DDIT, New Delhi V. M/s. Nipro Asia Pte. Ltd., Satara

ITA 4078/DEL/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6576 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I1
• Next Hearing Date: 15-02-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 02-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; International transaction; Permanent establishment
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 92E; 44BB; 9(1); 9(1); 9(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : I-1 : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4078/DEL/2013 ASSESSMENT YEAR : 2003-04 DDIT, CIRCLE-2(1), INTERNATIONAL TAXATION, NEW DELHI. VS. NIPRO ASIA PTE LTD., C/O NIPRO INDIA CORPORATION PVT. LTD., E-1, KESURDI MIDC, KHANDALA, SATARA. PAN: AABCN8824B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KISHOR PHADKE, CA DEPARTMENT BY : SHRI NEERAJ KUMAR, SR. DR DATE OF HEARING : 15.02.2017 DATE OF PRONOUNCEMENT : 16.02.2017 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 29.04.2013 IN RELATION TO THE ASSESSMENT YEAR 2003-04. ITA NO.4078/DEL/2013 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE ATTRIBUTION OF INCOME BY THE LD. CIT(A) AT A MARK-UP OF 15% ON COS TS INCURRED AS AGAINST THE ASSESSING OFFICER'S PROFIT ATTRIBUTION TO SALES ACTIVITY IN INDIA AT 40% OF THE PROFIT FROM SALES MADE IN INDIA. 3. SUCCINCTLY, THE FACTUAL MATRIX OF THE CASE IS T HAT THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE LAWS OF SINGAPORE. I TS MAIN BUSINESS ACTIVITY IS TRADING OF MEDICAL EQUIPMENTS TO AND FR OM INDIA. THE ASSESSEE IS OPERATING IN INDIA THROUGH A BRANCH OFF ICE WHICH, APART FROM DOING ALL THE ACTIVITIES RELATING TO MARKETING, SAL ES, WAREHOUSING, AFTER SALES SERVICE AND TECHNICAL SERVICES TO THE CUSTOME RS ON BEHALF OF ITS HEAD OFFICE IN INDIA, IS ALSO MARKETING NIPRO BRAND S IN INDIA. THE HEAD OFFICE OF THE ASSESSEE COMPANY IS ALSO DIRECTLY UND ERTAKING SALES ACTIVITY IN INDIA. THE ASSESSEE COMPANY MADE SALES IN INDIA OF NEPHROLOGY PRODUCTS AND CARDIOLOGY PRODUCTS, INJECTION RELATED PRODUCTS AND BULK PRODUCTS THROUGH DISTRIBUTORS OR THROUGH THE SALES FROM OVERSEAS TO THE END USERS. THE INDIAN BRANCH OFFICE SHOWED ONLY TH E TRANSACTIONS IN ITS ACCOUNT WHICH WERE ROUTED THROUGH THE BRANCH AND TH E VALUE OF PRODUCTS ITA NO.4078/DEL/2013 3 SOLD DIRECTLY OR THROUGH DISTRIBUTORS WAS NOT INCOR PORATED. IT IS UNDISPUTED THAT THE INDIAN BRANCH UNDERTAKES ALL TH E ACTIVITIES FOR MARKETING, SELLING AND AFTER SALES SERVICES OF THE PRODUCTS SOLD BY THE ASSESSEE IN INDIA, EITHER DIRECTLY OR THROUGH THE D ISTRIBUTORS, APART FROM MAKING SALES TO CUSTOMERS IN INDIA FROM THE BRANCH OFFICE. IN THE GIVEN FACTS, THE AO HELD THAT THE BRANCH OFFICE CONSTITUT ED PERMANENT ESTABLISHMENT IN INDIA UNDER ARTICLE 5 OF THE DOUBL E TAXATION AVOIDANCE AGREEMENT WITH SINGAPORE AS WELL AS THE B USINESS CONNECTION IN INDIA IN TERMS OF SECTION 9(1) OF THE INCOME-TA X ACT, 1961 (HEREINAFTER ALSO CALLED THE ACT). THEREAFTER, H E COMPUTED THE AMOUNT OF PROFIT ATTRIBUTABLE TO THE BUSINESS CONNECTION/P E. IN THIS REGARD, IT WAS NOTICED THAT THE ASSESSEE FILED AUDIT REPORT UN DER SECTION 92E IN FORM NO.3CEB DIVULGING INTERNATIONAL TRANSACTIONS B ETWEEN THE HEAD OFFICE AND BRANCH OFFICE. AS THE INDIAN BRANCH WAS NOT RECEIVING ANY INCOME IN LIEU OF SERVICES RENDERED IN SELLING THE PRODUCTS DIRECTLY BY THE HEAD OFFICE, THE AO HELD THAT THE TRANSFER PRICING STUDY REPORT WAS NOT RELIABLE. IT WAS FURTHER FOUND THAT NO COMPARABLE CASES WERE CITED IN THE TRANSFER PRICING STUDY REPORT. IN VIEW OF THESE FAC TS, THE AO HELD THAT ITA NO.4078/DEL/2013 4 THERE WAS NO JUSTIFICATION FOR THE APPLICABILITY OF `COST PLUS METHOD AS ALLEGEDLY APPLIED BY THE ASSESSEE FOR ARRIVING AT A RMS LENGTH COMPENSATION. THE AO FOUND THE CASE TO BE UNIQUE I N NATURE HAVING NO EXACT COMPARABLES. HE OBSERVED THAT THE ULTIMATE H OLDING COMPANY OF THE ASSESSEE, NAMELY, NIPRO CORPORATION, JAPAN, WAS HAVING THREE OVERSEAS BRANCH OFFICES INCLUDING ONE IN INDIA AND OTHERS IN AFRICA AND UAE. HE INVOKED THE PROVISIONS OF RULE 10 FOR DETER MINING THE INCOME OF THE ASSESSEE. FOR DOING THIS, HE VISITED THE WEB SITE OF THE NIPRO CORPORATION PROVIDING DETAILS OF COMPARATIVE PROFIT AND MARGIN OF THE PARENT COMPANY AS TABULATED ON PAGE 16 OF HIS ORDER . CONSIDERING NET SALES OF NIPRO CORPORATION AND ITS CONSOLIDATED SUB SIDIARIES FOR THE CALENDAR YEAR ENDING 31.12.2003 AT 180370 MILLIONS OF YEN AND COST OF SALES AT 128776 MILLIONS OF YEN, HE COMPUTED GROSS PROFIT @ 28.60%. SELLING AND GENERAL EXPENSES OF 36695 MILLIONS OF Y EN WERE NOT CONSIDERED IN CALCULATING THE GROSS PROFIT RATE OF 28.60%. HE ATTRIBUTED 40% OF THIS PROFIT TO THE SALES ACTIVITIES IN INDIA THROUGH THE PERMANENT ESTABLISHMENT. SO, THE PROFIT FROM ACTIVITIES IN I NDIA WAS WORKED OUT AT 11.44% (40% OF 28.60%) OF THE TURNOVER. AFTER APPL YING SUCH PROFIT ITA NO.4078/DEL/2013 5 RATE OF 11.44% TO THE TOTAL TURNOVER OF THE ASSESSE E COMPANY IN INDIA, HE REDUCED COSTS INCURRED IN INDIA AND ALSO ALLOWED DE DUCTION U/S 44C OF THE ACT AND COMPUTED TAXABLE INCOME OF THE ASSESSEE AT RS.80,95,721/-, AS UNDER:- TOTAL SALES TURNOVER IN INDIA = USD 36,15,095 (AS FURNISHED BY THE ASSESSEE) PROFIT ATTRIBUTABLE TO INDIAN OPERATIONS CALCULATED @ 11.44% AS PER THE DISCUSSION MADE ABOV E= USD 4,13,567 CONVERTED INTO INR @ 47.61 = RS.1,96,89,925 LESS COST INCURRED IN INDIA = RS.1,11,68,113 (EXCLUDING COST OF SALES AS THE SAME HAS BEEN ACCOUNTED FOR WHILE COMPUTING GROSS PROFIT) NET INCOME = RS.85,21,812 LESS H.O. EXPENSES @ 5% U/S 44C OF THE ACT = RS.4,42,0 90 NET TAXABLE INCOME = RS.80,95,721/- 4. AGGRIEVED THEREBY, THE ASSESSEE MOVED THE FIRST APPELLATE AUTHORITY AGAINST THE ADDITION OF RS.80.95 LAC. THE LD. CIT( A) CAME TO HOLD THAT THE TRANSFER PRICING STUDY REPORT WAS RIGHTLY REJEC TED BY THE AO ITA NO.4078/DEL/2013 6 INASMUCH AS IT DID NOT GIVE ANY INDICATION KEY FOR ALLOCATION OF COST AND HOW THE SEGMENTS WERE CREATED. HE, THEREFORE, REFU SED TO TAKE COGNIZANCE OF THE SEGMENTAL RESULTS SHOWN BY THE AS SESSEE FOR THE PURPOSES OF COMPARISON. HE FURTHER DID NOT AGREE W ITH THE AO IN TAKING 40% CONTRIBUTION OF SELLING AND MARKETING FUNCTIONS . TAKING NOTE OF THE TP STUDY REPORT OF THE ASSESSEE FOR THE A.Y. 2006-0 7 IN WHICH THE ASSESSEE HAD USED COST PLUS OF 15% AS A MARK-UP ON THE TOTAL COST INCURRED BY THE BRANCH OFFICE IN INDIA AS AGAINST T HE COMPENSATION TO THE BRANCH OFFICE AT COST PLUS 5%, THE LD. CIT(A) HELD THAT COST PLUS METHOD SHOULD BE THE MOST APPROPRIATE METHOD IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. AS THE BUSINESS MODEL O F THE ASSESSEE FOR ALL THE YEARS REMAINED THE SAME, THE LD. CIT(A) HELD TH AT 15% SHOULD BE ADDED TO THE ASSESSEES COSTS FOR THE PURPOSES OF MARK-UP, WHICH RESULTED IN REDUCING THE TOTAL INCOME TO RS.16,75, 217/-. THE REVENUE IS AGGRIEVED AGAINST THE REDUCTION IN ADDITION. THERE IS NO CROSS APPEAL FROM THE SIDE OF THE ASSESSEE, MEANING THEREBY, THA T ALL THE ADVERSE FINDINGS OF THE AO AS UPHELD BY THE CIT(A), HAVE B EEN IMPLIEDLY ACCEPTED. ITA NO.4078/DEL/2013 7 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FAC T THAT THE BRANCH OFFICE CONSTITUTES A PERMANENT ESTABLISHMENT OF THE ASSESS EE IN INDIA WHICH HAS BEEN FAIRLY ACCEPTED BY THE LD. AR AS WELL. ENTIRE CONTROVERSY BEFORE US REVOLVES ONLY AROUND THE ATTRIBUTION OF INCOME TO S UCH PE. THE ASSESSEE FILED REPORT IN FORM NO. 3CEB AND TRIED TO JUSTIFY THE ALP OF THE INTERNATIONAL TRANSACTION UNDER THE `COST PLUS METH OD ON THE SERVICES RENDERED, `COMPARABLE UNCONTROLLED PRICE METHOD ON TRADING OF NEPHROLOGY PRODUCTS AND `RESALE PRICE METHOD ON OT HER PRODUCTS SOLD IN INDIA. THE TP STUDY REPORT, AS HELD BY THE LD. CIT(A), DID NOT GIVE ANY INDICATION AS TO THE ALLOCATION OF COSTS AND HO W THESE SEGMENTS WERE CREATED, WHICH WAS REJECTED BY THE AUTHORITIES BELO W. ON A SPECIFIC QUERY, THE LD. AR CANDIDLY ACCEPTED THAT THE TP STU DY REPORT WAS NOT AVAILABLE AND THE SAME BE TREATED AS RIGHTLY REJECT ED IN VIEW OF THE DEFICIENCIES POINTED BY THE AUTHORITIES. WE, ERGO, APPROVE THIS FINDING. 6. AS A MATTER OF FACT, BOTH THE SIDES HAVE FOCU SED ONLY ON THE MANNER OF DETERMINATION OF THE QUANTUM OF INCOME OF THE AS SESSEE CHARGEABLE TO ITA NO.4078/DEL/2013 8 TAX IN INDIA. THE AO HAS STARTED WITH THE FIGURE OF TOTAL TURNOVER OF THE ASSESSEE IN INDIA FROM ALL SOURCES AT US DOLLARS 36 ,15,095, WHOSE BIFURCATION IS AVAILABLE ON PAGE 41 OF THE PAPER BO OK VIZ., SALES BY SINGAPORE HEAD OFFICE THROUGH INDIAN BRANCH OFFICE AT USD 6,46,408; SALES BY SINGAPORE HEAD OFFICE TO THE DISTRIBUTORS IN INDIA AT USD 11,06,680; AND SALES BY SINGAPORE HEAD OFFICE TO DI RECT CUSTOMERS IN INDIA AT USD 18,62,007. THE AO TOOK UP TOTAL SALES MADE BY THE ASSESSEE IN INDIA EITHER DIRECTLY OR THROUGH THE BR ANCH OFFICE FOR THE PURPOSE OF DETERMINATION OF INCOME. IT IS NOT DISP UTED THAT THE BRANCH OFFICE IN INDIA WAS NOT ONLY EFFECTING SALES DIRECT LY, BUT ALSO UNDERTAKING MARKETING ACTIVITIES IN RESPECT OF GOODS SOLD DIREC TLY BY THE HEAD OFFICE IN INDIA EITHER THROUGH DISTRIBUTORS OR DIRECT CUST OMERS. UNDER THESE CIRCUMSTANCES, IT IS INCORRECT TO ARGUE THAT THE AO APPLIED `FORCE OF ATTRACTION RULE FOR DETERMINING THE INCOME OF THE ASSESSEE. AU CONTRAIRE, WE FIND THAT THE AO HAS RESTRICTED HIMSELF TO THE ` PROFIT ATTRIBUTION PRINCIPLE, INASMUCH AS THE BRANCH OFFI CE IN INDIA RENDERED MARKETING SERVICES TO ITS HEAD OFFICE FOR MAKING DI RECT SALES AND THE AO HAS CONFINED THE COMPUTATION OF INCOME ONLY TO THE EXTENT OF THE ITA NO.4078/DEL/2013 9 CONTRIBUTION MADE BY SUCH MARKETING SERVICES RENDER ED IN INDIA. AN INCOME WHICH IS A QUID PRO QUO TO THE BRANCH OFFICE FOR RENDERING MARKETING SERVICES DIRECTED TOWARDS EFFECTING DIREC T SALES BY THE HEAD OFFICE IN INDIA, FALLS WITHIN THE SWEEP OF `PROFIT ATTRIBUTION. `FORCE OF ATTRACTION RULE IS SAID TO BE APPLIED WHEN INCOME FROM ACTIVITIES DIRECTLY UNDERTAKEN BY HEAD OFFICE IN INDIA, DE HORS THE INVOLVEMENT OF INDIAN BRANCH OFFICE, IS ALSO INCLUDED IN THE TOTAL INCOME . WHERE, HOWEVER, THE INDIAN BRANCH OFFICE RENDERS SOME SERVICES IN RESPE CT OF THE DIRECT SALES MADE BY THE HEAD OFFICE, THE DETERMINATION OF INCOM E FOR SUCH SERVICES, CANNOT BE BROUGHT WITHIN THE AMBIT OF FORCE OF ATTR ACTION RULE. AS THE AO HAS RESTRICTED THE COMPUTATION OF TOTAL INCOME OF T HE ASSESSEE ONLY TO THE EXTENT OF CONTRIBUTION MADE BY THE MARKETING EFFORT DONE BY THE INDIAN BRANCH OFFICE IN THE OVERALL PROFIT FROM THE SALES MADE BY THE HEAD OFFICE IN INDIA, WE, WILL HAVE TO REJECT THE CONTENTION OF THE LD. AR THAT THE AUTHORITIES BELOW APPLIED FORCE OF ATTRACTION RULE. 7. NOW WE TURN TO THE DETERMINATION OF THE QUANTUM OF INCOME CHARGEABLE TO TAX IN INDIA. IT IS REITERATED AT THE COST OF REPETITION THAT ITA NO.4078/DEL/2013 10 BOTH THE SIDES HAVE LIMITED THEIR RESPECTIVE ARGUME NTS ONLY TO THE WORKING DONE BY THE AO OR CIT(A). IT IS NOT THE CAS E OF EITHER SIDE THAT THE INCOME SHOULD HAVE BEEN DETERMINED IN ANY OTHER MANNER. AS SUCH, WE WILL ALSO LIMIT OURSELVES TO THE ARGUMENTS MADE WITHOUT GOING INTO THE LARGER QUESTION WHETHER SUCH MECHANISM OF WORKI NG OF TOTAL INCOME IS RIGHT OR NOT. 8. IT HAS BEEN NOTICED ABOVE THAT THE DIRECT SA LES MADE BY THE HEAD OFFICE WERE NOT RECORDED IN THE BOOKS OF THE BRANCH OFFICE. IT IS FURTHER NOT DISPUTED THAT THE ASSESSEE BOOKED ALL THE EXPEN SES INCURRED IN MARKETING ACTIVITY FOR SUCH DIRECT SALES MADE BY TH E HEAD OFFICE WITHOUT RECEIVING ANY CORRESPONDING INCOME. IN SUCH CIRCUMS TANCES, COUPLED WITH THE ABSENCE OF ANY CORRECT TRANSFER PRICING ST UDY REPORT, THE AO WAS LEFT WITH NO ALTERNATIVE BUT TO DETERMINE INCOME ON SOME REASONABLE BASIS, FOR WHICH HE INVOKED THE PROVISIONS OF RULE 10 OF INCOME-TAX RULES, 1962. THE LD. CIT(A) NOTED IN PARA 5 OF THE IMPUGNED ORDER THAT THE ASSESSEE IN SUBSEQUENT ASSESSMENT YEARS, NAMELY , 2005-06 AND 2006- 07 HAS USED COST PLUS 15% AS A MARK UP ON TOTAL COS T INCURRED BY THE ITA NO.4078/DEL/2013 11 BRANCH OFFICE IN INDIA, WHEREAS THE BRANCH OFFICE W AS COMPENSATED AT COST PLUS 5%. WE FIND SOME INFIRMITIES IN THIS FIN DING. WE HAVE GONE THROUGH THE TRANSFER PRICING STUDY REPORT FOR THE A .Y. 2005-06 WHICH HAS BEEN PLACED AT PAGE 158 OF THE PAPER BOOK. IT CAN BE SEEN THAT THE ASSESSEE APPLIED TRANSACTIONAL NET MARGIN METHOD (T NMM) AND NOT THE COST PLUS METHOD (CPM) AS HAS BEEN TAKEN NOTE OF BY THE LD. CIT(A). IN THIS REPORT, THE PROFIT LEVEL INDICATOR OF OP/TC HAS BEEN TAKEN AT 15%. BE THAT AS IT MAY, WE ARE UNABLE TO ACCEPT THE CALC ULATION MADE BY THE LD. CIT(A) FOR THE INSTANT YEAR BY APPLYING THE PROFIT RATE FROM THE TP STUDY REPORT FOR THE AY 2005-06 FOR THE REASONS THAT, F IRSTLY, IT RELATES TO A LATER YEAR AND THE MARGINS UNDERGO A CHANGE FROM YE AR TO YEAR AND, SECONDLY, THE ASSESSEE APPLIED TNMM AND NOT THE CPM AS HAS BEEN NOTICED BY THE LD. CIT(A), WHICH DISTURBS THE ENTIR E CALCULATION FOR THE CURRENT YEAR ON SUCH BASIS. 9. THE WORKING DONE BY THE AO IS ALSO EQUALLY NOT UP TO THE MARK. HE COMPUTED `GROSS PROFIT MARGIN AT 28.60% OF NIPRO C ORPORATION AND ITS CONSOLIDATED SUBSIDIARIES. SUCH GROSS PROFIT RATE WAS APPLIED TO ALL THE ITA NO.4078/DEL/2013 12 SALES MADE BY THE ASSESSEE IN INDIA, WHETHER DIRECT LY OR THROUGH ITS BRANCH OFFICE. 40% OF SUCH DETERMINED PROFIT WAS A TTRIBUTED TO SALES ACTIVITY IN INDIA THROUGH PE. THAT IS HOW, PROFIT R ATE FROM THE ACTIVITIES IN INDIA WAS DETERMINED AT 11.44% (I.E. 40% OF 28.6 0%). WE ARE UNABLE TO COUNTENANCE THE VIEW ADOPTED BY THE AO BECAUSE H E TOOK THE FIGURES OF NET SALES AND COST OF SALES AND COMPUTED GROSS P ROFIT AT 28.6% FROM THE ACCOUNTS OF NIPRO CORPORATION AND ITS CONSOLIDA TED SUBSIDIARIES. THE TABLE FROM WHICH SUCH PERCENTAGE OF 28.6% WAS WORKE D OUT, ALSO SHOWS THE AMOUNT OF SELLING, GENERAL AND ADMINISTRATIVE E XPENSES TO THE TUNE OF 36695 MILLIONS OF YEN, WHICH IS A LITTLE MORE THAN 20% OF SALES VALUE. ADOPTION OF BASE AS GROSS PROFIT RATE BY THE AO, IN STEAD OF NET PROFIT, DOES NOT LEND CREDENCE TO HIS CALCULATION. 10. AT THIS JUNCTURE, IT IS RELEVANT TO NOTE THE PR ESCRIPTION OF RULE 10 OF INCOME-TAX RULES, 1962, DEALING WITH THE DETERMINAT ION OF INCOME IN THE CASE OF NON-RESIDENTS, AS UNDER :- `IN ANY CASE IN WHICH THE ASSESSING OFFICER IS OF O PINION THAT THE ACTUAL AMOUNT OF THE INCOME ACCRUING OR ARISING TO ANY NON- RESIDENT PERSON WHETHER DIRECTLY OR INDIRECTLY, THR OUGH OR FROM ANY BUSINESS CONNECTION IN INDIA OR THROUGH OR FROM ANY ITA NO.4078/DEL/2013 13 PROPERTY IN INDIA OR THROUGH OR FROM ANY ASSET OR S OURCE OF INCOME IN INDIA OR THROUGH OR FROM ANY MONEY LENT A T INTEREST AND BROUGHT INTO INDIA IN CASH OR IN KIND CANNOT BE DEFINITELY ASCERTAINED, THE AMOUNT OF SUCH INCOME FOR THE PURP OSES OF ASSESSMENT TO INCOME-TAX MAY BE CALCULATED: (I) AT SUCH PERCENTAGE OF THE TURNOVER SO ACCRUING OR ARISING AS THE ASSESSING OFFICER MAY CONSIDER TO BE REASONABL E, OR (II) ON ANY AMOUNT WHICH BEARS THE SAME PROPORTION TO THE TOTAL PROFITS AND GAINS OF THE BUSINESS OF SUCH PERSON WI TH PROFITS AND GAINS BEING COMPUTED IN ACCORDANCE WITH THE PROVISI ONS OF THE ACT, AS THE RECEIPTS SO ACCRUING OR ARISING BEAR TO THE TOTAL RECEIPTS OF THE BUSINESS, OR (III) IN SUCH OTHER MANNER AS THE ASSESSING OFFICER MAY DEEM SUITABLE. 11. A BARE PERUSAL OF THE RULE TRANSPIRES THAT WHER E ACTUAL AMOUNT OF INCOME ACCRUING TO NON-RESIDENT FROM ANY BUSINESS C ONNECTION, ETC., IN INDIA CANNOT BE DEFINITELY ASCERTAINED, THE AMOUNT OF SUCH INCOME MAY BE CALCULATED IN ONE OF THE THREE WAYS AS GIVEN UND ER CLAUSES (I) TO (III) OF RULE 10 AND THE FIRST, BEING ` AT SUCH PERCENTAGE OF THE TURNOVER SO ACCRUING OR ARISING AS THE ASSESSING OFFICER MAY C ONSIDER TO BE REASONABLE AND THE THIRD, BEING `IN SUCH OTHER MANNER AS THE A SSESSING OFFICER MAY DEEM SUITABLE. IN PRINCIPLE, THE AO HAS RIGHTLY INVOKED THIS RULE FOR DETERMINING THE INCOME OF THE ASSESSEE. AS THE ANNUAL ACCOUNTS OF NIPRO CORPORATION ITA NO.4078/DEL/2013 14 AND ITS CONSOLIDATED SUBSIDIARIES WERE NOT MADE AVA ILABLE AND THE AO GOT SOME OF THE IMPORTANT FIGURES FROM THE WEBSITE OF NIPRO CORPORATION, SUCH SELECTIVE FIGURES CANNOT BE EQUAL IZED WITH THE FULL FLEDGED ANNUAL ACCOUNTS OF THE ASSESSEE COMPANY, FA CILITATING THE PRECISE DETERMINATION OF INCOME ACCORDINGLY. WE HAVE NOTIC ED ABOVE THAT THE WORKING DONE BY THE AO IN CONSIDERING GROSS PROFIT MARGIN AS A BASE POINT FROM SUCH SELECTIVE FIGURES, IS ALSO NOT CAPA BLE OF ACCEPTANCE. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT PROFIT OF THE ASSESSEE BE COMPUTED UNDER RULE 10 AT 10% OF THE SALES CONSIDERATION TO THE CUSTOMERS IN INDIA, EITHER DIR ECTLY BY THE HEAD OFFICE OR THROUGH THE BRANCH OFFICE. IN HOLDING SO, WE DR AW STRENGTH FROM THE PRESCRIPTION OF SECTIONS 44BB AND 44BBB WHICH PROVI DE FOR PROFIT RATE OF 10%. 12. THEN COMES THE QUESTION OF ATTRIBUTING INCOME TO THE ACTIVITIES OF MARKETING AND SALES CARRIED OUT BY THE BRANCH OFFIC E IN INDIA. IN THIS REGARD, IT IS SEEN THAT THE DELHI BENCH OF THE TRIB UNAL IN ROLLS ROYCE PLC VS. DDIT 2007-TII-32-ITAT-DEL-INTL, HAS APPLIED 35% OF 10% ITA NO.4078/DEL/2013 15 OF THE TOTAL PROFIT AS PERTAINING TO MARKETING ACTI VITIES, WHICH STANDS AFFIRMED BY THE HONBLE DELHI HIGH COURT IN ROLLS ROYCE PLC VS. DIT(IT) (2011) 339 ITR 147 (DEL) . IT IS FURTHER NOTED THAT THE DELHI BENCH OF THE TRIBUNAL IN ZTE CORPORATION VS. ADDL. DIT (2016) 159 ITD 696 (DEL) HAS ALSO ATTRIBUTED 35% OF THE PROFITS ATTRIBUTABLE TO MARKETING ACTIVITIES IN INDIA. IT IS STILL FURTHER NOTED THAT THE DELHI BENCH OF THE TRIBUNAL IN G.E. ENERGY PARTS INC. VS. ADIT IN ITA NO.671/DEL/2 011, AFTER CONSIDERING THE EARLIER DECISIONS AND THE NAT URE OF ACTIVITIES CARRIED OUT BY THE PE IN INDIA, HAS ATTRIBUTED 26% OF THE PROFITS ATTRIBUTABLE TO MARKETING ACTIVITIES IN INDIA. THERE CAN BE NO HAR D AND FAST RULE OF ATTRIBUTION OF PROFIT TO MARKETING ACTIVITIES CARRI ED OUT IN INDIA AT A PARTICULAR LEVEL. IN FACT, ATTRIBUTION OF PROFITS TO PE IN INDIA IS FACT BASED, DEPENDING UPON THE ROLE PLAYED BY THE PE IN THE OVE RALL GENERATION OF INCOME. SUCH ACTIVITIES CARRIED OUT BY A PE IN IND IA RESULTING IN GENERATION OF INCOME, MAY VARY FROM CASE TO CASE. ATTRIBUTION OF INCOME HAS TO BE IN LINE WITH THE EXTENT OF ACTIVIT IES OF PE IN INDIA. TAKING ALL THE RELEVANT FACTS INTO CONSIDERATION AN D ON A HOLISTIC APPROACH, WE DIRECT TO APPLY 30% OF THE PROFITS, NA MELY, 3% (30% OF ITA NO.4078/DEL/2013 16 10%) ON THE AMOUNT OF SALES MADE BY THE ASSESSEE IN INDIA EITHER DIRECTLY OR THROUGH ITS BRANCH OFFICE AMOUNTING TO RS.17,21,14,673/- (USD 36,15,095 X RS.47.61), AS THE AMOUNT OF PROFI T ATTRIBUTABLE TO THE PE IN INDIA. NO FURTHER DEDUCTION ON ANY ACCOUNT I S TO BE ALLOWED. THIS WILL RESULT INTO DETERMINATION OF TOTAL INCOME AT R S.51,63,440/- AS AGAINST RS.80.95 LAC DETERMINED BY THE AO AND RS.16.75 LAC COMPUTED BY THE LD. CIT(A). WE DIRECT TO TAKE RS.51,63,440 AS THE TOTAL INCOME OF THE ASSESSEE. 13. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.02.201 7. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 16 TH FEBRUARY, 2017. DK ITA NO.4078/DEL/2013 17 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.