Joint Director of Income Tax (OSD), New Delhi V. M/s. Western Union Financial Services Inc., Gurgaon

ITA 4956/DEL/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3075 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IN RESPECT OF AY AN
• Assessee Lawyers: IN RESPECT OF AY; ITA NO DEL IS PREFERRED
• Keywords: Transfer pricing; Permanent establishment
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SH.G.D.AGRAWAL, HONBLE PRESIDENT AND SH.K.N.CHARY, JUDICIAL MEMBER ITA NO. 4956/DEL/2011 (ASSESSMENT YEAR: 2008 -09) ITA NO. 5649/DEL/2010 (ASSESSMENT YEAR: 2007 -08) ORDER PER K.N.CHARY, JUDICIAL MEMBER ITA NO.4956/DEL/2011 IS PREFERRED BY THE ASSESSEE IN RESPECT OF AY 2007-08 AND ITA NO.5649/DEL/2010 IS PREFERRED BY TH E REVENUE IN RESPECT OF AY 2008-09. THE ASSESSEE AND THE FACTS INVOLVED IN THESE MATTERS ARE JOINT DIRECTOR OF INCOME TAX (OSD), INTL. TAXATION, CIRCLE-2(2), NEW DELHI. VS WESTERN UNION FINANCIAL SERVICES INC., C/O-KPMG INDIA PVT. LTD., BUILDING NO.10, 8 TH FLOOR, TOWER-B, DLF CYBER CITY, PHASE-II, GURGAON. PAN-AAACW1936E (APPELLANT) (RESPONDENT) WESTERN UNION FINANCIAL SERVICES INC., C/O-KPMG INDIA PVT. LTD., 8 TH FLOOR, TOWER- B, DLF BUILDING # 10, DLF CYBER CITY, PHASE-II, GURGAON-122002. PAN-AAACW1936E V S DDIT, INTERNATIONAL TAXATION-2(2), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. TARANDEEP SINGH, CA RESPONDENT BY SH. S.S.RANA, CIT DR DATE OF HEARING 16.11.2017 DATE OF PRONOUNCEMENT 06.12.2017 ITA NO. 5649/DEL/2010 & 4956/DEL/2011 2 COMMON. WE, THEREFORE, DEEM IT JUST AND CONVENIENT TO DISPOSE THESE APPEALS OF BY WAY OF A COMMON ORDER. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A FOREIGN COMPANY INCORPORATED IN USA AND IS ENGAGED IN THE BUSINESS OF RENDERING MONEY TRANSFER SERVICES FROM ABROAD. SOME OF THE REMITTAN CES MADE THROUGH THE ASSESSEE, BY THE REMITTERS ABROAD ARE DESTINED IN F AVOUR OF INDIVIDUALS RESIDING IN INDIA AND THE ASSESSEE HAS APPOINTED RE PRESENTATIVES IN INDIA WHO PROVIDE SERVICES OF MAKING PAYMENTS TO INDIVIDU AL BENEFICIARIES IN INDIA, AND ACCORDING TO THE ASSESSEE SUCH REPRESENT ATIVES ARE INDEPENDENT PERTAINS LIKE BANKS, POST OFFICE, TRAVEL AGENTS ETC . HAVING SUBSTANTIAL BUSINESS OF THEIR OWN. ASSESSEE CLAIMS THAT THERE WERE NO LIAISON OFFICES IN INDIA. FOR BOTH THE AYS 2007-08 AND 2008-09, THE AO FOUND THAT THE ASSESSEE HAS A BUSINESS CONNECTION IN INDIA U/S 9 O F THE INCOME TAX ACT, 1961 (IN SHORT ACT), THE ASSESSEE HAD A PERMANENT ESTABLISHMENT (IN SHORT PE) IN INDIA UNDER ARTICLE 5 OF THE INDO- U S TAXATION AVOIDANCE AGREEMENT, THE ARMS LENGTH REMUNERATION PAID TO T HE REPRESENTATIVES IN INDIA WILL NOT EXTINGUISH THE TAX LIABILITY OF THE ASSESSEE IN INDIA; THAT 50% OF THE NET PROFIT EARNED ABROAD FROM FUNDS REMITTED TO INDIA IS TAXABLE IN INDIA. IN RESPECT OF THE AY 2007-08, THE ASSESSEE C ARRIED THE MATTER BEFORE THE DISPUTE RESOLUTION PANEL-II (IN SHORT DRP), N EW DELHI AND THE DRP HELD THAT FROM THE CHART FURNISHED BY THE ASSESSEE, THE FACTS INVOLVED IN THIS MATTER FOR THE AY 2007-08 WERE COVERED BY THE DECISI ON OF THE TRIBUNAL FOR THE AY 2001-02 IN ASSESSEES OWN CASE, BUT SINCE THE DEPARTMENT FILED AN ITA NO. 5649/DEL/2010 & 4956/DEL/2011 3 APPEAL BEFORE THE HONBLE HIGH COURT, THEY DECLINED TO INTERFERE WITH THE ORDERS OF THE TRANSFER PRICING OFFICER (IN SHORT T PO) AND CONFIRMED THE ASSESSMENT ORDERS ON ALL THE ISSUES INCLUDING CHARG ING OF INTEREST U/S 234B OF THE ACT. 3. IN RESPECT OF AY 2008-09, THE ASSESSEE CARRIED T HE MATTER IN APPEAL TO THE LD.CIT(A)-XXIX, NEW DELHI AND BY ORDER DATED 29 .07.2011, LD.CIT(A) FOLLOWED THE ORDER OF THE TRIBUNAL FOR THE AY 2001-0 2 IN ASSESSEES OWN CASE AND ALLOWED THE APPEAL OF THE ASSESSEE. HENCE, THE ASSESSEE IS IN APPEAL BEFORE US FOR THE AY 2007-08 IN ITA NO.5649/DEL/2010 AND THE REVENUE IS IN APPEAL BEFORE US FOR THE AY 2008-09 IN ITA NO.495 6/DEL/2011. 4. HEARD THE LD. COUNSEL ON EITHER SIDE AND PERUSED THE MATERIAL PAPERS ON RECORD. LD. DR HEAVILY PLACED RELIANCE ON THE A SSESSMENT ORDERS FOR BOTH THE YEARS AND ALSO THE ORDER OF THE DRP FOR AY 2007- 08. LD.AR PLACED RELIANCE ON THE DECISION OF THIS TRIBUNAL IN ASSESS EES OWN CASE IN ITA NO.4889/DEL/2004, ITA NO.1572-74/DEL/2010 & CO.NO.1 63-165/DEL/2010 AND IN ITA NO.5551 & 5552/DEL/2012 FOR THE AY 200 1-02, FOR THE AY 2002-03, 2003-04 & 2005-06 AND AY 2004-05 & 2009-1 0 RESPECTIVELY. HE SUBMITTED THAT IN THE ORDER DATED 24.09.2010 PASSED BY THE LD.DRP FOR THE AY 2007-08 VIDE PARAGRAPH NO.4, THE DRP, ON A COMPAR ISON OF THE FACTS RELATING TO THE AY 2001-02 WITH THE FACTS FOR AY 200 7-08 FOUND THAT THE FACTS ARE SIMILAR AND AS A MATTER OF FACT THE FACTS FOR THE AY 2007-08 ARE SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN AS SESSEES OWN CASE FOR THE ITA NO. 5649/DEL/2010 & 4956/DEL/2011 4 AY 2001-02. FOR THAT MATTER, LD. CIT(A) BY ORDER DA TED 29.07.2011 FOR THE AY 2008-09 VIDE PARAGRAPH NOS.5 & 6 HELD THAT THE FA CTS RELATING TO THE YEAR 2008-09 ARE SIMILAR TO THE FACTS INVOLVED IN T HE 2001-02 AY AND THE MATTER WAS COVERED BY THE ORDER OF THE TRIBUNAL FOR THE AY 2001-02 IN ITA NO.4889/DEL/2014. BOTH THE PARTIES ALSO ADMITTED B EFORE US THAT THE FACTS INVOLVED FOR THE YEARS 2007-08 & 2008-09 ARE SIMILA R TO THE FACTS INVOLVED FOR THE YEAR 2001-02. 5. WE HAVE CAREFULLY CONSIDERED THESE FACTS IN THE LIGHT OF THE ORDERS OF THE CO-ORDINATE BENCHES OF THIS TRIBUNAL FOR THE YE AR 2001-02, 2002-03, 2003-04, 2005-06 & 2004-05, 2009-10. IN ITA NO.488 9/DEL/2004 FOR THE AY 2001-02, THE TRIBUNAL CONSIDERED THE ISSUES AT LE NGTH AND REACHED THE CONCLUSIONS THAT THOUGH THE ASSESSEE HAS A BUSINESS CONNECTION IN INDIA, THEY HAD NEITHER FIXED NOR THE AGENCIES PE IN INDIA , AS SUCH IN THE ABSENCE OF ANY PE IN INDIA, THE PROFITS, IF ANY, ATTRIBUTAB LE TO INDIAN OPERATIONS COULD NOT BE ASSESSED AS BUSINESS PROFITS UNDER ARTICLE 7 OF THE TREATY. THE TRIBUNAL FURTHER HELD THAT THE LIAISON OFFICE COULD NOT BE CONSIDERED TO BE FIXED PLACE PE OF THE ASSESSEE AS IT CARRIES OUT TH E ACTIVITIES WHICH ARE OF A PREPARATORY OR AUXILIARY CHARACTER. IT WAS ALSO H ELD THAT THE AGENTS ENGAGED BY THE ASSESSEE IN THIS MATTER ARE INDEPEND ENT AGENTS UNDER ARTICLE 5(5) OF THE TREATY AND THEY DO NOT HABITUALLY EXERC ISE THE AUTHORITY TO CONCLUDE THE CONTRACTS ON BEHALF OF THE ASSESSEE, A ND ON THAT PREMISE IT WAS HELD THAT THERE IS NO AGENCY PE OF THE ASSESSEE IN INDIA. THE SUM AND SUBSTANCE OF THE ORDER OF A CO-ORDINATE BENCH OF TH E TRIBUNAL IS THAT ITA NO. 5649/DEL/2010 & 4956/DEL/2011 5 THOUGH THE ASSESSEE HAD BUSINESS CONNECTION, SINCE THEY DO NOT HAVE ANY FIXED PLACE PE OR AGENCY PLACE PE IN INDIA, AND IN THE ABSENCE OF ANY PE IN INDIA, THE PROFITS IF ANY ATTRIBUTABLE TO INDIAS O PERATION COULD NOT BE ASSESSED AS BUSINESS PROFITS UNDER ARTICLE 7 OF THE TREATY. FACTS BEING SIMILAR FOR ALL THE YEARS INVOLVED IN THIS MATTER, WE FIND IT DIFFICULT TO REACH A DIFFERENT CONCLUSION AND THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL FOR ALL THE EARLIER YEARS COULD NOT BE DISTURBED WITHOUT AN Y COMPELLING REASONS. THE CONCLUSIONS REACHED BY THE TRIBUNAL FOR THE AY 2 001-02 ANSWERS ALL THE GROUNDS RAISED BY THE ASSESSEE FOR THE AY 2007-0 8 AND REVENUE FOR THE AY 2008-09 AS SUCH WHILE RESPECTFULLY FOLLOWING THE CONSISTENT VIEWS OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, WE HOLD THAT TH E FINDINGS OF THE DRP FOR THE AY 2007-08 CANNOT BE SUSTAINED, AND AT THE SAME TIME, FINDING OF THE LD.CIT(A) FOR THE AY 2008-09 CANNOT BE INTERFERED WI TH. CONSEQUENTLY ITA NO.5649/2010 HAS TO BE ALLOWED WHILE ITA NO.4956/DE L/2011 HAS TO BE DISMISSED. WE ORDER ACCORDINGLY. 6. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.4 956/DEL/2011 IS DISMISSED AND THE APPEAL OF THE ASSESSEE IN ITA NO. 5649/DEL/2010 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 06 TH OF DECEMBER, 2017. SD/- SD/- (G.D.AGRAWAL) (K.N.CHARY) PRESIDENT JUDICIAL MEMBER DATE:- 06 TH DECEM BER, 2017 *AMIT KUMAR* ITA NO. 5649/DEL/2010 & 4956/DEL/2011 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGIST RAR ITAT NEW DELHI