DDIT, New Delhi V. M/s. Whirlpool India Holdings Ltd., New Delhi

ITA 2475/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82195 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 18-12-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR SENIOR
• Assessee Lawyers: TAPAS RAM MISHRA
• Keywords: Transfer pricing; Permanent establishment
• Section: 234B; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H : NEW DELHI) BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO.2475/DEL./2012 (ASSESSMENT YEAR : 2001-02) ITA NO.2476/DEL./2012 (ASSESSMENT YEAR : 1999-00) ITA NO.2477/DEL./2012 (ASSESSMENT YEAR : 1998-99) ITA NO.2478/DEL./2012 (ASSESSMENT YEAR : 1997-98) DDIT, CIRCLE 2 (2), VS. M/S. WHIRLPOOL INDIA HOLD INGS LTD., NEW DELHI. B 1/A-12, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA RAOD, NEW DELHI 110 044. (PAN : AAACW0039J) ITA NO.5445/DEL./2011 (ASSESSMENT YEAR : 2003-04) ITA NO.5446/DEL./2011 (ASSESSMENT YEAR : 2004-05) ITA NO.5447/DEL./2011 (ASSESSMENT YEAR : 2005-06) JDIT, CIRCLE 2 (2), VS. M/S. WHIRLPOOL INDIA HOLD INGS LTD., NEW DELHI. B 1/A-12, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA RAOD, NEW DELHI 110 044. (PAN : AAACW0039J) ITA NO.2477/DEL./2012 & ORS. 2 CO NO.281/DEL/2012 (IN ITA NOS.2475/DEL./2012) (ASSESSMENT YEAR : 2001-02) CO NO.282/DEL/2012 (IN ITA NOS.2476/DEL./2012) (ASSESSMENT YEAR : 1999-00) CO NO.283/DEL/2012 (IN ITA NOS.2477/DEL./2012) (ASSESSMENT YEAR : 1998-99) CO NO.284/DEL/2012 (IN ITA NOS.2478/DEL./2012) (ASSESSMENT YEAR : 1997-98) M/S. WHIRLPOOL INDIA HOLDINGS LTD., VS. DDIT, CIRCL E 2 (2), B 1/A-12, NEW DELHI. MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA RAOD, NEW DELHI 110 044. (PAN : AAACW0039J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI TAPAS RAM MISHRA, ADVOCATE REVENUE BY : SHRI J.P. CHANDRAKAR, SENIOR DR O R D E R PER BENCH : THE ASSESSEE, M/S. WHIRLPOOL INDIA HOLDINGS LTD. ( WIHL), IS A COMPANY INCORPORATED IN USA AND IT IS A WHOLLY OWNE D SUBSIDIARY OF M/S. WHIRLPOOL CORPORATION USA. IT HAS OPENED A BR ANCH IN NEW DELHI. IT WAS CLAIMED THAT THE MAIN OBJECT OF THIS BRANCH IS TO WATCH AND SAFEGUARD THE INTEREST OF THE HOLDING COMPANY IN INDIA. THE EXPENSES ARE MET OUT OF ITA NO.2477/DEL./2012 & ORS. 3 THE FUND RECEIVED FROM THE HEAD OFFICE. THE PARENT COMPANY, M/S. WHIRLPOOL CORPORATION, HAS ALSO A SUBSIDIARY COMPAN Y IN INDIA I.E. M/S. WHIRLPOOL OF INDIA LIMITED (WIL) AND THIS COMPANY I S ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF CONSUMER DURA BLE GOODS. IT IS SUBMITTED THAT THE MAIN ACTIVITY OF THE BRANCH OFFI CE OF THE ASSESSEE COMPANY IS TO PROTECT AND SAFEGUARD THE INTEREST OF PARENT COMPANY IN INDIA, WHICH HAS MADE INVESTMENT IN EQUITY CAPITAL OF WIL THROUGH ITS SUBSIDIARY COMPANY IN MAURITIUS. THE PARENT COMPAN Y WANTED TO ENSURE THAT SOME TOP LEVEL EMPLOYEES ARE PLACED IN WIL TO MANAGE ITS AFFAIRS. HOWEVER, DUE TO LEGAL RESTRICTIONS UNDER THE COMPAN IES ACT, THESE PERSONS COULD NOT BE ADEQUATELY REMUNERATED BY WIL AS IT WA S INCURRING LOSS CONTINUOUSLY. THEREFORE, THE PARENT COMPANY HAS PA ID REMUNERATION OF THESE PERSONS THROUGH THE BRANCH OFFICE IN INDIA. THE ASSESSEES CLAIM BEFORE THE ASSESSING OFFICER IS THAT NO BUSINESS OP ERATION HAS BEEN CONDUCTED BY THE BRANCH OFFICE IN INDIA, THEREFORE, IT IS NOT LIABLE TO BE ASSESSED TO TAX IN INDIA. THIS ISSUE HAS BEEN DISC USSED ELABORATELY BY THE ITAT IN ITS ORDER FOR ASSESSMENT YEAR 2002-03. 2. IN ALL THESE REVENUES APPEAL, THE GROUNDS TAKEN BY THE REVENUE ARE COMMON AND READ AS UNDER :- 1. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE WHILE GIVING RELIEF TO THE ASSESSEE, THE CIT(A) HAD ERRED IN PLACING RELIANCE UPON THE ORDERS OF THE ITAT IN ASSESSEE'S CASE FOR A.Y. 2002-03, WHICH HAVE NOT BEEN ACCEPTED BY THE DEPART MENT. ITA NO.2477/DEL./2012 & ORS. 4 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAD ERRED IN HOLDING THAT THE ASSESSEE D ID NOT HAVE ANY PE IN INDIA IN TERMS OF INDO-USA DTM. 3. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE BRANCH OFFICE OF THE ASSESSEE COMPANY DID NOT RENDER ANY SERVICES WHICH WERE LIABLE TO BE TAXED IN INDIA. 4. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) IS PERVERSE AND BAD IN LAW IN VIE W OF THE FACT THAT THE ADDITION TO THE INCOME OF THE ASSESSEE COM PANY WAS MADE AFTER IT WAS FOUND THAT ITS TRANSACTIONS WITH ITS ASSOCIATED ENTERPRISE I.E. WHIRLPOOL INDIA LTD. WAS NOT AT ARM 'S LENGTH AS PER THE FINDINGS GIVEN BY THE TPO. 5. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MOD IFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OR BEFORE T HE HEARING OF THE APPEAL. IN ALL THESE CROSS OBJECTIONS, THE GROUNDS TAKEN IN THE CROSS OBJECTIONS ARE ALSO COMMON WHICH READ AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT (A) ERRED ON FACTS AND LAW IN NOT ACCEP TING THE APPELLANTS (RESPONDENT HEREIN) CONTENTION THAT THE REOPENING OF THE ASSESSMENT WAS BAD IN LAW, AND IN NOT CANCELLIN G THE ASSESSMENT U/S 147/143 (3) ON THAT GROUND. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER, AMEND O R VARY FROM THE AFORESAID GROUNDS OF APPEAL AT OR BEFORE T HE TIME OF HEARING. 3. IN ALL THESE APPEALS, GROUND NO.1 MENTIONS THAT THE CIT (A) HAS PLACED RELIANCE ON THE ORDER OF THE ITAT IN ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2002-03 WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE. HENCE, THE APPEAL FILED BEFORE THE ITAT. ITA NO.2477/DEL./2012 & ORS. 5 4. BEFORE US ALSO, IT WAS PLEADED BY LD. AR THAT TH E ISSUE IS EXACTLY THE SAME WHICH IS INVOLVED IN THE ASSESSMENT YEAR 2002- 03. IT WAS ALSO CLAIMED THAT THE FACTS ARE EXACTLY THE SAME. IT WA S ALSO STATED THAT IN ALL THESE YEARS, THERE WAS NO PROFIT. NO LOSS HAS BEE N CLAIMED TO BE CARRY FORWARD AS PER PROVISIONS OF I.T. ACT. LD. AR ALS O PLEADED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT IN ITA NO.622/DEL/2006 FOR ASSESSMENT YEAR 2002-03 DATED 14.01.2011. LD. DR W AS ALSO NOT HAVING ANY OTHER VIEW ON THIS PLEADINGS. THE ITAT IN ITS DECISION, CITED SUPRA, HAS DECIDED THE ISSUE AS UNDER :- 7. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE IS A COM PANY INCORPORATED IN THE USA AND IT HAS OPENED A BRANCH OFFICE IN INDIA WITH THE PERMISSION OF RESERVE BANK OF INDIA INTER-ALIA FOR UNDERTAKING TH E ACTIVITIES OF- (A) IMPORT/EXPORT OF GOODS TO AND FROM INDIA; (B) PROVI DING SERVICE SUPPORT TO LOCAL SUPPLIERS FOR DEVELOPMENT OF GOOD QUALITY RAW-MATERIAL, COMPONENTS AND FINISHED PRODUCTS FOR LOCAL AND OVER SEAS REQUIREMENTS; AND (C) PROMOTING TECHNICAL/FINANCIAL COLLABORATION AND OTHER INCIDENTAL ACTIVITIES MENTIONED IN THE APPLICATION WHICH ARE N OT IN THE NATURE OF MANUFACTURING OR PROCESSING ACTIVITIES. THE ASSESSE E FILED ITS RETURN DECLARING NIL INCOME. IT WAS ACCOMPANIED BY STATEME NT OF INCOME WHICH SHOWED LOSS OF ABOUT RS.6.22 CRORES. THIS AMOUNT RE PRESENTS PAYMENT OF SALARIES TO THE EMPLOYEES SECONDED BY THE PARENT CO MPANY. THE EXPENSES WERE MET OUT OF REPATRIATION OF FOREIGN EXCHANGE FR OM THE USA AND IT IS THE CASE OF THE ASSESSEE THAT SUCH FOREIGN EXCHANGE WAS RECEIVED FROM THE PARENT COMPANY. THE NOTE TO THE PROFIT AND LOSS ACC OUNT STATES THAT THE MAIN ACTIVITY OF THE BRANCH IS TO WATCH AND SAFEGUA RD THE INTEREST OF THE PARENT COMPANY IN INDIA. SINCE THERE IS NO BUSINESS ACTIVITY IN INDIA, THE LOSS IS NOT CLAIMED. THE MAIN QUESTION IS-WHETHER, THE BRANCH OFFICE OF THE ASSESSEE IN INDIA CONSTITUTES PE IN INDIA? IT A PPEARS TO US THAT PARAGRAPH NOS. 1 AND 2 OF ARTICLE 5 OF THE TREATY B ETWEEN THE USA AND INDIA ARE MATERIAL FOR DECIDING THIS ISSUE. THESE P ARAGRAPHS READ AS UNDER:- 1. FOR THE PURPOSES OF THIS CONVENTION, THE TERM P ERMANENT ESTABLISHMENT MEANS A FIXED PLACE OF BUSINESS THRO UGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRI ED ON. 2. THE TERM PERMANENT ESTABLISHMENT INCLUDES ESPE CIALLY : ITA NO.2477/DEL./2012 & ORS. 6 (A) A PLACE OF MANAGEMENT; (B) A BRANCH; (C) AN OFFICE; (D) A FACTORY; (E) A WORKSHOP; (F) A MINE, AN OIL OR GAS WELL, A QUARRY, OR ANY OT HER PLACE OF EXTRACTION OF NATURAL RESOURCES. (G) A WAREHOUSE, IN RELATION TO A PERSON PROVIDING STORAGE FACILITIES FOR OTHERS; (H) A FARM, PLANTATION OR OTHER PLACE WHERE AGRICUL TURE, FORESTRY, PLANTATION OR RELATED ACTIVITIES ARE CARR IED ON; (I) A STORE OR PREMISES USED AS A SALES OUTLET; (J) AN INSTALLATION OR STRUCTURE USED FOR THE EXPLO RATION OR EXPLOITATION OF NATURAL RESOURCES, BUT ONLY IF SO U SED FOR A PERIOD OF MORE THAN 120 DAYS IN ANY TWELVE-MONTH PERIOD; (K) A BUILDING SITE OR CONSTRUCTION, INSTALLATION O R ASSEMBLY PROJECT OR SUPERVISORY ACTIVITIES IN CONNECTION THEREWITH, WHERE SUCH SITE, PROJECT OR ACTIVITIES (TOGETHER WITH OTHER SUCH SITES, PROJECTS OR ACTIVI TIES, IF ANY) CONTINUE FOR A PERIOD OF MORE THAN 120 DAYS IN ANY TWELVE-MONTH PERIOD; (L) THE FURNISHING OF SERVICES, OTHER THAN INCLUDED SERVICES AS DEFINED IN ARTICLE 12 (ROYALTIES AND FEES FOR IN CLUDED SERVICES), WITHIN A CONTRACTING STATE BY AN ENTERPR ISE THROUGH EMPLOYEES OR OTHER PERSONNEL, BUT ONLY IF: (I) ACTIVITIES OF THAT NATURE CONTINUE WITHIN THAT STATE FOR A PERIOD OR PERIODS AGGREGATING TO MORE THAN 90 DAYS WITHIN ANY TWELVE MONTH PERIOD; OR (II) THE SERVICES ARE PERFORMED WITHIN THAT STATE F OR A RELATED ENTERPRISE (WITHIN THE MEANING OF PARAGRAPH 1 OF ARTICLE 9 (ASSOCIATED ENTERPRISES). 7.1 THE CASE OF THE LD. COUNSEL IS THAT NO BUSINESS ACTIVITY HAS BEEN CARRIED OUT IN INDIA AND, THEREFORE, THE BRANCH OFF ICE DOES NOT CONSTITUTE THE PE. AS AGAINST THE AFORESAID, THE CASE OF THE L D. DR IS THAT THE BRANCH ITA NO.2477/DEL./2012 & ORS. 7 OFFICE CONSTITUTES PE IN INDIA, FROM WHICH SERVICES HAVE BEEN RENDERED TO THE PARENT COMPANY FOR SAFEGUARDING THE INTEREST OF THE LATTER, CONSISTING PRIMARILY THE INVESTMENT MADE BY IT THROUGH MAURITI AN COMPANIES IN WIL. FOR THIS PURPOSE, THE EMPLOYEES OF THE ASSESSE E HAVE BEEN SECONDED, ON WHICH EXPENDITURE HAS BEEN INCURRED. 7.2 WE MAY EXAMINE THE RIVAL CONTENTIONS IN TERMS O F PARAGRAPH NOS. 1 AND 2 OF ARTICLE 5. PARAGRAPH NO. 1 DEFINES THE TERM PE IN GENERAL TERMS TO MEAN A FIXED PLACE OF BUSINESS THR OUGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRI ED ON. IT IS TRUE THAT THE ASSESSEE HAS A FIXED PLACE OF BUSINESS IN INDIA IN THE FORM OF THE BRANCH OFFICE. HOWEVER, THERE SEEMS TO BE NOTHING ON RECOR D TO SHOW THAT THE BUSINESS OF THE ASSESSEE HAS BEEN CONDUCTED WHOLLY OR PARTLY THROUGH THIS BRANCH. THE REASON IS THAT ONLY EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT IS PAYMENT OF SALARIES, STATED TO HAVE BEEN REIMBURSED BY THE PARENT COMPANY. THE EMPLOYEES ARE THE EMPLOYEES OF WIL AND LOOK AFTER ITS BUSINESS. THE CONCLUSION WHICH CAN BE DRAWN IS THAT THE EMPLOYEES ARE THAT OF THE PARENT COMPANY WHICH HAS DISBURSED THE PAYMENT OF SALARIES THROUGH THE ASSESSEE. THAT, HOWEVER, DOES NOT MAKE THE PERSONNEL TO BE THE EMPLOYEES OF THE ASSESSEE C OMPANY. THERE COULD BE A VALID DISPUTE WHETHER THE EMPLOYEES ARE OF THE WIL OR THAT OF THE PARENT COMPANY. IT IS POSSIBLE TO ARGUE THAT IN TER MS OF RESOLUTIONS OF THE BOARD OF THE WIL, THE EMPLOYEES WERE UNDER CONTROL AND SUPRINTENDENCE OF THE BOARD OF DIRECTORS OF THE WIL. THEREFORE, TH E EMPLOYEES ARE THOSE OF THE WIL. IT IS EQUALLY PLAUSIBLE TO ARGUE THAT S INCE SALARIES HAVE BEEN PAID BY THE PARENT COMPANY, THE ECONOMIC REALITY OV ERTAKES THE LEGAL REALITY. THEREFORE, THE EMPLOYEES ARE THOSE OF THE PARENT COMPANY. NONETHELESS, IT WILL BE DIFFICULT TO COME TO A CONC LUSION THAT THE EMPLOYEES ARE THOSE OF THE ASSESSEE COMPANY. THERE COULD BE ANOTHER ARGUMENT ADVANCED IN THIS BEHALF BY THE LD. DR THAT IT HAS NOT BEEN PROVED CONCLUSIVELY THAT THE MONIES PAID BY WAY OF SALARIES WERE REIMBURSED TO THE ASSESSEE COMPANY BY THE PARENT CO MPANY. THIS STAND IS TAKEN ONLY BY WAY OF AN ARGUMENT. THE POSITION BECO MES A LITTLE MORE CONFUSED AS ACCORDING TO US LAWS, THE ACCOUNTS OF T HE PARENT COMPANY AND THE ASSESSEE COMPANY HAVE TO BE MERGED AND, THU S, THE DISTINCTION BETWEEN THE ASSESSEE AND THE PARENT COMPANY BECOMES BLURRED. WE HAVE CONSIDERED THIS MATTER ALSO. WE ARE OF THE VIEW THA T BEFORE BRINGING A FOREIGN COMPANY TO TAX IN INDIA ON ITS BUSINESS PRO FITS, IT IS FOR THE REVENUE TO ESTABLISH THAT IT HAS PE IN INDIA. THIS HAS NOT BEEN DONE. THE CASE OF THE REVENUE ALSO HINGES ON THE STATEMENT OF MR. S.K. PRADHAN RECORDED ON OATH BY THE AO ON 13.3.2003 UNDER THE P ROVISION OF SECTION 131 OF THE ACT. THE REVENUE HAS RELIED VERY HEAVILY ON ANSWER TO QUESTION NO. 7. IN THIS ANSWER, IT HAS INTER-ALIA B EEN DEPOSED THAT THE PARENT COMPANY HAD TIED UP THAT WIL (FORMERLY KNOWN AS KELVINATOR OF INDIA LTD.) AND HAS INVESTED ABOUT RS.300 CRORES IN ACQUIRING MAJORITY STAKE. CONSEQUENT THERETO, THE ASSESSEE OPENED A BR ANCH OFFICE IN INDIA WHICH IS ALSO THE REGIONAL OFFICE OF THE PARENT COM PANY FOR SOUTH ASIA. THIS BRANCH OFFICE OF THE ASSESSEE IS RESPONSIBLE F OR FORMULATING POLICY AND TAKING STRATEGIC DECISION FOR OPERATIONS OF WIL IN INDIA, NEPAL, SRI LANKA, BANGLADESH AND PAKISTAN. THE MANUFACTURING O PERATIONS OF ITA NO.2477/DEL./2012 & ORS. 8 WHIRLPOOL GROUP EXTEND TO MORE THAN 11 COUNTRIES AN D THE PRODUCTS ARE BEING SOLD IN MORE THAN 125 COUNTRIES. THE BRANCH O FFICE CREATES EXPORT OPPORTUNITIES FOR RAW MATERIAL, COMPONENTS AND FINI SHED PRODUCTS FOR OVERSEAS REQUIREMENTS AND WOULD ULTIMATELY GENERATE EXPORT REVENUE FOR THE ASSESSEE COMPANY. IT IS ALSO RESPONSIBLE FOR ID ENTIFYING SUPPLIER OF GOODS ETC. BOTH FOR EXPORT AND LOCAL CONSUMPTION OF THE GROUP COMPANIES. FOR THIS PURPOSE, THE PARENT COMPANY AND THE INDIAN BRANCH ASSIST THE SUPPLIERS TO INTRODUCE NEW TECHNOLOGIES ETC. THE BR ANCH OFFICE ACTS AS A COORDINATING AGENCY BETWEEN THE PARENT COMPANY AND THE ASSESSEE FOR PROVIDING LATEST MANAGEMENT INFORMATION IN RESPECT OF TECHNOLOGY, LEGAL, COMMERCIAL AND POLITICAL FIELDS. IT ALSO ADVISES ON THE MATTERS OF STAFF TRAINING, EDUCATION, DEVELOPMENT AND IMPLEMENTATION OF HUMAN RESOURCES. IT ALSO SCOUTS FOR INVESTMENT OPPORTUNIT IES IN CONSUMER DURABLE GOODS IN COLLABORATION WITH WIL. ON THE BASIS OF TH IS ANSWER, IT IS ARGUED THAT THE BRANCH OFFICE IS TAKING UP ALL THE ACTIVIT IES WHICH ARE GENERALLY MANAGERIAL IN NATURE AND THESE ACTIVITIES ARE UNDER TAKEN FOR THE BENEFIT OF THE PARENT COMPANY, BEING THE PURPOSE FOR WHICH THE COMPANY HAS BEEN INCORPORATED. ON THE OTHER HAND, THE ARGUMENT OF THE LD. COUNSEL IS THAT THESE ARE THE PURPOSES FOR WHICH THE ASSESSEE COMPANY HAS BEEN INCORPORATE D. THESE ACTIVITIES HAVE NOT BEEN UNDERTAKEN IN THE YEAR UNDER QUESTION . THE SAME IS CLEAR FROM ANSWER TO QUESTION NO. 3, WHICH CLEARLY STATES THAT THE ASSESSEE IS NOT RENDERING ANY KIND OF SERVICES TO ANY COMPANY. THEREFORE, READING THE STATEMENT AS A WHOLE WOULD PROVE BEYOND DOUBT T HAT NO BUSINESS ACTIVITY HAS BEEN UNDERTAKEN BY THE BRANCH OFFICE. IN THIS CONNECTION, WE HAVE CONSIDERED THE RETURN OF INCOME AND THE STATEM ENT OF MR. S.K. PRADHAN. FROM THESE, IT BECOMES CLEAR THAT THE ASSE SSEE HAS MADE PAYMENT TO WIL OF THE SALARIES OF THE SECONDED EMPL OYEES. WE HAVE ALREADY CONCLUDED THAT IT HAS NOT BEEN ESTABLISHED IN ANY MANNER THAT THESE EMPLOYEES ARE THOSE OF THE ASSESSEE COMPANY. BY SUCH SECONDMENT, IT CANNOT BE SAID THAT THE ASSESSEE HAS RENDERED AN Y SERVICE EITHER TO WIL OR TO THE PARENT COMPANY. THEREFORE, ANSWER TO QUES TION NO. 7 IS ONLY IN RESPECT OF INTENDED ACTIVITIES AND ANSWER TO QUESTI ON NO. 3 IS IN RESPECT OF ACTUAL ACTIVITIES. THUS, IT IS HELD THAT THE ASSESS EE COMPANY DOES NOT HAVE A PE IN INDIA AS UNDERSTOOD UNDER PARAGRAPH NO . 1 OF ARTICLE 5. 7.3 PARAGRAPH NO. 2 INCLUDES CERTAIN PLACES WITHIN THE AMBIT OF THE PE SUCH AS A PLACE OF MANAGEMENT, A BRANCH, AN OFFI CE, A FACTORY, A WORKSHOP ETC. THESE PLACES ARE MENTIONED IN CLAUSES (A) TO (E) OF PARAGRAPH NO. 2. OTHER PLACES MENTIONED IN CLAUSES (F) TO (K) ARE NOT APPLICABLE TO THE FACTS OF THE CASE AS THESE PLACES ARE IN THE NATURE OF A MINE, A WAREHOUSE, A FARM, A STORE, AN INSTALLATION OR A BUILDING SITE ETC. CLAUSE (L) CONSISTS OF THE FURNISHING OF SERVICES, OTHER THAN INCLUDED SERVICES AS DEFINED IN ARTICLE 12 (ROYALTIES AND FE ES FOR INCLUDED SERVICES) WITHIN A CONTRACTING STATE BY AN ENTERPRISE THROUGH EMPLOYEES OR OTHER PERSONNEL SUBJECT TO CONTINUATION OF THE ACTIVITY F OR THE PRESCRIBED NUMBER OF DAYS IN A PERIOD OF 12 MONTHS. AS IT HAS NOT BEEN ESTABLISHED THAT THE SECONDED EMPLOYEES ARE THOSE OF THE ASSESS EE, IT CANNOT BE HELD THAT SERVICES WERE FURNISHED BY THE ASSESSEE EITHER TO WIL OR TO THE PARENT COMPANY. THEREFORE, WE ARE OF THE VIEW THAT THE BRA NCH OFFICE, THOUGH A ITA NO.2477/DEL./2012 & ORS. 9 FIXED PLACE OF BUSINESS, HAS NOT CARRIED OUT THE BU SINESS OF THE ASSESSEE WHOLLY OR PARTLY AND IT DOES NOT CONSTITUTE THE PE. 7.4 THE LD. DR HAS ALSO RELIED ON PARAGRAPH NO. 1(B ) OF ARTICLE 9 REGARDING ASSOCIATED ENTERPRISES. IT IS PROVIDED TH AT WHERE THE SAME PERSONS PARTICIPATE DIRECTLY OR INDIRECTLY IN THE M ANAGEMENT, CONTROL OR CAPITAL OF AN ENTERPRISE OF A CONTRACTING STATE AND AN ENTERPRISE OF THE OTHER CONTRACTING STATE AND IN EITHER CASE CONDITIO NS ARE MADE OR IMPOSED BETWEEN THE TWO ENTERPRISES IN THEIR COMMERCIAL OR FINANCIAL RELATIONS WHICH DIFFER FROM THOSE WHICH WOULD BE MADE BETWEEN INDEPENDENT ENTERPRISES, THEN ANY PROFITS WHICH, BUT BY REASON OF THOSE CONDITIONS HAVE NOT SO ACCRUED, MAY BE INCLUDED IN THE PROFITS OF THAT ENTERPRISE AND TAXED ACCORDINGLY. IT IS FAIRLY SUBMITTED BY THE LD . DR THAT ARTICLE 9 IS AN EXTENSION OF ARTICLE 7 REGARDING DETERMINATION OF A RMS LENGTH PROFITS. SUCH A COMPUTATION WILL ARISE ONLY IF THER E IS A PE IN INDIA. SINCE THERE IS NO PE IN INDIA, THE QUESTION OF COMPUTING PROFITS EITHER UNDER ARTICLE 7 OR ARTICLE 9 DOES NOT ARISE. 7.5 AS THE ASSESSEE IS NOT CHARGEABLE TO TAX IN IND IA IN TERMS OF THE PROVISION CONTAINED IN ARTICLE 5 OF THE TAX TREATY, IT IS NOT NECESSARY FOR US TO GO INTO THE QUESTION WHETHER TRANSFER PRICING AD JUSTMENT COULD BE MADE IN DETERMINING SUCH PROFIT. SINCE THERE IS NO PROFI T, THERE WOULD BE NO QUESTION OF TRANSFER PRICING ADJUSTMENT. THUS, WE D O NOT THINK IT NECESSARY TO GO INTO RULE 10 OF THE INCOME-TAX RULE S, RECOGNIZED METHODS OF DETERMINING ARMS LENGTH PROFITS OR THE CASES RELIED UPON BY THE LD. DR IN THIS MATTER. IN VIEW OF THE AFORESAID FINDING, IT IS ALSO NOT NECESSARY TO GO INTO THE DECISION IN THE CASE OF HC L INFOSYSTEMS LTD. (DEL) AND VANUNBURG GROUP BV (AR) (SUPRA). 7.6 THE RESULT OF AFORESAID DISCUSSION IS THAT THE ASSESSEE IS NOT LIABLE TO PAY TAX IN INDIA IN THIS YEAR. 8. AS THE ASSESSEE IS NOT LIABLE TO BE TAXED UNDER THE INCOME-TAX ACT, 1961, THE GROUND REGARDING CHARGING OF INTERES T U/S 234B DOES NOT SURVIVE AND, THEREFORE, WE NEED NOT DISCUSS THE CAS E OF JACABS CIVIL INCORPORATION (SUPRA). 9. IN THE RESULT, THE APPEAL IS ALLOWED. SINCE THE FACTS AND THE ISSUE ARE SAME, THEREFORE, WE ADOPT THE SAME FOR THESE ASSESSMENT YEARS AS DELIVERED BY ITAT IN ASSE SSEE IN ASSESSEES OWNS CASE FOR ASSESSMENT YEAR 2002-03. RESPECTFULL Y FOLLOWING THE SAME, WE DISMISS ALL THESE SEVEN APPEALS FILED BY THE REV ENUE. ITA NO.2477/DEL./2012 & ORS. 10 5. THE LD. AR HAS ALSO MENTIONED DURING THE HEARING THAT ASSESSEE IS NOT PRESSING ALL THE FOUR CROSS OBJECTIONS FILED BY THE ASSESSEE. HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 6. IN THE RESULT, ALL THE SEVEN APPEALS FILED BY TH E REVENUE ARE DISMISSED AND ALL THE FOUR CROSS OBJECTIONS FILED BY THE ASSE SSEE ARE DISMISSED AS NOT PRESSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 23 RD DAY OF DECEMBER, 2014. SD/- SD/- (C.M. GARG) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 23 RD DAY OF DECEMBER, 2014 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXV, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.