MITSUI MINING AND SMELTING COMPANY LIMITED,TOKYO JAPAN V. ASSISTANT COMMISSIONER OF INCOME TAX - CIRCLE 2(2)(1), CIVIC CENTRE, MINTO ROAD, NEW DELHI

SA 197/DEL/2025

AI Insights

The case involves Mitsui Mining and Smelting Company Limited, Tokyo, Japan, which sought a stay on the recovery of outstanding tax and interest for the assessment year 2022-23. The tax demand arose from the AO's finding that the secondment of employees to its Indian subsidiary resulted in the creation of a permanent establishment (PE) in India, attributing profits to this PE. The assessee argued that similar cases had been decided in its favor by various High Courts, and previous ITAT decisions had granted stays under similar circumstances. However, the Departmental Representative (DR) contended that the AO's decision was based on a detailed analysis of the secondment agreement and had the approval of the Dispute Resolution Panel (DRP). The Tribunal found that the assessee did not demonstrate a prima facie case for a complete stay but granted a partial stay on the recovery of the demand.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46895 (ITAT-DELHI)
• Appeal Type: Stay Application
• Pronouncement Date: 11-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Other Referred Cases: Progress Rail Locomotive incorporated Vs. Deputy Commissioner of Income Tax IT (2024) 163 taxmann.com 52, Delhi, Principal Commissioner of Income Tax -3 Vs. Samsung Electronic Co Limited (2025) 170 taxmann.com 417, Delhi, FlipKart Internet Private Limited Vs. DCIT- International Taxation (2022) 139 taxmann.com 595 (Karnataka)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKSH
• Assessee Lawyers: S.K. AGGARWAL
• Keywords: TDS; Permanent establishment; Application of stay

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH “I”, DELHI BEFORE :SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER S.A No.197/Del/2025 (In ITA No.1407/Del/2025) Assessment Years: 2022-23 Mitsui Mining and Smelting Company Limited Tokyo Japan Vs. ACIT Circle -2 (2) (1), Civic Centre, Minto Road, New Delhi Appellant Respondent Date of hearing 11.04.2025 Date of pronouncement 11.04.2025 ORDER Per Annapurna Gupta, Accountant Member: 1. Vide the impugned application ,the assessee seeks stay of recovery of outstanding tax and interest for the impugned assessment year 2022-23, amounting in all to Rs.39,09,67,280/- . The contention for the Ld. Counsel for the assessebefore us is that the assessee has prima facie favourable case, the addition made in its case Assessee by Sh. S. K. Aggarwal, CA Department by Sh. Om Praksh, Sr. DR being made in a casual and arbritrary manner and the issue in any case being covered in its favour by decisions of various of Hon’ble High Courts. Elaborating on the same it was pointed out that the assessee was a foreign entity in the businessof mining of minerals and had a wholly owned Indian subsidiary i.e. Mitsui, Kinzoku component India Private Limited (MKCI) which was in the business of manufacturing, for which purposes raw materials required by way of certain minerals were imported from its parent i.e the assessee before us. 2. The assessee, it was stated, had seconded certain employees to its Indian subsidiary to work for it. This secondment of employees was held by the AO to have resulted in the creation of a permanent establishment of the assessee in India and profits attributed to the PE in India in respect of sales made by the assessee to its Indian subsidiary, all of which he pointed out was offshore sales. The Ld. Counsel for the assessee pointed that the Hon’ble Delhi High Court in the case of Progress Rail Locomotive incorporated Vs. Deputy Commissioner of Income Tax IT (2024) 163 taxmann.com 52 ,Delhi and in the case of Principal Commissioner of Income Tax -3 Vs. Samsung Electronic Co Limited (2025) 170 taxmann.com 417 ,Delhi and the Hon’ble Karnataka High Court in thecase of FlipKart Internet Private Limited Vs. DCIT- International Taxation (2022) 139taxmann.com 595 (Karnataka) had held secondment agreements to not result in the creation of permanent establishment. He further pointed out that in identical facts and circumstances the ITAT had granted complete stay of demand arising on the same issue of secondment of employees to have created a permanent establishment, in SA No. 108/ Del/ 2025 dated 07.03.2025.Copies of all the orders of the Hon’ble High Courts and the stay orders were pointed out to us from the paperbook field before us. 3. The Ld DR opposed the grant of complete stay stating that the AO had done a detailed exercise of analyzing the terms of secondment agreement while arriving at his finding that it had resulted in the creation of permanent establishment of the assessee in India, that it was not arbitrary and ad-hoc exercise and the same had been met with the approval of DRP also. He pointed out that the creation of permanent establishment by virtueof secondment agreement was a factual matter to be determined from the terms of secondment agreement and therefore, it could not be stated that the issue was squarely covered in favour of the assessee by various decisions of the higher courts on the issue,until parity of facts is clearly demonstrated. 4. Having heard both the parties we are not convinced with the contention of Ld. Counsel for the assessee that the addition made in its case by the AO resulting in huge demand being created on it by treating itto have a permanent establishment in India and attributing profits on the sales made to Indian subsidiary,is highly unjustified &covered in its favour by various decision ofthe Hon’ble High Court as cited before us. We agree with the Ld. DR that this is a factual matter and the application of the decisions of the High Courts to the present case would determine on the parity of facts ,which has not been demonstrated before us satisfactorily. Therefore, clearly the assessee prima facie does not have afavourable case, but noting that out of the total tax determined on the assessee of 44.56 crores almost 1/3rd,i..e 15.38 crores was adjusted by TDS credit,we deem it fit to direct the assessee to pay 10% of the outstanding demand of Rs.39.09 crores in two fortnightly instalments. The ld. Counsel for the assessee has pleaded for the appeal to be fixed for hearing at an early date . The registry is therefore, directed to fixed the appeal for hearing on 14.05.2025. The assessee is directed to pay the 10% demand by 14.05.25. The recovery of the remaining demand, subject to the compliance with the above direction, is stayed for 180 days or till the disposal of the appeal whichever is earlier. 5. The applicants are advised to file paper book before the date of hearing of appeals with advance copy to the opposite side in accordance with ITAT Rules. The Revenue, if so desires ,may seek any report from the AO before the date of hearing. Both sides are refrained from seeking adjournment. In case adjournment is sought the benefit of stay granted shall be deemed to be withdrawn forthwith. We may point out that anyobservation in the order may not be construed in any manner as comment on the merits of the issue of the appeal. The appeal may be decided unfluenced by any observations whatsoever in this order by us. 6. In the result, all the stay applications are allowed in above terms. Order pronounced in the open court on 11.04.2025. Sd/- Sd/- (VIMAL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER *Neha, SR. PS * Date: 11.04.2025 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "