS OPERATING AS LIAISON OFFICE OF NAGASE AND CO. LTD., A COMPANY INCORPORATED IN JAPAN THE BOMBAY LIAISON OFFICE IS FUNCTIONING AS PER THE PERMISSION OF RESERVE BANK OF INDIA (RBI). AS REQUIRED BY THE ABOVE PERMISSIONS OF RBI - ( A ) ENTIRE EXPENSES OF LIAISIN OFFICE TO BE MET EXCLUSIVELY OUT OF EXPENSES RECEIVED FROM ABROAD. ( B ) EXCEPT THE LIAISON OFFICE WORK, THE OF FICE SHALL NOT UNDERTAKE ANY ACTIVITY OF A TRADING, COMMERCIAL OR INDUSTRIAL NATURE WITHOUT THE PERMISSION OF R.B.I. (C ) NO COMMISSION/ FEES TO BE CHARGED OF ANY OTHER REMUNERATION TO BE RECEIVED FOR THE LIAISON ACTIVITY TO BE RENDERED. 2. ACCORDINGLY, THE BOMBAY LIAION OFFICE OF NAGASE AND CO. LTD. DURING THE ACCOUNTING YEAR ENDED 12.3.2002 - ( A ) HAS MET ENTIRE EXPENSES EXCLUSIVELY OUT OF REMITTANCES RECEIVED FROM ABROAD (FROM IT'S HEAD OFFICE). ( B ) HAS NOT UNDERTAKEN OR CARRIED OUT ANY ACTIVITY PF A TRADING C OMMERCIAL OR INDUSTRIAL NATURE. ( C ) HAS NOT CHARGED OR EARNED ANY COMMISSION, FEE OR ANY OTHER REMUNERATION FOR THE LIAISON ACTIVITIES. 3. HENCE, THE BOMBAY LIAISON OFFICE OF NAGASE & CO. LTD., HAS NOT EARNED ANY INCOME NOR ANY INCOME ACCRUED TO IT IN INDIA DURING THE ACCOUNTING YEAR ENDED 12.3.2002 . 4. A SET OF AUDTED STATEMENT S OF ACCOUNTS ALONGWITH AUDITORS REPORT FOR THE ACCOUNTING YEAR ENDED 12.3.2002 IS ENCLOSED HEREWITH. 5. ALSO ENCLOSED HEREWITH A COPY OF CERTIFICATE FROM THE AUDITORS, CERTIFYING THAT THE BOMBAY LIAISON OFFICE, NAGASE & CO. LTD. DID NOT CARRY OUT ANY TRADING, MANUFACTURING OR COMMERCIAL ACTIVITY OR UNDERTOOK INVOICING OF GOODS IN INDIA DURING THE YEAR EN DED 12.3.2002. 6 NAGASE AND COMPANY LTD. 6. THE BOMBAY LIAISON OFFICE HAD EARLIER FILED IT'S RETURN OF INCOME IN FORM 2C FOR THE ACCOUNTING YEAR ENDED 12 TH MARCH, 2002. A COPY OF THE SAME IS ENCLOSED HEREWITH. 7. THIS RETURN IS BEING FILED IN COMPLIANCE TO THE NOTICES DATED 21.2.2003, ISSUED BY THE ADIT(IT) 2(2) MUMBAI. NO INCOME WAS EARNED NOR ANY INCOME ACCRUED TO THE LIAISON OFFICE DURING THE PREVIOUS YEAR ENDED 31.3.2002. FURTHER, THE LIAISON OFFICE IS NOT A PERMANENT ESTABLISHMENT IN TERMS OF THE DOUBLE TAXATION AVOIDANC E AGREEMENT WITH JAPAN. THEREFORE, THIS RETURN IS BEING FILED UNDER PROTEST AND WITHOUT PREJUDICE. 4 . FURTHER, IN RESPONSE TO THE NOTICES AND QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER THE ASSESSEE FURNISHED VARIOUS DETAILS CALLED FOR AND REITERATED IT S STAND TAKEN ON EXISTENCE OF PE IN INDIA. THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT IN COURSE OF SURVEY PROCEEDINGS A NUMBER OF FILES CONTAINING LOOSE PAPERS AND A DIARY WERE IMPOUNDED. HE OBSERVED , SOME OF THE IMPOUNDED FILES CONTAINED PERFORMANCE REVIEW REPORTS (PRR) OF THE STAFF MENTIONING VARIOUS PARTICULARS LIKE NAME OF THE EMPLOYEE, DATE OF JOINING, JOB TITLE, REVIEW PERIOD, APPRAISAL OF THE WORK, CONTRIBUTION OF THE EMP LOYEE, AIMS FOR THE SUBSEQUENT YEARS AND THE OVERALL ASSESSMENT OF THE HIGHER AUTHORITIES. HE OBSERVED , IN THE APPRAISAL COLUMN OF THE SAID PERFORMANCE REVIEW REPORT, SALES FIGURES WERE REPORTED AND THE COLUMN WAS REQUIRED TO BE MAINTAINED BY THE SALES STA FF ONLY. FROM THE AFORESAID INFORMATION, THE ASSESSING OFFICER OBSERVED THAT THE LO AT BOMBAY WAS HAVING SEPARATE SALES STAFF OTHER THAN THE REGULAR STAFF. HE OBSERVED , THE PERFORMANCE REVIEW REPORT S CLEARLY REVEAL THAT 7 NAGASE AND COMPANY LTD. SALES TARGET WERE FIXED , ACHIEVEMENT OF THE CONCERNED EMPLOYEE IS LOOKED INTO, EVALUATION BY THE EMPLOYEE WAS ASSESSED BY THE EMPLOYEE HIMSELF AS WELL AS BY THE SUPERIOR AUTHORITY. HE OBSERVED , SALES TARGET FIXED FOR A PARTICULAR EMPLOYEE AND HIS ACHIEVEMENT IN RESPECT OF SUCH TARGET ALSO FI NDS PLACE IN THE REVIEW REPORT FOR THE REVIEW PERIOD 1998 99. REFERRING TO ANOTHER REVIEW REPORT THE ASSESSING OFFICER MADE SIMILAR OBSERVATION. REFERRING TO VARIOUS OTHER CORRESPONDENCES AND DOCUMENTS IMPOUNDED DURING THE SURVEY OPERATION, THE ASSESSING O FFICER ULTIMATELY CONCLUDED THAT THE ASSESSEE COULD NOT FILE ANY REASONABLE EXPLANATION TO SUBSTANTIATE ITS STAND THAT THE LIAISON OFFICE A T MUMBAI CANNOT BE TREATED AS P E. HE OBSERVED , THE PERFORMANCE REVIEW REPORT CLEARLY REVEAL S THAT ASSESSEES LIAISON OFFICE WAS CARRYING OUT COMMERCIAL ACTIVITIES IN INDIA, HEN CE, IT HAS TO BE TREATED AS A PE BOTH UNDER THE ACT AS WELL AS UNDER ARTICLE 5 OF INDIA JAPAN TAX TREATY. HE OBSERVED , SINCE THE ASSESSEE WAS HAVING A FULL FLEDGED OFFICE WITH EMPLOYE ES AND STAFF I T CONSTITUTES A PE UNDER THE TREATY ALSO. HE OBSERVED , SINCE THE LO WAS DEALING IN FULL FLEDGED ACTIVITIES WHICH WERE FOUND ON THE BASIS OF DOCUMENTS IMPOUNDED DURING THE SURVEY OPERATION IT NOT ONLY CONTRAVENES RBIS PERMISSION BUT ESTABLISHES THE EXISTEN CE OF P E. HE OBSERVED , THE LIAISON OFFICE IN INDIA WAS ACTIVELY PURS U ING POTENTIAL CUSTOMERS AND THE RATES BEING OFFERED BY THE COMPETING PARTIES. HE OBSERVED , JUST BECAUSE THE FINAL INVOICES WERE RAISED BY THE HEAD OFFICE IN JAPAN FROM WHERE THE GOODS 8 NAGASE AND COMPANY LTD. WER E SUPPLIED , IT DOES NOT MEAN THAT NO PROFIT IS ATTRIBUTABLE TO INDIA. HE OBSERVED , THE ENTIRE ACTIVITY OF THE BUSINESS EXCEPT THE FINAL DISPATCH AND BILLIN G WAS DONE IN INDIA. T HEREFO RE, AS PER SECTION 9 OF THE ACT THE ASSESSEE HAS A BUSINESS CONNECTION IN INDIA, HENCE, ITS INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA. THUS, ULTIMATELY, THE ASSESSING OFFICER HELD THAT SINCE THE ASSESSEE HAS A PE IN INDIA, THE INCOME ATTRIBUTABLE TO PE IN INDIA IS REQUIRED TO BE BROUGHT TO TAX. ACCORDINGLY, HE PROCEEDED TO COMPUTE THE INCOME OF THE ASSESSEE AND THE TAX LIABILITY IN DIFFERENT ASSESSMENT YEARS STARTING FROM ASSESSMENT YEAR 1995 96 TO 2002 03. IN THE IMPUGNED ASSESSMENT YEAR THE ASSESSING OFFICER DETERMINED THE SALES TURNOVER OF THE ASSESSEE AT ` 225 CRORE AND ESTIMATED THE PROFIT @ 10% ON SUCH SALES WHICH WORKED OUT TO ` 28,58,39,400. THE AFORESAID AMOUNT WAS TREATED AS INCOME OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR AND BROUGHT TO TAX. BEING AGGRIEVED WITH THE AFORESAID ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY . 5 . THE LEARNED COMMISSIONER (APPEALS) TOOK UP THE APPEAL PROCEEDINGS FOR THE ASSESSMENT YEAR S 1996 97 TO 2002 03 TOGETHER. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HE CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. AFTER EXAMINING THE REMAND REPORT AND THE SUBMISSIONS OF THE ASSESSEE, THE LEARNED COMMISSIONER (APPEALS) AGREED WITH THE ASSESSING OFFICER THAT SINCE THE ASSESSEE 9 NAGASE AND COMPANY LTD. WAS CARRYING ON COMMERCIAL ACTIVITY FROM THE LIAISON OFFICE AT MU MBAI, IT HAS TO BE TREATED AS PE OF THE ASSESSEE. HENCE, THE INCOME / PROFIT ATTRIBUTABLE TO THE PE HAS TO BE BROUGHT TO TAX. HOWEVER, LEARNED C OMMISSIONER (APPEALS) DIRECTED THE ASSESSING OFFICER TO ADOPT THE SALES FIGURES FOR ALL THE ASSESSMENT YEARS I.E., A.Y. 1995 96 TO 2002 03 EXCEPT ASSESSMENT YEAR 1999 2000, 2000 01 AS PER THE CERTIFIED EXHIBITS SUBMITTED BY THE ASSESSEE. FURTHER, HE DIRECT ED THE ASSESSING OFFICER TO ADOPT THE GROSS PROFIT RATE @ 8% AND EXPENDITURE INCURRED BY THE ASSESSEE ON ACTUAL BASIS. ACCORDINGLY, HE DISPOSED OFF THE APPEALS OF THE ASSESSEE RELATING TO A.Y. 1996 97 TO 2002 03 IN A CONSOLIDATED ORDER. BEING AGGRIEVE D WITH THE AFORESAID DECISION OF THE LEARNED COMMISSIONER (APPEALS), THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. 6 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SOLELY RELYING UPON THE DOCUMENTS FOUND AND IMPOUNDED DURING THE SURVEY OP ERATION CONDUCTED UNDER SECTION 133A OF THE ACT, THE ASSESSING OFFICER HAS CONCLUDED THAT THE LIAISON O FFICE AT MUMBAI CONSTITUTES A PE AND ATTRIBUTED INCOME TO IT. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN THE SURVEY OPERATION CONDUCTED UNDER SE CTION 133A OF THE ACT ON 6 TH FEBRUARY 2003, THE DEPARTMENT HAS NOT COME ACROSS ANY DOCUMENT RELATING TO THE IMPUGNED ASSESSMENT YEAR WHICH COULD REVEAL THAT THE LIAISON OFFICE AT MUMBAI HAS CONCLUDED CONTRACT ON 10 NAGASE AND COMPANY LTD. BEHALF OF THE ASSESSEE. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE DOCUMENTS FOUND AND IMPOUNDED DURING THE SURVEY . H E SUBMITTED , THE ONLY DOCUMENTS PERTAINING TO THE IMPUGNED ASSESSME NT YEAR ARE TWO INVOICES REFERRED TO IN A COMMUNICATION OF M/S MUSK AND FRAGRANCE, AN INDEPENDENT AGENT OF ASSESS EE . HE SUBMITTED , THESE LETTERS / COMMUNICATIONS ARE FOR THE PURPOSE OF A MEETING BETWEEN HEAD OFFICE AND INDEPENDENT AGENT TO APPRAISE THE HEAD OFFICE OF ACHIEVEMENT OF TARGET. HE SUBMITTED , M/S MUSK AND FRAGRANCE BEING AN INDEPENDENT AGENT OF THE ASSESSE , THIS LETTER HAS NOTHING TO DO WITH ANY CONTRACT CONCLUDED BY THE LIAISON OFFICE. REFERRING TO THE IMPOUNDED DOCUMENTS SPECIFICALLY REFERRED TO BY THE LEARNED COMMISSIONER (APPEALS) , COPIES OF WHICH ARE SUBMITTED IN THE PAPER BOOK , THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SUCH DOCUMENTS DO NOT SHOW THAT THE LIAISON OFFICE IS CONCLUDING CONTRACT ON BEHALF OF THE ASSESSEE. HE SUBMITTED , THE ALLEGATION OF THE DEPARTMENTAL AUTHORITIES THAT THERE WAS DISCREPANCY WITH REGARD TO THE ACCOUNTING STATEMENT S UBMITTED BY THE ASSESSEE INSOFAR AS IT RELATES TO COMMISSION PAYMENT AN D SALES FIGURE ACHIEVED BY M/S MUSK AND FRAGRANCE EFFECTIVELY RECONCILED BY THE ASSESSEE THROUGH PROPER DOCUMENTARY EVIDENCES. IN THIS CONTEXT, THE ASSESSEE DREW OUR ATTENTION TO THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE REMAND REPORT AND THE ASSESSEES REPLY. HE ALSO DREW OUR ATTENTION TO THE RECONCILIATION STATEMENT FURNISHED BEFORE THE ASSESSING OFFICER SHOWING THE SALE S FIGURE BOTH IN TERMS OF 11 NAGASE AND COMPANY LTD. U.S. DOLLAR AS WELL AS JAPANESE YEN. HE SUBMITTED , IF THE SALES FIGURE IS CONVERTED TO ANY ONE CURRENCY I.E., U.S. DOLLAR OR JAPANESE YEN , THERE WILL BE NO DISCREPANCY. HE SUBMITTED , IN THE REMAND REPORT THE ASSESSING OFFICER HAS NOT AT ALL CONSIDERED THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE. THE LEARNED AUTHORIS ED REPRESENTATIVE SUBMITTED , IN ANY CASE OF THE MATTER, SINCE THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER IS ON THE BASIS OF DOCUMENTS IMPOUNDED AT THE TIME OF SURVEY OPERATION CONDUCTED UNDER SECTION 133A OF THE ACT, THE ASSESSING OFFICER HAS TO RESTRICT HIMSELF IN MAKING THE ADDITION IN THE REL EVANT ASSESSMENT YEAR WITH REFERENCE TO THE IMPOUNDED DOCUMENTS BELONG TO THE SAID ASSESSMENT YEAR . THE LEARNED AUT HORISED REPRESENTATIVE SUBMITTED , AS PER THE IMPOUNDED DOCUMENT ONLY TWO INVOICES RAISED BY THE INDEPENDENT AGENT M/S MUSK AND FRAGRANCE RELATE TO THE IMPUGNED ASSESSMENT YEAR. IN THIS CONTEXT, HE DREW OUR ATTENTION TO THE LETTER DATED 21 ST AUGUST 2002, WR ITTEN BY M/S MUSK AND FRAGRANCE TO THE LIAISON OFFICE OF THE ASSESSEE AT MUMBAI, A COPY OF WHICH IS PLACED AT PAGE 278 O F THE PAPER BOOK. REFERRING TO COMMUNICATION DATED 2 ND DECEMBER 2002, A COPY OF WHICH IS PLACED AT PAGE 277 OF THE PAPER BOOK, THE LEARN ED AUTHORISED REPRESENTATIVE SUBMITTED , ONLY BECAUSE EMPLOYEES OF THE LIAISON OFFICE ATTENDED A MEETING BETWEEN THE ASSESSEE AND THE INDEPENDENT AGENT M/S MUSK AND FRAGRANCE , THE DEPARTMENTAL AUTHORITIES HAVE PRESUMED THAT THE LIAISON OFFICE IS INVOLVED IN FINALIZING THE CONTRACT, HE NCE, IT CONSTITUTES 12 NAGASE AND COMPANY LTD. AN AGENCY P E. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE PURPOSE OF THE SAID MEETING BETWEEN THE HEAD OFFICE AND THE AGENT WAS TO APPRAISE THE HEAD OFFICE REGARDING THE ACHIEVEMENT OF TARGET AND IT HAS NOTHING TO DO WITH CONCLUSION OF CONTRACT BY THE LIAISON OFFICE AT MUMBAI. HE SUBMITTED , SINCE APART FROM THESE TWO INVOICES THERE IS NO OTHER DOCUMENT FOUND DURING THE SURVEY WHICH PERTAINS TO THE IMPUGNED ASSESSMENT YEAR , THE SUSTAINABILITY OF THE AD DITION MADE BY THE ASSESSING OFFICER HAS TO BE EXAMINED QUA THESE DOCUMENTS. HE SUBMITTED , THE CONCERNED INVOICES WERE RAISED BY THE INDEPENDENT AGENT WHO WAS DIRECTLY DEALING WITH THE HEAD OFFICE WITHOUT THE INTERVENTION OF THE ASSESSEE. HE SUBMITTED , EVE N THE LETTER DATED 21 ST AUGUST 2002 OF M/S MUSK AND FRAGRANCE TO THE LIAISON OFFICE AT MUMBAI HAS NOTHING TO DO WITH EXECUTION OF CONTRACT IN INDIA , RATHER , IT RELATES TO A GRIEVANCE EXPRESSED BY M/S MUSK AND FRAGRANCE WITH REGARD TO DEMURRAGE AND REDUCTION OF THEIR COMMISSION IN RESPECT OF SUPPLY OF CITRAL R TO HINDUSTAN LIVER LTD., TALOJA. HE SUBMITTED , THESE TWO DOCUMENTS IN NO WAY ESTAB LISH THAT ASSESSEE WAS HAVING PE IN INDIA THROUGH THE LIAISON OFFICE AT MUMBAI. THE LEARNED AUT HORISED REPRESE NTATIVE REFERRING TO VARIOUS ALLEGATION S MADE BY THE ASSESSING OFFICER IN THE REMAND REPORT WITH REFERENCE TO THE IMPOUNDED DOCUMENTS PERTAINING TO TH E IMPUGNED ASSESSMENT YEAR SUBMITTED , THE LETTER DATED 2 ND DECEMBER 2002 OF M/S MUSK AND FRAGRANCE AT PAGE 277 OF THE PAPER BOOK IS A STATEMENT FROM THE INDEPENDENT 13 NAGASE AND COMPANY LTD. AGENT SHOWING THE APP ROXIMATE SALES ACHIEVED BY THEM. W HEREAS , HE SUBMITTED , THE ASSESSEE HAS FURNISHED THE EXACT SALES FIGURES CERTIFIED BY AN AUDITOR BEFORE THE ASSESSING OFFICER. HE SUBMITTED , S INCE THE SALES FIGURE SHOWN IN THE IMPOUNDED DOCUMENT IS ON APPROXIMATE BASIS , RELIANCE SHOULD BE PLACED ON THE DOCUMENT CERTIFIED BY THE AUDITOR. HE SUBMITTED , EVEN OTHERWISE ALSO, THE ASSESSEE HAS FURNISHED STATEMENT RECONCILING THE SAL ES FIGURE BOTH IN U.S. DOLLAR AND JAPANESE YEN. THEREFORE, THERE IS NO SUCH DISCREPANCY EXISTING AS ALLEGED BY THE DEPARTMENTAL AUTHORITIES. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , WHILE DECIDING DISPUTE RELATING TO THE IDENTICAL ADDITION MADE BY THE ASSESSING OFFI CER ON THE BASIS OF IMPOUNDED DOCUMENTS FOR THE ASSESSMENT YEAR 1998 99, THE TRIBUNAL HAS CONSIDERED THE ISSUE AT LENGTH BOTH FACTUALLY AND LEGALLY AND AFTER VERIFYING THE VERY SAME IMPOUNDED DOCUMENT S HAS HELD THAT THE DEPARTMENT HAS FAILED TO BRING ANY R ELIABLE EVIDENCE ON RECORD TO ESTABLISH THAT THE LIAISON OFFICE CONSTITUTES THE PE OF THE ASSESSEE. HE SUBMITTED , THE TRIB UNAL ULTIMATELY HELD THAT IN ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD BY THE DEPARTMENT , IT CANNOT BE SAID THAT THE LIAI SON OFFICE WAS FUNCTIONING AS PE OF THE ASSESSEE IN INDIA. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SIMILAR VIEW WAS REITERATED BY THE TRIBUNAL WHILE DECIDING ASSESSEES APPEAL FOR ASSESSMENT YEAR 2007 08 AND 1996 97, 1997 98, 2005 06 AND 2006 07 UNDER IDENTI CAL FACTS AND CIRCUMSTANCES. IN THIS CONTEXT, HE 14 NAGASE AND COMPANY LTD. DREW OUR ATTENTION TO THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ON THE ISSUE. THUS, HE SUBMITTED , FOLLOWING THE DECISION S OF THE TRIBUNAL IN ASSESSEES OWN CASE THE ADDITION SHOULD BE DELETED. 7 . THE LEARNED DE PARTMENTAL REPRESENTATIVE REFERRING IN DETAIL TO THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS) SUBMITTED , THE IMPOUNDED DOCUMENTS WERE THOROUGHLY EXAMINED NOT ONLY AT THE TIME OF SURVEY BUT DURING THE ASSESSMENT PROCEEDINGS AND EVEN BY THE FIRST A PPELLATE AUTHORITY. HE SUBMITTED , THE PERFORMANCE REVIEW REPORT IMPOUNDED DURING THE SURVEY DOES ESTABLISH THAT THEY ARE NOT WITHIN THE PURVIEW OF PREPARATORY AND OBSERVATORY CHARACTER AND THEY DO ESTABLISH THAT THE LIAISON OFFICE WAS ACTIVELY INVOLVED IN THE SALES TRANSACTIONS. 8 . THE LEARNED DEPARTMENTAL REPRESENTATIVE REFERRING TO THE IMPOUNDED DOCUMENT PLACED AT PAGE 277 AND 278 OF THE PAPER BOOK SUBMITTED , THE DOCUMENTS CLEARLY ESTABLISH THE INVOLVEMENT OF LIAISON OFFICE IN ACHIEVING THE SALES TARGET. H E SUBMITTED , OTHERWISE THERE WAS NO NEED FOR THE EMPLOYEES OF THE LIAISON OFFICE TO ACTIVELY INVOLVE THEMSELVES IN THE MEETING BETWEEN THE INDEPENDENT AGENT AND HEAD OFFICE. HE SUBMITTED , THE DOCUMENTS IMPOUNDED DURING THE SUR VEY OPERATION NOT ONLY PERTAIN TO THE IMPUGNED ASSESSMENT YEAR BUT AFTER THOROUGH VERIFICATION OF THE IMPOUNDED DOCUMENTS AT VARIOUS STAGES THE ASSESSING OFFICER HAS ESTABLISHED THAT THE LIAISON OFFICE OF THE 15 NAGASE AND COMPANY LTD. ASSESSEE AT MUMBAI CONSTI TUTES A PE . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , SINCE SOME OF THE DOCUMENTS DO NOT PERTAIN TO THE IMPUGNED ASSESSMENT YEAR , IT CANNOT BE SAID BY THE ASSESSEE THAT NO ADDITION IS SUSTAINABLE IN THE IMPUGNED ASSESSMENT YEAR IN THE ABSENCE OF ANY IMPOUNDED DOCUMENT PERTAINING TO THE IMPUGNED ASS ESSMENT YEAR. HE SUBMITTED , D URING THE ASSESSMENT AS WELL AS REMAND PROCEEDINGS, THOUGH, THE ASSESSING OFFICER HAS CALLED FOR VARIOUS DETAILS TO RECONCILE THE MISMATCH / DIFFERENCES IN SALES / COMMISSION PAYMENT, HOWEVER, THE ASSESSEE HAS NOT FURNISHED THE REQUIRED DETAILS. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , AS PER ARTICLE 5(1) OF THE INDIA JAPAN TAX TREATY, PE MEANS A FIXED PLACE OF BUSINES S THROUGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. HE SUBMITTED , SINCE THE BUSINESS OF THE ASSESSEE IS CARRIED ON THROUGH THE LIAISON OFF ICE IN INDIA, IT CONSTITUTES A P E. 9 . IN REJOINDER, THE LEARNED AUTHORISED REPRESENTATIVE SUB MITTED , THE IMPOUNDED DOCUMENTS HAVING RELATION TO THE IMPUGNED ASSESSMENT YEAR DO NOT IN ANY MANNER INDICATE THAT LIAISON OFFICE IS AN INDEPENDENT BUSINESS ENTITY. HE SUBMITTED , THE PRESENCE OF LIAISON OFFICE EMPLOYEE S IN THE MEETING BETWEEN THE INDEPENDE NT AGENT AND THE HEAD OFFICE WAS IN THE NATURE OF A COMMUNICATION CHANNEL BETWEEN THE CUSTOMERS IN INDIA AND THE HEAD OFFICE , SINCE , THE PERSON COMING FROM HEAD OFFICE DOES NO ANY OTHER LANGUAGE EXCEPT JAPANESE. 16 NAGASE AND COMPANY LTD. THUS, HE SUBMITTED , THE ADDITION MADE SHOULD BE DELETED. 10 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. A CAREFUL READING OF THE ASSESSMENT ORDER WOULD REVEAL THAT THE TEN VOLUMES OF THE IMPOUNDED DOCUMENT IN CONSEQUENCE OF SURVEY OPERATIO N UNDER SECTION 133A OF THE ACT FORM T HE MATERIAL BASIS FOR THE ASSESSING OFFICER TO CONCLUDE THAT THE LIAISON OFFICE AT MUMBAI CONSTITUTE S A PE OF THE ASSESSEE. IT IS ALSO RELEVANT TO OBSERVE , THE ASSESSING OFFICER HAS HEAVILY RELIED UPON CERTAIN PERFORMANCE REVIEW REPORT S FORMING PART OF THE IMPOUNDED DOCUMENT S TO CONCLUDE THAT THE LIAISON OFFICE WAS EMPLOYING SALES STAFF AND WAS ACTIVELY INVOLVED IN COMMERCIAL TRANSACTION. IN THIS CONTEXT, THE ASSESSING OFFICER HAS DRAWN REFERENCE TO PERFORMANCE REVIEW REPORT FOR THE PERI OD 1998 99 AND ANOTHER PRR FOR APRIL 1999 TO MARCH 2000. IN THIS CONTEXT, HE HAS MADE OBSERVATIONS ABOUT THE CONTRIBUTION OF CERTAIN EMPLOYEES WHOSE NAME ARE APPEARING IN PRR TOWARDS INCREASING SALES TURNOVER. THE ASSESSING OFFICER HAS ALSO REFERRED TO AN AGREEMENT BETWEEN L.G. CHEMICALS LTD., KOREA, AND THE LIAISON OFFICE AT MUMBAI FOR GRANTING THE ASSESSEE AN EXCLUSIVE AND NON TRANSFERRABLE RIGHT TO DISTRIBUTE CERTAIN CHEMICAL PRODUCTS ON COMMISSION BASIS IN SPECIFIED TERRITORIES. HOWEVER, THE ASSESSING O FFICER HAS CATEGORICALLY STATED THAT THE SAID AGREEMENT IS VALID UP TO DECEMBER 1996 AND TO BE RENEWED FURTHER FROM TIME TO TIME. THUS, FROM THE AFORESAID FACTS IT IS VERY MUCH 17 NAGASE AND COMPANY LTD. EVIDENT THAT THE IMPOUNDED DOCUMENT S , SPECIFICALLY REFERRED TO BY THE ASSESSING OFFICER , DO NOT PERTAIN TO THE IMPUGNED ASSESSMENT YEAR. FURTHER, THE ASSESSING OFFICER HAS OBSERVED THAT THE LIAISON OFFICE HAS CONTRAVENED THE TERMS OF RBIS PERMISSION FOR WHICH HE INTENDED TO TAKE UP THE ISSUE SEPARATELY WITH THE RBI. THUS, FROM THESE PRIMARY FACTS DISCUSSED IN THE ASSESSMENT ORDER IT IS APPARENT THAT ON THE BASIS OF CERTAIN PRRS AND AGREEMENT WITH L.G. CHEMICALS LTD. AS WELL AS CERTAIN CORRESPONDENCES WHICH DO NOT PERTAIN TO THE IMPUGNED ASSESSMENT YEAR , THE ASSESSING OFFICER HAS CONC LUDED THAT THE LIAISON OFFIC E AT MUMBAI CONSTITUTES THE PE . 11 . INSOFAR AS LEARNED COMMISSIONER (APPEALS) IS CONCERNED, ADMITTEDLY, HE HAS DISPOSED OF THE APPEALS PERTAINING TO ASSESSMENT YEAR S 1996 97 TO 1999 2000 AND ASSESSMENT YEAR 2000 01 TO 2002 03 IN A CONSOLIDATED ORDER. WHILE CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER IN PRINCIPLE , EXCEPT , GRANTING PARTIAL RELIEF TO THE ASSESSEE ON QUANTIFICATION, THE LEARNED COMMISSIONER (APP EALS) HAS HEAVILY RELIED UPON THE REMAND REPORTS FURNISHED BY THE ASSESSING OFFICER. AFTER GOING THROUGH THE ENTIRE GAMUT OF THE FACTUAL ASPECT CONCERNING THE IMPUGNED ADDITION, IT IS NOTICED THAT THE IMPOUNDED DOCUMENT S WHICH COULD BE HAVING A REMOTE CONN ECTION WITH THE IMPUGNED ASSESSMENT YEAR ARE TWO COMMUNICATIONS FROM M/S MUSK AND FRAGRANCE , AN INDEPENDENT AGENT OF THE ASSESSEE IN INDIA. THESE 18 NAGASE AND COMPANY LTD. COMMUNICATIONS DATED 2 ND DECEMBER 2002 AND 21 ST AUGUST 2002 ARE PLACED AT PAGE 277 AND 278 OF THE PAPER BOOK. THE COMMUNICATION DATED 2 ND DECEMBER 2002 DEPICTS THE ACHIEVEMENT OF SALES TARGET FOR THE PERIOD 2001 02 AND 2002 03. IN FACT, THIS COMMUNICATION IS AN AGENDA FOR A MEETING ARRANGED FOR ONE MR. KAZUH IKO IJARASHI, FROM THE TOKYO HEAD OFFICE OF THE ASSESSEE COMPANY AND THE REPRESENTATIVE OF M/S MUSK AND FRAGRANCE . INCIDENTALLY , SOME OF THE EMPLOYEES OF THE LIAISON OFFICE ALSO ATTENDED THE MEETING HELD FROM 4 TH DECEMBER TO 7 TH DECEMBER 2002. THE NEXT IMPOUNDED DOCUMENT PERTAINING TO THE IMPUGNED ASSESSMENT YEAR IS LETTER DATED 21 ST AUGUST 2002, OF M/S MUSK AND FRAGRANCE TO THE LIAISON OFFICE AT MUMBAI . A PERUSAL OF THE SAID LETTER INDICATE S THAT IT PERTAINS TO THE SHARING OF DEMURRAGE CHARGES AND REDUCTION OF COMMISSION TO 0.5% WITH REFERENCE TO CERTAIN INVOICES RAISED FOR THE PERIOD 2002 03 AND 2003 04. ON A PERUSAL OF THE AFORESAID IMPOUNDED DOCUMENT S , WE ARE UNABLE TO FIND ANY CLUE TO CONCLUDE THAT THEY ESTABLISH THE INVOLVEMENT OF THE LIAISON OFFICE AT BOMBAY IN CARRYING ON ANY COMMERCIAL ACTI VITY ON BEHALF OF THE HEAD OFFICE. THE CONTENTION OF THE ASSESSEE THAT THE PRESENCE OF THE EMPLOYEES / OFFICERS OF THE LIAISON OFFICE AT MUMBAI IN THE MEETING BETWEEN THE REPR ESENTATIVE OF THE HEAD OFFICE AND M/S MUSK AND FR AGRANCE WAS ONLY FOR ESTABLISHIN G A COMMUNICATION CHANNEL , SINCE , THE REPRESENTATIVE OF THE HEAD OFFICE DID NOT KNOW ANY OTHER LANGUAGE EXCEPT JAPANESE. THE OTHER IMPOUNDED DOCUMENTS SPECIFICALLY REFERRED 19 NAGASE AND COMPANY LTD. TO BY THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) IN NO WAY CONCLU SIVELY ESTABLISHES THE FACT THAT THE LIAISON OFFICE AT MUMBAI WAS ACTING AS AN AGENT BY INVOLVING ITSELF IN CONCLUDING CONTRACT S ON BEHALF OF THE HEAD OFFICE OR INVOLVING ITSELF IN ANY COMMERCIAL TRANSACTION ON BEHALF OF TH E HEAD OFFICE TO CONSTITUTE A PE IN INDIA. 12 . IN FACT, IT IS WORTHWHILE TO MENTION , THE VERY SAME IMPOUNDED DOCUMENTS REFERRED TO BY THE DEPARTMENTAL AUTHORITIES FOR COMING TO THE CONCLUSION THAT THE LIA I SO N OFFICE AT MUMBAI CONSTITUTE PE AND CONSEQUENTLY MAKING THE ADDITION WERE CONSIDER ED, LOOKED INTO AND EXAMINED BY THE TRIBUNAL WHIL E DECIDING ASSESSEES APPEAL ON THE ISSUE OF IDENTICAL ADDITION MADE IN ASSESSMENT YEAR 1998 99 . T HE TRIBUNAL WHILE DECIDING THE APPEAL IN ITA NO. 1800/MUM./2007 AND ITA NO.115/MUM./2006, DATED 12 TH JANUARY 2 017, HELD THAT THE IMPOUNDED DOCUMENTS , INCLUDING THE PERFORMANCE REVIEW REPORTS ON WHICH THE DEPARTMENTAL AUTHORITIES HAVE HEAVILY RELIED UPON , IN NO WAY ESTABLISHES THAT THE LIAISON OFF ICE AT BOMBAY CONSTITUTES THE PE OF THE ASSESSEE IN INDIA. THE TRIBUN AL OBSERVED THAT UNTIL AND UNLESS SOME RELIABLE EVIDENCE IS BROUGHT ON RECORD BY THE DEPARTMENT TO DEMONSTRATE THAT THE LIAISON OFFICE IS DOING BUSINESS INDEPENDENTLY INCLUDING DEALING WITH THE CUSTOMERS, CONCLUDING CONTRACTS, ETC., IT CANNOT BE SAID THAT THE LIAISON OFFICE CONSTITUTES A P E. THE TRIBUNAL 20 NAGASE AND COMPANY LTD. OBSERVED , WHAT NEEDS TO BE SEEN IS , WITH WHOM THE DECISION MAKING POWER LIES. IF THE LIAISON OFFICE HAS TO FOLLOW THE DIRECTIONS AND THE COMMAND OF THE HEAD OFFICE, THEN THE REINS OF THE BUSINESS WOULD NOT BE IN THE HANDS OF THE LIAISON OFFICE, HENCE, CANNOT BE TREATED AS AN INDEPENDENT ENTITY. THUS, ON THE BASIS OF THE FACTS AND EVIDENCES AVAILABLE ON RECORD, WHICH ARE VERY MUCH THE S AME IN THE IMPUGNED ASSESSMENT YEAR, THE TRIBUNAL ULTIMATELY CONCLUDED THAT THERE IS NOTHING ON RECORD TO PROVE THAT THE LIAISON OFFICE AT MUMBAI WAS FUNCTIONING AS AN INDEPENDENT PROFIT CENTRE TO CONSTITU T E AS PE OF THE ASSESSEE. WHILE COMING TO SUCH CONC LUSION, THE TRIBUNAL ALSO TOOK NOTE OF THE ALLEGATION OF THE ASSESSING OFFICER THAT THE LIAISON OFFICE HAS VIOLATED THE PERMISSION GRANTED BY THE RBI WITH REGARD TO CONDUCTING ITS ACTIVITIES AND WHICH WILL BE TAKEN UP BY THE ASSESSING OFFICER WITH THE RBI. IN THIS CONTEXT, THE TRIBUNAL OBSERVED THAT SINCE THERE IS NO ADVERSE REPORT OR ACTION TAKEN BY THE RBI AGAINST THE ASSESSEE , IT HAS TO BE ACCEPTED THAT THE LIAISON OFFICE WAS PERFORMING ITS ACTIVITIES IN ACCORDANCE WITH THE PERMISSION GRANTED BY THE RBI. IT IS RELEVANT TO OBSERVE , SAME VIEW WAS EXPRESSED BY THE TRIBUNAL WHILE DECIDING IDENTICAL ISSUE IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 08 IN ITA NO.4654 AND 4778/MUM./2010, DATED 30 TH NOVEMBER 2017. IT IS WORTH MENTIONING , WHILE DECIDING ASSESS EES APPEAL FOR ASSESSMENT YEAR S 1996 97, 1997 98 , ARISING OUT OF THE IMPUGNED ORDER OF THE LEARNED COMMISSIONER (APPEALS) , IN ITA NO.113 /MUM./2006, ITA 21 NAGASE AND COMPANY LTD. NO.1798/MUM./2007, ITA NO.114/MUM./2006 AND ITA NO.1799/MUM./ 2007, FOR ASSESSMENT YEAR 1997 98, THE T RIBUNAL AGAIN HAD AN OCCASION TO EXAMINE AND ANALYSE THE IMPOUNDED DOCUMENT S ON THE BASIS OF WHICH THE ASSESSING OFFICER CONCLUDED THAT THE LIAISON O FFICE AT BOMBAY CONSTITUTES A PE , HENCE, MADE THE ADDITION. THE TRIBUNAL ON EXAMINING THE IMPOUNDED DOCUMEN T S BEING SATISFIED THAT NONE OF THOSE DOCUMENTS ESTABLISH THE CASE OF THE DEPARTMENT THAT THE LIAISON OFFICE CONSTITUTES A PE OF HEAD OFFICE DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER. WHILE DOING SO, THE TRIBUNAL REFERRING TO ONE OF THE COMMUNICATIONS FROM M/S MUSK AND FRAGRANCE TO THE LIAISON OFFICE AT BOMBAY OBSERVED THAT M/S MUSK AND FRAGRANCE IS AN INDEPENDENT COMM ISSION AGENT APPOINTED BY THE HEAD OFFICE AND SUCH COMMUNICATION NO WAY ESTABLISHES THAT THE LIAISON OFFICE WAS INVOLVED IN BUSINESS ACTIVITY. THE FACTS INVOLVED IN THE IMPUGNED ASSESSMENT YEAR ARE NO DIFFERENT. IT IS A FACT ON RECORD, ON THE BASIS OF VERY SAME IMPOUNDED DOCUMENT S , THE ASSESSING OFFICER HAS COMPUTED BUSINESS PROFIT OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR IN A MANNER SIMILAR TO THE PRECEDING ASSESSMENT YEARS. IN FACT, IN THE CONSOLIDATED ORDER PASSED FOR THE ASSESSMENT YEAR S 1996 97 TO 2002 03 THE LEARNED COMMISSIONER (APPEALS) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE IMPOUNDED DOCUMENT S . SINCE , AFTER EXAMINING THE IMPOUNDED DOCUMENT S WHILE DECIDING ASSESSEES APPEAL S FOR THE PRECEDING ASSESSMENT YE AR S, THE TRIBUNAL HAS TAKEN A 22 NAGASE AND COMPANY LTD. CONSCIOUS VIEW THAT SUCH IMPOUNDED DOCUMENTS DO NOT ESTABLISH THE FACT THAT THE LIAISON OFFICE IS ACTING AS A PE OF THE ASSESSEE , SUCH DECISION OF THE TRIBUNAL BEING PURELY ON THE BASIS OF FACTS OBTAINING FROM THE IMPOUNDED DO CUMENT S, WHICH ALSO FORMS THE BASIS FOR ADDITION IN THE IMPUGNED ASSESSMENT YEAR, RESPECTFULLY FOLLOWING THE VIEW EXPRESSED BY THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR S IN THE ORDERS REFERRED TO ABOVE, WE HOLD THAT THE LIAISON OFFICE AT BOMBAY DOES NO T CONSTITUTE A PE OF THE ASSESSEE UNDER ARTICLE 5 OF INDIAN JAPAN TAX TREATY. HENCE, NO INCOME OF THE ASSESSEE CAN BE BROUGHT TO TAX IN INDIA . ACCORDINGLY, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER. GROUNDS NO.1, 2 AND 3, ARE ALLOWED. 13 . IN VIEW OF OUR DECISION IN GROUNDS NO.1, 2 AND 3 HEREIN ABOVE, THE REST OF THE GROUNDS RAISED BY THE ASSESSEE RELATIN G TO ATTRIBUTION OF PROFIT TO PE AND THE RATE OF TAX HAVE BECOME REDUNDANT, HENCE, DO NOT REQUIRE ADJUDICATION. 14 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO.368/MUM./2006 REVENUES APPEAL 15 . THE GROUNDS RAISED BY THE REVENUE IN THIS APPEAL PERTAIN TO QUANTIFICATION OF SALES TURNOVER AND GROSS PROFIT ATTRIBUTABLE TO THE P.E. IN INDIA . S INCE , WHILE DECIDING ASSESSEES APPEAL IN ITA NO.119/MUM./ 23 NAGASE AND COMPANY LTD. 2006, HEREIN BEFORE, WE HAVE HELD THAT THE LIAISON OFFICE AT BOMBAY DO ES NOT CONSTITUTE A PE, HENCE, DELETED THE ADDITION, T HE GROUNDS RAISED BY THE REVENUE HAVE BECOME REDUNDANT, HENCE, DISMISSED. 16 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA NO. 1804 /MUM ./2007 ASSESSEE S APPEAL 17 . THIS APPEAL ARISES OUT OF THE ORDER GIVING APPEAL EFFECT PASSED BY THE ASSESSING OFFICER . I N VIEW OF OUR DECISION IN ITA NO.119/MUM./2006, HEREIN BEFORE, THIS APPEAL HAS BECOME INFRUCTUOUS, HENCE, DISMISSED. 18 . IN THE RESULT, ASSESSEES APPEAL IN ITA NO.119/MUM./2006 IS PARTLY ALLOWED; REVENUES APPEAL IN ITA NO.368/MUM./2006 AND ASSESSEES APPEAL IN ITA NO.1804/MUM./2007, ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 22.02.2019 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 22.02.2019 24 NAGASE AND COMPANY LTD. COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI