M/s Samsung Electronics Co. Ltd., New Delhi V. DDIT, New Delhi

ITA 66/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2769 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 29-05-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Transfer pricing; Double taxation relief; International transaction; Permanent establishment; Revised return; Reason to believe; Reassessment proceedings
• Section: 234B; 115JB; 147; 148

Judgement Text

ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NOS.- 65 TO 70/DEL/2013 ( ASSESSMENT YEARS: 2004-05 TO 2009-10) SAMSUNG ELECTRONICS CO. LTD. C/O SAMSUNG INDIA ELECTRONICS PVT. LTD. GROUND FLOOR, TOWER-C, VIPUL TECH SQUARE, SECTOR-43, GOLF COURSE ROAD, GURGAON. AACCS8960N S DCIT (INT. TAXATION) ROOM NO. 418, BLOCK-E2, CIVIC CENRE, J.L. NEHRU MARG, NEW DELHI. ITA NO.- 315/DEL/2016 ( ASSESSMENT YEAR: 2011-12) SAMSUNG ELECTRONICS CO. LTD. C/O SAMSUNG INDIA ELECTRONICS PVT. LTD. GROUND FLOOR, TOWER-C, VIPUL TECH SQUARE, SECTOR-43, GOLF COURSE ROAD, GURGAON. AACCS8960N S DCIT (INT. TAXATION) ROOM NO. 418, BLOCK-E2, CIVIC CENRE, J.L. NEHRU MARG, NEW DELHI. ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 2 ITA NOS.- 4705 & 4706/DEL/2017 ( ASSESSMENT YEARS: 2012-13 & 2014-15) SAMSUNG ELECTRONICS CO. LTD. C/O SAMSUNG INDIA ELECTRONICS PVT. LTD. GROUND FLOOR, TOWER-C, VIPUL TECH SQUARE, SECTOR-43, GOLF COURSE ROAD, GURGAON. AACCS8960N S DCIT (INT. TAXATION) ROOM NO. 418, BLOCK-E2, CIVIC CENRE, J.L. NEHRU MARG, NEW DELHI. & ITA NO.- 982/DEL/2016 ( ASSESSMENT YEAR: 2011-12) DCIT (INT. TAXATION) ROOM NO. 418, BLOCK-E2, CIVIC CENRE, J.L. NEHRU MARG, NEW DELHI. S SAMSUNG ELECTRONICS CO. LTD. C/O SAMSUNG INDIA ELECTRONICS PVT. LTD. GROUND FLOOR, TOWER-C, VIPUL TECH SQUARE, SECTOR-43, GOLF COURSE ROAD, GURGAON. AACCS8960N ASSESSEE BY SH. HIMANSHU SINHA, ADV. MS. VRINDA TULSHAN, ADV. REVENUE BY SH. T.M. SHIVAKUMAR, CIT DR (INT. TAXATION) DATE OF HEARING 27.02.2018 DATE OF PRONOUNCEMENT 22 03.2018 ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 3 ORDER PER BENCH: ITA NOS 65 TO 70/DEL/2013, 315/DEL/2016, AND 4705 AND 4706/ DEL/2017 ARE FILED BY THE ASSESSEE IN RESPECT OF AY 2004-05 TO 2009-10, 2011-12, 2012-13, AND 2014-15 RESPECTIV ELY. ITA NO. 982/DEL/2016 IS PREFERRED BY THE REVENUE. SINCE PA RTIES AND THE ISSUES INVOLVED IN ALL THESE APPEALS ARE SIMILAR, W E DEEM IT JUST AND CONVENIENT TO DISPOSE OF THESE APPEALS BY WAY OF A COMMON ORDER. 2. RELEVANT FACTS, IN BRIEF, ARE THAT THE SAMSUNG E LECTRONICS CO. LTD (SEC) I.E. ASSESSEE IS A COMPANY ESTABLISHED IN REPUBLIC OF KOREA ON 01.12.1969 AND IS A TAX RESIDENT OF SOUTH KOREA AND THE PRINCIPAL ACTIVITY OF THE COMPANY IS MANUFACTURING AND SALES OF VARIOUS CATEGORIES OF TELEVISIONS, HOME APPLIANCES, TELECOMMUNICATION TERMINALS, SEMI-CONDUCTORS AS WEL L AS OTHER STATE OF THE ART IT PRODUCTS FOR GLOBAL MARKETS. I T HAS TWO WHOLLY OWNED SUBSIDIARIES IN INDIA I.E. SAMSUNG INDIA ELEC TRONICS PRIVATE LIMITED (SIEL) AND SAMSUNG INDIA SOFTWARE OPERATI ONS PRIVATE LIMITED (NOW KNOWN AS SAMSUNG R&D INSTITUTE INDIA B ANGALORE PRIVATE LIMITED) (SAMSUNG R&D). PURSUANT TO THE SURVEY CONDUCTED ON THE PREMISES OF SIEL ON 24-06-10, LD. AO ISSUED A NOTICE DATED 28-03-11 TO SEC UNDER SECTION 148 FOR INITIATING RE- ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT FOR SIX AYS FROM AY 2004-05 TO 2009-10. IN RESPONSE TO THE ABO VE NOTICE, SEC FILED ITS TAX RETURNS ON 09-SEP-11FOR ALL THESE YEA RS DECLARING INCOME FROM BRANCH ACTIVITIES FOR AYS 2004-08 TO 2 008-09 WHICH ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 4 WAS DECLARED IN THE ORIGINAL RETURN AS WELL AND ALS O ROYALTY/FEE FOR TECHNICAL SERVICES WHICH WAS NOT DECLARED IN THE OR IGINAL RETURN FOR ANY YEAR. 3. AT THE REQUEST OF THE ASSESSEE THROUGH THEIR LET TER DATED 14.9.2011 BEFORE THE TAX OFFICER REQUESTING THE REA SONS FOR ISSUANCE OF NOTICE UNDER SECTION 148 FOR AY 2004-05 TO AY 20 09-10, LD. AO, ON 21.09.2011 FURNISHED THE FOLLOWING REASONS: - 'A SURVEY IN THIS CASE WAS CONDUCTED ON 24.06.2010. DURING THE COURSE OF SURVEY IT WAS FOUND THAT M/S SAMSUNG INDIA ELECTRONICS LTD IS A SUBSIDIARY OF M/S SAMSUNG ELEC TRONICS CO.. LTD., SOUTH KOREA. M/S SAMSUNG INDIA ELECTRONICS LTD IS IN THE BUSINES S OF MANUFACTURING AS WELL AS TRADING OF CONSUMER ELECTR ONICS . THE ITEMS MANUFACTURED BY THE COMPANY ARE WASHING MACHI NE, TELEVISIONS, AIR-CONDITIONERS, REFRIGERATORS AND MO BILE PHONES. THESE ITEMS ARE MANUFACTURED UNDER THE TECHNICAL AS SISTANCE OF THE PRESENT COMPANY FOR WHICH THE PARENT COMPANY RE CEIVES FEES FOR TECHNICAL SERVICES. THE PARENT COMPANY M/S SAMSUNG ELECTRONICS CO LTD, SOUTH KOREA HAS NOT PAID ANY ROYA LTY FOR USE OF ITS BRAND NAME SAMSUNG BY THE SUBSIDIARY COMPANY. THUS, INCOME OF THE KOREAN COMPANY IN THE FORM OF ROYALTY HAS ESCAPED ASSESSMENT. AS PER INFORMATION AVAILABLE ON INTERNET, THE SALES OF M/S SAMSUNG INDIA ELECTRONIC S WERE RS. 5,000 CRORES DURING THE PREVIOUS YEAR RELEVANT TO A .Y. 2004-05. THE AMOUNT OF ROYALTY CAN BE TAKEN AS RS. 100 CRORES BY TAKING THE FIGURE OF ROYALTY @ 2% OF SALES. FURTHER, DURING POST SURVEY PROCEEDINGS, STATEMENTS OF MR. JUNG SOO SHIN, PRESIDENT & CEO OF THE INDIAN COMPAN Y WAS RECORDED ON 14.07.2010. IT WAS OBSERVED THAT HE IS ALSO HEAD OF SOUTH L/VEST ASIA OPERATIONS OF THE PARENT COMPANY. THUS HE IS REPRESENTING NOT ONLY SAMSUNG INDIA BUT ALSO SAMSUN G KOREA IN HIS CAPACITY AS SOUTH WEST ASIA HEAD. THE COUNTRIES COVERED INDIA, BANGLADESH, SRI LANKA, NEPAL, BHUTAN AND MAL DIVES. HE IS NOT PAID ANYTHING EXTRA TO PERFORM HIS DUTIES IN TH E CAPACITY OF SOUTH WEST ASIA HEAD. IN ADDITION TO STATEMENT OF MR. JUNG SOO SHIN, THE STATEMENTS OF THE FOLLOWING EMPLOYEES OF SAMSUNG INDIA ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 5 ELECTRONICS LTD WERE RECORDED. I. B D PARK, DIRECTOR MOBILE BIZ & IT BIZ II. SACHIN BAWEJA, COMPANY SECRETARY III. C S CHOI, VICE PRESIDENT, CORPORATE MARKETING IV. Y H CHO, VICE PRESIDENT, SALES, NORTH REGION V. HK SEO, VICE PRESIDENT, CE SALES & MARKETING VI. J H KYUNG, DIRECTOR, CEO A CLOSE ANALYSIS OF THESE STATEMENTS FURTHER REVEAL S THAT: (I) THERE IS NO EVIDENCE IN THE MINUTES OF THE BOARD M EETINGS SHOWING ANY . IMPORTANT POLICY DECISIONS BEING TAKEN BY THE BOARD MEMBERS IN INDIA. (II) THE INDIAN COMPANY HAS TO REGULARLY UPDATE THE REAS ONS FOR AGEING STOCK TO THE PARENT COMPANY. THE PARENT COMPANY REGULARLY OVERVIEWS THE PERFORMANCE OF THE INDIAN C OMPANY. (III) THE TEAM AT INDIAN COMPANY COLLECTS INFORMATION FR OM INDIAN CONSUMERS AND SENDS THAT INFORMATION TO THE PARENT COMPANY SO AS TO DEVELOP INDIANISED PRODUCT E.G. TW O VEGETABLE BOXES IN REFRIGERATORS, SOUND FOCUSED LCD TVS AND S EMI AUTOMATIC WASHING MACHINES ARE SOME OF THE PRODUCTS WHICH HAS BEEN INDIANISED BY THE PARENT COMPANY ON THE REQUEST OF THE INDIAN COMPANY. (IV) SAMSUNG KOREA HAS DIFFERENT GLOBAL BUSINESS MANAGEM ENTS (GBMS) TO LOOK AFTER THE DIFFERENT CATEGORIES OF PR ODUCTS. EACH GBM DEVELOPS NEW PRODUCTS WHICH ARE INITIALLY MARKETED FROM SAMSUNG KOREA AND THEN LATER ON LOCALIZED TO BE MANUFACTURE D IN THE DIFFERENT GLOBAL SUBSIDIARIES. (V) IN DECIDING WHICH PRODUCT IS TO BE IMPORTED OR TRA DED A CONFIRMATION IS REQUIRED FROM THE PARENT COMPANY. (VI) THE PURCHASE PRICE OF AN IMPORTED ITEM IS DECIDED BY A REVERSE CALCULATION IN WHICH FIRST A TENTATIVE SALE PRICE IS DETERMINED THERE AFTER TAKING INTO ACCOUNT THE DEAL ER MARGINS AND THE INDIAN COMPANY'S OVERHEAD THE PURCHASE PRICE IS NEGOTIATED WITH THE HEADQUARTERS I.E. SAMSUNG KOREA. (VII) EVEN THE SALE PRICE OF THE PRODUCTS MANUFACTURED I N INDIA IS DECIDED AFTER DISCUSSION WITH THE HEADQUARTERS. FROM THE ABOVE IT CAN BE SEEN THAT THE INDIAN COMPA NYS OFFICE IS BEING USED AS PLACE OF MANAGEMENT FOR SOUTH ASIA OPERATIONS BY THE PARENT COMPANY M/S SAMSUNG ELECTRONICS CO. LTD, SOUTH ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 6 KOREA THEREFORE THE INDIAN COMPANY WOULD CONSTITUTE PE OF THE FOREIGN PARENT COMPANY UNDER ARTICLE 5(2)(A) OF THE DTAA AND A PART OF INCOME FROM SALES IN SOUTH ASIAN COUNTRIES SUCH AS BANGLADESH, NEPAL, BHUTAN AND MALDIVES SHOULD BE AT TRIBUTED TO SAMSUNG ELECTRONICS, KOREA. FURTHER, IT CAN BE INFERRED FROM THE ABOVE THAT THE INDIAN COMPANY IS ACTING AS A DEPENDENT AGENT OF THE FOREI GN COMPANY IN TERMS OF ARTICLE 5(5) OF THE DTAA, AND THE TRANSACT IONS BETWEEN THE TWO ARE NOT AT ARM'S LENGTH. HENCE AN ADJUSTMEN T IS NEEDED IN THIS REGARD. A PERUSAL OF RECORDS SHOWS THAT THE ASSESSEE HAS NO T FILED ITS RETURN OF INCOME IN INDIA FORA.YS. 2004-05. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY & TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE SHORT LEVY OF TAX EXCEEDS F 1,00,000/-. 4S SUCH THE CASE IS COVERED BY PROVISION OF CLAUSE (C) OF EXPLANATION 2 OF SECTION 147 OF THE IT ACT, 1961.' 4. ASSESSEE FILED THEIR OBJECTIONS ON 03-11-2011 RE FUTING THE REASONS AND SUBMITTED THAT THE FIPB REGULATIONS PRO HIBIT PAYMENT OF BRAND ROYALTY, HENCE FIRST REASON FOR IS SUE OF NOTICE IS NOT VALID, AND SINCE SOUTH-WEST ASIA OPERATIONS WER E NOT CARRIED OUT THROUGH SIEL DURING THE PERIOD UNDER CONSIDERAT ION, QUESTION OF PE DOES NOT ARISE. ASSESSEE FURTHER AS SERTED THAT, BASED ON ANALYSIS OF EMPLOYEE STATEMENTS IT IS NOT A CASE OF DEPENDENT AGENT PE ALSO. BY WAY OF COMMUNICATION DA TED 18.11.2011, LD. AO DISPOSED THE OBJECTIONS RAISED B Y THE ASSESSEE, REJECTING THE CONTENTIONS EXCEPT IN RESPE CT OF PAYMENT OF BRAND ROYALTY. LD. AO PASSED DRAFT ASSESSMENT OR DER IN RESPECT OF THE AY 2004-05 TO 2009-10 HOLDING THAT T HE SECONDED EXPATRIATE EMPLOYEES ARE RENDERING SERVICES TO SIEL ON BEHALF OF THE ASSESSEE AND, THEREFORE, CREATED A PE OF SEC IN INDIA UNDER ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 7 ARTICLES 5 OF THE INDIA-KOREA DTAA. LD. AO PASSED DRAFT ASSESSMENT ORDER DATED 30.12.2011, HOLDING THAT EXP ATRIATES EMPLOYEES CREATE A PE OF THE ASSESSEE IN INDIA BY R ENDERING SERVICES TO SIEL THROUGH ITS EMPLOYEES BASIS, AND A DDED AN ESTIMATED INCOME OF 10% ON THE REMUNERATION PAID TO SUCH EXPATRIATE EMPLOYEES DURING THE YEARS UNDER CONSIDE RATION TO DETERMINE THE PROFITS ATTRIBUTABLE TO TAX IN INDIA BY APPLYING CLAUSE (III) OF RULE 10 OF THE INCOME TAX RULES, 19 62. 5. IN RESPECT OF AY 2011-12, 2012-13 & 2014-15, LD. AO ISSUED SCRUTINY NOTICE U/S 143(2) OF THE ACT AND AL SO REFERRED THE CASE TO THE LD. TRANSFER PRICING OFFICER FOR DETERM INATION OF THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTION S ENTERED BY THE ASSESSEE. LD. TPO PASSED ORDERS, BUT HAS NOT DR AWN ANY ADVERSE INFERENCE. LD. AO PASSED THE DRAFT ASSESSME NT ORDER, ON SIMILAR LINES AS FOR AY 2004-05 TO 2009-10, HOLDING THAT THE SECONDED EMPLOYEES ARE PROVIDING SERVICES ON BEHALF OF THE ASSESSEE AND CONSTITUTE ITS FIXED PLACE PE IN INDIA IN ACCORDANCE WITH ARTICLE 5 OF THE TAX TREATY. LD. AO FURTHER HE LD THAT THE DECISION OF DELHI HIGH COURT IN THE CASE OF CENTRIC A INDIA OFFSHORE (P.) LTD. VS. CIT [2014] [364 ITR 336] (DE LHI) SHALL APPLY TO THE CASE OF ASSESSEE ALSO, AND PROCEEDED TO ADD AN AD HOC 10% ON THE REMUNERATION PAID TO SUCH EXPATRIATE EMP LOYEES DURING THE FINANCIAL YEAR UNDER CONSIDERATION TO DE TERMINE THE PROFITS ATTRIBUTABLE TO TAX IN INDIA BY APPLYING CL AUSE (III) OF RULE 10 OF THE INCOME TAX RULES, 1962. ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 8 6. ACCORDINGLY, THE LD. AO MADE THE FOLLOWING ADDIT IONS TO THE RETURNED INCOME: S. NO ASSESSMENT YEAR RETURNED INCOME (IN INR) AMOUNT OF ADDITION (IN INR) ASSESSED INCOME (IN INR) 1. AY 2004-05 183,792,647 6,639,512 190,432,159 2. AY 2005-06 180,897,736 9,894,848 190,792,584 3. AY 2006-07 229,261,833 10,722,431 239,984,264 4. AY 2007-08 354,257,732 44,789,046 399,046,778 5. AY 2008-09 564,889,589 57,863,051 622,752,640 6. AY 2009-10 727,560,470 80,918,894 808,479,364 7. AY 2011-12 1,480,742,857 84,758,114 1,565,500,971 8. AY 2012-13 1,976,164,087 111,836,425 2,088,000,512 9. AY 2014-15 6,210,353,870 167,753,195 6,378,107,065 7. AGAINST THE DRAFT ASSESSMENT ORDER, ASSESSEE FILED ITS OBJECTIONS BEFORE THE HONBLE DRP, AND DURING THE C OURSE OF PROCEEDINGS BEFORE LD. DRP, THE LD. AO WAS ASKED TO SUBMIT A REMAND REPORT. 8. THE LD. ASSESSING OFFICER ON AN ANALYSIS OF THE STATEMENTS THAT WERE RECORDED DURING THE SURVEY, FOUND THAT THERE W AS CONTINUITY OF BUSINESS BETWEEN THE INDIAN COMPANY AND THE NON-RES IDENT, THE NON-RESIDENT IS DOING BUSINESS IN INDIA THROUGH ITS EMPLOYEES WHO ARE HEADING VARIOUS DIVISIONS IN THE INDIAN COMPANY AND ALSO ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 9 THROUGH EMPLOYEES VISITING INDIA REGULARLY, THAT TH ERE IS A CLOSE BUSINESS CONNECTION IN TERMS OF THE DEPENDENCE OF T HE INDIAN COMPANY ON THE NON-RESIDENTS FOR ALL IMPORTS BECAU SE THE INDIAN ENTITY DOES NOT HAVE THE AUTHORITY TO MAKE IMPORTS FROM ANY OTHER CONFERENCE OTHER THAN SAMSUNG AFFILIATES, THAT THE WHOLE TRANSACTION IS SO INTERMIXED THAT SUPPLY OF EQUIPME NT CANNOT BE SEGREGATED FROM THE SUPPLY OF TECHNOLOGY AND MARKET ING OF PRODUCTS, THE FOREIGN PARENT AND THE INDIAN SUBSIDI ARY WORK AS PARTNERS IN BUSINESS, THAT THE TRANSACTIONS BETWEEN BOTH THE PARTIES ARE SO INTERLINKED THAT THE INDIAN COMPANY CANNOT MOVE AN INCH WITHOUT THE SUPPORT AND SUPPLIES OF THE NON-RE SIDENT, THE POSTINGS AND A RECRUITMENT OF SENIOR EMPLOYEES IS D ECIDED BY KOREA, THE KOREAN EXPATRIATES WHO WORK IN INDIA ARE WORKIN G AND UNDER THE COMPLETE GUIDANCE, CONTROL AND SUPERVISION UNDE R THE KOREAN BUSES AND, THEREFORE, THEY HAVE A LION IN THEIR EMP LOYMENT WITH THE PARENT COMPANY. 9. BASING ON THESE OBSERVATIONS LD. AO PROPOSED TO TREAT SIEL IN ITS ENTIRETY AS PERMANENT ESTABLISHMENT OF THE ASSE SSEE, ALSO AGENCY PE, AS A PLACE OF MANAGEMENT FOR SOUTHEAST O PERATIONS, AND ALSO SERVICE PE. HE FURTHER PROPOSED TO TREAT IT T HIS PARTICULAR RECEIPT ON ACCOUNT OF SERVICES OF THE SECONDED EMPL OYEES AS ROYALTY AND FEES FOR TECHNICAL SERVICES ONLY ATTRIBUTED TO THE PE. BY WAY OF ORDER DT. 29.09.2012, LD. DRP REACHED A C ONCLUSION THAT SIEL BE TREATED AS A DEEMED FIXED PLACE PE OF THE A SSESSEE. ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 10 PURSUANT TO THESE DIRECTIONS, THE LD. AO PASSED FIN AL ASSESSMENT ORDER. 10. THOUGH THE ADDITION OF ESTIMATED 10% OF INCOME ON THE TOTAL REMUNERATION COST OF EXPATRIATE EMPLOYEES SECONDED TO SIEL IN INDIA, LEVY OF INTEREST UNDER SECTION 234 A AND 234 B AND SHORT CREDIT OF TAXES WITHHELD BY SIEL AS AGAINST THE CRE DIT OF TAXES CLAIMED BY THE ASSESSEE IN THE RETURN OF INCOME OR FORMING PART OF THE GROUNDS, THE PRIME DISPUTE THAT REQUIRES ADJUDI CATION IN THIS BATCH OF MATTERS IS MAINLY REVOLVING AROUND TWO ASP ECTS, NAMELY, THE REOPENING OF THE ASSESSMENT RELATING TO ASST YE ARS 2004-05 TO 2009-10 UNDER SECTION 147/148 OF THE ACT, AND THE E XISTENCE OF PERMANENT ESTABLISHMENT IN INDIA IN THE FORM OF SEC ONDED EXPATRIATE EMPLOYEES OPERATING FROM THE PREMISES OF SAMSUNG INDIA ELECTRONICS PRIVATE LIMITED. WE SHALL THEREFORE PRO CEED TO DEAL WITH THESE PRIME ISSUES AT LENGTH. REASSESSMENT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT IS INVOLVED IN ASSESSEES APPEALS FOR AY 2004-05 TO 2009-10 11. ON THIS ASPECT THE ARGUMENT OF THE LD.AR IS THR EEFOLD. FIRSTLY, HE SUBMITS THAT THE APART FROM THE STATEMENTS OF TH E EMPLOYEES, NO INDEPENDENT MATERIAL REVEALING ANY PRIMA FACIE GROU ND TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME IS THERE. HE SUB MITS THAT THE STATEMENTS ALONE CANNOT BE RELIED UPON FOR REOPENIN G THE ASSESSMENT. SECONDLY HE SUBMITS THAT IF AFTER ISSUI NG THE NOTICE UNDER SECTION 148, LD. AO ACCEPTS THE CONTENTION OF THE TAXPAYER AND HOLDS THAT THE INCOME FOR WHICH HE HAD FORWARDE D A REASON TO BELIEVE IN RESPECT OF ESCAPEMENT OF INCOME. FROM AS SESSMENT, NO ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 11 ROVING ENQUIRY IN THE GARB ON SECTION 148 IS IMPERM ISSIBLE. LASTLY HE SUBMITS THAT THE LD. AO TRAVELLED BEYOND HIS JUR ISDICTION TO REASSESS ISSUES OTHER THAN THE ISSUES IN RESPECT OF WHICH PROCEEDINGS WERE INITIATED ESPECIALLY WHEN THE REAS ONS FOR THE LATTER CEASED TO EXIST. IN SUPPORT OF HIS CONTENTIO NS HE PLACED RELIANCE ON THE DECISIONS OF THE HONBLE JURISDICTI ONAL HIGH COURT AND OTHER HIGH COURTS. 12. PER CONTRA, LD. DR CONTENDED THAT THE ASSESSEE CANNOT TAKE ANY OBJECTION TO THE LEGALITY OF THE REOPENING PROC EEDINGS, HAVING NOT DISPUTED THEM BEFORE THE 1 ST APPELLATE AUTHORITY. PLACING RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN VODAFONE INDIA SERVICES PRIVATE LIMITED VERSUS UOI (2013) 37 TAXMANN.COM 250 (BOMBAY) HE SUBMITS THAT THE LD. DR P HAD JURISDICTION TO ENTERTAIN THE ISSUES RELATING TO TH E LEGALITY OR OTHERWISE OF THE PROCEEDINGS UNDER SECTION 147 OF T HE ACT. 13. NOW WE SHALL PROCEED TO DEAL WITH THE OBJECTION OF THE ASSESSEE TO THE REOPENING PROCEEDINGS. FIRST OF ALL, FROM TH E REASONS RECORDED, WE UNDERSTAND THAT THIS IS NOT A MATTER O F REOPENING PROPOSED SOLELY BASING ON THE STATEMENTS OF THE EXP ATRIATE EMPLOYEES. APART FROM THE STATEMENTS, THE NON DISC LOSURE OF RECEIPT OF ROYALTY AS DISCLOSED BY THE TAX RETURNS OF THE B RANCH INDICATED THAT THE ROYALTY RECEIVED FROM SIEL WAS NOT DISCLOS ED. LD. AO CONSIDERED THE EXPLANATION OF THE ASSESSEE AND OBSE RVED IN LETTER DATED 18.11.2011 (PAGE NO 45 OF THE PAPER BOOK) THA T THE MANUFACTURING ROYALTY/FTS RECEIVED BY THE ASSESSEE FROM THE ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 12 INDIAN SUBSIDIARY AS REFLECTED IN THE TAX RETURNS F ILED BY THE SIEL WAS NOT REPORTED BY THE ASSESSEE, AND IT IS ONLY IN THE RETURNS FILED IN RESPONSE TO THE NOTICES ISSUED U/S 148 OF THE AC T, SUCH AN INCOME WAS REPORTED. ASSESSEE ADMITTED THE FACT TH AT THEY DID NOT DECLARE THIS INCOME IN THE ORIGINAL RETURN OF INCOM E. THIS FACT IS BORNE BY THE ASSESSMENT ORDER DATED 18.10.2012 VIDE PARAGRAPH NO.7.1 TO 7.3, WHEREIN LD.AO RECORDED THAT, TO THE NOTICE ISSUED U/S 148 OF THE ACT, THE ASSESSEE REPLIED THAT THE ROYAL TY/FTS RECEIVED FROM SIEL WAS OMITTED BY THE ASSESSEE DUE TO INADVE RTENCE TO BE DECLARED IN THE ORIGINAL TAX RETURN U/S 139(1) OF T HE ACT. 14. FOLLOWING ARE THE DETAILS RELATING TO THE INCOM E AS PER ORIGINAL RETURN OF INCOME, INCOME AS PER RETURN FILED UNDER SECTION 148, FURNISHED BY THE ASSESSEE : ASSESSMENT YEAR INCOME AS PER ORIGINAL RETURN OF INCOME (IN INR) INCOME AS PER RETURN FILED UNDER SECTION 148 (IN INR) AMOUNT OF ADDITION MADE BY AO (IN INR) ASSESSED INCOME (IN INR) AY 2004-05 NIL 183,792,647 6,639,512 190,432,159 AY 2005-06 86,592 WAS OFFERED TO TAX UNDER OTHER INCOME 180,897,736 9,894,848 190,792,584 AY 2006-07 MAT PAID ON BOOK PROFITS (13,10,35,049) U/S 115JB 229,261,833 10,722,431 239,984,264 AY 2007-08 NIL (OPERATIONS CEASED TO EXIST) 354,257,732 44,789,046 399,046,778 ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 13 AY 2008-09 NIL (OPERATIONS CEASED TO EXIST) 564,889,589 57,863,051 622,752,640 AY 2009-10 NO RETURN FILED (BRANCH WAS CLOSED) 727,560,470 80,918,894 808,479,364 AY 2011-12 1,480,742,857 N.A. 84,758,114 1,565,500, 971 AY 2012-13 1,976,164,087 N.A. 111,836,425 2,088,000 ,512 AY 2014-15 6,210,353,870 N.A. 167,753,195 6,378,107 ,065 15. A PERUSAL OF THE FIGURES IN THE STATEMENT FURNI SHED IN RESPECT OF THE INCOME AS REPORTED IN THE ORIGINAL RETURN OF INCOME AND THE RETURN FURNISHED U/S 148 OF THE ACT LEAVES NO DOUBT THAT THERE IS HUGE DIFFERENCE AND IN THIS CONTEXT IT CANNOT BE SA ID THAT THE NOTICE U/S 148 OF THE ACT IS NOT SUPPORTED BY ANY VALID RE ASON OR REASONS PROPOSING TO RE-OPEN THE ASSESSMENT FOR THE ASSESSM ENT YEARS BETWEEN 2004-05 AND 2009-10. IT IS ONLY AFTER RE-O PENING THE MATTER AND VERIFICATION OF THE RE-CONCILIATION OF R OYALTY AND FTS INCOME AS DECLARED IN THE RETURN U/S 147 OF THE ACT WITH THE TDS DETAILS OF SIEL, THE AO RECORDED THAT THE ROYALTY/F TS INCOME AS OFFERED TO TAX IN SUCH RETURNS WAS ACCEPTABLE. IT CANNOT BE SAID THAT THERE IS NO ESCAPEMENT OF INCOME FROM COMPUTAT ION IN THE ORIGINAL RETURNS OF INCOME FILED BY THE ASSESSEE FO R THE ASSESSMENT YEARS 2004-05 TO 2009-10. IT IS ONLY BECAUSE THE S IEL AFFECTED TDS ON SUCH ROYALTY, FTS INCOME, WHOSE BENEFIT WAS AVAI LED BY THE ASSESSEE IN THE REVISED RETURNS THAT NO FURTHER TAX LIABILITY WAS INCURRED THOUGH INCOME ESCAPING ASSESSMENT GOT TAXE D IN FRESH PROCEEDINGS. ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 14 16. WE, THEREFORE, FIND THAT THIS ASPECT OF NON-REP ORTING OF THE RECEIPT OF INCOME ON ACCOUNT OF ROYALTY IS A VALID GROUND FOR THE LD. AO TO PROPOSE THE REOPENING OF THE ASSESSMENT, AND IT CANNOT BE SAID THAT THERE WAS NO ESCAPEMENT OF INCOME MERELY BECAUSE TAX WAS DEDUCTED AT SOURCE ON SUCH INCOME. 17. WHEN IT IS OPEN UNDER EXPLANATION 3 TO SECTION 147 OF THE ACT FOR THE LD. AO TO REASSESS THE INCOME ON ANY ISSUE WHICH NEWLY COMES TO HIS NOTICE SUBSEQUENT TO THE ISSUANCE OF N OTICE UNDER SECTION 148 OF THE ACT, IT CANNOT BE SAID THAT MERE WRONG MENTIONING OF THE PROVISION OF LAW RELATING TO THE OTHER ISSUES IN THE REASONS RECORDED WOULD VITIATE THE PROCEEDINGS. WE, THEREFORE, REJECT THE CONTENTION OF THE ASSESSEE THAT THE REOPENING P ROCEEDINGS ARE BAD UNDER LAW. FIXED PLACE' PERMANENT ESTABLISHMENT IN INDIA IN THE FORM OF SECONDED EXPATRIATE EMPLOYEES OPERATING FROM THE PREMISES OF SAMSUNG INDIA ELECTRONICS PRIVATE LIMITED (SIEL) 18. AT THE OUTSET, WE WOULD LIKE TO REFER TO RELEVA NT PORTION OF ARTICLE 5 OF THE INDO-SOUTH KOREAN TREATY, WHICH DE ALS WITH THE CONCEPT OF PERMANENT ESTABLISHMENT, IN DIFFERENT FO RMS. ARTICLE 5 PERMANENT ESTABLISHMENT 1. FOR THE PURPOSES OF THIS AGREEMENT, THE TERM 'PER MANENT ESTABLISHMENT' MEANS A FIXED PLACE OF BUSINESS THROUGH WHICH THE BUSINESS OF AN ENTERPRISE IS WHOLLY OR PARTLY CARRIED ON. 2. THE TERM 'PERMANENT ESTABLISHMENT' INCLUDES ESPE CIALLY: ( A ) A PLACE OF MANAGEMENT; ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 15 ( B ) A BRANCH; ( C ) AN OFFICE; ( D ) A FACTORY; ( E ) A WORKSHOP; ( F ) A SALES OUTLET; ( G ) A WAREHOUSE IN RELATION TO A PERSON PROVIDING STORA GE FACILITIES FOR OTHERS; ( H ) A FARM, PLANTATION OR OTHER PLACE WHERE AGRICULTURA L, FORESTRY, PLANTATION OR RELATED ACTIVITIES ARE CARRIED ON; AND ( I ) A MINE, AN OIL OR GAS WELL, A QUARRY OR ANY OTHER PLA CE OF EXTRACTION OF NATURAL RESOURCES. 3. THE TERM 'PERMANENT ESTABLISHMENT' ALSO ENCOMPAS SES: ( A ) A BUILDING SITE OR CONSTRUCTION, INSTALLATION OR ASS EMBLY PROJECT OR SUPERVISORY ACTIVITIES IN CONNECTION THEREWITH, ONLY IF SUCH SIT E, PROJECT OR ACTIVITIES LAST MORE THAN 183 DAYS; ( B ) THE FURNISHING OF SERVICES, INCLUDING CONSULTANCY SE RVICES, BY AN ENTERPRISE THROUGH EMPLOYEES OR OTHER PERSONNEL ENGAGED BY THE ENTERPR ISE FOR SUCH PURPOSE, BUT ONLY WHERE ACTIVITIES OF THAT NATURE CONTINUE (FOR THE S AME OR CONNECTED PROJECT) WITHIN THE COUNTRY FOR A PERIOD OR PERIODS AGGREGATING MOR E THAN 183 DAYS WITHIN ANY 12- MONTH PERIOD. 4. NOTWITHSTANDING THE PRECEDING PROVISIONS OF THIS ARTICLE, THE TERM 'PERMANENT ESTABLISHMENT' SHALL BE DEEMED NOT TO INCLUDE: ( A ) THE USE OF FACILITIES SOLELY FOR THE PURPOSE OF STO RAGE, DISPLAY OR DELIVERY OF GOODS OR MERCHANDISE BELONGING TO THE ENTERPRISE; ( B ) THE MAINTENANCE OF A STOCK OF GOODS OR MERCHANDISE BELONGING TO THE ENTERPRISE SOLELY FOR THE PURPOSE OF STORAGE, DISPLAY OR DELIVE RY; ( C ) THE MAINTENANCE OF A STOCK OF GOODS OR MERCHANDISE BELONGING TO THE ENTERPRISE SOLELY FOR THE PURPOSE OF PROCESSING BY ANOTHER ENT ERPRISE; ( D ) THE MAINTENANCE OF A FIXED PLACE OF BUSINESS SOLELY FOR THE PURPOSE OF PURCHASING GOODS OR MERCHANDISE OR OF COLLECTING INFORMATION, F OR THE ENTERPRISE; ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 16 ( E ) THE MAINTENANCE OF A FIXED PLACE OF BUSINESS SOLELY FOR THE PURPOSE OF CARRYING ON, FOR THE ENTERPRISE, ANY OTHER ACTIVITY OF A PREPARA TORY OR AUXILIARY CHARACTER; ( F ) THE MAINTENANCE OF A FIXED PLACE OF BUSINESS SOLELY FOR ANY COMBINATION OF ACTIVITIES MENTIONED IN SUBPARAGRAPHS A) TO E), PROVIDED THAT T HE OVERALL ACTIVITY OF THE FIXED PLACE OF BUSINESS RESULTING FROM THIS COMBINATION I S OF A PREPARATORY OR AUXILIARY CHARACTER. 18. INSOFAR AS THE PRESENT CASE IS CONCERNED, THE E NTIRE DISPUTE ON THIS ISSUE REVOLVES AROUND THE STATUS OF THE EXPATR IATE EMPLOYEES WORKING WITH THE SIEL AND THE NATURE OF FUNCTIONS T HEY ARE PERFORMING - WHETHER THEY ARE ACTUALLY THE EMPLOYEE S OF THE ASSESSEE AND PLACED WITH THE SUBSIDIARY TO RUN THE BUSINESS OF THE ASSESSEE, OR THEY ARE ASSESSEES EMPLOYEES WHO ARE SECONDED TO SIEL AND THE SIEL IS THE ECONOMIC EMPLOYER WHO EXER CISES FULL CONTROL OVER THEM . 19. PROPER APPRECIATION OF THE RIVAL CONTENTIONS RE QUIRES REFERENCE TO RELEVANT PORTION OF SUCH STATEMENTS, WHICH ARE E XTRACTED HEREUNDER: STATEMENT OF SH. KYOUNG SOO KIM S/O SHRI JONG SUK KI M Q1. PLEASE IDENTIFY YOURSELF? ANS. I AM KYOUNG SOO KIM S/O JONG SUK KIM AGED 40 YRS, WORK- ING WITH SAMSUNG INDIA ELECTRONICS AS DEPUTY GENER AL MANAGER (PURCHASING). Q2. SINCE WHEN YOU USE WORKING IN THIS ORGANI SATION? Q7. BEING THE PURCHASE INCHARGE DO YOU GET A NY DIRECTION FROM SAMSUNG ELECTRONICS KOREA REGARDING IMPORT OF RAW ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 17 MATERIALS? ANS. KOREAN COMPANY GIVES ME INFORMATION ON QUA LITY, DELIVERY & COST OF RAW MATERIALS. Q8. WHO ARE YOU REPORTING HERE? ANS. I AM REPORTING K W CHO M D. Q9. BY WHOM HAVE YOU BEEN ISSUED THE APPOINTME NT LETTER FOR WORKING IN THE SAMSUNG ELECTRONICS INDIA P. LTD.? ANS. I HAVE BEEN ISSUED THE APPOINTMENT LETTER BY S AMSUNG ELECTRONICS CORPORATE KOREA. Q10. WHO DECIDES THE PRICING OF IMPORT? ANS. I AM GUIDED BY THE KOREAN COMPANY SAMSUNG ELECTRONICS KOREA, THEN I DECIDED THE PURCHASE. STATEMENT OF MR. B.D. PARK, DIRECTOR, SAMSUNG INDIA ELECTRONICS LTD. Q1. PLEASE IDENTIFY YOURSELF? ANS. NAME BYONG DAE PARK, WORKING AS A DIRECTO R IN SAMSUNG INDIA ELECTRONICS LTD. LOOKING AFTER THE MOBILE B USINESS & IT BUSINESS. Q2. SINCE WHEN HAVE YOU BEEN WITH M/S SIEL? ANS. SINCE MIDDLE OF THE YEAR200 Q5. WHAT IS YOUR PRESENT SALARY APPROXIMATELY? ANS. APPROXIMATELY US 200 K A YEAR. Q6. YOU ARE WORKING IN INDIA, WHY IS IT CONVE NIENT FOR YOU TO REMEMBER YOUR SALARY IN US CURRENCY ESPECIALLY W HEN YOU ARE GETTING YOUR SALARY IN INR? ANS. I AM MORE COMFORTABLE IN CALCULATING IN U S DOLLARS. Q9. FOR HOW MUCH TIME HAVE YOU BEEN POSTED IN INDIA? ANS. IT IS NOT FIXED. NORMALLY I EXPECT TO STA Y FOR THREE TO FOUR ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 18 YEARS. Q10. CAN YOU BE REPLACED BACK TO SAMSUNG KOREA, AT YOUR WISH OR WOULD IT BE THE DECISION OF THE HEAD QUARTER S TO WHEN TO GET YOU BACK? ANS. IN TWO WAY AGREEMENT. Q16. WHAT IS THE MODE OF COMMUNICATION WITH SA MSUNG KOREA? ANS. OVER THE PHONE & EMAIL (INTRANET) . Q17. YOU HAVE THE INTRANET SYSTEMS INSTALLED WI TH THE CORPORATION, WHERE IS THE SERVER OF THE INTRANET SITUATED? ANS. I HAVE NO IDEA. MAYBE, IN KOREA, OR IN SI NGAPORE. QL8. HOW OFTEN DO YOU COMMUNICATE WITH THE HEAD QUA RTER IN SAMSUNG KOREA? ANS. NORMALLY DAILY. Q19. YOU COMMUNICATE DIRECTLY OR THROUGH YOUR GEO? ANS. IT DEPENDS ON ISSUES. SOMETHING WHICH MAY AFFE CT THE BUSINESS RESULT SERIOUSLY WILL BE DISCUSSED WITH MY BOSS, MD BUT IN MOST CASES OF SIMPLE OPINION EXCHANGE THE COMMUNICATION IS DONE WITHOUT MD INTERVENTION. Q20. TO WHOM DO YOU GENERALLY COMMUNICATE IN KO REA? ANS. MR. RYU, VICE PRESIDENT IN MOBILE COMMUNIC ATION DIVISION AND MANY OTHER PERSONS. Q21. FROM WHERE DO YOU GENERALLY IMPORT YOUR PR ODUCTS, PLEASE GIVE DETAILS PRODUCT-WISE. 1) MOBILE PHONE : KOREA, CHINA & VIETNAM, 2) MONITOR : MALAYSIA, 3) OMS : PHILIPPINES, 4) PRINTER : CHINA 5) LAP TOP COMPUTER : CHINA Q25. THE COMPUTERS IN YOUR OFFICE HAVE OPERATION SYSTEM INSTALLED ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 19 IN KOREAN, AS WELL AS THE COMMUNICATION BETWEEN THE HEADS IS IN KOREAN. WHAT IS THE REASON FOR IT? ANS. SOMETIMES IN KOREAN. SOMETIMES IN ENGLISH . COMMUNICATION BETWEEN ONLY KOREANS IS DONE IN KOREAN NORMALLY. BU T WHEN ANY INDIAN OR NON-KOREAN IS INVOLVED WE USE ENGLISH . STATEMENT OF SHRI ANUJ PAREEK, SR. MANAGER ACCOUNTS Q. PLEASE INTRODUCE YOURSELF. ANS. MYSELF IS ANUJ PAREEK, WORKING IN SAMSUNG (SI EL) SINCE JULY AT PRESENT WORKING IN THE CAPACITY OF SR. M ANAGER- ACCOUNTS. Q. I AM SHOWING YOU THE REMITTANCES OF RS. 9,63,13 4 DTD. 10/02/10 AND RS. 12,42,25,457 DTD.9/02/10 IN WHIC H THESE PAYMENTS HAVE BEEN MADE TO M/S SAMSUNG ELECTR ONICS CORPORATION AS REIMBURSEMENT OF EXPENSES. HOW WOULD YOU JUSTIFY SU CH PAYMENT WITHOUT DEDUCTION OF TAX THEREON? ANS. QUESTION ASKED ABOUT RS. 12,42,25,457 DTD. 0 9/02/10 WAS NOT MADE. FORM 15CA WAS WRONGLY UPLOADED ON THE SI TE AND THERE IS NO PROVISION TO SEVER IT OR CANCEL IT. REM ITTANCE OF RS. 9,63,13481 DTD. 9. FEB 10 WAS ON ALSO SALARY PAID T O THE EXPATRIATE EMPLOYEES, THE SAID SALARY HAS BEEN OFFERED TO TAX BY THE EMPLOYERS IN INDIA. FOR ADMINISTRATION CONVEYANCE P ART OF THE SALARY IS PAID TO SAMSUNG KOREA WHICH IN TURN PAID TO EXPATRIATE EMPLOYEES ALL IN KOREA. Q3. THE PART SALARY WHICH IS REMITTED OUTSIDE IND IA IS OF THE INDIVIDUAL EXPATRIATE AND IF IT HAS TO BEREMITTED F OR THEIR CONVEYANCE THEN IT SHOULD BE IN THEIR RESPECTIVE SO UTH KOREA BANK A/CS AND NOT IN THE BANK A/C OF SAMSUNG ELECTRONICS CORPORAT ION. PLEASE GIVE REASON FOR THIS. ANS. FOR ADMINISTERED CONVEYANCE THE SALARIES PA ID TO SAMSUNG ELECTRONICS CORPORATION KOREA. Q4. WHAT IS THE ADMINISTRATION CONVEYANCE IN REM ITTING THE SALARY ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 20 TO THE A/C OF THE PARENT COMPANY THAT IS SAMSUNG EL ECTRONICS CORPORATION. ANS. THE EXPATRIATE EMPLOYEES HAVE PERSONAL OBLIGA TIONS IN KOREA. TO AVOID ANY INCONVENIENCE FOR THEIR PERSONAL OBLIG ATION IN KOREA THE SALARIES PAID BY SAMSUNG ELECTRONICS KORE A TO EXPATRIATE BANK A/C AND SAME IS REIMBURSED BY SAMSUNG INDIA ELECTRONICS PVT. LTD. Q5. DOES THIS REPLY IN Q4 MEAN THAT THE SALARIES O F THE EMPLOYEES OF SAMSUNG INDIA ELECTRONICS PVT. LTD IS PAID BY SE C SOUTH KOREA AND THE SAME IS REIMBURSED BY SIEL. ANS. NO. SAMSUNG ELECTRONICS IS ONLY A CONDUIT FOR THE PAYMENTS IN EXPATRIATE BANK A/CS IN KOREA. SALARY EXPENSES ARE INCURRED IN SIEL INDIA AND PROPER INCOME TAX ON THE SALARIES DEDUCTED FROM INDIVIDUAL OF EXPATRIATE EMPLOYEES SALARY AND DEPOS ITED. Q6. PLS EXPLAIN WHY SUCH REMITTANCES ARE TERMED AS REIMBURSEMENTS. ANS. THE SALARY PAID IS EXPENSE OF SIEL, INDIA AS STATED ABOVE. JUST FOR ADMINISTRATION PURPOSE THE AMOUNT IS PA ID TO SEC KOREA WHICH IN TURN PAID TO EXPATRIATE PERSONAL BAN K A/CS. Q7. IN REPLY TO Q4 AND Q3 YOU HAVE STATED THAT TH E ABOVE METHODOLOGY ADOPTED FOR ADMINISTRATION CONVEYANCE O F THE EXPATRIATE EMPLOYEES, WHERE IS IN REPLY OF QNO. 6 Y OU HAVE STATED THAT SEC PAID THIS AMOUNT TO PERSONAL BANK A /C OF THE EMPLOYEES WHEN SUCH AMOUNT IS REMITTED TO SEC.SINCE THE REMITTANCE OF SALARIES ARE MADE TO SEC ON QTRLY BAS IS, THIS WOULD MEAN THAT A PERSON I WOULD GET HIS SALARY IN HIS SOUTH KOREA BANK AFTER 3MONTHS OF THE RECEIPT OF SALARY I N INDIA.HOW WOULD YOU TERM THIS AS A CONVEYANCE OF SU CH EMPLOYEE. ANS. I AM NOT AWARE. Q8. THE REMITTANCE LETTERS SENT TO BANK OF AMERICA SHOW THAT THESE EXPATRIATE ARE ON DEPUTATION TOYOUR COMPANY F ROM SEC, KOREA. WHERE AS IT HAS BEEN CLAIMED THAT SUCH PERSO NS ARE YOUR ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 21 EMPLOYEES WITHOUT ANY (NOT CLEARLY READABLE) WITH T HE PARENT COMPANY. PIS JUSTIFY YOUR ABOVE STATEMENT. ANS. I AM NOT AWARE. Q9. DETAILS AVAILABLE SHOW THAT SOMETIMES THE R EMITTANCE IS CREDITED TO (NOT CLEARLY READABLE) BANK BRANCH WHER EAS SOMETIME TO KOREA EXCHANGE BANK. WHO GIVES DIRECTIO N REGARDING BANK BRANCH IN WHICH THIS AMOUNT HAS TO B E CREDITED. ANS. LOOKS AFTER BY TREASURY DEPARTMENT. Q10. THE DETAILS AVAILABLE SHOW THAT DEBIT NOTE H AS BEEN RAISED BY SEC, KOREA AND THEIR AFTER PAYMENT IS MADE FROM SIEL INDIA. THIS IMPLIES THE SALARIES ARE NOT PAID TO TH E EMPLOYEES OF SIEL AFTER THE PAYMENT HAS BEEN RECEIVED FROM I NDIA BUT THE SALARIES ARE PAID AS IF SUCH EXPATS WERE THEIR OWN EMPLOYEES AND THEN A DEBIT NOTE IN RESPECT OF SUCH SALARIES IS RAISED TO SIEL INDIA. WHAT DO YOU HAVE TO SAY. ANS. I CANNOT COMMENT BECAUSE I AM NOT AWARE O F THE REASON. STATEMENT OF MR. ANSHUMAN SAH 1) PLEASE IDENTIFY YOURSELF I AM ANSHUMAN SAH WORKING AS VICE-PRESIDENT (SALES & MARKETING) FOR TELECOM SYSTEMS INSAMSUNG ELECTRONIC S INDIA LTD. I HAVE BEEN WORKING HERE FOR 7 MONTHS. 7) HOW FREQUENTLY DO YOU DEAL WITH THE EXPATS WHILE CARRYING OUT YOUR DUTIES AS VP-SALES & MARKETING? PLEASE GIVE A DETAILED NOTE ON IT. WE ARE A TECHNOLOGY COMPANY & SOMETIMES LIKE WHENEV ER THERE IS A NEW LAUNCH, WE NEED ONEOR TWO EXPERTS TO COME AND TRAIN US AND & SOMETIME EXPLAIN TO OUR OTENTIAL CLI ENT. THE REQUESTFOR SUCH EXPAT EXPERTS CAN BE SENT EITHER BY ME OR MY DIRECT REPORTIES. 10) PLEASE REFER TO QUESTION @ SR. NO. 7 AND YOUR R EPLY. DO YOU HAVE ANY SUCH EXPAT EXPERTS WORKING FOR YOU AT PRES ENT: ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 22 WE HAVE FEW EXPAT CAME FEW DAYS BACK. NORM ALLY THEY ARE HERE IN 2-3 MONTHS AS PERREQUIREMENT. THERE ARE 5 PERSONS HERE: 1. MR. MAHESH - FOR TECH SUPPORT. 2. MR: JIHO SONG - FOR TECH MARKETING 3. MR. SHIN-FOR TECH SUPPORT. 4. MS. CHA - FOR TECH SUPPORT. 5. MR. JAEWOO PARK-MARKETING SUPPORT. ARE WORKING TO SUPPORT MY LOCAL UNIT AS TECHNICAL E XPERTS. THEY NORMALLY COME TO IMPART TECHNICAL EXPERTISE TO LOCAL ENGINEERS. THEY HAVE COME HERE ON LOCAL UNIT'S REQU EST FOR TRAINING & SOME TECH SUPPORT. THIS REQUEST IS MADE TO THE R&D OR TECHNICAL SUPPORT GROUP BASES OUT OF SOUTH K OREA. 11) HOW ARE THESE EXPATS COMPENSATED FOR THEIR SERVICES ? I DO NOT KNOW. 12) FOR HOW LONG THESE EXPATS WOULD BE IN INDIA? THERE IS NO FIXED TENURE BUT GENERALLY THEY COME FO R 3-4 DAYS & GO BACK BY WEEKEND. 13) PLEASE REFER TO THE QUESTION @ SR. NO. 10 AND YOUR SUBSEQUENT REPLY TO THAT. YOU HAVE SAID THAT THESE EXPATS 'COME TO IMPART TECHNICAL EXPERTISE TO LOCAL ENGINEERS'. PLEASE ELABORATE ON THIS. TO IMPART TECHNICAL DETAILS OF NEW TECHNOLOGY OR PR ODUCTS, EXPAT ENGINEERS ARE REQUIRED ONCE THE LOCAL ENGINEE RS ACQUIRE REQUISITE KNOWLEDGE & EXPERTISE THE LOCAL SUPPORT' IS, HANDLED BY THEM. SOME SUCH SUPPORTS ALSO IS ARRANGE D THROUGH TELE CONFERENCING. STATEMENT OF SH KYONG YEOL KIM, VICE PRESIDENT, HA MARKETING, Q1. PLEASE IDENTIFY YOURSELF AND YOUR NATIONA LITY. ANS. I AM SH. KYUNG YEOL KIM, VICE PRESIDENT, S AMSUNG ELECTRONICS PVT, LTD, HA (HOME APPLIANCE) MARKETING. I AM A N ATIONAL OF REPUBLIC OF KOREA. Q8. HOW OFTEN DO YOU TRAVEL BACK TO KOREA? ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 23 I TRAVEL BACK TO KOREA 1-2 TIMES A YEAR FOR BUSINESS TRIP AND FAMILY VISITS. MY FAMILY IS IN DELHI WITH ME A ND MY PARENTS ARE IN KOREA. Q9. WHAT IS THE AGENDA FOR MEETINGS IN KOREA? PRODUCE LINE IN INDIA IS DISCUSSED ALONG WITH BUSINESS STRATEGY. THE MAIN PRODUCT LINE AND R&D IS IN KOREA . AT THE ADDRESS: 413 MACTAN- DONG, YOUNG TONG - KU, SUWAN C IY, KOREA. THIS IS THE OFFICE OF R&D AND MARKETING. Q10. WHO DO YOU REPORT TO HERE? CEO - JUNG SOO SHIN, DEPUTY MD - RAVINDRA ZUITHI THEY ARE BOTH AT PRESENT IN SOUTH KOREA ON A GLOBAL STRATEGY MEETING BEING HELD FROM 22 ND JUNE TO 24 TH JUNE AT OFFICE PREMISES 4B MACTAN - DONG, YOUNG TONG - KU SUWAN CITY, KOREA OF SAMSUNG ELECTRONICS LTD. ALL THE COU NTRY HEADS OF SAMSUNG ELECTRONICS ....COMING FOR THIS MEETING. STATEMENT OF MR. J H KYUNG, QL. PLEASE IDENTIFY YOURSELF. ANS. I AM JH KYUNG AS CFO & DIRECTOR SIEL SINCE JAN 2010. Q2. WHERE HAD YOU BEEN WORKING BEFORE JOINING SIEL? ANS. I WAS WORKED IN MOBILE .. DIVISION IN SAMSUN G KOREA. Q3. YOU WERE WORKING IN THE PARENT COMPANY BEFO RE YOU JOINED SIEL? WHAT WAS YOUR DESIGNATION IN SAMSUNG KOREA? ANS. YES, DIRECTOR. Q4. SINCE WHEN HAVE YOU BEEN ASSOCIATED WITH SAMS UNG GROUP? ANS. 1990 Q6. WHAT ARE THE DUTIES ASSIGNED TO YOU IN SIEL? ANS. MANAGING F/A, A/R, LOGISTICS, TAXATION & HR Q7. WHEN YOU JOINED SIEL, WAS IT YOUR DECISION OR YOU WERE SIMPLY POSTED TO INDIA? ANS. OWN DECISION AND MD'S ORDER & HQ RECOMMENDAT ION. ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 24 Q9. HOW OFTEN DO YOU COMMUNICATE WITH THE HEAD QUARTER? WHAT IS THE MOST COMMON MODE OF COMMUNICATION? ANS. 2-4 TIMES A WEEK, INTERNET AND MOBILE PHONE S. Q10. WITH WHOM DO YOU GENERALLY COMMUNICATE IN HEAD QUARTERS AT KOREA FOR OFFICIAL PURPOSES? ANS. GLOBAL SUPPORT TEAM AND GLOBAL BIZ MANAGEM ENT. Q1 1. PLEASE CLARIFY WHAT IS GLOBAL BIZ MANAGEME NT. ANS. MANAGE ALL FUNCTIONS OF SPECIFIC PRODUCT A LL OVER THE WORLD. Q12. ARE THERE DIFFERENT GBMS FOR DIFFERENT PROD UCTS? ANS. YES, MOBILE-MOBILE PHONES & VIDEO DISPLAY-T V, MONITOR. Q13. DO YOU REGULARLY SEND REPORTS TO GBMS? HOW OF TEN ARE THE REPORT SENT? ANS. NO, 1-2 TIMES BY-YEARLY. Q14. THEN HOW DO THE GBMS MANAGE THE FUNCTIONING OF DIFFERENT DIVISIONS IN INDIA, AS STATED BY YOU IN ANSWER TO QUESTION 11? ANS. GBM IS MORE COMMON SALES THEY TOUCH MORE SA LE TEAMS THEN ME Q15. WHO TAKES THE POLICY DECISION REGARDING THE FINANCING OF VARIOUS BUSINESS DIVISIONS OF SIEL? ANS. MD&CFO Q16. HOW ARE SUCH POLICY DECISIONS TAKEN? ARE THEY THROUGH THE BOARD MEETINGS OR YOUR INDEPENDENT DECISIONS? ANS. BOTH Q17. BUT NONE OF THE MINUTES OF BOARD MEETINGS SHO W ANY SUCH POLICY DECISIONS BEING TAKEN IN BOARD MEETINGS? ANS. I AM NOT SURE BECAUSE I HAVE JOINED LESS THAN 6 MONTH BUT MAJOR ISSUE SHOW ALL BOARD MEMBERS. Q20. WHO TAKES THE POLICY DECISION REGARDING WHIC H PRODUCT/MODEL ARE TO BE MANUFACTURED AND WHICH ARE TO BE PURCHA SED AND TRADED? ANS. SALES. I JUST CONCERN PROFIT & LOSS Q26. IN CASE OF MAJOR INVESTMENT OR POLICY DECISI ON OF SETTING UP A ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 25 FACTORY IN CHENNAI ETC, IS THE CONSENT OR APPROVAL OF HEADQUARTERS AT KOREA TAKEN? ANS. YES Q27. IS THIS APPROVAL NECESSARY? SAY IF YOU HAVE YOUR OWN FUNDS AND YOU WANT TO LAUNCH A MANUFACTURING UNIT OF NEW PRODUCT, STILL YOU WOULD REQUIRE APPROVAL FROM HEADQUARTER A T KOREA? ANS. YES STATEMENT OF MR. H.K. SEO, VICE PRESIDENT- CE SALES & MARKETING IN M/S SAMSUNG INDIA ELECTRONICS (P) LTD. (SIEL) Q5. WHAT ARE THE DUTIES ASSIGNED TO YOU IN CU RRENT POSTING? ANS. SALES & MARKETING RELATED JOB: - INVOLVE LOCAL SALES & MARKETING IN SIEL'S STRATEGIC DIRECTION. FOR EXAMPLE: TO INTRODUCE SAMSUNG PRODUCTS ON GLOBAL CONSUMER'S REQUIREMENTS; - SALES FORECAST FOR SALES AND PRODUCTION; - MORE STRATEGIC DIRECTION SETTING AND ALSO LIASE WIT H SAMSUNG HQ FOR PRODUCT DEVELOPMENT AND PRODUCTION; - ALSO, BY MEETING INDIAN CUSTOMERS- TRY TO MAKE STRA TEGY OF SALES & MARKETING WITH OTHER EMPLOYEE OF SIEL. Q6. HOW DO YOU LIASE WITH SAMSUNG HQ FOR PROD UCTS DEVELOPMENT AND PRODUCTION? ANS. BY READING INDIAN CONSUMER'S INSIGHT AND FIND ING THE BETTER PRODUCT FOR INDIA, I REQUEST HQ TO DEVELOP INDIANIZ ED PRODUCTS. IN THIS PROCESS, THERE NEEDS LOTS OF EXPL ANATION & PERSUASION. ONCE HQ DECIDED TO DEVELOP THE PRODUCT BY UTILIZING HQ'S RERSOURCE IN INITIAL STAGE AND THEN FACTORY PREPARE ITS PRODUCTION FACILITIES FOR MATERIAL LOCALLY AND OTHE R COUNTRY'S FACTORY. IF POSSIBLE, FACTORY IS TRYING TO PURCHASE ITS MATERIAL LOCALLY. Q7. IN THE LIASONING ACTIVITIES WITH THE HQ, DO- YOU SEND INFORMATION COLLECTED FROM INDIA TO SAMSUNG KOREA. SO THAT THEY CAN DEVELOP A PRODUCT SUITABLE FOR INDIA? ANS. DEFINITELY Q8. HOW OFTEN DO YOU COMMUNICATE WITH HQ AND W HAT IS THE MODE OF COMMUNICATION? ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 26 ANS. IN GENERAL ONCE A WEEK, BEFORE COMMUNICATIN G I HEAR AND DISCUSS WITH LOCAL PEOPLE AND HEAR THE NECESSITIES AND I SUMMARIZE AND COMMUNICATE WITH HQ MARKETING AND OTH ER DEPARTMENT. Q9. SINCE YOU ARE HAVING R&D CENTRE'S IN INDIA A T BANGALORE AND NOIDA, THEN WHY IS NOT SUCH TECHNOLOGY DEVELOP IN T HESE R&D CENTRES? ANS. BASICALLY SAMSUNG'S PHILOSOPHY IS TO MAKE LOC ALIZED FOR OPERATION (SALES & MARKETING) AND PRODUCTION. WHEN LOCAL ENVIRONMENT IS NOT READY, SAMSUNG HQ SUPPORT TO DEV ELOP. AND WHEN ALL LOCAL FUNCTIONS ARE READY, WHOLE DEVELOPMENT & MATERIAL PURCHASE OCCURS LOCALLY. IN THE MEANTIME, LOCALIZAT ION RATE IS INCREASING YEAR BY YEAR. Q10. WHAT IS THE ROLE OF GBM (GLOBAL BUSINESS MANA GEMENT) AT HQ IN DECIDING WHICH PRODUCTS TO MANUFACTURE OR TRADE? ANS. IT IS NOT GBM'S DECISION TO DECIDE A SPECIFIC MODELS. ON SIEL'S REQUIREMENT THEY DEVELOP AND ALSO SIEL SELECT THE M ODELS OF LOCAL MARKET'S DEMAND. GBM HAS MORE PRODUCT AND STR ATEGY FUNCTION FROM GLOBAL MARKET PERSPECTIVE THEY DISCUS S WITH GLOBAL SUBSIDIARIES FOR PRODUCTS, PRICE TREND, AND MARKET DEVELOPMENT, MARKETING FUNCTION. BUT, AS THEY ARE M ORE GLOBALLY DEDICATED FUNCTIONAL ORGANIZATION, SIEL IS COMMUNICATING WITH HQ TO DEVELOP THE PRODUCT AND SU PPORT MARKETING PRACTICE BY COLLECTING BEST PRACTICE OF SAMSUNG GLOBAL OPERATION. Q11. WHAT IS GATHERED FROM YOUR REPLIES IS THAT A FTER MARKET RESEARCH OF INDIAN MARKET & COORDINATION WITH GBM, A NEW PRODUCT IS DEVELOPED IN KOREA. LATER ON THIS TECHNO LOGY IS TRANSFORMED TO SIEL FOR DOMESTIC PRODUCTION. IS IT TRUE? ANS. YES. MARKET RESEARCH IS DONE TWO WAYS, A,) B Y SIEL ALONE B) BY THE REQUEST OF SIEL TOGETHER WITH GBM. AS RECENT RESEARCH, MWO, IT IS FOUND THAT INDIAN CONSUMERS PR EFER MORE SMALL OAVITY OF MWO, AND MORE BLACK COLOUR. TH IS IS DONE BY FOCUS GROUP INTERVIEW. AS RESULTS IT WAS SENT TO HQ AND IT IS UNDER PROGRESS OF DEVELOPM ENT. STATEMENT OF MR. Y.H. CHO, VP SALES -NORTH REGION IN M/S SAMSUNG INDIA ELECTRONICS (P) LTD. (SIEL) ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 27 Q5. HOW DID YOU CARRY PRODUCT MARKETING AS GBM GM IN INDIA? ANS. DISCUSSION ABOUT, PROPER USP WITH EACH COUNTR Y SUBSIDIARY. WE DON'T ARRANGE DIRECT MARKETING, WHICH WILL BE DO NE BY SUBSIDIARY. GBM IS FOCUSING ON DEVELOPING SPECIAL F EATURES FOR EACH MARKET SUBSIDIARY. Q6. HOW DO YOU GET TECHNICAL INPUT TO DEVELOP SPECIAL FEATURES FOR INDIAN MARKET? ANS. SIEL SENDS EACH REQUIREMENT OF USP TO GBM. W E DISCUSS ON THESE REQUIREMENTS WITH INTERNAL R & D DEPARTMEN T IN GBM. Q7. THIS MEANS THAT THE TECHNICAL INPUT FOR A SPEC IFIC PRODUCTS SPECIALIZATION ARE PROVIDED BY SIEL? ANS. FEATURE REQUIREMENTS ARE REQUESTED BY SIEL. Q8. WHAT ARE YOUR DUTIES AS HEAD OF SALES, NORTH REGION IN SIEL? ANS. MANAGE ORGANIZATION AND SALES OF SIEL PRODUC TS IN NORTHERN REGION. Q9. HOW DO YOU CARRY OUT SUCH DUTIES? ANS. WE HAVE EACH RM & BMS EXECUTE OUR SALES & ALS O GET INVOLVED IN SALES WITH THEM. Q10. DO YOU HAVE TO COMMUNICATE WITH SAMSUNG HEAD QUARTER TO PERFORM YOUR DUTIES? IF YES THEN HOW AFTER DO YOU COMMUNICATE WITH SAMSUNG INDIA? ANS. YES, ONCE IN A WEEK. QL 1. IN YOUR COMMUNICATION WITH HQ WHAT ARE THI NGS/POINTS DISCUSSED? ANS. THEY USUALLY ASK US ABOUT THE REASON OF AGI NG STOCK. Q12. SINCE MOST OF THE ITEMS MARKETED BY YOU, BEI NG CE HEAD, ARE MANUFACTURED IN INDIA THEN WHY IS HQ CONCERNED WITH AGEING STOCK? ANS. BECAUSE OF GLOBAL PERFORMANCE. STATEMENT OF MR. MAHESH SUTAGATTI QL. PLEASE GIVE YOUR INTRODUCTION? ANS. WORKING AS MANAGER IN SAMSUNG ELECTRONICS SI NCE 2004 ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 28 OCT 15 AT THEIR HQ R&D IN SUWON, BEFORE THIS I HAD TAKEN A SABBATICAL OF APPROX. 1 YEAR, BEFORE THIS WORKED WITH L&T INFOTECH (BANGALORE) FOR 3 YEARS APPROX. AS PROJECT LEADER, BEFORE THAT WORKED IN ARVIND MILLS (PUNE) FOR APPRO X. 8 YR. Q2. YOU ARE DRAWING YOUR SALARY FROM WHICH COMP ANY AND WHAT IS THE AMOUNT OF SALARY? ANS. SAMSUNG ELECTRONICS CORP. SUWON SOUTH KOREA, MY SALARY IS BEING PAID BY SAMSUNG ELECTRONICS APPROX 3200000-3500000 WON (NET IN MY SALARY ACCOUNT) IN WON. Q3. WHAT IS YOUR SCOPE OF WORK IN SAMSUNG ELEC TRONICS SOUTH KOREA? ANS. INCHARGE FOR INTEROPERATIONAL TESTING BETWEE N BASE STATION AND MOBILE DEVICES, ALSO TAKE CARE OF TRAIL TEST WITH OPERATORS FOR MOBILE WIMAX. Q4. SINCE WHEN HAVE YOU BEEN IN INDIA AND WHAT IS YOUR SCOPE OF WORK IN INDIA? ANS. ARRIVED AT BOMBAY ON 18TH JUNE, SCOPE OF WORK IS TO PLAN POC/PROOF OF CONCEPT TRIAL TEST WITH RIL AND A SSIST STATES ASSETS. Q7. WHO INSTRUCTED YOU TO PROCEED TO INDIA AND H ELP SAMSUNG ELECTRONICS INDIA LTD FOR WIMAX? ANS. USUALLY ON REQUEST FROM INDIAN TEAM AND LOCAL HQ REPRESENTATIVES, WE GET INSTRUCTIONS THROUGH EMAILS/TELEPHONE ETC. Q8. WHO PAYS YOU FOR THE WORK DONE IN INDIA FOR SAMSUNG INDIA ELECTRONICS LTD? ANS. I AM PAID MY MONTHLY SALARY IN KOREA, I COLLE CT BILLS FOR MONEY THAT I SPREAD DURING STAY AND GET REIMBURSEMENTS IN KOREA. Q9. WHY IS SAMSUNG ELECTRONICS CORPORATION, SOUTH KOREA PAYING YOU FOR THE WORK YOU ARE DOING IN INDIA FOR SAMSUNG ELECTRONICS INDIA LTD. ANS. I DON'T KNOW ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 29 STATEMENT OF MR. CHUNGSEOP SONG Q13. DO YOU RECEIVE THE GUIDELINES FROM KOREA REGAR DING PURCHASES? ANS. YES, SOMETIMES I RECEIVE GUIDELINE FROM KOREA. Q14. WHAT TYPE OF GUIDELINES YOU RECEIVE? ANS. REGARDING VENDORS (FOREIGN SUPPLIERS) 20. IT IS THE ARGUMENT ON BEHALF OF THE ASSESSEE TH AT THE ASSESSEE IS THE HOLDING COMPANY OF THE INDIAN SUBSIDIARY, (S IEL) IN A HIGHLY GLOBALISED AND COMPETITIVE BUSINESS ENVIRONMENT, I T IS ESSENTIAL FOR GROUP COMPANIES SPREAD ACROSS THE GLOBE TO COMMUNIC ATE WITH EACH OTHER TO SUSTAIN ITS SUPPLY CHAIN MANAGEMENT, WITHO UT WHICH EXCHANGE OF INFORMATION ON THE ASPECTS AS TO WHAT S ORT OF MODELS/DESIGNS ARE PREFERRED BY THE CUSTOMERS IN TH E MARKET ON MID-TERM TO LONG-TERM BASIS, RELEVANT FORECAST, PL AN STRATEGY TO SELL THE PRODUCTS, DETAILED STOCK/LOGISTICS STATUS ETC I T WOULD NOT BE POSSIBLE FOR ANY COMPANY TO PLACE OPTIMIZED PURCHA SE ORDERS AT A RIGHT TIMING NOR TO ACQUIRE MOST PROMISING MANUFACT URING TECHNOLOGIES. IN THIS CASE ALSO, AS IS EVIDENT FROM THE STATEMENTS RECORDED BY THE ASSESSING OFFICER, THERE IS A CONST ANT EXCHANGE OF INFORMATION BETWEEN THE SUBSIDIARY AND THE GLOBAL B USINESS MANAGEMENT (GBM) TO PERFORM THE PRODUCT/STRATEGY FUNCTIONS FROM A GLOBAL MARKET PERSPECTIVE. 21. LEARNED AR SUBMITTED THAT IT IS TO BE NOTED THA T NONE OF THE STATEMENTS OF THE EMPLOYEES REVEAL THAT THE KEY DEC ISIONS WITH REGARD TO THE PRODUCTS, PRICING, LAUNCHING ETC ARE TAKEN BY THE ASSESSEE BUT THEY ARE WELL WITHIN THE REALM OF THE INDIAN SUBSIDIARY. HE SUBMITS THAT NONE OF THE STATEMENTS RECORDED BY THE ASSESSING ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 30 OFFICER WOULD SHOW THAT ANY ACTIVITY OF THE GBM IS DONE IN INDIA. HE FURTHER SUBMITTED THAT THE ASSESSEE DOES NOT CARRY OUT ANY MARKET SURVEY IN INDIA, BUT WHATEVER THE MARKET SURVEY THA T WAS SPOKEN BY THE EMPLOYEES WAS IN RELATION TO THE BUSINESS OF TH E SUBSIDIARY TO UNDERSTAND THE BUSINESS OF THE INDIAN CUSTOMERS AND PROVIDE INDIA SPECIFIC INFORMATION TO GBMS WHICH IN TURN THEN CA RRY OUT RESEARCH AND DEVELOPMENT TO DEVELOP INDIA SPECIFIC PRODUCTS. 22. IT IS FURTHER SUBMITTED ON BEHALF OF THE ASSESS EE THAT IS NOT THE CASE OF EVEN THE ASSESSING OFFICER THAT ANY CORE MA NAGEMENT DECISION RELATING TO THE ASSESSEE BUSINESS WAS TAKE N IN INDIA AND THE INVOLVEMENT OF THE SECONDED EXPATRIATE EMPLOYEE S WORKING UNDER THE CONTROL OF THE INDIAN SUBSIDIARY IN THE D ECISION-MAKING PROCESS WITH REGARD TO PRODUCT AND PRICING, MARKETI NG, STRATEGIZING ETC ONE TAKEN IN RESPECT OF THE BUSINESS OF THE IND IAN SUBSIDIARY AND NOT FOR THE BUSINESS OF THE ASSESSEE. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, ALL THE COMMUNICATION BET WEEN THE EMPLOYEES OF THE ASSESSEE IN KOREA AND THE SECONDED EMPLOYEES IN INDIA RELATE ONLY TO THE BUSINESS OF THE INDIAN SUB SIDIARY AND THE SECONDED EMPLOYEES WERE DISCHARGING THE DUTIES OF T HE SUBSIDIARY TOWARDS THE HOLDING COMPANY. HE SUBMITS THAT NO BUS INESS OF ASSESSEE IS CARRIED OUT BY THE SECONDED EMPLOYEES A CCORDING TO THE STATEMENTS RECORDED BY THE LD. ASSESSING OFFICER. H E, THEREFORE, SUBMITTED THAT THERE IS NO BASIS FOR THE AUTHORITIE S BELOW TO CONCLUDE THAT THE SECONDED EMPLOYEES WERE ACTING IN FURTHERANCE OF THE BUSINESS OF THE ASSESSEE BY SITTING IN THE PREM ISES OF THE INDIAN ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 31 SUBSIDIARY, THEREBY THEY CONSTITUTE A FIX REPLACE P ERMANENT ESTABLISHMENT. 23. PER CONTRA, IT IS ARGUMENT OF THE LD. DR THAT I T IS EVIDENT FROM THE STATEMENTS OF THE EXPATRIATE EMPLOYEES WELL COR ROBORATED BY THE MATERIAL THAT THE AMOUNT WAS PAID TO THE FOREIGN PA RENT BUT NOT TO THE ACCOUNT OF THE EMPLOYEES AND IF IT ALL SHOULDN T BE ANY CONVENIENCE AS PLEADED BY THE ASSESSEE, THE PART OF THE SALARY SHOULDVE BEEN LIMITED TO A FOREIGN ACCOUNT OF THE EXPATRIATE EMPLOYEE BUT NOT TO THE ACCOUNT OF THE FOREIGN PARE NT. FURTHER, AS COULD BE SEEN EVEN FROM THE MODE OF PAYMENT THE SAL ARIES ARE NOT PAID TO THE EXPATRIATE EMPLOYEES AFTER IT IS RECEIV ED FROM THE SIL. AS A MATTER OF FACT IT WAS CONFRONTED TO ONE OF THE EM PLOYEES WITH REFERENCE TO THE BANK ACCOUNTS THAT SEC PAID THE AM OUNT TO PERSONAL BANK ACCOUNT OF THE EMPLOYEES WHEN SUCH AM OUNT IS LIMITED TO SEC, HOWEVER THE REMITTANCE OF SALARIES ARE MADE TO SEC ON QUARTERLY BASIS, WHICH MEANS THAT A PERSON WOULD GET HIS SALARY IN THE HIS SOUTH KOREAN BANK AFTER 3 MONTHS OF THE RECEIPT OF SALARY IN INDIA AND CERTAINLY ITS NOT THE TO THE CONVENIE NCE OF SUCH PERSON. 24. LD. DR FURTHER ARGUED THAT THE DETAILS ARE AVAI LABLE SHOW THAT THE DEBIT NOTE HAS BEEN RAISED BY SEC, KOREA AND TH EN AFTER PAYMENT IS MADE FROM SIL INDIA, WHICH IMPLIES THE S ALARIES ARE NOT PAID TO THE EMPLOYEES OF SIL AFTER THE PAYMENT HAS BEEN RECEIVED FROM INDIA BUT THE SALARIES ARE PAID AS IF SUCH EXP ATS WERE THEIR OWN EMPLOYEES AND THEN A DEBIT NOTE IN RESPECT OF SUCH SALARIES IS RAISED BY SIL INDIA. BASING ON THIS HE ARGUES THAT THE EXP ATRIATE ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 32 EMPLOYEES ARE IN FACT THE EMPLOYEES OF THE KOREAN E NTITY AND THE BENEFICIARY OF THE PAYMENTS FROM SIL IS THE KOREAN ENTITY. 25. LD. DR FURTHER DREW OUR ATTENTION TO POINT NO. 9 OF THE LETTER OF APPOINTMENT OF MR K W CHO, WHEREIN IT IS STATED THA T, - YOUR SERVICES MAY BE UTILIZED IN ANY OF THE OFFICE S OF THE BRANCHES OF THE COMPANY OR IN ANY DEPARTMENT OF THE COMPANY OR IN ANY OF THE ASSOCIATED COMPANIES AS MAY BE REQ UIRED FROM TIME TO TIME. YOUR SERVICES CAN BE TRANSFERRED TO A NY OF THE BRANCHES OF THE COMPANY LOCATED IN INDIA, WHETHER I N EXISTENCE AT THE TIME OF YOUR APPOINTMENT ARE SET AT A LATER DATE AT THE SOLE DISCRETION OF THE MANAGEMENT WITHOUT DETRIMENT TO YOUR STATUS AND EMOLUMENTS. AND TO POINT NO 12 WHERE IT IS STATED THAT,- DURING YOUR APPOINTMENT WITH A COMPANY, SINCE YOU A RE ON DEPREDATION, YOU WILL BE GOVERNED BY SERVICE AS RUL ES AS APPLICABLE TO SAMSUNG INDIA ELECTRONICS CO LTD KORE A EMPLOYEES. 26. HE LASTLY SUBMITTED THAT THE EXPATRIATE EMPLOYE ES, AS REVEALED BY THEIR STATEMENTS, ARE WORKING IN FURTHERANCE OF THE BUSINESS INTERESTS OF THE KOREAN ENTITY AND THEIR WORK DESCR IPTION DOES NOT FIT IN THE DESCRIPTION OF PREPARATORY OR AUXILIARY IN N ATURE AS SUCH THERE IS NO EMPLOYER TO EMPLOYER RELATIONSHIP BETWE EN THE KOREAN PARENT AND INDIAN SUBSIDIARY. 27. IT IS PERTINENT TO NOTE THAT HAVING GONE THROUG H THE STATEMENTS AND ALSO SOME OTHER MATERIAL RELATING TO THE ASPECT S AS TO WHO PAYS THE SALARY, WHOM THE SENIOR EMPLOYEES REPORTED TO, FREQ UENCY OF COMMUNICATION WITH HEADQUARTERS IN KOREA ETC, LD. DRP DEALT WITH ALMOST ALL THE ASPECTS ARGUED BY THE LD. DR BEFORE US. THEY FOUND THAT THE ASSESSEE IS NOT EXERCISING THAT KIND OF ABSOLUT E CONTROL OVER POSTING ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 33 OF EMPLOYEES TO THE INDIAN SUBSIDIARY, BUT THE ASSE SSEE HAS BEEN POSTING THE EMPLOYEES ONLY PURSUANT TO THE TRIPARTE AGREEMENTS BETWEEN THE ASSESSEE, INDIAN SUBSIDIARY AND THE CON CERNED EMPLOYEE. LD. DRP FURTHER HELD THAT THE INDIAN SUBSIDIARY IS A COMPANY INCORPORATED UNDER THE LAWS GOVERNING THE COMPANIES IN INDIA AND IS CONFIRMING TO ALL THE RULES AND REGULATIONS THAT GO VERN THE OPERATIONS OF A CORPORATE BODY IN THE COUNTRY, BY FILING ITS R ETURNS AND PAYING THE TAXES UNDER THE INCOME TAX AT AND OTHER STATUTES. I T WAS FURTHER OBSERVED BY THE LIBRARY DRP THAT THE INTERNATIONAL TRANSACTIONS HAVE BEEN REPORTED UNDER THE TRANSFER PRICING REGULATION S AND EXAMINED BY THE TPO. 28. LD. DRP VIDE PARAGRAPH NO. 5.4.4.2 RECORDED THAT THE OBSERVATIONS OF THE LD. AO IN RESPECT OF THE ASSERTION AS TO THE SUBSIDIARY AS PE, THE CONCLUSIONS MADE BY THE AO ARE BASED ON THE STATEMENT OF THE VARIOUS EMPLOYEES OF SIEL DURING THE SURVEY CONDUCTED AT ITS PREMISES. SINCE SIEL IS A COMPANY INCORPORATED UNDER THE LAWS GOVERNING THE COMPANIES IN INDIA AND IS CONFIRMING TO ALL THE RULES AND REGULATIONS THAT GOVERN THE OPERATIONS OF A COOPERATE BODY, FILING ITS RETURNS OF INCOME AND PAYING TAXES BY REPORTING THE INTERNATIONAL TRANSACTIONS UNDER TRANSFER PRICING REGULATIONS, IT CANNOT BE SAID THAT THE SIEL WHICH IS SUBSIDIARY COMPANY IS A PE AND REJECTED THE FINDINGS OF THE AO ON THAT ASPECT. 29. SO ALSO THE LD. DRP BY PARAGRAPH NO. 5.4.4.4 REJECTED THE ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 34 CONTENTION OF THE AO THAT SIEL MAY BE TREATED AS A DEPENDENT AGENT FOR THE PURPOSE OF ARTICLE 5. LD. DRP ALSO REJECTED THE VIEW OF THE AO THAT SIEL IS A PLACE OF MANAGEMENT FOR SOUTH EAST OPERATIONS AND HELD THAT NO PE OF THE ASSESSEE EXISTS UNDER ARTICLE 5(2)(A) OF THE TREATY WITH REGARD TO SOUTH EAST OPERATIONS. 30. VIDE PARAGRAPH NO. 5.4.4.6, LD. DRP REJECTED THE SUGGESTION OF THE LD. AO THAT SIEL CAN BE CONSIDERED AS A SERVICE PE OF THE ASSESSEE. LASTLY LD. DRP HELD THAT THE SIEL HAD NOTHING TO DO WITH THE PROVISION FOR ROYALTY AND FEE FOR TECHNICAL SERVICES. 31. HAVING REJECTED ALL THE GROUNDS PLEADED BY THE AO, LD. DRP REACHED A CONCLUSION THAT SIEL BE TREATED AS A DEEMED FIXED PLACE PE OF THE ASSESSEE, AND THE RELEVANT OBSERVATION IS TO THE EFFECT THAT,- A LTHOUGH THEY DERIVE THEIR REMUNERATION FROM SIEL, T HEIR FORMAL CONTRACT OF EMPLOYMENT IS WITH THE PARENT COMPANY. T HE STATEMENTS OF SOME OF THESE EMPLOYEES REPORT FREQUENTLY TO SEC. SH. B. D PARK, DIRECTOR (MOBILE AND I.T BUSINESS), WHO IS AT NUMBER TWO POSITION IN SIEL HAS ACKNOWLEDGED THAT HE COMMUNICATES WITH SEC ALMOST DAILY. SH. J. H KYUNG, CHIEF FINANCIAL OFFICER HAS STATED T HAT HE IS IN TOUCH WITH SEC TWO TO THREE TIMES A WEEK. SH. H. K SEO, P RESIDENT MARKETING AND SALES ALSO STATED THAT HE COMMUNICATES WITH SEC ONCE A WEEK IN GENERAL. SH. YONG HEE CHO, WHO IS IN CHARGE OF SALES HAS STATED THAT HE COMMUNICATES WITH SEC ONCE A WEEK. STATEMENTS OF S OME OF THESE OFFICERS WHO ARE OF THE RANK OF DIVISION HEADS, ALSO SHOW THAT THEY CONTINUE TO BE UNDER SOME CONTROL OF THE SEC FOR CERT AIN ACTIVITIES LIKE RESEARCH AND DEVELOPMENT OF PRODUCTS FOR THE INDIAN MARKET, DEVELOPMENT OF MARKETING STRATEGY, DECISIONS RELATING T O PRICING OF PRODUCT, EXPLORATION AND DEVELOPMENT OF NEW MARKETS IN THE ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 35 NEIGHBORING COUNTRIES. THESE ARE THE FUNCTIONS THAT W OULD NORMALLY HAVE BEEN PERFORMED BY SEC THROUGH ITS OWN EMPLOYEES, OR SUCH FUNCTIONS WOULD HAVE BEEN OUTSOURCED BY IT TO SOME THI RD PARTY, IN WHICH CASE THE THIRD PARTY WOULD BE ENTITLED TO SOME REMUNERATION FOR THESE SERVICES. HOWEVER IN THE PRESENT CASE IT IS TH E SECONDED EMPLOYEES OF SEC ARE PERFORMING THESE FUNCTIONS JN AD DITION TO THEIR OWN DUTIES PERFORMED BY THEM FOR SIEL. FOR PERFORMING T HE ABOVE FUNCTIONS OF SEC THESE EMPLOYEES HAVE A 'FIXED PLACE O F BUSINESS' I.E THE PREMISES OF SEIL AVAILABLE TO THEM. MOREOVER, IT IS A N ADMITTED FACT THAT APART FROM THESE 'SECONDED EMPLOYEES' WHO ARE IN TH E PAYROLL OF SIEL, OTHER EMPLOYEES OF SEC ALSO COME FROM TIME TO TIME TO INDIA AND USE THE PREMISES OF SIEL FOR THE FUNCTIONS PERFORMED BY THEM FOR SEC. THIS IS QUITE EVIDENT FROM THE STATEMENT OF SH. MAHESH S UTAGATTI AND SH. ANSHUMAN SAH, VP (SALES & MARKETING). SH. SUTTAGATI IS HIMSELF AN EMPLOYEE OF SEC WHO WAS IN INDIA FOR THE DEVELOPMENT OF ASSESSEE'S WI-MAX BUSINESS IN INDIA. SH. SAH HAS ADMITTED THAT THE EMPLOYEES OF SEC COME FROM TIME TO TIME AND WORK WITH THE LOCAL PERSONNEL. 32. WE HAVE CONSIDERED THE OBSERVATIONS OF LD. DRP IN THE LIGHT OF THE ABOVE STATEMENTS. THERE IS NO DOUBT THAT THERE IS SEEMLESS INFORMATION EXCHANGE BETWEEN THE EMPLOYEES OF THE A SSESSEE AND THE EXPAT EMPLOYEES. HOWEVER, ON A CAREFUL CONSIDE RATION OF THE ENTIRE MATTER INCLUDING THE STATEMENTS OF THE EXPAT RIATE EMPLOYEES, EXTRACTED SUPRA, WE ARE OF THE CONSIDERED OPINION T HAT THE STATEMENTS SHOW THAT SUCH INFORMATION EXCHANGE RELA TES TO THE MODELS/DESIGNS TO THE LIKING OF THE INDIAN CONSUMER S, PLANS AND STRATEGIES RELATING TO THE SALE OF THE PRODUCTS, DE TAILED STOCK/LOGISTICAL STATUS, THE MARKET STRATEGIES BOTH THE MID AND LONG TERMS ETC. 33. AS RIGHTLY ARGUED BY THE LD. AR THAT NONE OF TH E STATEMENT WOULD GO TO SHOW THAT THE ANY ACTIVITY OF THE GLOBA L BUSINESS MANAGEMENT (GBM) HAS EVER BEEN CONDUCTED IN INDIA O R THAT THE MARKET SURVEY THAT IS CONDUCTED IN INDIA, AS SPOKEN BY THE ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 36 EXPATRIATE EMPLOYEES HAS NOTHING TO DO WITH THE BUS INESS OF THE INDIAN SUBSIDIARY AND IT IS SOLELY FOR THE BENEFIT OF THE ASSESSEE. ALL THE ACTIVITIES THAT ARE SPOKEN BY THE EXPATRIATE EM PLOYEES RELATED TO THE SPECIFICITY OF THE PRODUCTS, STOCK VERIFICATION , THEY DESIGNS ACCORDING TO THE PREFERENCES OF THE INDIAN CONSUMER S, THE MARKET STRATEGIES TO BE ADOPTED ETC ARE CLEARLY WITHIN THE AMBIT OF THE BUSINESS OF THE INDIAN SUBSIDIARY. SUCH A COMMUNICA TION WOULD PRIMARILY BENEFIT THE INDIAN SUBSIDIARY, AND WOULD HELP THE ASSESSEE IN ITS GBM TO SUSTAIN ITS SUPPLY CHAIN MAN AGEMENT AND TO PLACE OPTIMIZED PURCHASE ORDERS AT A RIGHT TIMING O R TO ACQUIRE THE MOST PROMISING MANUFACTURING TECHNOLOGIES, AS IS SU BMITTED ON BEHALF OF THE ASSESSEE. 34. AT THE BEST, THE STATEMENTS AND OTHER MATERIAL RELIED UPON BY THE REVENUE SHOW THAT BY WAY OF THE SEAMLESS COMMUN ICATION BETWEEN THE INDIAN SUBSIDIARY AND THE ASSESSEE, THE EXPATRIATE EMPLOYEES WERE ONLY DISCHARGING THE DUTIES OF THE S UBSIDIARY COMPANY TOWARDS THE HOLDING COMPANY. WHATEVER THE BENEFITS THAT ARE DERIVED BY THE INDIAN SUBSIDIARY BY SUCH COMMUN ICATION ARE OFFER TO TAX IN INDIA. WE THEREFORE FIND THAT THE A CTIVITIES SPOKEN BY THE EXPATRIATE EMPLOYEES IN THEIR STATEMENTS ARE IN THE NATURE OF REPORTING REQUIRED IN THE COURSE OF DISCHARGE OF TH E FUNCTIONS OF THE SUBSIDIARY COMPANY TOWARDS THE HOLDING COMPANY, AND SUCH ACTIVITIES DO NOT CONSTITUTE A PE UNDER ARTICLE 5(4 )(D), (E) AND (F) OF THE DTAA. ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 37 35. AS RIGHTLY POINTED OUT BY THE LD. AR, EVEN IF T HE IMPUGNED ACTIVITIES OF SECONDED EMPLOYEES AMOUNT TO RENDERIN G OF SERVICES TO SUBSIDIARY BY THE ASSESSEE, IN VIEW OF THE FACT THA T THERE IS NO PROVISION FOR A SERVICE PE IN INDIA-SOUTH KOREA DTA A, NO QUESTION OF SERVICE PE ARISES IN THIS MATTER. AS A MATTER O F FACT, LD. DRP VIDE PARAGRAPH NO 5.4.4.6 OF THEIR ORDER OBSERVED THE SA ME. 36. FROM A READING OF ART.5 OF THE DTAA, WE UNDERST AND THAT IN ORDER TO CONSTITUTE A PE, THERE MUST BE A FIXED PLA CE OF BUSINESS AVAILABLE TO THE ASSESSEE, THROUGH WHICH THE BUSINE SS OF ASSESSEE IS WHOLLY OR PARTLY CARRIED ON. IN THE PRECEDING PARA GRAPHS WE HELD THAT WHAT THE EXPAT EMPLOYEES ARE DOING IS ONLY THE DISCHARGE OF THE FUNCTIONS OF SUBSIDIARY TOWARDS THE HOLDING COMPANY , WHICH IS FOR THE BENEFIT OF THE BUSINESS OF THE SUBSIDIARY TO MA KE THE GBM UNDERSTAND THE PRIORITIES AND PREFERENCES OF THE IN DIAN CUSTOMERS BY PROVIDING INDIA SPECIFIC INFORMATION TO GBMS WH ICH IN TURN THEN CARRY OUT RESEARCH AND DEVELOPMENT TO DEVELOP INDIA SPECIFIC PRODUCTS. BY NO STRETCH OF IMAGINATION COULD IT BE SAID THAT IT IS IN FURTHERANCE OF THE BUSINESS OF THE ASSESSEE DE HORS THE BUSINESS OF THE SUBSIDIARY. 37. IN THE ABSENCE OF PROOF AS TO ANY MANAGEMENT AC TIVITY OF THE ASSESSEE BEING CONDUCTED IN INDIA OR THAT IT IS EST ABLISHED THAT THE DECISIONS RELATING TO THE PRODUCTS TO BE MANUFACTUR ED, PRICING IN THE DOMESTIC MARKETS, OR THE DECISIONS RELATING TO THE LAUNCH OF SUCH PRODUCTS IN INDIA IS TAKEN BY THE ASSESSEE, WE FIND IT DIFFICULT TO AGREE WITH THE AUTHORITIES BELOW THAT THROUGH TH E EXPATRIATE ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 38 EMPLOYEES THE ASSESSEE HAS BEEN CONDUCTING THE BUSI NESS OF ASSESSEE IN INDIA. FURTHER, EXCEPT STATING THAT 10% OF THE REMUNERATION OF THESE EMPLOYEES HAS TO BE ASSUMED A S THE INCOME OF THE ASSESSEE, ABSOLUTELY THERE IS NO EVIDENCE TH AT IS PLACED ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT BY WAY OF BUSINESS THROUGH THESE EXPATRIATE AND SECONDED EMPLOYEES, TH E ASSESSEE DERIVED ANY BUSINESS INCOME IN INDIA. 38. FOR THESE REASONS, WE ARE OF THE CONSIDERED OPI NION THAT THERE IS NEITHER ANY BUSINESS CONDUCTED BY THE ASSESSEE I N INDIA THROUGH THE EXPATRIATED EMPLOYEES NOR ANY INCOME IS DERIVED BY THEM THOUGH THE ACTIVITIES OF THE EMPLOYEES. CONSEQUENT LY WE HOLD THAT THERE IS NO FIXED PLACE PE OF THE ASSESSEE CONSTITU TED THROUGH THE EXPATRIATED EMPLOYEES. ISSUE IS, THEREFORE, ANSWER ED IN FAVOUR OF THE ASSESSEE. ADDITION OF 10% ESTIMATED INCOME ON THE TOTAL REMUNERATION COST OF EXPATRIATE EMPLOYEES SECONDED TO SIEL IN INDIA, 40. LD. AO, IN THE ASSESSMENT ORDER, PROCEEDED TO A TTRIBUTE INCOME IN RESPECT OF SUCH PERMANENT ESTABLISHMENT A S PER ARTICLE 7 OF THE INDO SOUTH KOREAN TREATY. WHILE MAKING RECOU RSE TO CLAUSE (III) OF RULE 10 OF THE INCOME TAX RULES, 1962, HE TOOK THE REMUNERATION COST OF THE EXPATRIATE EMPLOYEES SECON DED TO SIEL AS THE BASIS FOR ATTRIBUTING INCOME AND ADDED AN ESTIM ATED INCOME OF 10% ON THE UNDERSTANDING THAT HAD SUCH SERVICES BEE N RENDERED BY AN UNRELATED ENTITY TO SIEL, 10% WOULD BE A REASONA BLE MARKUP THAT WOULD HAVE BEEN EARNED BY IT. LD. DRP CONFIRME D THIS FINDING OF THE LD. AO. HOWEVER, IN VIEW OF OUR FINDING THAT THERE IS NO ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 39 BUSINESS ACTIVITY THAT IS CONDUCTED BY THE ASSESSEE THROUGH THE EXPATRIATE EMPLOYEES, THE QUESTION OF ESTIMATED INC OME DOES NOT ARISE. LEVY OF INTEREST UNDER SECTION 234B AND 234A OF THE ACT. 41. INASMUCH AS WE HELD IN THE PRECEDING PARAGRAPHS THAT THERE IS NO BUSINESS ACTIVITY THAT IS CONDUCTED BY THE ASSES SEE THROUGH THE EXPATRIATE EMPLOYEES, THE QUESTION OF ESTIMATED INC OME DOES NOT ARISE AND CONSEQUENTLY THE LIABILITY OF THE ASSESSE E TO DEDUCT TDS OR INTEREST LIABILITY UNDER SECTION 234 A AND B DOES N OT ARISE. THIS ISSUE IS, THEREFORE, ANSWERED IN FAVOUR OF THE ASSE SSEE IN ALL THE ASSESSMENT YEARS, AND AGAINST THE REVENUE IN ITA NO 982 OF 2016. SHORT CREDIT OF TAXES 42. SHORT CREDIT OF TAXES WITHHELD BY SIEL AS AGAIN ST THE CREDIT OF TAXES CLAIMED BY ASSESSEE IN ITS RETURN OF INCOME I S CHALLENGED IN THE ASSESSEES APPEAL FOR AY 2011-12 43. IN RESPECT OF THE ASSESSMENT YEAR 2011-12, IT I S SUBMITTED ON BEHALF OF THE ASSESSEE THAT A SUM OF RS. 18,15,99,2 03/-WAS WITHHELD BY THE SIEL AND IT IS LYING TO THEIR CREDI T. IT IS FURTHER SUBMITTED THAT THE LD. AO ALLOWED CREDIT OF TAXES O NLY TO THE EXTENT OF RS. 17, 79, 07, 391/-, THEREBY THERE IS AN OFFEN CE OF SHORT CREDIT OF TAXES TO A TUNE OF RS. 36, 91, 812/-. ASSESSEE I S AGGRIEVED BY THIS ALLIANCE OF SHORT CREDIT. IN THE CIRCUMSTANCES, WE DIRECT THE LD. AO TO GRANT CREDIT OF THE TDS TO THE ASSESSEE IF THEY FULFILLED THE REQUISITE CONDITIONS OF POSSESSING A VALID CERTIFIC ATE AS PER THE ACT. ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 40 44. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 .03.2018 SD/- SD/- (G.D. AGRAWAL) (K. NARASIMHA CHA RY) PRESIDENT JUDI CIAL MEMBER DATED: 22.03.2018 *VIJAY COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI ITA NOS. 65 TO 70/DEL/2013, 315, 982/D/2016 & 4705, 4706/DEL/2017 41 DRAFT DICTATED ON 22.12.2017 DRAFT PLACED BEFORE AUTHOR DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS KEPT FOR PRONOUNCEMENT ON FILE SENT TO THE BENCH CLERK DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.