Whirlphool India Holdings Ltd., V. DDIT, Intl. Taxation Circle-2(2).,

ITA 622/DEL/2006

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0616 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-12-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 21-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWANI MAHAJAN
• Keywords: Transfer pricing; Double taxation relief; Additional evidence; Permanent establishment; Advance ruling; Wholly owned subsidiary
• Section: 143(3); 5(2); 234B; 131; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G.BANSAL ITA NO. 622(DEL)/2006 ASSESSMENT YEAR: 2002-03 WHIRLPOOL INDIA HOLDINGS LTD., D EPUTY DIRECTOR OF INCOME-TAX, B1/A-12, FIRST FLOOR, VS. INTERNATIONAL TAXATION, MOHAN COOP. INDUSTRIAL ESTATE, C IRCLE 2(2), NEW DELHI. MATHURA ROAD, NEW DELHI. 44. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SACHIT JOLLY, ADVO CATE RESPONDENT BY : SHRI ASHWANI MAHAJAN, CIT, DR ORDER PER K.G. BANSAL : AM THIS APPEAL EMANATES FROM THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXIX, NEW DELHI, DATED 2 .1.2006 IN APPEAL NO. 91/05-06 PERTAINING TO ASSESSMENT YEAR 2002-03. THE CORRESPONDING ASSESSMENT ORDER WAS FRAMED BY THE DEPUTY DIR ECTOR OF INCOME-TAX, CIRCLE 2(2), INTERNATIONAL TAXATION, NEW DELHI, ON 30.3.2005 UNDER THE PROVISIONS OF SECTION 143(3) OF THE INCOME-TAX A CT, 1961. THE ASSESSEE HAS TAKEN UP FOLLOWING GROUNDS IN THE APPEAL:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE ORDERS PASSED BY LD. ASSESSING O FFICER [AO] AND THE LD. COMMISSIONER OF INCOME-TAX (AP PEALS) [CIT(A)] ARE BAD IN LAW AND VOID AB-INITIO. ITA NO. 622(DEL)/2006 2 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW,, THE LD. CIT(A) GRAVELY ERRED IN CO NFIRMING THE ACTION OF THE LD. AO IN INVOKING THE PROVISIONS OF SECTION92 OF THE INCOME-TAX ACT, 1961 [ACT], THEREBY HOLDI NG THE APPELLANT TO BE LIABLE TO TAX UNDER THE ACT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) FURTHER ERRED IN EST IMATING THE INCOME AT RS. 15,558,463 ON A NOTIONAL BASIS AS AGAINST NIL INCOME RETURNED BY THE APPELLANT. 3.1 THAT THE LD. CIT(A) ALSO ERRED IN HOLDING THA T THE PROVISIONS OF SECTIONS 5(2) AND 9(1) OF THE ACT RE AD WITH ARTICLE 9 OF THE INDO-USA TAX TREATY [DOUBLE TAXAT ION AVOIDANCE AGREEMENT] WERE ATTRACTED. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) GRAVELY ERRED IN CON CLUDING THAT THE APPELLANT HAD CARRIED OUT VARIOUS COMMERCIA L ACTIVITIES IN INDIA AND HAD NEITHER DENIED THE SAME NOR PLAC ED ON RECORD ANY EVIDENCE TO PROVE THAT SAID ACTIVITIES WER E NOT CARRIED ON BY THE APPELLANT, SUCH CONCLUSIONS BEING ERRO NEOUS AND CONTRARY TO THE FACTS. 4.1 THAT IN COMING TO THE ABOVE CONCLUSION, THE LD. CIT(A) ERRED IN RELYING ON PART CONTENTS OF THE STATE MENT OF SHRI S.K. PRADHAN, AR OF THE APPELLANT AS REPRODUCED BY THE LD. AO IN THE ASSESSMENT ORDER, WITHOUT CONSIDERING T HE FULL CONTENTS OF THE STATEMENT PLACED ON RECORD. 4.2 THAT THE LD. CIT(A) HAD FAILED TO PROPERLY PERUSE THE AVERMENTS/MATERIAL PLACED ON RECORD TO SUBSTANTIAT E THE FACT THAT THE APPELLANT HAD NOT UNDERTAKEN ANY COMMERCIAL/INDUSTRIAL ACTIVITIES OR RENDERED SERV ICES OF ANY KIND DURING THE ASSESSMENT YEAR UNDER CONSIDERAT ION. 4.3 THAT THE LD. CIT(A) ALSO ERRED BY IGNORING THE FACT THAT THERE WERE NO RESOURCES AVAILABLE, WHATSOEVER, WITH THE APPELLANT TO RENDER ANY KIND OF SERVICES TO ANY P ERSON. ITA NO. 622(DEL)/2006 3 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) GRAVELY ERRED IN A GREEING WITH THE CONCLUSION OF THE LD. AO THAT THE APPELLANT WAS WORKING AS A CONSULTANT TO WHIRLPOOL CORPORATION, USA BY GIVING DIRECTIONAL INPUTS VIS--VIS MANAGEMENT OF WHIRLP OOL OF INDIA LTD., SUCH CONCLUSION BEING ERRONEOUS AND CONTR ARY TO THE FACTS. 5.1 THAT BOTH THE LD. AO AND THE LD. CIT(A) HAD FAILED TO APPRECIATE THE FACT THAT THE ONLY ACTIVITY UN DERTAKEN BY THE APPELLANT WAS TO FACILITATE PAYMENT OF SALARY AND RELATED EMOLUMENTS ON BEHALF OF ITS PARENT COMPANY [WHIRLPO OL CORPORATION, USA], (RECEIVED IN ADVANCE) TO A FE W PERSONNEL WORKING WITH WHIRLPOOL OF INDIA LTD. IN THE CAPACIT Y OF EXECUTIVE DIRECTOR/MANAGING DIRECTOR. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, BOTH THE LD. AO AND THE LD. CIT(A) FAI LED TO APPRECIATE THAT EVEN FOR THE SAKE OF ASSUMPTION, IF THE APPELLANT IS DEEMED TO HAVE RENDERED SERVICES TO WHIRLPOOL CORPORATION, USA BY FACILITATING PAYMENT OF SA LARY AND OTHER RELATED EMOLUMENTS (RECEIVED IN ADVANCE) TO A FEW SENIOR EXECUTIVES OF WHIRLPOOL OF INDIA, EVEN THE N UNDER THE PROVISIONS OF SECTION 92 OF THE ACT, NO INCOME WO ULD ARISE IN THE HANDS OF THE APPELLANT. 7. WITHOUT PREJUDICE AND IN ALTERNATE TO THE ABOVE , ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) ERRED IN HOLDING THAT AN ESTIMATED AND NOTIONAL NCP MARGIN OF 25% BE APPLIED FOR COMPUTING TH E INCOME OF THE APPELLANT AS AGAINST NCP OF 12.19% COMPUTE D IN THE TRANSFER PRICING REVIEW (ECONOMIC ANALYSIS REPORT) . 2. THE FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY FILED ITS RETURN ON 31.10.2002 DECLARING NIL INCOME. THE RETURN WAS PROCESSED U/S ITA NO. 622(DEL)/2006 4 143(1). THEREAFTER, THE CASE WAS TAKEN UP FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) ON 23.10.2003. 2.1 IT IS FOUND THAT THE ASSESSEE HAD BEEN INCORPO RATED IN THE USA AND IT IS A WHOLLY OWNED SUBSIDIARY OF WHIRLPOOL CORPOR ATION, USA. IT HAS OPENED A BRANCH IN NEW DELHI. IT HAS BEEN STATE D IN THE RETURN THAT ITS MAIN OBJECT IS TO WATCH AND SAFEGUARD THE INTERE ST OF THE HOLDING COMPANY IN INDIA. THE EXPENSES ARE MET OUT OF THE FUNDS RECEIVED FROM THE HEAD OFFICE. THE PARENT COMPANY, WHIRLPOOL CORPORATI ON, USA, ALSO HAS A SUBSIDIARY COMPANY IN INDIA, WHIRLPOOL OF INDIA LTD. (WIL FOR SHORT). THIS COMPANY IS ENGAGED IN THE BUSINESS OF MANUFAC TURE AND SALE OF CONSUMER DURABLE GOODS. IN THE COURSE OF ASSESSM ENT PROCEEDINGS, IT HAS BEEN EXPLAINED THAT THE MAIN ACTIVITY OF THE BRAN CH OF THE ASSESSEE- COMPANY IN INDIA IS TO PROTECT AND SAFEGUARD TH E INTEREST OF THE PARENT COMPANY IN INDIA, WHICH HAS MADE INVESTMENT IN EQ UITY CAPITAL OF WIL THROUGH ITS SUBSIDIARY COMPANIES IN MAURITIUS. THE PARENT COMPANY WANTS TO ENSURE THAT SOME TOP LEVEL EMPLOYEES A RE PLACED IN WIL TO MANAGE ITS AFFAIRS. HOWEVER, DUE TO LEGAL RESTRI CTIONS UNDER THE COMPANIES ACT, THESE PERSONS CANNOT BE ADEQUATELY REMUNERATED BY WIL AS IT HAS INCURRED LOSSES CONTINUOUSLY. THEREFO RE, THE PARENT COMPANY HAS ITA NO. 622(DEL)/2006 5 PAID REMUNERATION OF THESE PERSONS THROUGH THE BRANCH OF THE ASSESSEE. IN CONNECTION WITH ITS ACTIVITIES, THE STATEMENT OF SHRI S.K. PRADHAN, MANAGER TAXATION, HAS BEEN RECORDED ON 13.3.2003, WHICH HAS BEEN SUBSTANTIALLY REPRODUCED AT PAGES 3 TO 5 OF THE ORDER. 2.2 IN THE CONTEXT OF THESE FACTS, THE QUESTIONS WHICH AROSE BEFORE THE AO ARE-WHETHER, (A) THE ASSESSEE IS LIABLE TO BE TAXED IN INDIA, AND (B) WHAT IS THE INCOME ATTRIBUTABLE TO THE OPERATIONS OF THE BRANCH IN INDIA IN REGARD TO SAFEGUARDING THE INTEREST OF THE PAR ENT COMPANY, WHIRLPOOL CORPORATION, USA? THE CASE OF THE ASSESSEE BEFO RE THE AO IS THAT NO BUSINESS OPERATION HAS BEEN CONDUCTED BY THE BRANC H IN INDIA AND, THEREFORE, IT IS NOT LIABLE TO BE ASSESSED IN INDIA. IT IS FOR THIS REASON THAT THE ASSESSEE HAS FILED NIL RETURN. HOWEVER, THE CASE OF THE AO IS THAT THE ASSESSEE IS RENDERING SERVICES TO THE PARENT C OMPANY IN THE FOLLOWING FIELDS:- FORMULATION OF POLICY AND TAKING STRATEGIC DEC ISIONS FOR THE OPERATIONS OF WHIRLPOOL OF INDIA LTD.; CREATION OF EXPORT OPPORTUNITIES FOR RAW-MATERIA LS, COMPONENTS AND FINISHED PRODUCTS FOR WHIRLPOOL CORPORATIONS OVE RSEAS REQUIREMENTS; RESPONSIBLE FOR IDENTIFYING GOODS SUPPLIERS FO R QUALITY PRODUCTS FOR BOTH EXPORT AND LOCAL PURPOSES; ITA NO. 622(DEL)/2006 6 ASSISTANCE TO SUPPLIERS TO INTRODUCE NEW TECHNOLO GIES AND SUPPORT LOCAL SUPPLIER FOR DEVELOPMENT OF QUALITY RAW-M ATERIAL, COMPONENTS AND FURNISHED PRODUCTS; PROVIDE TECHNICAL KNOW-HOW AND ASSISTANCE TO WH IRLPOOL OF INDIA LTD. IN DEVELOPMENT OF NEW PRODUCTS AND UP-GRADAT ION OF EXISTING PRODUCTION CAPABILITIES, ADHERENCE TO STRICT Q UALITY CONTROL PROCESS AND STANDARD AS REQUIRED BY WORLD-CLASS COMPANI ES AND LOCAL MARKET; ACTS AS A COORDINATING AGENCY BETWEEN WHIRLPO OL CORPORATION, USA AND WHIRLPOOL OF INDIA LTD. AND PROVIDES LAT EST MANAGEMENT INFORMATION IN RESPECT OF TECHNOLOGY, LEGAL, COM MERCIAL AND POLITICAL DEVELOPMENTS IN ASIA REGION WHICH ENA BLES THE MANAGEMENT OF WHIRLPOOL OF INDIA LTD. TO TAKE E FFECTIVE BUSINESS DECISION; ADVISE AND ASSIST WHIRLPOOL OF INDIA LTD. ON BE HALF OF WHIRLPOOL CORPORATION, ON STAFF TRAINING, EDUCATION, DEVEL OPMENT AND IMPLEMENTATION OF HUMAN RESOURCES MANAGEMENT AND PROCEDURE; THE ASSESSEE HAS DEDICATED PERSONNEL ACTIVELY TO SCOUT FOR INVESTMENT OPPORTUNITIES IN CONSUMER DURABLE APP LIANCES AND ARE PROMOTING THE INDIAN COLLABORATION, NAMELY, WHIRL POOL OF INDIA. LTD. THUS, IT IS HELD THAT THE ASSESSEE COMPANY IS A CTING AS A CONSULTANT TO THE PARENT COMPANY AND IN THIS ROLE IT IS THE GU IDING FORCE FOR MANAGING THE AFFAIRS OF WIL. THE OPERATIONS ARE SUBS TANTIVE BUSINESS OPERATIONS FOR WHICH THE ASSESSEE COMPANY HAS BEEN INCORPOR ATED AND, THEREFORE, THE INCOME IS TAXABLE IN INDIA. ITA NO. 622(DEL)/2006 7 2.3 COMING TO THE QUANTIFICATION OF THE INCOME, I T IS MENTIONED THAT THE PAID EMPLOYEES OF THE ASSESSEE-COMPANY ARE MANAG ING THE AFFAIRS OF WIL. THEREFORE, IT WOULD BE FAIR TO ESTIMATE T HE CONSIDERATION ACCRUING TO THE ASSESSEE FOR THESE SERVICES AT 6% OF THE TURNOVER OF WIL. ACCORDINGLY, THE INCOME OF THE ASSESSEE HAS BEEN COMPUTED AT ` 54,70,88,850/- AS UNDER:- TURNOVER OF WHIRLPOOL INDIA LTD. FOR F.Y. 1999-00 =RS. 1015.51 CRORE ESTIMATED CONSIDERATION AS DISCUSSED ABOVE @ 6% =RS. 60,93,06,000/- LESS: EXPENSES CLAIMED IN P&L ACCOUNT OF THE INDIAN BRANCH R S. 6,22,33,850/- EXPENSES NOT ALLOWABLE CHARITY AND DONATION - RS. 8,000/- WEALTH-TAX - RS. 8,700/- RS. 16,700/- = RS. 6,22,17,150/- TOTAL TAXABLE INCOME = RS. 54,70,88,850/- DIRECTION HAS ALSO BEEN ISSUED TO CHARGE INTEREST UNDER SECTIONS 234A, 234B AND 234C OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESS EE MOVED AN APPEAL BEFORE THE LD. CIT(APPEALS). IN REGARD TO THE TAX ABILITY IN INDIA, THE CRUX OF THE SUBMISSIONS MADE IS THAT THE ASSESSEE ACTED AS A CONDUIT FOR PAYMENT ITA NO. 622(DEL)/2006 8 OF SALARIES OF TOP EMPLOYEES BY THE PARENT COMPAN Y. NO OTHER BUSINESS ACTIVITY HAS BEEN UNDERTAKEN BY THE ASSESSEE COM PANY IN INDIA. HOWEVER, THE LD. CIT(APPEALS) DID NOT AGREE WITH ITS SUBM ISSIONS. HIS FINDING IS THAT SENIOR EXECUTIVES WERE NOT PAID REMUNERAT ION BY WIL. THE SALARIES AND OTHER BENEFITS TO THEM WERE PROVIDE D BY THE ASSESSEE COMPANY. THEREFORE, THE BRANCH OFFICE OF THE ASSE SSEE COMPANY IN INDIA PROVIDED VARIOUS SERVICES TO THE PARENT COMPANY . HE ANALYZED THE PROVISIONS CONTAINED IN SECTIONS 5(1)(B) AND 9( 1)(I) OF THE INCOME-TAX ACT. HE ALSO ANALYZED THE PROVISION CONTAINED I N ARTICLE 5 OF THE DTAA BETWEEN INDIA AND THE USA. IT HAS BEEN HELD THA T ALL THESE PROVISIONS ARE ATTRACTED AND, THEREFORE, THE ASSESSEE IS LIABLE TO BE ASSESSED TO TAX IN INDIA. FOR THE SAKE OF READY REFERENCE, PARAGR APH 4 OF HIS ORDER IS REPRODUCED BELOW:- 4. I HAVE CONSIDERED THE SUBMISSIONS OF LD. A R AND HAVE PERUSED THE MATERIAL ON RECORD. FROM THE FACTS ON RECORD, IT IS CLEARLY ESTABLISHED THAT THE BO OF WIHL HAD CA RRIED OUT VARIOUS ACTIVITIES IN INDIA WHICH HAS NOT BEEN DENIED BY THE APPELLANT COMPANY. THE SAME WAS ALSO ADMITTED BY SHRI S.K. PRADHAN, AR OF THE APPELLANT COMPANY HIS STA TEMENT WHICH WAS RECORDED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE A.Y. 2000-01. TH E APPELLANTS CLAIM IS THAT THESE SERVICES WERE SIMPLY MENTIONED IN THE LETTER TO THE RBI FOR SEEKING I TS APPROVAL FOR CARRYING OUT COMPREHENSIVE ACTIVITIES IN THE LONG RUN AND THESE SERVICES HAD ACTUALLY NOT BEEN PROVIDED. THIS ARGUMENT OF THE APPELLANT IS A SELF-SERVING STATEMENT AND IS DEVOID OF ANY MERITS. NO EVIDENCE WHATSOEVER HAS BEEN PLAC ED ON ITA NO. 622(DEL)/2006 9 RECORD BY THE APPELLANT TO PROVE THAT THESE ACT IVITIES WERE NOT CARRIED OUT BY THE BO OF WIHL. THE APPELLANT COMPANY HAD DEPUTED VERY SENIOR EXECUTIVES, NAMELY, SH RI ASHOK KHANNA, SHRI JOHN C. PINTO AND SHRI RAJIV VERMA TO WORK AS EXECUTIVE DIRECTORS IN WIL. SHRI ASHOK KHANNA IS HEADING THE HUMAN RELATIONS DEPARTMENT, SHRI PINTO IS HEAD ING THE FINANCE DEPARTMENT AND SHRI RAJIV VERMA IS THE HEA D OF MANUFACTURING OPERATIONS IN WIL. THEREFORE, THE THREE KEY DEPARTMENTS OF WIL, NAMELY, MANUFACTURING OPERATIO NS, FINANCE DEPARTMENT AND HR DEPARTMENT WERE BEING HANDED BY THE SENIOR EXECUTIVES WHO WERE DEPUTED BY THE APPELLANT COMPANY TO WIL. THIS CLEARLY SHOWS THAT THE KEY O PERATIONS OF WIL WERE BEING SUPERVISED AND CONTROLLED ONL Y BY WIHL. BY APPOINTING ITS OWN EMPLOYEES TO THE KE Y STRATEGIC POSITIONS OF WIL, THE APPELLANT COMPANY IS VIRTU ALLY RUNNING WIL ON BEHALF OF THE PARENT COMPANY, NAMELY, WC. IT IS ALSO RELEVANT TO MENTION HERE THAT THESE SENIOR EX ECUTIVES WERE NOT GIVEN ANY REMUNERATION BY WIL AND THE SALARI ES AND OTHER BENEFITS TO THEM WERE PROVIDED BY THE APPELL ANT COMPANY ONLY. THEREFORE, IT IS CLEAR THAT THE APPELLANT COMPANY THROUGH ITS BO IN INDIA HAD PROVIDED VARIOUS S ERVICES TO WHIRLPOOL CORPORATION, USA. IT HAS ALSO BEEN A DMITTED BEFORE THE AO THAT NO AMOUNT HAS BEEN PAID TO WHI L EITHER BY WHIRLPOOL OF INDIA LTD. OR BY WHIRLPOOL CORP ORATION, USA. THE APPELLANT COMPANY HAS CARRIED ON VARIOU S ACTIVITIES IN INDIA BY GIVING CRITICAL AND COMPREHE NSIVE SERVICES TO WHIRLPOOL CORPORATION OF USA. I AGR EE WITH THE CONCLUSION OF THE AO THAT APPELLANT IS WORKING AS CONSULTANT, THE GUIDING FORCE FOR WHIRLPOOL CORPORATION SO FAR THE MANAGEMENT OF ITS INDIAN AFFAIRS AS WELL AS GI VING DIRECTIONAL INPUTS TO WHIRLPOOL OF INDIA LTD. IS CONCERNED. THIS IS AN ASSOCIATED ENTERPRISE OF WHIRLPOOL CO RPORATION OF USA AND IT IS NOT A CHARITABLE ORGANIZATION WHICH H AS PROVIDED SERVICES TO WHIRLPOOL CORPORATION WITHOUT ANY I NTEREST. AS PER SECTION 5(1)(B) OF THE IT ACT ALL INCOME FROM WHATEVER SOURCE ACCRUES OR ARISES OR IS DEEMED TO ACCRUE O R ARISE IN INDIA WILL BE INCLUDED IN THE TOTAL INCOME. AS PE R SECTION 9(1)(I) OF THE IT ACT ALL INCOME ACCRUING OR AR ISING, WHETHER DIRECTLY OR INDIRECTLY THROUGH OR FROM ANY BUSIN ESS CONNECTION IN INDIA--- SHALL BE DEEMED TO ACCRUE OR ARISE IN ITA NO. 622(DEL)/2006 10 INDIA. IN THE INSTANT CASE THE APPELLANT IS HAV ING BRANCH OFFICE (PE) IN INDIA WHICH IS DOING COMMERCIAL ACTIVIT IES FOR WHIRLPOOL CORPORATION AND IS MANAGING ALL THE AFFA IRS OF WC IN INDIA. THIS IS AN ASSOCIATED ENTERPRISE OF W HIRLPOOL CORPORATION AND IS TRANSACTING IN A MANNER WHICH CAN NOT BE TERMED AT ARM LENGTH. THEY HAVE MANAGED TH EIR AFFAIRS IN SUCH A FASHION THAT NO PROFIT FOR THE AC TIVITIES RENDERED BY THE APPELLANT IN INDIA IS SHOWN TO ACCRUE IN INDIA AND, THEREFORE, NO INCOME HAS BEEN DECLARED IN INDIA. I AGREE WITH THE AO THAT IN SUCH SITUATION PROVISIONS OF ARTI CLE 9 OF DTAA BETWEEN INDIA AND USA GET ATTRACTED. THEREFORE, AS PER THESE FACTS AND LEGAL POSITI ON, THE INCOME/PROFIT OF APPELLANT IS LIABLE TO BE TAXED IN INDIA. IN VIEW OF ABOVE, THE QUESTION ARISES AS TO HOW MUCH REMUNERATION/AMOUNT WOULD HAVE BEEN PAYABLE BY WH IRLPOOL CORPORATION IF AN INDEPENDENT ENTERPRISE OTHER T HAN THE APPELLANT WOULD HAVE CARRIED OUT SUCH ACTIVITIE S IN INDIA INCLUDING COMPLETE MANAGEMENT OF WIL. SUCH AMOU NT OR REMUNERATION WOULD BE ATTRIBUTABLE OR ACCRUING IN INDIA AND WOULD BE CHARGEABLE TO TAX IN INDIA IN VIEW OF S ECTIONS 5(1) AND 9(1) OF THE IT ACT COUPLED WITH THE PROVISION S OF ARTICLE 9 OF DTAA BETWEEN US & INDIA. THEREFORE, CONSI DERING THE ABOVE FACTS, CIRCUMSTANCES AND LEGAL POSITION, I HOLD THAT THE AO WAS JUSTIFIED IN HOLDING THAT THE INCOME OF T HE APPELLANT IS LIABLE TO BE TAXED IN INDIA. 3.1 IN REGARD TO THE COMPUTATION OF INCOME, THE ASSESSEE FILED ADDITIONAL EVIDENCE TO SUPPORT ITS ALTERNATIVE AND WITHOUT PREJUDICE ARGUMENT. THE ADDITIONAL EVIDENCE CONSISTS OF ECONOMIC ANALYSIS REPORT, IN WHICH IT HAS BEEN OPINED THAT THE NET P ROFIT RATIO SHOULD BE IN THE VICINITY OF 17.19%. THEREFORE, TAKING THE VARIA TION OF 5% INTO ACCOUNT, IT ITA NO. 622(DEL)/2006 11 SHOULD BE FIXED AT 12.19%. THUS, PROFITS WERE C OMPUTED AT ` 75,86,306/- AS UNDER:- TOTAL EXPENDITURE INCURRED DURING THE YEAR UNDER CONSIDERATION RS. 6,22,33,850/- IF BUSINESS ADVISORY SERVICES RENDERED THE NCP MARGIN OF 12.19% TO BE APPLIED RS. 75,86,306/- TOTAL RECEIPTS RS. 6,98,20,156/- LESS: EXPENDITURE RS. 6,22,33,850/- PROFIT RS. 75,86,306/- 3.2 THE LD. CIT(A) CONSIDERED THIS MATTER AFTER O BTAINING THE REMAND REPORT FROM THE AO. IT HAS BEEN MENTIONED THAT T HE ASSESSMENT MADE BY THE AO AT 6%, BASED UPON THE ORDER OF CIT(APPEALS ) FOR ASSESSMENT YEAR 2000-01, IS NOT CORRECT. FIRSTLY, THE ORDER OF TH E CIT(A) HAS BEEN REVERSED BY THE TRIBUNAL ALTHOUGH ON A DIFFERENT ISSUE. SECONDLY, THE WIL DID NOT PAY ANY ROYALTY TO THE PARENT COMPANY BECAUSE OF CONTINUED LOSSES, IN VIEW OF WHICH THE AGREEMENT BETWEEN THESE TWO PARTIES HAS BEEN NOVATED BY ANOTHER AGREEMENT IN 1997 UNDER WHICH ROYALTY IS PAYABLE ONLY WHEN WIL EARNS PROFITS. THEREFORE, HE C HANGED THE BASIS OF COMPUTATION OF INCOME. HE ALSO DID NOT AGREE WITH THE ASSESSEE THAT THE NCP MARGIN SHOULD BE TAKEN AT 12.19%. HE IS OF THE VIEW THAT THE MARGIN OF 25% WOULD BE FAIR AND REASONABLE. THE ASSESSEE HAD INCURRED ITA NO. 622(DEL)/2006 12 THE EXPENDITURE OF ` 6,22,33,850/- TO WHICH THE MARGIN OF 25% HAS BEEN APPLIED TO ESTIMATE THE INCOME AT ` 1,55,58,460/-. 3.3 AGGRIEVED BY THIS ORDER, THE ASSESSEE IS IN A PPEAL BEFORE US. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE R EFERRED TO PAGE NOS. 1 AND 2 OF THE PAPER BOOK, WHICH ARE COPIES OF RETURN OF INCOME AND STATEMENT OF INCOME. THE LOSS HAS BEEN SHOWN A T ABOUT ` 6.14 CRORES IN THE STATEMENT, WHICH CONSISTS OF PAYMENT OF SAL ARIES ONLY. THIS LOSS HAS NOT BEEN CLAIMED. FURTHER, OUR ATTENTION HAS BE EN DRAWN TO PAGE NOS. 3 TO 5, WHICH CONTAIN THE APPLICATION DATED 9.2.1995 BY THE ASSESSEE TO THE RESERVE BANK OF INDIA FOR SEEKING PERMISSION TO S ET UP A BRANCH OFFICE IN INDIA. HE ALSO MADE REFERENCE TO PAGE NOS. 6 TO 8 OF THE PAPER BOOK, WHICH IS THE APPROVAL OF THE RESERVE BANK OF IND IA DATED 10.4.1995. THE ASSESSEE HAS BEEN PERMITTED TO OPEN A BRANCH OFFI CE FOR UNDERTAKING FOLLOWING ACTIVITIES:- (I) TO IMPORT/EXPORT GOODS ETC. TO/FROM INDIA. (II) TO PROVIDE SERVICE SUPPORT TO LOCAL SUPPLIER FO R DEVELOPMENT OF GOOD QUALITY RAW-MATERIAL, COMPONENTS AND FINISHE D PRODUCTS FOR LOCAL AND OVERSEAS REQUIREMENTS. ITA NO. 622(DEL)/2006 13 (III) TO PROMOTE TECHNICAL/FINANCIAL COLLABORATION AND O THER INCIDENTAL ACTIVITY MENTIONED IN YOUR APPLICATION, WHICH AR E NOT OF MANUFACTURING/PROCESSING NATURE. 4.1 OUR ATTENTION IS ALSO DRAWN TO PAGE NOS.9 A ND 16 OF THE PAPER BOOK, WHICH CONTAIN RESOLUTIONS OF THE ANNUAL GENERAL M EETING OF WIL FOR APPOINTMENT OF MR. RAJ JAIN AS MANAGING DIRECTOR, MR. RAJIV VERMA AS THE DIRECTOR OF THE COMPANY, MR. JOHN PINTO AS WHOLE- TIME DIRECTOR OF THE COMPANY AND MR. ASHOK KHANNA AS WHOLE-TIME DIRE CTOR. OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS ANSWER TO QUESTION NO . 7 FURNISHED BY MR. S.K. PRADHAN, MANAGER TAXATION ON OATH. THE QUES TION AND ANSWER READ AS UNDER:- Q. 7. PLEASE READ OUT THE SUBMISSION AGAIN SUBST ITUTING THE TERM ASSESSEE IN THE SAID SUBMISSION AND SPE CIFY THE ENTITIES MENTIONED IN THE SAID SUBMISSIONS ALSO. A. NOTE ATTACHED WITH THE REPLY DULY MODIFIED READS AS UNDER:- WHIRLPOOL INDIA HOLDINGS LIMITED WAS INCORPORATE D IN USA AND IS A 100% OWNED SUBSIDIARY OF WHIRLPOOL CORP ORATION OF USA AND IS THE INVESTMENT VEHICLE OF THE COMPAN Y (WHIRLPOOL CORPORATION). WHIRLPOOL (CORPORATION) I S A VERY LARGE MULTINATIONAL COMPANY OPERATING ON WORLDWIDE BASIS WITH PRESENT TURNOVER IN EXCESS OF USD 8 BILLION. IT IS ONE OF THE GLOBAL MARKET LEADER IN THE WHITE GOOD INDUST RY AND IS INVOLVED IN THE MANUFACTURING AND MARKETING OF CO NSUMER DURABLE APPLIANCES. THE COMPANY CURRENTLY MANUFAC TURES IN 11 COUNTRIES AND MARKET ITS PRODUCTS IN MORE THAN 12 0 COUNTRIES UNDER THE BRAND NAMES SUCH AS WHIRLPOOL, KITCHEN AID, ROPER, ESTATE, BAUN ECHT, LADEN AND INGLIS. ITA NO. 622(DEL)/2006 14 THE MANAGEMENT OF WHIRLPOOL (CORPORATION) HAS IDE NTIFIED ASIA AS ONE OF ITS FOCUS AREA OF EXPANSION. FO R THIS PURPOSE WHIRLPOOL CORPORATION HAS TIED UP WITH WHIRLPOOL O F INDIA LTD. (FORMERLY KNOWN AS KELVINATOR OF INDIA LTD.) AND HAS INVESTED RS. 300 CRORES IN ACQUIRING MAJORITY S TAKE IN INDIAN VENTURE. IN THIS CONTEXT WHIRLPOOL (INDIA HOLDINGS) HAS O PENED A BRANCH OFFICE IN INDIA, WHICH IS THE WHIRLPOOL COR PORATIONS REGIONAL OFFICE FOR SOUTH EAST ASIA. THIS BRANCH OFFICE (WHIRLPOOL INDIA HOLDINGS) IS RESPONSIBLE FOR FOR MULATING POLICY AND TAKING STRATEGIC DECISIONS FOR OPERA TIONS OF THE WHIRLPOOL (CORPORATION) IN INDIA, NEPAL, SRI LANKA , BANGLA DESH AND PAKISTAN. ACTIVITIES OF THE WHIRLPOOL BRANCH OFFICE (WHIRLPOO L INDIA HOLDINGS) IN INDIA. WHIRLPOOL BRANCH OFFICE (WHIRLPOOL INDIA HOLDINGS) SPECIFICALLY PERFORMS THE FOLLOWING ACTIVITIES I N INDIA:- WHIRLPOOL (GROUP COMPANIES) MANUFACTURES IN 11 COUN TRIES AND MARKET THEIR PRODUCTS IN MORE THAN 125 COUNTRIES WORLDWIDE. THE INDIAN BRANCH OFFICE (WHIRLPOOL INDIA HOLDIN GS) IN THIS CONTEXT IS CREATING EXPORT OPPORTUNITIES FOR RAW MATERIALS, COMPONENTS AND FINISHED PRODUCTS FOR WHIRLPOOL (CORPORATION)S OVERSEAS REQUIREMENTS, WHICH WOU LD ULTIMATELY GENERATE EXPORT REVENUE TO THE INDIA BRANCH (WHIRLPOOL INDIA HOLDINGS). THE BRANCH OFFICE (WHIRLPOOL INDIA HOLDINGS) IS R ESPONSIBLE FOR IDENTIFYING GOODS SUPPLIERS FOR QUALITY PROD UCTS FOR BOTH EXPORT AND LOCAL PURPOSES. WITH WHIRLPOOL (CORPOR ATION) GLOBAL STRENGTH THE BRANCH OFFICE (WHIRLPOOL INDI A HOLDINGS) ASSIST SUPPLIERS TO INTRODUCE NEW TECHNOLOGIES A ND SUPPORT LOCAL SUPPLIER FOR DEVELOPMENT OF QUALITY RAW-MAT ERIAL, COMPONENTS AND FURNISHED PRODUCTS. ITA NO. 622(DEL)/2006 15 PROVIDE TECHNICAL KNOW-HOW AND ASSISTANCE AND DE VELOPMENT OF NEW PRODUCTS AND UP-GRADATION OF EXISTING PRO DUCTION CAPABILITIES, ADHERENCE TO STRICT QUALITY CONTRO L PROCESS AND STANDARD AS REQUIRED BY WORLD-CLASS COMPANIES AND LOCAL MARKET. THE BRANCH OFFICE (WHIRLPOOL INDIA HOLDINGS) WORKS AS A COORDINATING AGENCY BETWEEN WHIRLPOOL CORPORATION, USA AND ITS SOUTH ASIA REGIONAL OFFICE (WHIRLPOOL INDI A HOLDINGS) AND PROVIDES LATEST MANAGEMENT INFORMATION IN RE SPECT OF TECHNOLOGY, LEGAL, COMMERCIAL AND POLITICAL DEV ELOPMENTS IN ASIA REGION WHICH ENABLES THE MANAGEMENT TO TAKE EFFECTIVE BUSINESS DECISION. THE BRANCH OFFICE (WHIRLPOOL INDIA HOLDINGS) ADVI SE AND ASSIST ON STAFF TRAINING, EDUCATION, DEVELOPMEN T AND IMPLEMENTATION OF HUMAN RESOURCES MANAGEMENT AND PROCEDURE. THE BRANCH OFFICE (WHIRLPOOL INDIA HOLDINGS) DEDI CATED PERSONNEL ACTIVELY SCOUT FOR INVESTMENT OPPORTUN ITIES IN CONSUMER DURABLE APPLIANCES AND ARE PROMOTING THE INDIAN COLLABORATION, NAMELY, WHIRLPOOL OF INDIA LTD. 4.2 PAGE NOS. 20 AND 21 CONTAIN THE REPLIES FURNI SHED BY WIL TO THE AO IN RESPONSE TO A NOTICE U/S 133(6). POINT N O. 6 STATES THAT THERE IS NO EMPLOYEE ON THE ROLL OF WIL IN USA AND NONE OF THE EMPLOYEES HAD VISITED INDIA DURING THE CAPTIONED PERIOD. 4.3 ON THE BASIS OF THESE SUBMISSIONS AND EXPLANA TIONS, THE CASE OF THE LD. COUNSEL IS THAT NO EMPLOYEE OF THE ASSESSE E COMPANY HAS BEEN DEPUTED TO THE WIL AS ALL THE EMPLOYEES HAVE BEEN DEPUT ED BY THE PARENT ITA NO. 622(DEL)/2006 16 COMPANY TO THE WIL, WHICH ON SUCH APPOINTMENT BE COME THE EMPLOYEES OF THE WIL. THE ASSESSEE HAS MERELY ACTED A S A CONDUIT FOR TRANSFER OF MONEY FROM THE PARENT COMPANY TO THE WIL FOR PAYM ENT OF REMUNERATION. NO INCOME CAN BE SAID TO BE ATTRIBUTED TO SUCH T RANSFER OF MONEY THROUGH THE ASSESSEE. THEREFORE, THE ASSESSEE IS NOT LI ABLE TO BE ASSESSED IN INDIA. 4.4 IN ORDER TO SUPPORT THE AFORESAID CONTENTION S, RELIANCE HAS BEEN PLACED ON ARTICLES 5 AND 9 OF THE TREATY. IT IS ARGUED THAT NONE OF THESE ARTICLES ARE APPLICABLE TO THE FACTS OF THE CASE . FURTHER, RELIANCE HAS BEEN PLACED ON THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF DIRECTOR OF INCOME-TAX VS. HCL INFOSYSTEMS LTD. (2 005) 274 ITR 261. RELIANCE HAS ALSO BEEN PLACED ON THE DECISION OF A BENCH OF THE BANGALORE TRIBUNAL IN THE CASE OF IDS SOFTWARE SOLUTION (INDIA) PVT. LTD. VS. ITO 2009-TIOL-82-ITAT-BANG. DATED 21.01.20 09, A COPY OF WHICH HAS BEEN PLACED IN THE CASE LAW PAPER BOOK ON PA GES 1 TO 9. 4.5 COMING TO THE QUANTIFICATION OF INCOME, IT HAS BEEN SUBMITTED THAT THE ASSESSEE HAS NOT EARNED ANY INCOME IN INDIA. THE TRANSFER PRICING REGULATIONS COME INTO EFFECT ONLY WHEN PROFIT EAR NED BY AN ASSESSEE IS TO BE ALLOCATED IN TWO JURISDICTIONS, WHICH IS NOT THE CASE HERE. THEREFORE, ITA NO. 622(DEL)/2006 17 THESE REGULATIONS CANNOT BE USED FOR DEEMING CERTAIN AMOUNT AS INCOME. IN THIS CONNECTION, RELIANCE HAS BEEN PLACED ON THE RULING OF AUTHORITY FOR ADVANCE RULING IN THE CASE OF VANENBURG GROUP B V (2007) 289 ITR 464. 4.6 IN REGARD TO CHARGING OF INTEREST UNDER SEC TION 234B, IT IS SUBMITTED THAT THE ASSESSEE IS A NON-RESIDENT CO MPANY AND ALL PAYMENTS MADE TO IT ARE SUBJECT TO TAX DEDUCTION AT SOUR CE U/S 195 OF THE ACT. THEREFORE, THE LIABILITY OF ADVANCE-TAX PAYABLE BY THE ASSESSEE IS NIL. ACCORDINGLY, IT IS ARGUED THAT INTEREST CANNOT BE CHARGED U/S 234B. IN THIS CONNECTION, RELIANCE HAS BEEN PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOM E-TAX VS. JACABS CIVIL INCORPORATION (2010) 235 CTR 122. 5. IN REPLY, THE LEARNED CIT, DR SUMMARIZED TH E SUBMISSIONS OF THE LD. COUNSEL THAT (I) THE ASSESSEE HAS NOT BEEN CONDUCTING ANY BUSINESS OPERATION IN INDIA, (II) THE PERSONS ARE THE EM PLOYEES OF WIL ALTHOUGH THE PAYMENT IS MADE BY THE PARENT COMPANY THROUGH THE BRANCH OFFICE OF THE ASSESSEE-COMPANY, AND (III) IF AT ALL ANY SERVICE H AS BEEN RENDERED, IT HAS BEEN RENDERED TO THE INDIAN COMPANY. ITA NO. 622(DEL)/2006 18 5.1 IT IS SUBMITTED THAT WHIRLPOOL CORPORATION, U SA, IS THE PARENT COMPANY OF THE ASSESSEE COMPANY WITH 100% EQUI TY PARTICIPATION. THE PARENT COMPANY HAS ALSO VARIOUS SUBSIDIARIES IN MAURITIUS, WHOSE NAMES HAVE NOT BEEN FURNISHED. THE MAURITIAN COMPANIES HAVE INVESTED 82.33% IN THE EQUITY OF WIL DIRECTLY OR INDIRECTLY. AC CORDING TO THE ASSESSEE, THE PARENT COMPANY TRANSFERRED A SUM OF ABOUT ` 6.22 CRORES TO THE BRANCH OFFICE OF THE ASSESSEE-COMPANY IN INDIA, WHICH WAS PAID TO THE WIL FOR THE SALARIES OF THE EMPLOYEES. THIS BEGS A QUEST ION- WHAT IS THE PURPOSE OF INCORPORATION OF THE ASSESSEE-COMPANY IN THE USA? THE LD. CIT(APPEALS) HAS MENTIONED IN PARAGRAPH 2 THAT THE ASSESSEE COMPANY HAS BEEN INCORPORATED IN THE USA AS A SPECIAL PURPOSE VEH ICLE TO FACILITATE THE SAFEGUARDING OF INVESTMENT MADE IN WIL, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF CONSUMER DUR ABLE GOODS. THIS VERY PURPOSE HAS BEEN MENTIONED IN THE RETURN OF INCOME . FURTHER, IT HAS BEEN SUBMITTED BEFORE THE LD. CIT(APPEALS) THAT THE INVESTMENTS OF THE PARENT COMPANY HAVE GROWN PROGRESSIVELY, THEREFORE, IN O RDER TO SEPARATELY MONITOR AND SUPERVISE THESE INVESTMENTS, THE A SSESSEE COMPANY WAS INCORPORATED IN THE USA AND AN APPLICATION WAS MO VED BEFORE THE RBI IN THE YEAR 1995 TO OPEN A BRANCH OFFICE IN INDIA . THE ASSESSEE AND THE PARENT COMPANY ARE NOT TAXED SEPARATELY IN THE USA AND, THEREFORE, THE ITA NO. 622(DEL)/2006 19 ACCOUNTS OF THESE TWO COMPANIES HAVE BEEN MERGED . IT HAS ALSO BEEN SUBMITTED THAT THE SECONDMENT OF EMPLOYEES OF THE PARENT COMPANY AND THE ASSESSEE COMPANY IS AIMED AT PROTECTING AND ENH ANCING THE INTEREST OF THE PARENT COMPANY AND THIS WORK WAS CARRIED THROUG H THE BRANCH OFFICE IN INDIA. THE EXPENDITURE WAS WHOLLY MET BY THE P ARENT COMPANY. THE ASSESSEE, HOWEVER, DID NOT CARRY ON ANY BUSINES S IN INDIA AND NEVER EARNED ANY INCOME FROM THE BRANCH OFFICE. THE P ARENT COMPANY MANUFACTURED GOODS IN MORE THAN 11 COUNTRIES AN D SOLD THEM IN MORE THAN 120 COUNTRIES. THE VASTNESS OF OPERATIONS NECESSITATED INCORPORATION OF THE ASSESSEE COMPANY AS A SEPARATE COMPANY. THE OPERATIONS IN INDIA NECESSITATED OPENING A BRANCH OFFICE IN INDIA. I N ORDER TO ENSURE IMPLEMENTATION OF THE POLICIES OF THE PARENT COMP ANY, THE ASSESSEE SECONDED THE EMPLOYEES TO THE WIL TO WORK IN KEY POSITIONS. THIS WAS DONE AT THE INSTRUCTIONS OF THE PARENT COMPANY. THE SALARY AND BENEFITS TO THESE EMPLOYEES WERE BORNE BY THE ASSESSEE OUT OF THE FUNDS RECEIVED FROM THE PARENT COMPANY. IN THIS CONNECTION, OUR ATTENTION HAS ALSO BEEN DRAWN TOWARDS ANSWER TO QUESTION NO. 7 AND IT IS STRESSED THAT THE STATEMENT FURNISHES ELABORATE DETAILS ABOUT THE ACTIVITIES CARRIED ON BY THE ASSESSEE COMPANY THROUGH ITS BRANCH OFFICE IN IN DIA. THIS IS A POSITIVE EVIDENCE SHOWING HOW THE INTEREST OF THE PARENT C OMPANY HAS BEEN ITA NO. 622(DEL)/2006 20 SAFEGUARDED IN ACTUAL PRACTICE. SINCE THE TO P LEVEL EMPLOYEES HAVE BEEN SECONDED TO MANAGE THE AFFAIRS OF WIL, IT CAN BE SAID THAT THE ASSESSEE PROVIDED SERVICES TO THE PARENT COMPAN Y BY SUCH SECONDMENT. THE SUBMISSION OF THE ASSESSEE BEFORE THE LD. CIT (A) HAS BEEN THAT THE SECONDMENT OF EMPLOYEES OF THE WHIRLPOOL IN THE PARENT COMPANY AIMED AT PROTECTING AND ENHANCING INTEREST OF THE PARE NT COMPANY WAS CARRIED OUT THROUGH THE ASSESSEES INDIAN BRANCH AND THE EXPENDITURE ON THAT ACCOUNT WAS PAID BY THE PARENT COMPANY, AS MENTIO NED IN PARAGRAPH 3.1 OF THE IMPUGNED ORDER. THE ASSESSEE HAS NOW TAKEN A TOTALLY DIFFERENT STAND BEFORE THE TRIBUNAL THAT IT IS MERELY A CONDUIT FOR TRANSFER OF MONEY FOR PAYMENT OF SALARIES FROM THE PARENT COMPANY TO THE WIL. THUS, HE RELIED ON THE FINDINGS OF THE LD. CIT(APPEALS) FU RNISHED IN PARAGRAPH NO.4, WHICH HAS ALREADY BEEN REPRODUCED BY US. 5.2 COMING TO TAXATION OF PROFITS IN INDIA, IT IS SUBMITTED THAT THE ADMITTED POSITION IS THAT THE ASSESSEE HAS A BR ANCH IN INDIA. THEREFORE, THE PROVISION CONTAINED IN ARTICLE 5 IS CLEARLY A PPLICABLE. EMPLOYEES HAVE BEEN SECONDED TO THE WIL FOR PROTECTING THE INTE REST OF THE PARENT COMPANY AND, THEREFORE, ARTICLE 7 IS ALSO APPLICAB LE FOR THE PURPOSE OF ATTRIBUTING PROFITS TO THE INDIAN BRANCH. IT IS ARGUED THAT ECONOMIC REALITY ITA NO. 622(DEL)/2006 21 IS THAT THE ASSESSEE HAS PAID THE SALARIES OF T HE SECONDED EMPLOYEES. THEREFORE, EVEN IF THE ARRANGEMENT IS GIVEN SOME DIFFERENT LEGAL FORM, IT IS A FIT CASE TO LIFT THE VEIL AND EXAMINE THE TR UE NATURE OF THE SERVICES RENDERED BY THE ASSESSEE COMPANY. COMING TO ARTI CLE 9, IT IS SUBMITTED THAT IT IS MERELY AN EXTENSION OF ARTICLE 7, I. E., IT PROVIDES FOR COMPUTATION OF ARMS LENGTH PROFITS, IN A CASE WHERE SOME CONDITION HAS BEEN IMPOSED. THUS, THE ESSENCE OF BOTH THE PROVISIONS IS TO COMPUTE THE PROFITS OR INCOME AS IF THE TRANSACTION IS AN UNOBSTRUCTED TRANSACTION. 5.3 IN CONNECTION WITH THE ARGUMENT OF THE LD. CO UNSEL THAT TRANSFER PRICING ADJUSTMENT COMES INTO PICTURE WHEN SOME INCOME IS CHARGEABLE TO TAX UNDER THE ACT ON ACCOUNT OF APPORTIONMENT OF INCOME BETWEEN TWO JURISDICTIONS, ONE OF THEM BEING INDIA, IT IS SU BMITTED THAT THE SAME IS IN CONTRADICTION WITH THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VVF LIMITED VS. DY. CIT 2010-TII-04-ITAT AND PEROT SYSTEMS TSI INDIA LTD. VS. DY. CIT 2010-TII-03-ITAT-DEL, COPIES OF WHICH HAVE BEEN PLACED ON RECORD. IN RESPECT OF DETERMINAT ION OF THE TOTAL INCOME, THE LD. DR SUBMITTED THAT WHILE THE AO TOOK RECOURSE TO RULE 10 OF THE INCOME-TAX RULES, 1962, THE LD. CIT(APPEALS) DETE RMINED THE SAME ON COST PLUS METHOD. ITA NO. 622(DEL)/2006 22 6. IN THE REJOINDER, THE LD. COUNSEL SUBMITTED T HAT THE SECONDED EMPLOYEES WERE NOT THE EMPLOYEES OF THE ASSESSEE COMPANY BUT THOSE OF THE PARENT COMPANY. THE ASSESSEE WAS MERELY U SED AS A CONDUIT FOR TRANSFER OF MONEY FROM THE PARENT COMPANY TO THE WIL. THESE EMPLOYEES WERE NOT BORNE ON THE ROLLS OF THE A SSESSEE BUT ON THE ROLLS OF WIL. IN SUCH A CIRCUMSTANCE, NO SERVICE COULD HAVE BEEN RENDERED BY THE ASSESSEE TO THE PARENT COMPANY EXCEPT THE TRANS FER OF MONEY. EVEN OTHERWISE, IF THE INDIAN BRANCH IS SAID TO HAVE EARNED ANY INCOME IN INDIA, ITS PROFIT AND LOSS ACCOUNT WILL HAVE TO BE DRAWN , WHICH HAS NOT BEEN DONE BY THE AO. THE ADJUSTMENT, IF ANY, CAN ONLY BE MA DE IN THE CASE OF THE PARENT COMPANY, WHICH PROVIDED FREE SERVICES OF TOP EMPLOYEES TO THE WIL. THE FACTS IN THE CASE OF VVF LIMITED AND PETRO SYSTEMS TSI INDIA LTD. WERE DISTINGUISHED BY SUBMITTING THAT BOT H THESE CASES DEALT WITH THE ISSUE OF INTEREST-FREE LOAN AND THE TAXATIO N OF INTEREST INCOME DOES NOT REQUIRE THE EXISTENCE OF PERMANENT ESTABLISHMENT( PE). IN THIS CASE, THE PE DOES NOT EXIST AND, THEREFORE, BUSINESS INCOM E CANNOT BE COMPUTED. IT HAS ALSO BEEN SUBMITTED THAT THE STATEMENT OF MR. S.K. PRADHAN, HEAVILY RELIED UPON BY THE REVENUE, SHOULD BE READ AS A WHOLE. IN ANSWER TO QUESTION NO. 3, IT HAS BEEN STATED SPECIFICALLY BY HIM THAT THE ASSESSEE IS NOT RENDERING ANY KIND OF SERVICES TO ANY COMP ANY. THEREFORE, THE ITA NO. 622(DEL)/2006 23 ANSWER TO QUESTION NO. 7 IS ONLY IN RESPECT OF I NTENDMENT OF INCORPORATION OF THE ASSESSEE COMPANY AND OPENING ITS BRANCH OF FICE IN INDIA. 7. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE IS A COMPANY INCORPORATED IN THE USA AND IT HAS OPENED A BRANCH OFFICE IN INDIA WITH THE PERMISSION OF RESERVE BANK OF INDIA INTER-ALIA FOR UNDERTAKI NG THE ACTIVITIES OF-(A) IMPORT/EXPORT OF GOODS TO AND FROM INDIA; (B) P ROVIDING SERVICE SUPPORT TO LOCAL SUPPLIERS FOR DEVELOPMENT OF GOOD QUALI TY RAW-MATERIAL, COMPONENTS AND FINISHED PRODUCTS FOR LOCAL AND O VERSEAS REQUIREMENTS; AND (C) PROMOTING TECHNICAL/FINANCIAL COLLABORATI ON AND OTHER INCIDENTAL ACTIVITIES MENTIONED IN THE APPLICATION WHICH ARE NOT IN THE NATURE OF MANUFACTURING OR PROCESSING ACTIVITIES. THE AS SESSEE FILED ITS RETURN DECLARING NIL INCOME. IT WAS ACCOMPANIED BY ST ATEMENT OF INCOME WHICH SHOWED LOSS OF ABOUT ` 6.22 CRORES. THIS AMOUNT REPRESENTS PAYMENT OF SALARIES TO THE EMPLOYEES SECONDED BY THE PAR ENT COMPANY. THE EXPENSES WERE MET OUT OF REPATRIATION OF FOREIG N EXCHANGE FROM THE USA AND IT IS THE CASE OF THE ASSESSEE THAT S UCH FOREIGN EXCHANGE WAS RECEIVED FROM THE PARENT COMPANY. THE NOTE TO TH E PROFIT AND LOSS ACCOUNT STATES THAT THE MAIN ACTIVITY OF THE BRANCH IS TO WATCH AND SAFEGUARD THE ITA NO. 622(DEL)/2006 24 INTEREST OF THE PARENT COMPANY IN INDIA. SINCE THERE IS NO BUSINESS ACTIVITY IN INDIA, THE LOSS IS NOT CLAIMED. THE M AIN QUESTION IS-WHETHER, THE BRANCH OFFICE OF THE ASSESSEE IN INDIA CONSTITU TES PE IN INDIA? IT APPEARS TO US THAT PARAGRAPH NOS. 1 AND 2 OF ARTICLE 5 OF THE TREATY BETWEEN THE USA AND INDIA ARE MATERIAL FOR DECIDING THIS ISS UE. THESE PARAGRAPHS READ AS UNDER:- 1. FOR THE PURPOSES OF THIS CONVENTION, THE TERM PERMANENT ESTABLISHMENT MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CAR RIED ON. 2. THE TERM PERMANENT ESTABLISHMENT INCLUD ES ESPECIALLY: (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 OTHE R 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 CARRIED ON; (I) A STORE OR PREMISES USED AS A SALES OUTLET; ITA NO. 622(DEL)/2006 25 (J) AN INSTALLATION OR STRUCTURE USED FOR THE EXPLORA TION OR EXPLOITATION OF NATURAL RESOURCES, BUT ONLY IF SO USED FOR A PERIOD OF MORE THAN 120 DAYS IN ANY TWELVE-MONTH PERIOD; (K) A BUILDING SITE OR CONSTRUCTION, INSTALLATION OR ASSEMBLY PROJECT OR SUPERVISORY ACTIVITIES IN CONNECTION THEREWITH, WHERE SUCH SITE, PROJECT OR ACTIVITIES (TOGETHER WITH OTHER SUCH SITES, PROJECTS OR ACTIVITIES, 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 INCL UDED SERVICES), WITHIN A CONTRACTING STATE BY AN ENTERPRISE THR OUGH EMPLOYEES OR OTHER PERSONNEL, BUT ONLY IF: (I) ACTIVITIES OF THAT NATURE CONTINUE WITHIN THA T STATE FOR A PERIOD OR PERIODS AGGREGATING TO MORE THAN 90 DAYS WI THIN ANY TWELVE- MONTH PERIOD; OR (II) THE SERVICES ARE PERFORMED WITHIN THAT STA TE FOR 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 BUSINES S 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 LD. DR IS THAT THE BRANCH OFFICE CONSTITUTES PE IN INDIA, FROM WHICH SERV ICES HAVE BEEN RENDERED TO THE PARENT COMPANY FOR SAFEGUARDING THE INTEREST OF THE LATTER, CONSISTING PRIMARILY THE INVESTMENT MADE BY IT THROUGH MAU RITIAN COMPANIES IN WIL. FOR THIS PURPOSE, THE EMPLOYEES OF THE ASSES SEE HAVE BEEN SECONDED, ON WHICH EXPENDITURE HAS BEEN INCURRED. ITA NO. 622(DEL)/2006 26 7.2 WE MAY EXAMINE THE RIVAL CONTENTIONS IN TERM S OF 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 THRO UGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. IT IS TRUE THAT THE ASSESSEE HAS A FIXED PLACE OF BUSINESS IN INDIA IN THE FO RM OF THE BRANCH OFFICE. HOWEVER, THERE SEEMS TO BE NOTHING ON RECORD T O SHOW THAT THE BUSINESS OF THE ASSESSEE HAS BEEN CONDUCTED WHOLL Y OR PARTLY THROUGH THIS BRANCH. THE REASON IS THAT ONLY EXPENDITURE DEB ITED 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 ASSESSE E COMPANY. 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 TERMS OF RESOLUTIONS OF THE BOARD OF THE WIL, THE EMPLOYEES WERE UNDER CONTR OL AND SUPRINTENDENCE OF THE BOARD OF DIRECTORS OF THE WIL. THEREFORE, THE EMPLOYEES ARE THOSE OF THE WIL. IT IS EQUALLY PLAUSIBLE TO ARGUE THAT SINCE SALARIES HAVE BEEN PAID BY THE PARENT COMPANY, THE ECONOMIC REALITY OVERTAKES THE LEGAL ITA NO. 622(DEL)/2006 27 REALITY. THEREFORE, THE EMPLOYEES ARE THOSE OF TH E PARENT COMPANY. NONETHELESS, IT WILL BE DIFFICULT TO COME TO A CO NCLUSION THAT THE EMPLOYEES ARE THOSE OF THE ASSESSEE COMPANY. THERE COULD BE ANOTHER ARGUMENT ADVANCED IN THIS BEHALF BY THE LD. DR THAT IT HA S NOT BEEN PROVED CONCLUSIVELY THAT THE MONIES PAID BY WAY OF SALA RIES WERE REIMBURSED TO THE ASSESSEE COMPANY BY THE PARENT COMPANY. THIS STAND IS TAKEN ONLY BY WAY OF AN ARGUMENT. THE POSITION BECOMES A LIT TLE MORE CONFUSED AS ACCORDING TO US LAWS, THE ACCOUNTS OF THE PAREN T COMPANY AND THE ASSESSEE COMPANY HAVE TO BE MERGED AND, THUS, TH E DISTINCTION BETWEEN THE ASSESSEE AND THE PARENT COMPANY BECOMES BL URRED. WE HAVE CONSIDERED THIS MATTER ALSO. WE ARE OF THE VIEW THAT BEFORE BRINGING A FOREIGN COMPANY TO TAX IN INDIA ON ITS BUSINESS PROFITS, 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 PROVIS ION OF SECTION 131 OF THE ACT. THE REVENUE HAS RELIED VERY HEAVILY ON A NSWER TO QUESTION NO. 7. IN THIS ANSWER, IT HAS INTER-ALIA BEEN DEPOSED T HAT THE PARENT COMPANY HAD TIED UP THAT WIL (FORMERLY KNOWN AS KELVINATOR O F INDIA LTD.) AND HAS INVESTED ABOUT ` 300CRORES IN ACQUIRING MAJORITY STAKE. CONSEQU ENT THERETO, THE ASSESSEE OPENED A BRANCH OFFICE IN INDIA WHICH IS ALSO THE ITA NO. 622(DEL)/2006 28 REGIONAL OFFICE OF THE PARENT COMPANY FOR SOUTH AS IA. THIS BRANCH OFFICE OF THE ASSESSEE IS RESPONSIBLE FOR FORMULATING POLIC Y AND TAKING STRATEGIC DECISION FOR OPERATIONS OF WIL IN INDIA, NEP AL, SRI LANKA, BANGLADESH AND PAKISTAN. THE MANUFACTURING OPERATIONS OF WHI RLPOOL GROUP EXTEND TO MORE THAN 11 COUNTRIES AND THE PRODUCTS ARE BEIN G SOLD IN MORE THAN 125 COUNTRIES. THE BRANCH OFFICE CREATES EXPORT OP PORTUNITIES FOR RAW- MATERIAL, COMPONENTS AND FINISHED PRODUCTS FOR OV ERSEAS REQUIREMENTS AND WOULD ULTIMATELY GENERATE EXPORT REVENUE FOR TH E ASSESSEE COMPANY. IT IS ALSO RESPONSIBLE FOR IDENTIFYING SUPPLIER OF GOODS ETC. BOTH FOR EXPORT AND LOCAL CONSUMPTION OF THE GROUP COMPANIES. F OR THIS PURPOSE, THE PARENT COMPANY AND THE INDIAN BRANCH ASSIST THE SUPPLIERS TO INTRODUCE NEW TECHNOLOGIES ETC. THE BRANCH OFFICE ACTS A S A COORDINATING AGENCY BETWEEN THE PARENT COMPANY AND THE ASSESSEE FOR P ROVIDING LATEST MANAGEMENT INFORMATION IN RESPECT OF TECHNOLOGY, LEGAL, COMMERCIAL AND POLITICAL FIELDS. IT ALSO ADVISES ON THE MATT ERS OF STAFF TRAINING, EDUCATION, DEVELOPMENT AND IMPLEMENTATION OF HUMAN RESOURCES . IT ALSO SCOUTS FOR INVESTMENT OPPORTUNITIES IN CONSUMER DURABLE GOO DS IN COLLABORATION WITH WIL. ON THE BASIS OF THIS ANSWER, IT IS ARGUED THAT THE BRANCH OFFICE IS TAKING UP ALL THE ACTIVITIES WHICH ARE GENERALLY MANAGERIAL IN NATURE AND THESE ACTIVITIES ARE UNDERTAKEN FOR THE BENEFI T OF THE PARENT COMPANY, ITA NO. 622(DEL)/2006 29 BEING THE PURPOSE FOR WHICH THE COMPANY HAS BEEN INCORPORATED. ON THE OTHER HAND, THE ARGUMENT OF THE LD. COUNSEL IS TH AT THESE ARE THE PURPOSES FOR WHICH THE ASSESSEE COMPANY HAS BEEN INCORPOR ATED. THESE ACTIVITIES HAVE NOT BEEN UNDERTAKEN IN THE YEAR UNDER QUES TION. THE SAME IS CLEAR FROM ANSWER TO QUESTION NO. 3, WHICH CLEARLY STA TES THAT THE ASSESSEE IS NOT RENDERING ANY KIND OF SERVICES TO ANY COMPA NY. THEREFORE, READING THE STATEMENT AS A WHOLE WOULD PROVE BEYOND D OUBT THAT NO BUSINESS ACTIVITY HAS BEEN UNDERTAKEN BY THE BRANCH OFFIC E. IN THIS CONNECTION, WE HAVE CONSIDERED THE RETURN OF INCOME AND THE S TATEMENT OF MR. S.K. PRADHAN. FROM THESE, IT BECOMES CLEAR THAT THE ASSESSEE HAS MADE PAYMENT TO WIL OF THE SALARIES OF THE SECONDED E MPLOYEES. WE HAVE ALREADY CONCLUDED THAT IT HAS NOT BEEN ESTABLISHE D IN ANY MANNER THAT THESE EMPLOYEES ARE THOSE OF THE ASSESSEE COMPANY. BY SUCH SECONDMENT, IT CANNOT BE SAID THAT THE ASSESSEE HAS RENDERED ANY SERVICE EITHER TO WIL OR TO THE PARENT COMPANY. THEREFORE, ANSWER TO QU ESTION NO. 7 IS ONLY IN RESPECT OF INTENDED ACTIVITIES AND ANSWER TO Q UESTION NO. 3 IS IN RESPECT OF ACTUAL ACTIVITIES. THUS, IT IS HELD THAT THE ASSESSEE COMPANY DOES NOT HAVE A PE IN INDIA AS UNDERSTOOD UNDER PARAGRAPH NO. 1 OF ARTICLE 5. ITA NO. 622(DEL)/2006 30 7.3 PARAGRAPH NO. 2 INCLUDES CERTAIN PLACES WITH IN THE AMBIT OF THE PE SUCH AS A PLACE OF MANAGEMENT, A BRANCH, AN OF FICE, A FACTORY, A WORKSHOP ETC. THESE PLACES ARE MENTIONED IN CL AUSES (A) TO (E) OF PARAGRAPH NO. 2. OTHER PLACES MENTIONED IN CLA USES (F) TO (K) ARE NOT APPLICABLE TO THE FACTS OF THE CASE AS THESE PLAC ES ARE IN THE NATURE OF A MINE, A WAREHOUSE, A FARM, A STORE, AN INSTALLA TION OR A BUILDING SITE ETC. CLAUSE (L) CONSISTS OF THE FURNISHING OF SERVICE S, OTHER THAN INCLUDED SERVICES AS DEFINED IN ARTICLE 12 (ROYALTIES A ND FEES FOR INCLUDED SERVICES) WITHIN A CONTRACTING STATE BY AN ENTERPRISE THRO UGH EMPLOYEES OR OTHER PERSONNEL SUBJECT TO CONTINUATION OF THE ACTIVITY FOR THE PRESCRIBED NUMBER OF DAYS IN A PERIOD OF 12 MONTHS. AS IT HAS NO T BEEN ESTABLISHED THAT THE SECONDED EMPLOYEES ARE THOSE OF THE ASSESSEE, I T 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 BRANCH OFFICE, THOUGH A FIXED PLACE OF BUSINESS, HAS NOT CARRIED OUT THE BUSINESS OF THE ASSESSEE WHOLLY OR PARTLY AND IT DOES NOT CONSTITUTE T HE PE. 7.4 THE LD. DR HAS ALSO RELIED ON PARAGRAPH NO . 1(B) OF ARTICLE 9 REGARDING ASSOCIATED ENTERPRISES. IT IS PROVIDE D THAT WHERE THE SAME PERSONS PARTICIPATE DIRECTLY OR INDIRECTLY IN THE MANAGEMENT, CONTROL OR ITA NO. 622(DEL)/2006 31 CAPITAL OF AN ENTERPRISE OF A CONTRACTING STAT E AND AN ENTERPRISE OF THE OTHER CONTRACTING STATE AND IN EITHER CASE CON DITIONS ARE MADE OR IMPOSED BETWEEN THE TWO ENTERPRISES IN THEIR COMMERCIAL OR FINANCIAL RELATIONS WHICH DIFFER FROM THOSE WHICH WOULD BE MADE BETW EEN INDEPENDENT ENTERPRISES, THEN ANY PROFITS WHICH, BUT BY REAS ON 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 DETERMINATI ON OF ARMS LENGTH PROFITS. SUCH A COMPUTATION WILL ARISE ONLY IF THERE 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 I N INDIA IN TERMS OF THE PROVISION CONTAINED IN ARTICLE 5 OF THE TAX TREAT Y, IT IS NOT NECESSARY FOR US TO GO INTO THE QUESTION WHETHER TRANSFER PRICING ADJUSTMENT COULD BE MADE IN DETERMINING SUCH PROFIT. SINCE THERE IS NO PROFIT, THERE WOULD BE NO QUESTION OF TRANSFER PRICING ADJUSTMENT. THUS, WE DO NOT THINK IT NECESSARY TO GO INTO RULE 10 OF THE INCOME-TAX RU LES, RECOGNIZED METHODS OF DETERMINING ARMS LENGTH PROFITS OR THE CAS ES RELIED UPON BY THE LD. DR IN THIS MATTER. IN VIEW OF THE AFORESAID FIND ING, IT IS ALSO NOT NECESSARY ITA NO. 622(DEL)/2006 32 TO GO INTO THE DECISION IN THE CASE OF HCL IN FOSYSTEMS LTD. (DEL) AND VANUNBURG GROUP BV (AR) (SUPRA). 7.6 THE RESULT OF AFORESAID DISCUSSION IS THAT T HE ASSESSEE IS NOT LIABLE TO PAY TAX IN INDIA IN THIS YEAR. 8. AS THE ASSESSEE IS NOT LIABLE TO BE TAXED UNDE R THE INCOME-TAX ACT, 1961, THE GROUND REGARDING CHARGING OF INTEREST U/S 234B DOES NOT SURVIVE AND, THEREFORE, WE NEED NOT DISCUSS THE CASE OF JACABS CIVIL INCORPORATION (SUPRA). 9. IN THE RESULT, THE APPEAL IS ALLOWED. 10. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 14 JANUARY, 2011. SD/- SD/- (C.L. SETHI) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 14TH JANUARY, 2011. SP SATIA ITA NO. 622(DEL)/2006 33 COPY OF THE ORDER FORWARDED TO:- WHIRLPOOL INDIA HOLDINGS LTD., NEW DELHI. DY. DIRECTOR OF INCOME-TAX, CIRCLE 2(2), INTL. TAXA TION, NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.